I get emails all the time from readers of my blog, but something very interesting happened last week. I received 5 emails in a row all having the same theme: FEAR. Random people wrote to me saying: “I’m horrified of this market,” “I’m scared that my stocks will collapse,” “How do I overcome my fear?” etc. etc. I would like to discuss what creates this fear and how to possibly overcome it, but first I would like to make one point:

What separates people who perform at a superior level from the rest of the crowd is mental toughness. You have no shot as a trader if you constantly live in fear. I don’t care if you have the greatest investment philosophy in the world, if you have no confidence in what you are doing, you have very little chance of succeeding.

By the way, I’m assuming that the people reading this are looking for consistent, superior returns. I recently read a survey that 25% of investors are happy with breakeven returns. Are you kidding me??? Why are you even IN the market if you are simply looking to breakeven??? If you fall in this category, please stop reading this, go home to your Mommy, and maybe she’ll comfort you with a nice bedtime story.

Many factors contribute to investor fear, but here are two main ones:

1) The financial collapse of 2008-09. While I can’t even remember what I had for dinner last night, it’s amazing that something which happened 7 years ago is still so fresh on people’s minds. I realize it was a traumatizing time for many investors and homeowners, but this constant “one foot out the door” mentality is keeping the markets from going into any prolonged corrections.

2) Financial Television. Watching TV news is not only depressing, but can also contribute to everyone’s fear. Remember that the Weather Channel gets its best ratings when there’s a hurricane, tornado, or blizzard coming. No one watches when it is 80 degrees and sunny outside. In other words, it is TV’s job to promote fear in order to get better ratings.

How do you overcome your fear? I could write a book on this, but here are some suggestions:

1) If living in the past, watching TV, reading a blog, or even reading a tweet can easily sway your opinion, then maybe you should turn off the noise and focus more on the market’s price action.

2) Learn to become mentally tougher. You can do this by starting small to build your confidence, by reading great market and “self-improvement” books to feed your mind with strong ideas, and also by focusing on the positive things you are doing in your trading rather than constantly focusing on your mistakes.

Remember, we were not put on this great Earth to live in fear and be average. FEAR stands for F*** Everything And Run. Don’t run away from your fears! Instead, start facing them and work on your mental toughness. I am confident you will see improvements in no time. Good luck and stay confident!

I can be reached at: jfahmy@zorcapital.com.

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