The stock market is a scary thing and can frighten any trader. It is a monstrous challenge, often tricking us more than treating us to profits.

Like Halloween, the market is full of Draculas ready to suck the capital out of our trading accounts. There are Wolfmen, howling in the night and slashing the overnight prices. There are merciless mummies setting bull traps and bear traps, and the scariest of all--the ghouls on CNBC who stir their bubbling caldron of expert opinions. It’s enough to make you wear garlic around your neck!

So how does a trader meet this daunting challenge? An experienced trader knows that the Holy Grail is within all of us, if we only face our fear. For traders, everyday is like Halloween. We are haunted by the ghosts of trading-errors-past and scared by the skeletons of our bone-headed decisions. As traders, we must accept that there are no magic potions or witches spells to cure a trader’s lack of courage.

Fear can be a rational response to a dangerous situation. When a dragon breathes, you should be prepared for fire. But dragons, like fear, are mostly in our imagination. Fear means false events appearing real. In the stock market, when faced with imagined risk and genuine fear, most people will average down on their self-doubt. Conversely, when they are winning, fear keeps them from adding to the position. And their trading accounts suffer.

As traders, we do not learn by running from fear. Thanks to paper trading and silver stakes, we can defeat all monsters if we have a plan.

Where most people see fear, consummate traders see opportunity. Rather than following down the road of the trading masses, they take the trade less traveled. Traders who succeed know that a person does not fail until he gives up.

You may have noticed that some of your best trades occur when you feared them the most but stuck to your battle plan. The market monsters appeared, but you trusted in yourself, your indicators, and you watched as price confirmed what you had determined to be the probable outcome. The market monsters were defeated. Traders learn that the best buys in life are when fear is at its highest.

Life, like the stock market, rewards courage. Have you ever noticed how many of the best decisions in life come from making difficult, unpopular decisions? For many, one of the hardest things to do in life is to have faith in themselves. All the ghouls and goblins of self-doubt appear when we least expect them and can least afford them. Life tests us, just as the stock market does. Traders learn that they must not only think for themselves, but they must listen to themselves.

As traders, Halloween is the perfect holiday to remind us of the scary lives we lead, and that the true monsters of the market lie within our own minds. If we have faith in ourselves, we can force any market Dracula back into his coffin. Of course, it doesn’t hurt to keep a little garlic on hand.

Happy and Fearless Trading,

Dr. Charles Schaap

May be used with permission, first published October, 2005 ©Stockmarketstore.com 2008 Dr. Charles B. Schaap 

Dr. Charles B. Schaap