Do You Need to Overcome Your Fear?

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Trading in the stock market can be a hazardous and yet it can also be quite a profitable enterprise.

How many traders do you know of who have been burnt and then decided never to invest again? The major primary emotion to be found in anything to do with investing is fear.This is followed closely behind by that other lifelong companion Greed . These two emotions can be found happily causing trouble and strife whenever the stock market is open.

For instance it is fear that may give you the excuse such as 'I don't have enough capital' or the more common excuse, 'I don't know what to invest in'. Fear causes paralysis and this then makes it harder for you to make a decision.

But the number one fear has always been the fear of losing your money.

Investing means different thing to different people .For now days you can invest in anything from buying gold futures to real estate. However, ordinary shares is the most popular form of investing since more than 40% of the Australian households now invest in the stock market. And the one thing they all have in common is the fear of losing their investment capital.

Remember that the more uncertain you become then the less risk you are willing to take on. You will also become more acutely aware of the potential downside risk of your investment. Once fear has taken hold is when the paralysis sets in and you end up doing nothing at all. Too frightened to buy or sell.

Once you begin trading the fear of losing money will always there in the back of your mind. The trick is to be aware of it, but don't allow it to hold you back.

Here are a few suggestions that might assist you to reduce your fear of investing in the stock market..

1. Get Yourself Educated.
It stands to reason that the more you know about something, then more certain you are of what the final result will be. Once you know how to calculate the fair value of a stock, you will then know your expected return on investment ( ROI.)

If a stock has $2 per share of positive net cash, is very profitable and is currently trading at around $4 per share, then you can be reasonably sure that it is unlikely at below $ 3 per share for a long period of time. It is learning information such as this, that makes you more aware of the risks involved but also it gives you more confidence the more you learn. And with more confidence the less mistakes you are likely to make.

2. Always Start out Small.
When you first begin trade on the stock market there are a lot of unknowns. Not having enough education means that there are even more unknown, which of course means greater risk.

How small should you start trading with? As much money that you can afford to lose. About $2,000 is a good start if you have it, any less than that is not practical as to begin with brokerage will take a large slice of your profits.

3.Always be willing to Learn From Your Mistakes
The best way to learn is from your own mistakes. You are guaranteed to make mistakes. It is knowing why you made the mistake and what caused it to happen the way it did that makes the difference. Analyse and look at each and every mistake you make. For armed with this information you are then less likely to make the same mistake again.

Unless of course you are stubborn and blame something or someone else for your mistake. Unfortunately once the same situation arises again, which it will, you will then find yourself making the same mistake again because you did not learn the first time around.

Will you be fear-free after reading this article? Unfortunately the answer is no, for fear will always there because of uncertainty or fear of the unknown.

We live in an uncertain world,so instead of hiding behind excuses, we need to accept it, educate ourselves to reduce the uncertainties in our trading. By doing this, it will in time effectively increase your profits and reduce your risk factor to the stage where your are confident in your abilities and are less fearful of failure.

Chris Strudwick is a successful share trader on the Australian Stock Market. For more info please visit my blog at www.asxnewbie.com.

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