TradingTrading Psychology
How to deal with trading stress
A minor problem in trading that has occurred may be felt by you as very painful and serious at a time when you are particularly sensitive to stress, when your mental condition is weakened. The cumulations of negative events affect your trading results, especially losses and mistakes. It is best not to trade then. Stabilize yourself.
Stress in trading and its impact on your results
You become particularly sensitive to stress, and your psychological reaction as a trader is greater and more painful when non-trading stress occurs: you are ill, you or a relative have an accident, a family member or friend dies, you have personal problems (e.g. quarrels, divorce, tensions at home, especially permanent), you have serious problems at work (especially permanent), etc.
Non-trading stress affects trading in the same way as it affects many other situations. Because… why not?
Very important: Stress from different sources cumulate.
Reactions to stress in trading
At times when you are under severe or permanent stress in a field other than trading, you will be more attentive because market failures will be more difficult to deal with and you will be more likely to be knocked off balance.
This increases the number of errors and lowers your intellectual capacity as a trader, so you may find it more difficult to analyze beforehand as well as to trade.
It is possible, but it will be more difficult and you should be more careful in such situations.
How to reduce stress in trading?
You may want to consider what you can do to reduce your non-trading stress. Often, for example, we are the source of our own conflicts and stress for others, and they will return the same to us, creating a vicious circle of negative reinforcement.
If you are in danger of losing your job, for example, think about what you can do to reduce your costs, so that you have peace of mind about the future: peace of mind brings a sum set aside for a year or a year and a half to cover all costs for yourself and your family, plus some extra for unforeseen accidents.
I have seen a situation where a young trader made a down payment from his third or fourth salary for a Bentley (fixed costs every month, installment plus insurance) and moved into a luxury apartment (again, high fixed costs every month). On top of that, there were weekly parties that he funded. As a result, he was spending almost his entire paycheck. There was stress about keeping it all up. Every problem at work caused him further stress, he was not sure if he would lose his job. He got into a negative feedback loop – the accumulation of stress plus parties and lack of sleep caused him to make more mistakes and have worse results.
This is the worst possible situation – he caused himself a state of permanent stress, which had a negative impact on his trading performance, which in turn caused more worry and more stress. A vicious circle. In the long run, it’s a recipe for layoffs, financial disaster or loss of business, or all of the above.
Take a look at your situation and ask yourself if you yourself are causing negative feedback that is (or could be) affecting your trading performance?
STAY IN THE KNOW
