How to Handle Fear

​The best way to handle fear comes in two steps:

1. A detailed trading plan

2. Risk control

Let's look at risk control first. You have no doubt, read it many times: "Trade with money you can afford to lose." Here's another one: "Trade positions that are so small that you may think, "what's the point of even putting on the trade?"" One more: "Do not over-trade!"

All of the above carry essentially the same message: They minimize the personal significance of a trade. If the trade seems basically insignificant, you will be able to do a better job of controlling your emotions. Be sure to limit your risk as much as you can. You cannot afford to let yourself lose a lot on a single trade, it is demoralizing and it will take many more trades to regain your losses.

It's essential for survival as a trader to limit the amount of capital you risk on any one trade. It's also mandatory to learn to cut your losses short. Don't get stuck in a losing trade. Don't hope that it will turn around; just sell the loser quickly, get out fast. Controlling risk will not only make you feel safe and secure, it will ensure your longevity as well.

Now to the second part: Having a detailed trading plan. Before you execute a trade, specify how and when you will enter. Make sure you set out the signals that indicate the market may be going against your trade, and how and when you will exit. Most wannabe traders fail to carefully plan their trades. They first execute a trade and then once they are in the trade they try to develop a plan as they go along. What usually happens is that they easily become alarmed because they don't know what to do or when to do it. It's hard to think on your feet, especially when you are first learning to trade. What you need is the safety of a detailed trading plan: specific guideline to follow. Making a plan follows the wisdom of any job being 80% preparation and only 20% execution. The more clearly the plan is laid out, the easier it is to follow. And when the plan is easy to follow, it's likely that you'll stick with it. You'll be disciplined and in control of your emotions and thought processes.

Andy Jordan is the editor for Traders Notebook which shows you Futures Trading Strategies in Spreads, Options, and Swing Trades. Learn step-by-step how to trade successfully.