Podcast – Episode 61 – Overcome the Fear of Losing Money
Hey, it’s Allen again with another edition of the Option Genius podcast. Welcome again passive traders, I hope the market is treating you well. I hope things are going great for you, because today we’re going to get real. We’re going to talk about something that is downright scary. But before we do, I just want to say thank you to all of those who are listening, thank you very much, we appreciate your support. I also want to say thank you to those of you who have actually gone out and helped the podcast by subscribing to it or even going one step further and even leaving a rating and review for the podcast, I definitely appreciate that and I would like to say thank you so much. If you have not done so, I would please urge you to use whatever app you’re using to listen to podcasts, if there’s a method there or go to iTunes and rate and review the podcast.
Let us know how we’re doing. Let other people know if you liked the podcast and that way more people could find out about it and we can expand our reach. If you do, I would be happy to return the favor. Just take a screenshot of your review, email it to us, and we’ll have a free gift for you. We’ll let you choose something from one of our goodie bags and I would really appreciate it if you do that. Again, just use whatever app you’re using. If you can leave a review there or go to iTunes, give a rating and a review and screenshot it. Email that to us and we’ll be happy to give you a choice from one of the things we offer in our goodie bag. So with that, let’s go ahead, cue the music and let’s get scared.
So what are you afraid of? What stops you in your tracks? Maybe is it clowns? A lot of people are afraid of clowns. How about drowning? My wife is afraid, definitely afraid of drowning. Could it be public speaking? Go in front of a room, maybe 100 people, 200 people, even 10 people, and just talking. Many people are deathly afraid of that. A lot of these news reports we hear nowadays are saying that the number one fear that seniors have is that they will outlive their money. That’s what they’re afraid of. And that’s a really big fear because most of them have no savings.
What’s yours and what do you do to overcome that? Do you have a set plan or do you just avoid whatever you’re afraid of? My particular… one I’m one of mine, I have several, but one of mine is heights. I’m really afraid of heights and I know that it has stopped me from doing some things in the past that I wanted to do, so I thought like, “Hey, let me see if I can get over this.” And so I believe that if you expose yourself to something that you’re afraid of, eventually, hopefully, you’ll become desensitized to it and you’ll be able to do it and they won’t make you scared, hopefully. That’s the idea.
So over the years I’ve done simple things or crazy things as well. There was one time I went hang gliding. And if you’ve never gone hang guiding, basically what it is, is you’re tied to this basically a plastic paper airplane and you run and then you jump off a cliff and you really hope that the wind picks up and the wind holds you and then you can just soar around. And basically you’re totally out of control, the wind is taking you and you can steer a little bit, but I didn’t go up there by myself, I had the instructor, he did everything I was just holding on for my dear life the whole way. But that was one of the things I did.
Another thing I did, which wasn’t as scary as I thought it was going to be, is actually flying a plane. And so we did this, my wife and I, we both did it off the coast of San Diego one time, where you can go and fly a vintage airplane. So mine was a WWII Warbird. These were the planes that they used to do dog fighting and fighting in WWII. And I went up there with a Navy pilot. He was a top gun Navy pilot, so he took me up there. He did the takeoff and the landing and everything, but once he showed me the controls, it wasn’t really hard to do. There’s just a stick.
That’s all I had to worry about. And the stick controls the airplane. So I was doing barrel rolls, I was doing corkscrews, I was doing flying upside down, I think they call it inversion. We were doing loop de loops, like in circles or the plane just going around and around and around in a circle and it was an amazing experience. I did it until I was about to throw up and then we had to stop and I’m like, “Okay, all right, time to go back in. Oh geez, I can’t take it anymore.”
But those are some of the things I’ve done. I’ve also gone parasailing. And the first time I did that, that was incredibly, incredibly stressful and scary until I learned to just relax. And parasailing, if you don’t know is when you go to these little resorts on the water, they have a boat that ties… you’re tied to this big parachute and then they send you all the way up in the air and then the boat pulls the parachute and you, and you’re hanging on there in the air. That is actually very, very relaxing and it’s amazing what you can see. It’s beautiful up there. I almost said no to that and I’m so glad that I did not let my fear overcome or I did not let it stop me.
Now when it comes to trading, we do have a lot of people that want to get involved because they hear the benefits, logically they look at it, they understand it, it makes sense. They want more money. I don’t know. I don’t think I’ve met too many people in my life that don’t want more money and they say, “Yeah, trading, this is a great thing. It’s not a lot of work. It doesn’t use your brain. You press a few buttons, it’s amazing. It’s like, Oh, I wish I could do that. That’s so amazing.” But for one reason or another, people do not get started.
