1) Fear of Losing Money

Fear of losing money happens when a trader first initiates a position and immediately sees the trade go against him/her. 

At this moment, beginners in the stock market (who normally do not trade according to some predetermined rules) will often second guess their decision. Intense fear of losing can cause the trader to immediately 'cut their loss' and exit the trade, at a small loss. These losses, though individually small, can quickly add up to a significant amount. Over time, such losses can cause the trader to lose his/her morale and confidence.

To overcome fear of losing, remind yourself that a surgeon spends more than R100k to receive his/her qualification.

Treat losing in the stock market as a form of tuition fees, a necessary investment. Investment in education always pays the best returns. To make sure you get the highest return from your 'tuition fees', make sure you analyse each losing trade to find out what mistakes you made and then modify your trading rules accordingly.

2) Fear of Losing Profits

Another fear is the fear of losing profits from winning trades. When a trader sees his/her position making a profit, the trader starts fearing that any second, the position will turn against him/her.

To quote Jesse Livermore (one of the greatest stock traders of all times):

"Most people fear when they should hope and hope when they should fear."

Thus, they close out their winning trades, taking a small profit, believing that they can't go broke by taking a profit.  Unfortunately, they CAN go broke taking small profits. Unless the trader can achieve 100% accuracy in picking stocks, he/she is bound to have a number of losing trades.

In order for traders to make money in the stock market, they need profits from those winning trades to be big, so as to cover for losing trades. If a trader constantly takes small profits, it is unlikely that he/she will have a significant amount of surplus left after covering for these loses.

George Soros once said:

"It is not about whether you win or lose, it is about how much you win when you are right and lose when you are wrong that matters."

To overcome fear of losing profits, use the method mentioned by Jesse Livermore in his book "How to Trade in Stocks". Constantly remind yourself: "Why am I afraid of losing profits I did not have the day before?" Instead of focusing your thoughts on the possibility that the position can go against you, focus on the need to win big when you are right.

1) Changing one's perception of losing

To overcome the fear of losing money, treat any money lost as tuition fees. In addition, do not treat unrealised profit as your money; those are merely profits on paper. One can't be afraid of losing money that does not belong to you yet.

2) Have clearly defined rules for cutting losses and taking profits.

These should be based on empirical research or intensive back-testing. Alternatively, one may choose to adopt the rules of a proven time-tested system (such as the CANSLIM system by Mr Williams O'Neil). 

3) Use visualisation techniques to take one's focus away from the possibility of losing.

Visualise the current position becoming a big winner, a grand slam. (Note, this does not mean one should pray and hope and visualise a losing position turning into a grand slam. A good trader should always ensure that they know exactly when to cut their loss (stop loss). As long as the stop loss level is not reached, one should not let the fear of losing overwhelm him/her resulting in the closing of a position prematurely.)

It helps to ask yourself three questions:

Equities

• Equity investments give investors part ownership (shares) in companies listed (publicly traded) on a stock exchange.
• Shares are bought and sold through one of the major equities exchanges, such as the New York Equities Exchange, London Equities Exchange or Johannesburg Stock Exchange (JSE), shares in smaller public companies are bought and sold in over-the-counter (OTC) markets.

Best used for:

• Equities form a vital cog in the wheel of the financial markets, because they enable companies to raise capital and they enable share owners to profit if the company performs well.

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Spreads (OTC Futures)

• The futures market is a major financial hub because it is useful for a wide range of traders and can be used to speculate or to hedge your investments (or manage your price risks). It has a reputation for being extremely liquid, risky and volatile, and intensely competitive. 
• Because futures are a leveraged instrument, requiring a relatively small initial deposit, they have the potential for big gains or losses, which is why at Global Trader we support you with best practice risk management mechanisms.

Best used for:

• Buyers and sellers in the futures market primarily enter into futures contracts to hedge risk or to speculate. In fact, most of the futures market is generated by speculators. The risks in futures trading are high, but then so are the rewards.

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• Global Trader is proud to launch the first Mini CFDs available to retail investors.
• Our great new offering allows you to trade Mini CFDs on the South African Equity Market.
• Mini CFDs provide an alternative to conventional share dealing or Equities dealing and are traded on Global Trader's spread platform.
• The great features of Mini CFDs are that they allow you to roll your traded position over to the next day, they provide superior transparency, and they offer reduced trading costs. 

Best used for:

• Mini CFDs are recommended for short-term equity market exposure. They can be used to speculate, hedge or enhance yield. As with other spread trading products, Mini CFDs allow you to benefit from rising or falling markets.
  
• Mini CFDs are not recommended for long-term market exposure because the accumulation of overnight funding charges will become expensive. 

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Contracts for Difference (CFDs)

• Global Trader was the first online broker to launch Contracts for Difference (CFDs) in South Africa in 2005. CFDs are arguably the fastest growing equity derivative in the world, and account for up to 60% of all derivatives trading on the London Stock Exchange. 
• Global Trader's CFDs are geared equity trades that give our clients low-cost, low-margin, two-way exposure to equity markets.
• Our CFDs offer an alternative to conventional share dealing. Like other derivative products, CFDs allow you to trade on the markets without having to physically own the shares.
• CFDs take away many of the disadvantages of stock ownership, such as scrip custody and tracing dividend payments, thereby making them a very simple and flexible financial instrument.

Best used for:

• CFDs are great for short-term investments, when you are looking for a quick and uncomplicated transaction. As with all derivatives, CFDs are suitable for hedging and speculating. 
• CFDs can be used to speculate on future share price movements. You can open both long and short CFD positions on the same instrument, to speculate on both upward and downward price movements.
• CFDs can be used to hedge an existing holding or hedge against exposure to adverse price movements. The effect of a decrease in the price of a share in your portfolio may be neutralised by taking a short position in a CFD on the same share. 
• CFDs can be used for pairs trading, which involves speculating on the relative performance of two different securities. An example would be taking a long position in a CFD on the shares in one company and taking a short position in a CFD on the shares in a different company within the same group (e.g. banking). Pairs trading is a good hedging strategy where potential gains can be offset against potential losses.

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• Binary options are derivative instruments with only two possible outcomes, either they expire at full value being 100 or no value being 0 - there is no in between. 
• Global Trader launched its binary options on its Spread trading platform, the first ever available to retail investors in South Africa, covering the ALSI, local equities to gold. As well as offering different expiries (e.g. weekly, intra day) 
• Binary Trading offers you a simple, but dynamic trading experience, working on a ìyesî or ìnoî principle, where the payoff is either some fixed amount of some asset or nothing at all. Binary options are simple to trade because, to succeed, you only need to be able to correctly determine the direction of the price movement, and not the magnitude of the movement. 
• One of the most attractive advantages of Binaries is that they offer high volatility with controlled risk. Regardless of market conditions, whether they may be rising, falling, volatile or stable, binary options present investors with exciting trading opportunities. 

• Binary options are popular with beginners to derivatives trading because, while they are subject to high volatility, you can control or limit your risk. 

    - Binary options allow you to profit from probability.
    - Binary options are ideal for day trading where you can benefit from daily and intraday market movement and short-term fluctuations in the market. 

• Binary options are good for hedging against daily and weekly movements in open portfolios.

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