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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Fear of Success

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 02/27/2017
20,837 15.68 0.1%
9,474 52.57 0.6%
696 -3.49 -0.5%
5,862 16.59 0.3%
2,370 2.39 0.1%
YTD
5.4%
4.8%
5.5%
8.9%
5.8%
Tom's Targets    Overview: 02/14/2017
21,150 or 20,000 by 03/15/2017
8,800 or 9,700 by 03/01/2017
700 or 640 by 03/01/2017
5,950 or 5,650 by 03/01/2017
2,400 or 2,260 by 03/01/2017
Indus strength: None YTD
Mutt Losers: None YTD
Mutt Winners: None YTD

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

 

When my brothers and I rode our bicycles to the train trestle that spanned the Seneca River, no one wanted to jump in.

Eventually, I took the rope that hung down from the bridge and jumped off. I was Tarzan swinging and then letting go, plunging into the water below. My two older brothers said to themselves, "If Tom could do it, so can I." They followed me into the water in quick succession.

And then I froze.

I froze not because the water was cold, but because fear paralyzed me. My brothers continued swinging off the bridge, but I worried about giant turtles, swimming snakes, and broken glass bottles hidden by the muddy water. I only made the first jump, and I have always wondered why I couldn't make the second.

Perhaps I had the fear of success.

People are coached by their parents and friends to avoid looking like a loser, to do their best, to always be a winner. This need to succeed at all costs makes trading more difficult. Traders afraid of looking like losers fail to cut their losses short, riding positions down to prices at which they can no longer hold. Then they sell for massive losses. Those traders become the losers they sought to avoid. They know the next trade is going down, too, setting up a fear of entering new trades. If they do dip their toe into the trading water, they jerk it out at the first sign of a reversal instead of following their trading plan and letting price move in the normal rise - retrace fashion.

Do You Have Fear of Success?

Take this quiz to see if you have a fear of success.

  1. Have you been taught to do your best, to be a winner, to always look good (or similar sentiment)?
  2. Do you have a fear of change?
  3. Do you fear the unknown?
  4. Do you feel the need to win at all costs?
  5. Are you willing to take responsibility for doing what it takes to achieve successful results repeatedly?
  6. Are you afraid of looking like a loser?
  7. Do you trade so as not to lose instead of pushing the boundary of your comfort zone?
  8. Do you routinely hold losing positions longer than you should?

Answering yes to any of the questions from 1 to 3 combined with more than one of the questions from 4 to 8 could mean you have a fear of success.

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Fear of Success: Three Possibilities

Here are three common scenarios that illustrate the fear of success.

  1. Win then loss.

    The fear of losing is related to the fear of winning. Based on prior winning trades, Basket Case Bob viewed his self-image as an extraordinary trader and tried to win every trade, regardless of the cost. He frequently held positions longer than he should, ignoring exit signals, and saw winning positions turn into losing ones and saw losing positions go deeper into the red. His unwillingness to learn from past mistakes meant that he was destined to continue making the same ones.

    On trades when price dropped, he doubled down -- added to losing positions -- and felt compelled to sell only after massive losses and often just before the stock bottomed.

    One trader I knew routinely placed a stop so close as to almost guarantee that he would be stopped out for a loss. Even when price moved up, he would trail the stop too closely so profits never amounted to much.

    Another trader conducted extensive research on each stock which he then ignored. He did not have confidence in his work, and his results showed it. His need to look successful prevented him from holding onto a position long enough to make a profit.

  2. Fear of falling (not failing).

    On another trade, Basket Case Bob increased his position to 200,000 shares and then panicked, as if he stood balanced on a tight rope and then looked down. He lost his focus on how well the trade was obeying his rules and instead focused on the money. Each penny drop meant a $2,000 loss, a message that reverberated in his brain like an unfading echo. Instead of pursuing the potential for a big win, he cut the position size and returned to his comfort zone.

