Danger and fear

I used to watch "After Earth" which is a science fiction movie casting with Will Smith. https://www.youtube.com/watch?v=CZIt20emgLY. The story is not very brilliant indeed but there is one line that inspires me much. It says "Danger is very real but fear is an option".

The reason why this line stands out so much that I remember it so well is that because despite it was just a teaching from Will, a father, to his son in the movie but in fact it could be a motto to everyone. It even sounds a bit of philosophical if you dig a little deeper in it.

Danger is something life-threatening and its existence is objective so it is real. It could be something like natural disasters or like being in a sinking ship in the middle of ocean. Fear is an instinct when one comes across danger. When facing these dangers one can choose to fear or not to though. Not many people in real life come across many cases encountering life-threatening scenario. Yet fear did strike though and it can arise out from nothing real just like any kind of phobia which is just a mental disorder. This is particular true for money gamers who constantly face greed and fear, eg., FOMO (fear of missing out) and fear on potential loss. Greed leads to FOMO while once engaged in a position, fear on potential loss will always set in.

As facing fear is the life of almost all money gamers have to live with so distinguishing real danger from an invalid fear becomes imperative as fear is an extreme anxiety which is harmful to one's health, mental and/or physical.  Having said so it is easier said than done though for those dangers and fear in the financial market setting. Unlike in the real life situation dangers mean the loss of life or at least injury which are tangible, however dangers in the financial market is more vague in definition because the loss could range between the vanish of just a small portion of own wealth to total loss or even bankruptcy. These dangers trigger fear. Fear does not necessarily related to danger though. Very often fear just arises out from our misjudgment on the situation. Therefore the fear arising from the different scenarios deserve a careful scrutiny inside them.

While fear per se is a mechanism preventing us from contracting danger but fear also limiting us from venturing into risks which could lead to potential profit. The first part of the line in the movie "Danger is very real" is the key point. Danger is something that can really bring damage so we must be respectful to dangers. Yet the latter part of the line "fear is an option" is even more meaningful. After knowing we are facing a danger and feeling the fear associates with it, we can make the choice, to navigate among the fear or be led by it. For sure this must be an informed decision and naturally it must be made only after evaluating how likely the danger will come true and the extent of the damage. On the other hand, if danger does not happen at the end of the day then what the reward is. This is just about the concept of probability and odds in my earlier post.

Warren Buffett advocates to buy in when the general public is in fear. Every value investor has heard about it and promised to practice it. Yet when the market is crashing and seems to go on, fear from self sets in, it is not easy to do so. This is the exact time to review this line "danger is very real but fear is an option".

Good luck in trading!