Over time, I realized that my own fears in trading were mainly due to a lack of a solid trading plan.

In fact, if you trade without a plan, meaning that you trade without any hard set of rules, then you are probably right to be afraid. The stock market is the wrong place to make up your own rules as you go.

As illustrated in today’s chart, amateur traders are results-oriented. If you lose, it’s a “bad” trade. If you win, it’s a “great” trade. This leads to impulsive trading, inconsistent profits and losses, and ultimately fear.

So, the key to overcoming fear in trading is to develop a trading plan and stick to it. To succeed in the long-term, you must become process-oriented instead of results-oriented.

For example, I personally use an 7%-8% stop loss on most of my swing trades. If the stock fails and stops out, that is typically my maximum loss.

Another example of my trading rules is that I rarely take a long position in any stock that is not in the top 3 or 4 performing sectors. If there is a hot new healthcare stock out there, but the healthcare sector as a whole is lagging, I simply do not buy it.

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With each of your trades, instead of focusing on the profit or loss, ask yourself, “Did I adhere to my trading plan or not?” Then, if you notice over time that you have more losing trades than winning trades, you can tweak your plan according to solid education and research.

Know this: The best traders are unemotional in their trading. They execute based upon a time-tested and profitable trading strategy, not based upon emotions.

Until tomorrow,
Jerry Robinson

P.S. This is just one of the many topics I discuss in our Stock Trading University Podcast. It’s free and has over 75 episodes available. Listen now.