I know every trades has some risk, but I find that I keep worrying about it every time I see a good setup and it makes me hesitate from entering. I would constantly just watch the price bounce up and down. Should I stop doing that as I suspect that is what causing my nervousness. What are ways I can get over this psychological barrier? Maybe I should just dive in and put a reasonable stop?
"See" your setups, make your trades. You should always have stops in place and you should always have targets in place. See your setups, have your stops/targets figured out ahead of time, make the trade, and then let it ride. Live in the moment. Don't worry about your previous trade, don't worry about your next trade. Don't worry about where price might go. If your setups are high probability, then in the long run you will profit. Don't micromanage your trades. I'm not overly qualified to give advice because I don't even trade real money right now, but I've been looking at the markets for about 6-7 years. You are the only one who can get over your psychological block. You will have to learn how to disassociate yourself from your money. Also, don't be under capitalized as your risk tolerance will be much lower and your stress level will be much higher.
The worry comes from the fear that your "good setups" aren't all that good. When the setups are good, the worry dissipates.
IMO, it is about finding out your personal risk %. For example, I have no problem risking 10% of my bankroll on some trades/spreads, however I would be (and have been) very nervous when I tried to use 20% of my bankroll for the same trade/spread. And because I was nervous at 20%, without meaning to, I found that I made decisions slightly differently which hurt my bottom line. Find your comfort level. Usually it means risking less per trade or saving for a larger bankroll. Joe.
Enter the trade and deal with your worries about losing. It's all about perception. If you view setups as potential winners as opposed to potential losers I'm sure that you would act on your signal. You must have positive expectancies to trade, otherwise you're going to be 2nd guessing yourself all the time and missing out on good opportunities. Then when you finally get the gall to enter a trade and it turns out to be a loser, it will only reinforce your negative mentality. Trading is an odds game at the end of the day. To capitalize on those odds you must act on your signals. There's no secret sauce to action. Just do it. Check out the now defunct Traderfeed blog for some great insights into trader mentality.
There is always fear. It is the nature of the business. You just need to learn how to face it and not let it get in your way.
Just think of it like driving your car, i.e. taking your life in your hands each time you drive. Seriously, just trade small until you have confidence in your method.
Agree with pspr. Probably some fear will always be present for you. Trade small and often with your method(s). Experience with your emotions will come. Fear will go down to manageble levels with time so you can pull the trigger when its time. Give it time and lots of practice.
When I was about twelve, there was a popular song called "Let's Dance!" We corrupted the clean tean lyrics to "Hey, baby, won't you take a chance? I left my rubbers in my other pants!"