Saturday, March 07, 2015

How to overcome the fear of entering market pullbacks

Salvador Dali
Have no fear of perfection, you will never reach it - Salvador Dali 

As swing traders we all know that a market pullback is our friend. If we go back and look at any market index chart, we will see that the best time to enter the market was on a pullback after and extended run. Take a look at this short one minute video that illustrates the power of doing nothing more than entering pullbacks in the S&P 500. In the past year, entering on a deep pullback was profitable 7 out of 8 times. That win rate is hard to beat.

Watch this 2 minute video showing the power of entering on market pullbacks.

So intellectually we know the right thing to do. Entering on pullbacks is a slam dunk trade. So why don't we do it more often?

It all goes back to the mental game. Fear is quite possibly the most powerful emotion. Fear stifles us and leads to indecisiveness and bad decisions. To be a successful winning trader, you must overcome fear. How do we overcome this fear?

Here are 4 methods for overcoming the fear of buying dips:

1. Trade small. Make sure you are risking an amount that won't cause you pain if you take a small loss. This way, even if you take a loss on the trade, it's no big deal.

2. Trust your methodology. You have done the research. You know that historically the way to make money in the market is buying dips.

3. Shut off social media and CNBC. Becoming a stock news junkie is a guaranteed method for increasing your fear levels.

4. Go to war with yourself.

Conquer your fear, buy on dips and become a profitable trader. It's that simple.

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1 comment:

Unknown said...

I like this article, therefore, I have decided to leave a quick comment! Many thanks for providing us with clear and detailed instructions of what should be done in order to overcome the fear of entering market pullbacks. You may be interested at this one!