And so we have come across thousands of people over the years. A lot of them actually take action, but there’s a huge percentage of people that come into our network or come into our classes or come into our memberships and they don’t take any action. They don’t do anything. They’re satisfied with just learning. They’re satisfied with just understanding the concepts. But when it comes time to actually click the button, hit that submit button, submit order button, they just can’t do it. And I’ve heard many, many reasons why. Some of them are like, “Oh, I don’t want to lose money.” Well, that’s valid. Of course, nobody wants to lose money, some people say, “Oh, I don’t know what I’m going to do once I place the trade, I’m not sure yet of what I’m going to do. I’m not sure how my adjustments will work, or I’m not sure how I will manage the trade. And so I’m not going to place a trade.”
Logically, that makes perfect sense. Some people say, “I’m not going to do it until I understand X.” And X could be anything/ like in algebra. X could be anything. It could be, I don’t understand technical analysis or I don’t understand how the government responds to a certain incident or a report that’s about to come up. Or I don’t understand how charting works and we talked about technical analysis or fundamental analysis, or I don’t know how EBITDA works or earnings per share or this indicator or that indicator or this pattern or that pattern or statistics or… it could be anything.
I’ve heard so many of these excuses. I can’t do it. I cannot trade until I know X. And then once they have a grasp on X, they either want to become an expert on it or they come up with a different X, “Oh, I learned this, but now I need to know this. Now I need to know this. Now I need to know this.” So there are people, and my dad was actually one of these. He still is. He buys course after course, after course, after course, but there’s no action, there’s only buying. And it seems that in his mind, when he does the buying, when he buys the course, it gives him a sense of accomplishment that he’s actually taking action. He feels good about himself because he’s actually doing something. “I’m trying to make my life better. I bought this course.”
And sometimes he’ll actually go through the course. He’ll listen to the videos or CD’s or whatever he’s bought. But most of the time, I would say probably 90% of the time, there is no action. There’s no follow through and there’s no change. But it’s okay for him. But I don’t want that to be okay for you. Because all of these reasons I gave, “I don’t know, I don’t want to lose money, I don’t know what I’m going to do when I place a trade.” All of these have the same root cause and that is fear.
So we could change the wordings and it’s not, “I don’t want to lose money.” It’s, “I am afraid to lose money.” It’s not, “I don’t know what I’m going to do,” It’s “I’m afraid I won’t know what to do once I place a trade. I’m afraid I don’t understand X. I’m afraid I don’t know which way the market is moving.” Well, guess what? Nobody does, right? And if you let your fear stop you, then nobody can help you. It doesn’t matter how much you know, it doesn’t matter how much you learn. It doesn’t matter how high the probability of profit is in your favor, nothing can help you if you stop yourself.
Fear is the one thing that stops humanity from achieving our highest potential. And everybody has fear. Every trader is afraid of losing money on every single trade. I second guess myself on many times like, “Man, do I really want to do this trade? Yeah, I need to hit my goal this month. Okay, put it on.”
And then sometimes when I’ve actually hit my goal, I hit my profit target for the month and I’m thinking, “Ooh, wow, look I found another trade, do I want to do it? No.” I’m afraid to lose my money. I’m afraid that I’m going to give back what I’ve already made and I don’t want to push the envelope. I probably could and maybe the trade work out, chances are it will. But because of that fear, it stopped me from putting on more trades. So I take it to a certain level, but then I stop. Now that’s something I need to work on. But every single person, every single trader is afraid of losing money on every single trade. You cannot let that stop you, because left unchecked, your fear will kill all of your dreams. Okay? But I do have good news.
I want to share with you an exercise that I have used in the past to help traders get over their fear of loss. All right, so I have this exercise. Hopefully you are doing this or listening to this where you can maybe stop, get a piece of paper or a pencil. If not, then you’ll have to come back to it. You can go ahead and listen to it now, but go back, when you do have a chance to sit down and do this exercise if you do suffer from this.
When I first tried this with a fellow named James, he was definitely afraid of losing money. I mean super afraid. Now James is in his late sixties. He’s already retired and every dollar that he loses is a dollar that he cannot replace by working, because he’s not able to work any longer. So I understand the fear and the fear is real. The negative aspect of it is real. If he loses money, he’s going to have a very hard time replacing it.
