Maintaining Trading Confidence During Uncertain Times

Uncertain times happen in life and the stock market is no exception. Most of us have more questions than we do answers. I’m sure we are all wondering what will happen with interest rates. How the current weather will affect how much consumers are spending, how we should prepare for any changes in the market and what we can generally expect in the upcoming weeks, months and years. I know many of us may be anxious in the face of this uncertainty, but now is the time to boost our confidence, not bury our heads in the sand hoping for the best.

We need a trading plan and be determined to adhere to it. A trading plan can keep our focus pointed in the right direction and not become fixated on the idea that we have to be right, no matter what.

The last thing we want to happen is to become lured away from rational thinking because of biased views of the market. Our plan should include a clear objective and a vision of what direction a trade will take. We should consider what might happen if the market goes against a trade we initiate and what warning signs we should look for that might indicate that the market could turn on us.

Something we don’t want to accept is the idea that we are powerless and at the mercy of the ups and downs of the market. Martin Pring wrote in his book “Investment Psychology Explained,” that “we do not like uncertainty. The need to have a firm opinion of where prices are headed is therefore a mental trick that many of us use to eliminate this uncertainty.”

We tend to want to hold on to a sense of control when we are in uncertain times. We may start thinking that we have control over everything we might come up against, giving us the false notion that we are more powerful than we truly are. There are those of us that might form opinions of what will happen with the market and be so inflexible that despite evidence to the contrary, we discard anything that contradicts our opinion.

However, it is in uncertain times that we must keep an open mind and be willing to deviate from our opinion if more reliable information becomes available. This is where we can refer to our trading plan and be confident in the fact that we are prepared and know what to do and when we should do it.

Of course, it is impossible for us to control everything, but especially in times of uncertainty, we should strive to control what we can. We also need to accept that there will always be uncertainty and outcomes that we are unable to influence. Having a plan and sticking to it is a major component of taking control. We will know what to do to minimise risk, what to do if we do have some losses and give us the reassurance that if we did experience a major setback, we can bounce back.

If we can take control over the things we are able to control, accept that there will always be situations we cannot control and approach trading in a calm, rational manner, we will have the best possible chance for success.