    Recognize where the boundary of your comfort zone lies and that such negative thoughts will come when you push the boundary. Ignore those warnings of doom and focus on how well the trade is progressing.

  3. Overly cautious.

    In his early days, Basket Case Bob made all the right moves and turned a small wad of cash into a mountain of profits. After a large, unexpected loss (a dead cat bounce), something changed. He began to second guess his analysis and avoided many trades. When he did take a trade, he often changed his mind and exited quickly. In other words, he lost his confidence and became overly cautious.

    Another trader was reluctant to ramp up his profits by taking larger positions. He failed to realize that the mechanism he had in place to limit losses would still work for larger positions. All he had to do was push the boundary of his comfort zone and increase his position size. Being unable to do so meant he could not increase his income as much as he wanted.

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Fear of Success: What Can You Do?

Try one or more of the following to help you conquer your fear of success.

  1. Ignore Profits and Losses

    Focus not on how much money you are making but on technique. Did you enter at the right time? Did you exit too soon or stay too long? What technique could have improved your profitability? If the markets are more volatile, did you cut the position size to reflect that volatility? When the markets are calmer, did you increase the position size appropriately yet still retain the diversity in you portfolio?

    All of these questions focus not on money but on execution. Do not let a losing trade overshadow your potential for a huge gain.

  2. Defeat Self Image

    An inflated ego or excessive concern with your image could cause a fear of success. Continually being stubborn in the face of overwhelming evidence or even hints in the market place that your trading position is in jeopardy may be keeping you from becoming the trader you want to be. Learn to listen to that voice inside that says you have it wrong, that it is time to exit a position. Do not allow that voice to scream, "Sell Now!" every time you enter a trade, but I find its guidance to be remarkably accurate.

    Listening to the advice of others is fine providing it does not overshadow your own guidance and research. Sometimes the television visionaries have it wrong. Learn to trade your own position and ignore the pundits. Combine their advice with your own to formulate a trading plan and then follow that plan.

    Discover the main factors that drive your success and failure, and then focus on improving each one.

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  4. Accept Change.

    The markets change over time (from bull to bear, high volatility to low and back again), and your trading plan and trading style need to adapt too. But change is more than one of style. Change your perception of the universe. You can accept change by letting go of your self-image and confronting the limiting aspects that plagued you in the past.

    To remove the fear of success, take responsibility for your actions. A trade that goes sour was not caused by a bad fill nor by listening to a pundit on television. Accept that sometimes you are wrong and that the markets will move in unpredictable ways. Prepare for all outcomes by creating a trading plan that covers those contingencies, but also by examining your feelings. Learn about your comfort zone and seek to expand its boundary.

    Learn to view trading anxiety not as an impediment, but as an opportunity. Have the confidence to pull the trigger with assurance that you are making the right decision. There should be no hesitation, no self-doubt when trading.

  5. Set Goals

    Understand what you want trading to provide. Is it the freedom to have the afternoons off? Is it the ability to buy anything you desire without worrying about where the money is going to come from?

    Once you have set your goals for your trading business, ask yourself what is stopping you from achieving them? Are you willing to spend money to become educated about market techniques? Are you willing to pay for a system? Will you follow the system? Will obeying your trading rules give you the success you seek? What is preventing you from becoming a better trader?

    Learn to ignore the "What if I fail?" question and focus on setting achievable goals for both the short and long term. Adopt a trading strategy which you can follow. If you deviate from the path laid out by your strategy, figure out why. Make the changes necessary to get back onto the correct path.

The successful trader has no room for self doubt. He has a trading plan which he follows. When he veers from the plan, he understands why and does not let it become a habit. He understands the motivations that propel him forward, and he understands the emotions that pull him back. A successful trader does not fear success, he plans for it.

This article was based on an idea from Technical Analysis of Stocks & Commodities magazine, November 1995 issue titled, "Fear of Success," by Kiev.

-- Thomas Bulkowski

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Mathematicians take it to the limit.