Dealing with Fear Memory in Trading

One common problem faced by traders is: not pulling the trigger (into trades or out of – to take profit or losses).

One reason for this is the fear of losses and the memory of pain of past losses.

Neuroscientists suggest to deal with Fear Memories by focusing on the “context” instead of the emotion of the memory. This takes us out of automatic responses or reactions to the overwrite of logic brain. We can then rationally look at the trades, balancing risks with rewards and gives us the chance to consider various methods of managing risks, instead of avoidance. 

Fear memories are saved in our memory bank (hippocampus) which get retrieved when faced with seemingly similar situation – a trade opportunity. Using these fear memories as a trigger for putting in place risk management strategies before the trade turn these memories into positive triggers.