(this article ”FEAR” is the first article of the series where the author, Aku Hentilä, writes and reflects on some of the most common emotions in the capital markets and investment world)

How can fear exist in trading – some examples:

• fear of losing (trading position, reputation, even job position)
• fear of losing profits (another stong emotion in play here: regret)
• fear of taking profits too early (again regret close)
• FOMO: Fear Of Missing Out…why i didnt buy this FX/share/etc. and now it’s sky rocketing (and again, regret is a ”close relative”)

How can fear impact trader – some examples (NOTE: these symptoms can obviously be outcome of some other triggers):

• sleeping disorders: difficulty to fall in sleep, waking up early, etc. (thinking position at bed, etc.)
• eating disorders: lost of appetite, bing eating, etc. (typically unconscious and ”autopilot”)
• body reactions: arrythmia, sweating, unnormal blood pressure, etc.
• ”social reactions”: person might want to ”pull back into the shell” and isolate from others (”shame of fear”) or alternatively socialize a lot (”share the fear”)

Strategies to cope and master fear – some examples:

• ”blocking/denying fear totally”: trying not to think/face fear à someone might succeed in this on quick glance and short term but this always has medium to long term consequences, usually on sub conscious level
• ”numbing fear”: medication, alcohol, drugs à ”alleviating the pain with chemicals” (high risk of addictions): ”taking the edge off” at night with some red wine glasses, etc.
• ”by passing the fear” with trading technique or algorithm (position sizing, time slicing, etc.): this is probably the most common strategy and it relies on data/cognition and systematic approach where fear (and other emotions) are ”cornered away”; ”only” (and not a little) problem is that fear is not faced and it is still ”in the system” and it can transform into another type of fear/worry: is my algorithm/technique working?, when ”tail risk” appears one can be totally swept by fear with unability to function, etc.
• ”practicing skills to master fear” just like professional athletes: practice facing and learning to live with fear. Typically we haven’t been taught at school how to handle emotions, including fear. It can be practiced at older age though. Talking it out and sharing with professional coach/mentor, doing ”fear exercises”, using meditative/mindfulness techniques, being aware of own fear triggers and other unconscious spots that impact trading, etc. – all of these help to live with fear; And this is by far my favorite strategy: this has undisputable positive impact on mental wellbeing. And since human is a holistic entity, taking care of mental skills/wellbeing typically leads to better performance on job in a long run. To consider: combine this with previous point (trading technique/algorithm) and it can be even better :).    

About the author:

Author has long experience from:

• competetive sports: national championship medals in waterpolo and swimming
• trading in capital markets: in 3 years most profitable (PL/capita) trader in Nordea Markets FX/MM franchise
• psychology: 4 year studies at integrative therapy school and graduated as certified therapist

Author has combined all these experiences and developed unique mental coaching program for traders, portfolio managers and alikes.