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Coach's Playbook Posted by Team Topstep October 2, 2022

The Psychology of Fear

Digging into the recent break in the British Pound and citing a few examples from their own careers trading through stock market crashes, the Topstep coaches are discussing the psychology of fear when taking on highly volatile markets this week.

Funded Trader Shoutout

This week’s Funded Trader Shoutout goes out to John M., who racked up a cool $5,200 trading the E-Mini Nasdaq-100 futures today (Tuesday, September 27, 2022). John put his solid day together with only two trades, which tells us that he’s been practicing patience, waiting for the right setups to appear, and calculating risk like a pro!


Whether you’re in or out of the market, fear can create a sense of urgency, especially for those who haven’t traded through periods like this before. When volatility picks up and the daily ranges get wider and wider, the impulse to get involved while the markets are moving can be the deatch blow for an inexperienced trader.

When panic hits the market, it’s difficult to anticipate how long it will take to subside or how far prices will move. The temptation to throw all your rules out the window and jump in during the middle of a move just to “take a shot” can be overwhelming, but these are not the actions of a disciplined trader. 

The old-timers say, “if you weren’t in when the move started, then you missed it.” That statement held true for a long time, and in some circumstances, it still holds true today. But, the markets have changed significantly since the days of the ‘87 crash. Technology has done away with outdated order entry methods and we have access to infinite amounts of data. You can trade the wild swings, but you shouldn’t do so blindly. 

Prepare Accordingly

Have a plan. For example, you might want to consider tightening up your risk parameters and cutting your lot size in half, and know how much of your account value you are willing to risk on each trade. 

Avoid overtrading. When the markets are speeding up, your trading should be slowing down. And if the markets get too thin, then just get out of the way. Take a step back and wait for a better opportunity. And try to remember that timing is everything. You can be right and wrong at the same time in this business, so spend some time looking for the right entry and exit levels.

Sometimes the best offense is a good defense, and always trade for tomorrow.

Trade Well!