Now, James wanted to learn to trade. So mentally, he was there. He understood the strategy we were working on, he understood the rules. He did try paper trading at first, but he found out that he wouldn’t take it seriously, which was a problem. But when he started trading with real money, he would freeze up and he would get out of the trade as soon as it lost a tiny fraction of what we were allowing. So now normally in most trades you have a stop loss. So if I lose a certain amount of money, I’m going to get out, or if this happens, I’m going to adjust it or dah, dah, dah. He would not even wait for that to happen. If he was down $100, $200 [“I got to get out.” 00:13:12].
Well, you know James, if you can make $1,000 on this trade, it’s not going to go perfectly in your favor every time. And if you jump out every time you lose 100 bucks, you’re going to miss out on a lot of trades that are going to come back than you’re actually going to make money on. Because when we’re selling options, many times when you get into a trade, it might move against you in the beginning and you might be sitting on a loss for a few days. It happens all the time, but you can’t get afraid. You have to have your plan in place and say, “Okay, this is what I’m going to do. I’m going to stick to it.” Now he had the plan. What he didn’t have, was the discipline to stick to the plan because of the fear. So I had him go through the following exercise, which I would urge you to go through as well. Okay?
Step one. I want you to write down your fear on paper. What is the worst thing that could happen if you did what you are afraid to do? The absolute worst. And I want you to write it out on detail. Don’t do this in your brain. Don’t do it in your head. I want you to sit down with a piece of paper, pen, pencil, whatever. Write it out in your hand and go into depth. What is it? “Oh, I’m going to lose money.” No. What does that mean? Why is that so bad that you’re going to lose money? “Oh, because I’m not going to be able to recover the money.” Okay? What does that mean? “Well, that means that I won’t have money to eat.” Okay. Why is that so bad? You can’t get food from anywhere else. “I’m going to become destitute. I’m going to be homeless. I’m going to be a burden.”
Whatever your fear is, you got to get to the bottom of it because rationally or irrationally, your fear of not trading is tied to something else. It’s not as simple as “I don’t want to lose money.” There’s something deeper there that we need to get to the root of. But, write down what do you think is the worst, in detail, and then next you have to tell me how likely is that outcome. Okay? So on a scale of 1 to 10, with 10 being guaranteed to happen and 1 is never going to happen, give your worst case scenario number. So let’s say I’m afraid to put this trade on because I’m going to lose $1,000. I’m going to lose the maximum amount I can lose on this trade. Maybe it’s $1,000. I’m going to lose $1,000. That’s the worst thing that could happen. All right? How likely is that to happen?
Is it guaranteed to happen? Well no, the odds are in my favor. I’ve got a tradie plan. I got all this stuff working in my favor, so probably not going to happen. There’s maybe like a 10% chance that I could lose money on this trade and probably even less than that, that I’m going to lose the maximum on this trade, so I’d probably give it like a 1 or 2, that the likelihood of me realizing my maximum loss and my fear. Okay, that will give you some perspective.
Now step two. I want you to write down what you’re going to do if the worst case happens. You’ve already told me what is the worst case, you’ve already told what is the likelihood. So maybe it’s likely, maybe it’s not, doesn’t matter. If the worst case happens, how are you going to recover? How are you going to react? What are you going to do? Because as human beings, we are amazingly resilient. When bad stuff happens to us normally we get up, we don’t let it keep us down, okay? And I know you can do that as well. I know you’ve done that millions of times in your life. Something bad happened, you overcame it, you reacted, you fixed it, you moved on.
This is just like that. So again, step two, write down what you’re going to do if the worst case happens, write down, tell me how you’re going to recover. How are you going to get back on track.
Now step three. Write down what you can do to stop the worst case from happening. Basically in trading, it’s called a hedge. How can you hedge yourself, or how can you set up your plan or your trade or whatever, so that the worst case does not happen? Is there a way? There is. There always is. So what are the steps that you can take, and the more things you list here, the better. The more choices you have, the more confidence you’ll have that you can actually stop the worst from happening, okay?
Now, step number four. Write down what you’re going to do or what will happen to you if you do nothing and things stay the same. So basically, I’m afraid to start trading. Okay, fine. Let’s say you don’t trade, you never try it again. Forget about it. What’s going to happen to you and your life if you do not trade? You got to make this really painful because you know that if you trade, you can make money. You know that if you trade, you can change things in your life. You can accomplish certain goals that you have. But if you do not trade, what’s going to happen? Are you going to run out of money before you die? It’s possible, it happens for a lot of people. They do become a burden on other people, on their families and on the system, because they didn’t have enough savings from themselves or they don’t know how to take their savings and actually make something from it.
