Fear of Loss Should Be on Everyone's Mind

Of the four fears of trading, the one most worry about is FOMO, or the fear of missing out.  After all, what feeling is worse than the markets and everyone else making money without you.  Psychologically it can be devastating, to constantly chase after the market and then once you catch up, the reversal happens.  Devastating to our bottom line and our minds.

 

But many investors and traders these days still throw caution into the wind, and find themselves not worried as much about losing money.  The fear of loss is probably the worst feeling next to FOMO that one can have.  All of us are risk averse to some extent, and prefer to get paid a handsome return with little to no risk possible.  That is the dream scenario, and highly unlikely under normal market conditions.  

 

I feel today's traders are paying little attention to risk, and that soon will be a problem.  Most investors are behind the '8 ball' after losing money the last twelve months. Coming off a stifling year in 2022 where markets plunged 20% or more, one would think caution and prudence would be the order of the day, but it seems to not be the case.

 

Stocks have been on a roll so far in 2023, many are breathing a sigh of relief as it appears the economy could be coming in for a soft landing.  That's the base case now for a few analysts and strategists, but that is not the word from the Fed - the most important view of them all.  As mentioned, markets have started 2023 with robust gains, but during this bear market those gains can be swept away quickly.  What I'm seeing and hearing - 'keep risk on, ride this out, we're going higher'.  When have we heard that boldness before?  Oh yeah, last year - several times just before the markets got whacked.  

 

So, what to do?  

 

Be FEARFUL of a loss, be more prudent and take profits as you continue to take risk down.  There will always be another day, another trade another opportunity.  If you're reckless and not concerned about losing money, then the market will take care of that for you - and you'll find yourself on the outside looking in, just when the situation may be turning around.