The One Thing an Investor Must Train Themselves to Overcome

Kiwis call it ‘gravity’s playground’.

It’s high, remote, and breathtaking — like something from National Geographic. But this scenic beauty isn’t for nature lovers. Well, at least not your typical kind.

No, this is strictly for adrenalin chasers.

I’m writing to you from my family holiday in Queenstown, New Zealand. Locals say it’s the adventure-sport capital of the world. And they’re right. Death-defying activities are everywhere.

The place I just described is about an hour out of town. It’s home to the Canyon Swing — an attraction that’s every bit as frightening as it sounds.

I’m going to be talking about fear this week. It’s an emotion that affects us like no other…and it’s one that I’ve had to frequently manage during my stay in Queenstown.

Many traders also battle fear. I’ve seen it end more than a few careers over the years. How you manage fear can have a big influence on your chances of success.

But, before I talk about trading, let me tell you a bit more about the Canyon Swing.

A leap of faith

Set atop a soaring cliff, the Swing is an intimidating sight. It sits on a platform jutting out 20 metres from a cliff edge. The Shotover River is a distant 109 metres below.

The purpose of this precarious-looking platform is to jump. My eldest child had it at the top of his New Zealand to-do list…and his expectations were that I’d do it too. I had no way out.

My tolerance for adrenalin activities isn’t what it once was. I saw a video of what I was in for a week earlier, and my anxiety levels began to spike. This is before we’d even left Sydney!

But now we’re here. My son and I were in a tandem harness. It was go-time.

Three, two, one…jump!

Plummeting down the cliff face was terrifying. We were at the mercy of gravity. Our acceleration was so fast that my eyes couldn’t focus. All I could see was a haze of yellow and grey.

After a 60-metre vertical drop, the cables began to tighten. We were now the weight at the end of a giant pendulum. The ride finishes with a 200-metre high-speed swing across the river.

The Canyon Swing is the scariest thing I’ve ever done — without exception.

So, would I do it again?

Well, I did. We went straight back to the launch site for another jump.

Hurling yourself into thin air is an unnatural experience. It goes against every survival instinct. But I was 100% sure it was safe. I knew no harm could come to us.

Being comfortable with the risk made all the difference. It allowed me to override a huge amount of fear. This made it possible to go forward when I wanted to step back.

A trader’s worst enemy

Fear is a vital emotion. It’s our brains response to potential danger. Without fear, we couldn’t protect ourselves from legitimate threats.

But fear can get out of hand. It can hold us back unnecessarily. A strategy for dealing with fear is essential.

I have an email I want you to read. It’s from a member whose fear of trading is overwhelming. He is at a stage where he’s ready to walk away.

This is what he says:

I’m mentally beating myself up every day. Quant trading really got my interest when I first heard of it. I read all the information and then took the chance to join. My plan was for a long-term commitment. It seemed like a natural extension to my real estate investments.

I completely get the concept. But that’s where it ends. I just can’t let the trades run, and I can’t go short. I’ve had a few goes, only to get cold feet. I just don’t have the nerve. That’s the brutal truth. And I hate owning up to it.

Member, Ian

I believe Ian’s fear comes down to one thing — losing money. And he’s not alone. I’ve seen the fear of a financial setback stop many traders in their tracks.

The challenge people like Ian face is sticking to a strategy. They simply can’t follow their trading plan — not due to a lack of discipline, but due to fear.

Research shows that fear can lead to poor decisions. And one of the worst things a trader can do is to regularly break their trading rules. This is a sure-fire way to fail.

Now, I’m not a mental-health specialist. But I do know about fear when it comes to taking financial risk. This is something I’ve had to work on over the years — many traders do.

I describe myself as being mildly risk-adverse. My lawyer laughs at this. He says it’s impossible for a futures trader to be anything but an extreme risk-taker.

But he’s wrong. Many of the best traders say managing risk is their biggest concern.

The truth is you don’t need a high-risk tolerance to trade. There are things you can do to override fear. This makes it possible to keep going when others stop.

My own fear is of a sudden extreme loss. One so big that it takes me out of the game. I simply couldn’t trade if I let this fear take hold.

So, what do I do?

First, I need to know my downside. Understanding the risk is a bit like turning on the light — all the scary stuff goes away.

You see, a big part of fear is worrying about the worst possible outcome. But if you know the worst likely result isn’t that bad, then you remove the fear.

The second step is good position sizing. This can make all the difference.

Now, position sizing is a big topic. I can’t do it justice in a few lines. But let me say this: I never risk more than I care to lose. A loss will rarely cause me a second thought.

Think about this: Fear is a response to possible danger. The key is to reduce the potential risk to an acceptable level. This shuts off fear’s fuel supply — it can never get going.

I’ve had to face fear many times in my career. Chances are you have too.

I remember the fear of making my first trade for the bank. I remember the fear of starting a business from scratch. I remember the fear of using my own capital to trade futures markets.

What if my best effort didn’t work out? The fear of failing was always present.

But here’s the thing: I can’t think of a time when facing my fears led to disaster. Sure, I wasn’t always successful. But I’ve never done something challenging and looked back on it with regret.

There’s an old German saying: Fear makes the wolf bigger than he is. And it’s true. Fear lets the imagination run wild. It will give you an excuse to hide.

But it doesn’t have to be this way. Fear is something we can overcome. If you know the risk — and it isn’t that bad — you’ll quickly cut the wolf down to size.

Until next week,

Jason McIntosh,
For Markets and Money

Editor’s Note: Do you sometimes find it hard to ‘pull the trigger’ on a trade? Don’t worry if you do, you’re not alone — fear causes many people to miss standout opportunities. But it doesn’t have to be this way. There are strategies that can help you override your fears.

Here’s something you should do — check out Jason McIntosh’s Quant Trader  advisory service. It’s a fully algorithmic trading system for ASX stocks. Quant Trader  scans practically every company. It then tells you when to buy and sell. Not only that, Jason aims to make you a better trader. He does this by passing on his two decades or experience via his weekly report.

Try it. See if it makes sense to you. It could change the way you trade forever.

Editor’s Note: This article was originally published in Money Morning.


Jason is a professional quantitative analyst. Before he graduated in 1991 he joined Bankers Trust — a Wall Street investment bank — to be a trader. After Bankers Trust was taken over in 1999, Jason, already financially independent, co-founded a stock market advisory and funds management business called Fat Prophets. At 37 he sold his part of that business and retired. These days, he’s a private trader and system developer. In 2014 he launched the wildly successful trading service: Quant Trader.


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