So what is the situation going to be if you do not take action? And to me that’s really the worst case scenario. Now you got to make it in vivid detail. “If I do not trade, I’m going to have to work until I am 70 years old. I’m going to have to go to work when my back is hurting every single day. I’m going to have to wake up at 5:30 in the morning in order to get ready for work and be there at eight o’clock and sit in traffic for an hour every day in the morning and an hour coming home. I’m going to miss out on my kids, whatever, graduation, or I’m going to miss out on this, or I’m going to miss out on that, or I’m not going to be able to do this.” You want to make it vivid and painful.
Step five. I want you to write down what’s going to happen if you overcome your fear, you actually do the thing you’re afraid of and the best scenario happens. What is the best case that’s going to happen? So yeah, let’s say you start to trade and let’s say you start making so much money, you don’t know what to do with it, and you’re able to help the entire world. You can go to the top of the buildings and just shower money on people. That could be the best case. Or you build schools for every child in the world, or you feed the homeless, you buy everybody a house. Every homeless person in the world gets a house, whatever. What is the best case that could happen? That’s what I want you to write down as step number five.
Okay, so just recap. Step one, write down your fear on paper. What is the worst that could happen? And then give it a number. On a scale of 1 to 10 with 10 being guarantee it’s going to happen, how likely is your fear going to happen if you take that step, maybe it’s trading, I’m going to take this trade or I’m going to get into trading, what is the likelihood that your fear is going to come true? And for most people it’s, “I’m going to lose all my money. So if I trade, I’m going to lose all my money.” Okay, that’s possible. It’s illogical, but it’s possible. So how likely is it on a scale of 1 to 10.
Number two, we’re going to write down what are you going to do to recover if the worst case happens. If you start trading and you lose all your money, what are you going to do? I mean, you saved up the money one time. You could probably do it again. You could make a list of things that you can do to recover. Step three, write down what you can do to stop the worst case from happening. Step four, write down what you’re going to do or what happens to your life if you don’t do anything and nothing changes. If you don’t take this step, what’s going to happen in your life? Number five, write down what’s going to happen if you overcome your fear and the best case scenario happens. So we already [inaudible 00:22:36] up the worst case, now this is the best case. And then eventually the real outcome is going to be somewhere in the middle.
So for James, this is what he came up with. “The worst case scenario is that I lose all the money that I have in my trading account, which is money that took me years to accumulate. I will feel like a failure. I will feel that I have been lied to again and made a fool by another trading expert, “trading expert”. My wife will jump down my throat telling me I am stupid for falling for another scam and for losing our money. I will feel like I let her down and that I cannot support her and myself. I will feel like less of a man. I will be a failure.”
Now, that’s pretty deep. It starts with “I’m afraid of losing money” to “I’m afraid that I’m not going to be a man, I’m going to be a failure.” If you lose a little money, you’re going to be a failure. So logically it’s like, okay, it’s possible to lose all your money. It’s not likely if you don’t put it all at risk, but this is what’s going through his mind. So he didn’t understand this. He didn’t understand this fear until he actually sat down, spent some time and wrote it out. And then when he saw this and he showed it to me, he was like, he was almost in tears because he’s like, “If I lose money, I’m not going to feel like a man.”
And he had lost money trading in the past. So he had felt this in the past. His wife did jump down on him. She jumped down his throat and screamed and yelled and complained and that’s why he was afraid to do it again. Logically he knew that he needed to try something new, but emotionally inside, he just couldn’t force himself to do it because he couldn’t go through that pain again. So let’s continue with his answer. “If the worst case happens,” this is step two. “If the worst case happens, I can try to get a job. I can cut my expenses until I have the money back. I can go back and pay per trade until I am consistent at making winning trades and can get my money back. I can sell some of the stuff that I own and that I never use anymore.”
So this is him logically trying to come up with steps or ways that he can recover if he lost his money trading. And some of these are really good. I can sell some of my stuff that I don’t use. I can go back and paper trade. This actually made him think about it. He’s like, “Oh man, if I lose all my money, I’m going to be in big trouble.” Okay. “Maybe I should focus on the paper trading more,” because he couldn’t do it at first. He was like, “Oh, paper trading, that’s not me. I don’t need to do that. I’m going to do real money.” Uh-uh (negative), no, it’s important.
All right, let’s go on, step three. How can I stop the worst case from happening? “I can get serious about paper trade. I can start small with just one option contract. A loss on one contract will not kill me. I can ask for advice on my trades before I make them from the passive trading community.” So he was part of our passive trading formula course and with the course comes a whole community of people that you can talk to and interact with and you can get feedback from. So in the past he was, I don’t want to say arrogant, but he didn’t like to run ideas by other people. But now that he can see that the loss would be devastating, maybe it’s a good thing to do things that can stop the loss from happening. And part of that is asking for help, asking for advice. It’s free. You don’t have to take it if you don’t want to, but you can ask.
