Stop Freezing Up During Stock Trades

We've all been there. You enter a trade, confident that you're about to become a little richer. You're thinking in your head how much you're about to bank on this trade and the stock instantly drops... You're PnL moves as much as you predicted, but in the negative. At this point, you're frozen and don't know if you should get out of this stock or wait and hope it comes back up. Although, the first choice isn't an option, since you're body is physically not responding; much like your old computer back in the day running Windows 98 every time you try... well every time you try doing anything on it. You watch and hope, while your loss slowly grows bigger and bigger until you can finally muster the energy to sell and stop the pain. At this point, this behemoth of a loss is staring you in the face as you contemplate quitting trading altogether and taking that sales job that your friends have been talking to you about. Well, there's good news. There is a way to prevent all this, so you can stay in the game and improve as a trader.

1) Always Have a Stop Point

This is basic trading knowledge, but sometimes, in the heat of the moment, we forget this and only think about the reward. It's human nature to be focused on the reward but there are ways to make sure you always know your risk as a trader.

• Use a hard stop-loss: If you've experienced freezing up when facing losses, it's probably a good idea to use a hard stop loss. By this I mean sending a "stop-loss" order of the price you are risking, immediately after you enter a trade. There are some risks with hard sops like getting filled lower than the price you wanted, if the stock is very volatile or illiquid, but this is a small risk compared to freezing up if you experience this. 

• Write down your stop price: If you'd rather not use a hard stop, make sure you have your stop price written down and in front of you. Having it written down makes you more likely to stick to it rather than just having a mental idea of it. I would also suggest making alerts near that price so you are ready to get out of the trade if you need to.

2) Start Small
 

Becoming a stock trader, you may be eager to make money fast but you have to understand that its not going to happen without a solid trading system in place. Many new traders underestimate how much emotions can really get in the way of trading. It is usually the biggest pitfall for any trader; amateurs to professionals. Your trading size has a lot to do with emotions so starting small and working your way up is one of the smartest things you can do to improve. If you need to start so small that commissions really affect your profits, I would suggest using a commission-free broker for sending your orders. Once you can control your emotions and become profitable, you can scale up your size slowly while keeping your emotions under control.

3) Peace of Mind

In the end, the only way to completely prevent yourself from freezing up in unexpected trading events is to fully accept that anything can happen. This takes some time to fully accept because you need your subconscious brain to accept it along with your conscious mind. This is a bit more difficult to understand and obtain this state of mind but there are many books on rewiring your brain and creating habits that really help traders in their careers. One book specifically tailored to traders is Trading in the Zone, by Mark Douglas. I highly recommend it to all traders at all levels.

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