Stress and Trading

Stress can be the biggest enemy we face as traders, therefore, it’s vitally important for you to understand where it comes from and know how to deal with it.

First of all recognize that stress can be good as well as bad.

Stress is great when something’s wrong and it prompts us to take action. Stress is also an essential part of growing and learning. When we try something new for example it often pushes out of our comfort zone which can cause a little, or maybe a lot, of uncertainty.  And when we are uncertain, we feel stress. In this case stress, we should embrace that feeling because it’s a signal that we’re growing as we reach for new goals.

On the other hand, stress caused by making up scenarios of unfavorable outcomes and trying to control things you have no control over is very damaging.

Here’s the thing about stress; when you create stress in yourself, the higher logic functions of your brain shut down. Once that happens, you become emotional and irrational and make poor decisions. Not the best thing with thousands of dollars on the line.  So what do we do about it?

1. Realize that stress is caused by making scary movies in our heads and there are basically two reasons we would do that. First is because there is real danger in which case, when trading, close the trade. And second, it can happen when we are uncertain, in which case, we are designed to imagine the worst case scenario and there’s the stress.

2. Become aware. Pay attention to yourself and identify when stress starts to pick up.

3. Realize that you and you alone are responsible for feeling stressed. You are either imagining something going bad or you are asking yourself questions that cannot be answered.

4. Find out what you are doing or thinking to cause the stress and determine if there is a real threat, if so deal with it. If not, reframe it.

Here’s an example, your brain is an amazing machine and will frantically search for solutions to anything you ask it, especially when there is emotion behind the command. So if you say to your brain something like “Tell me where the market is going and you better be right or it’s going to mean a lot of pain!” no wonder your stressed! First of all, you’re telling your brain to do the impossible. No one knows where the market is going nor do you have any control over where it’s going. Imagine telling your best friend that he better tell you right now whether it will be raining exactly one month from today, and he better be right or the worst thing imaginable will happen. Do you think he’d be stressed? Do you think he’d be obsessed with watching forecasts and creating evidence to support whatever he is fearing most? That’s what you’re doing to yourself. So why wouldn’t you be stressed?

Instead, reframe your request. Only give yourself commands or ask yourself questions about things you do have control over and never threaten yourself with massive pain.  Say to yourself, I realize it is impossible to know what the next move will be, tell me the best thing to do if the market does X and the best thing to do if the market does y. Then let go of the outcome because ultimately you have no control over it anyway. If you did the best you could with the information available at the time and things didn’t work out, you did a great job and the outcome was not your fault. So give yourself a pat on the back for staying focused and in control and then take any learning you got from the experience and do better next time.

For more information on trading stress free,  click here to learn about our Trading Triangle Program !