Also, he write, “I can get my wife involved and learn to trade with her so that we can do this together, which will give her some control over the situation and keep her from getting upset at me if we have a loss.” Now this one is brilliant. All of these are brilliant. These things that he’s come up with, how he can stop the worst case from happening. These are wonderful things that he had never thought of until he did this exercise. Now some of you guys might be thinking, “Oh, that’s common sense.” No it’s not. If your wife doesn’t want you trading, can you get her involved somehow? Most of us never even think about that. Most of us, “Ah, my wife wouldn’t care. She doesn’t care about money. She doesn’t want to get there. She’s busy, too busy.”
But I bet you if you tell your wife that, “Hey, this is going to be our financial future,” your wife is going to be interested. She might not want to learn how to trade, but she will definitely be probably willing to help you learn and stay on top of you and help you and be like a junior trader or just a sounding board for your ideas, okay?
Now here we’ll keep going with James’ answer, “If I do nothing, we will continue to struggle financially month to month. We will have nothing to leave to the kids and the grandkids for their inheritance. We might have to sell the house and move to a cheaper apartment. My biggest fear is dying before my wife and leaving her to cope with not having enough money.” Wow. If he does nothing to improve his financial situation, the struggle continues. That’s right now, but he realized that his biggest fear is not of losing the money, but his biggest fear is of leaving his wife to cope with not having enough money and he’s not there to help her and support her.
That’s pretty deep. Okay, let’s continue. “If the best case scenario happens, our money worries will be gone. I will be seen as a hero instead of a burden by my family.” Whoa. “We will finally be able to take that trip to The Bahamas that I promised my wife 15 years ago. I will be able to donate to our church to build the addition that they need. I was not able to pay for my kids’ college, but I will be able to pay for my grandkids colleges. I will have peace of mind.”
Now that sounds like a very worthy list of goals. To be seen as a hero instead of a burden to take your wife on a trip that she was promised 15 years ago, to be able to donate to charity or a church, to pay for your kids and grandkids, to have peace of mind. That’s what we’re talking about. That’s what happens when you succeed at trading. Okay?
Now I have found that this simple 15 minute exercise can help you overcome just about any fear you have, but you have to do this on paper, not just in your head. You have to write it down and you have to drill down to the absolute worst fear, the worst thing that could happen and make a list of how you can recover if it happens, knowing very well that it’s very unlikely that the worst will happen. But you got to know that even if it does, there is always something we can do to lift ourselves up.
Does that make sense? And once you create a list of all the good things that can happen, you will not only be less afraid to take that step, to take this action, but you’re going to have a positive outlook on the activity that you’re afraid of. Make sense? You’re actually going to want to do it because of all the good things that can happen because of it, once you have actually thought about them and listed them out. And if you’re still afraid, that’s fine, that’s normal, but then you can limit and adjust what you are going to do so that the worst case scenario never happens. So that was one of the steps as well. So if we’re still afraid, we’re like, “Man, I could still lose a lot of money doing this.” Yeah, you can.
But what if we change the thinking a little bit. Instead of risking all the money, what about we just risk a little bit. You take one step. We don’t have to make a huge jump. We just take one little step. And if that step goes good, then you take one more. And if you’re happy with that one, you take one more. And if that one doesn’t work, you can go back, take two steps back. Start again at the beginning. Small little step, small little step.
Because if it comes to trading, there are resources available. I’m here, I’m jumping up and down, “Hey, talk to me. I can help. Use me, let me know. Email me.” We have courses, we have people in the courses in the communities, that love it and they love to help each other. So you’re not alone and you’re not doing this for the first time. It’s been done before. If other people are doing it, if they’ve done it, you can do it. Just follow the steps that they have already taken. And if you’re afraid, that’s fine. We’re all afraid of things.
I’m still afraid of heights. I had the chance to jump out of an airplane a couple of years ago and I chickened out on the last day. I was like, “No, no, no, can’t do it.” We’re still afraid. But if you follow the steps and you do this exercise, it’s going to help you overcome some of the things that you’re afraid of, and you’ll be able to see that the fear, once you put it down on paper, once you look at it for what it really is, it loses control over you.
So I hope this helped. I hope you do this exercise the next time you’re afraid of something. I hope you do not let fear stop you from living your dreams, from achieving everything that you can achieve. And if you need help, reach out to us, let us know, we’re at optiongenius.com. Thank you, and may the odds be in your favor.
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