Is Fear A Good Thing When It Comes To Trading?

In most areas of life, confidence or a belief in what you are doing is essential if you want to succeed and it's no different when it comes to trading the market..Or is it?

Let's say you are bullish on a particular stock so you buy the stock and you think to yourself that you are right and you are going to stay with this position come hell or high water. Is that a good example of confidence? Will that kind of confident thinking help us succeed in making money? The answer is NO!

In my opinion, trading is a whole different mindset than any other activity I can think of. Yes it is true we have to be confident in ourselves when we put a trade on, but at the same time we must always have that fear that this could be the trade that will hurt us.

Being too confident is what causes a trader not to use a stop, risk more money than they should and become sloppy in their analysis of the market. I think fear is a good thing because who do you think will protect their money better? The trader who has some fear of the market, or the trader who has no fear and is very confident? Obviously the trader who has some fear of the market will protect their money better by using stops and not trading too large for their account size.

When I put on a trade, I always think to myself that this is going to be the trade that can wipe me out. That may sound like a very negative way to approach trading but it enables me to stay alert and use stops and not trade too large. Be confident in yourself but be fearful of the market. So getting back to my original question, is fear a good thing when it comes to trading the market? You bet it is!