I tried reading this chapter a few times; I'm not entirely sure I've understood it perfectly, but I'll do my best to explain how I read it.
It begins with a paradox: "we ought to combine caution with confidence in all that we do" (v. 1, p. 70).
He later explains that it is not paradoxical when explained like this: "Where things that lie outside the sphere of choice are concerned, there you should act with confidence, but when it comes to things within the sphere of choice, there you should act with caution" (v. 5, p. 70).
How I understand this: If you have a clear understanding of what is not in your control, then you should be able to behave confidently. For example, death is out of our control. Therefore, we do not need to let our fears control us with regard to death - in other words, we can be confident we are going to die and there is nothing we can do about it; the matter is settled.
And, with regard to things in our control (our use of impressions; our attitude; our desires), then we ought to exercise caution and be sure we are judging impressions correctly; that we recognize our attitude ought to be adjusted by ourselves and not swayed by things outside our control.
With this understanding, we can now review Epictetus' statements throughout the rest of the chapter.
In verses 10 to 12, he explains that we all ought to know that death, banishment, pain or ignominy are things outside our control - they could happen to any one of us and our efforts to ward them off will be futile. In this, we ought to be confident! But, as so many people do, we allow sure knowledge to turn into "rashness, recklessness, foolhardiness, impudence" and we allow fear to creep in our lives.
Later, he says, "it isn't death or pain that is frightening, but the fear that we feel in the face of death or pain. It is towards death, then, that our confidence should be directed, and towards the fear of death our caution" (v. 14, p. 71).
Socrates called such things as fear of death, "bogeys" which are similar to masks that frighten children. Children are afraid of such masks because they lack experience and knowledge.
Continuing on the subject of death, "What is death? A bogey. Turn it around and you'll find out; look, it doesn't bite! Sooner or later, your poor body must be separated from its scrap of vital spirit, just as it was formerly. Why be upset, then if it should come about now?" (v. 17, p. 71)
"And what is pain? A bogey; turn it round and you'll find out. Your poor flesh sometimes undergoes rough treatment, and sometimes gentle. If you don't find that to be to your profit, the door stands open" (v. 19, p. 72).
What do we get when we apply this reasoning? "a true philosophical education, namely, peace of mind, fearlessness, and freedom" (v. 21, p. 72).
"No one who lives in fear, then, or distress or agitation, can be free, but anyone who is released from fear, distress, and agitation is released by the very same course from slavery too" (v. 24, p. 72).
We must be able to demonstrate that we have learned from philosophy. The focus ought not to be on how well we remember or write, but how we applied what we learned. "Show me how you are in relation to desire and aversion, and whether you never fail to get what you want, and never fall into what you want to avoid" (v. 31, p. 73).
"See how I never fail to attain what I desire, see how I never fall into what I want to avoid. Bring death before me and you'll know. Bring hardships, bring imprisonment, bring ignominy, bring condemnation" (v. 35, p. 73).
"Let others study how to plead in the courts, or how to deal with problems, or with syllogisms, while you study how to face death, imprisonment, torture, and exile. Do all this with confidence, placing your trust in the one who has called you to this task, and has judged you worthy of this position, in which, once you have taken it up, you'll show what can be achieved by a rational ruling centre when it is ranged against forces that lie outside the sphere of choice" (v. 38-39, p. 74).
I like another translation of this same passage:
"Your duty is to prepare for death and imprisonment, torture and exile - and all such evils - with confidence, because you have faith in the one who has called you to face them, having judged you worthy of the role.
"When you take on the role, you will show the superiority of reason and the mind over forces unconnected with the will."