Stress management is important and overlooked facet to trading. Trading is often considered a stressful business, and yes, it is a difficult business, but a lot of what makes trading stressful is self-inflicted. Large doses of stress have significantly negative impacts on cognitive functions, not to mention it’s just not good for your overall health and well-being. If not properly managed it will lead to burnout. There are strategies, which are discussed below, that can be implemented to mitigate stress in both the short and long-term.
Unrealistic expectations are often at the heart of stress and anxiety.
The pressure to perform at a certain level can become a burdensome weight. It causes poor risk controls and other bad habits that undermine profitability.
Setting monetary goals for specific time-frames is a pitfall many traders fall in.
For example, saying that you will (want) to make X amount in the next month. This sets one up for frustration, as the market may not be conducive at that time for trading and lead to disappointment when one fails to reach the pre-determined goal. It can also leave you missing out on good opportunities if you meet your goal very early on in the period and you take a conservative approach to protect your profits. It is best to focus on doing the right things and then let everything else sort itself out.
Trade with risk parameters that you are comfortable with.
Trading is difficult enough as is, no need to further complicate matters with fear due to taking on too much risk. Everyone has their own tolerance for risk, so stick to what works for you. Make sure you are also trading with capital you can afford to lose. It’s better to trade a little too small than too big.
Draw downs are no fun but they are part of the game. Even the best traders in the world go through periods of draw downs. YOU SHOULD ACCEPT THE REAL SITUATION
Poor planning leads to indecision and stress.
When you aren’t clear on what you want to do it causes anxiety, this should be obvious, but yet traders still oftentimes don’t have a plan and as a result experience unnecessary amounts of stress. Your plan doesn’t need to be a book, but a couple of pages or so that outline your rules and parameters for risk and preferred trade set-ups.
Most traders gravitate towards one style of trading versus another, and so it is important to stay within your comfort zone while still maintaining flexibility for changing market conditions. If you are a trend trader then over weighting towards trend strategies may work best, or maybe you are a range trader, then overweight towards range opportunities. The bottom line is that the more comfortable you are with a style of trading the more confident you will be in making trades.
An alternative, but highly effective way to manage stress, is through meditation.
Yes, meditation. In addition to it being effective at managing stress, it helps develop self-awareness and you learn to create a ‘stop-gap’ between your impression of an event (like a bad trade) and your reaction to it, so you approach things with a more even keel. The benefits are hard to put into words. There are many different types of meditation, Mindfulness, Zen, Transcendental, and so on; not so much about the technique as it is that you are doing it.
Winding Up, trading isn’t an easy endeavor.
But it doesn’t necessarily have to be a highly stressful one. There are plenty of challenges, but many of them tend to make more difficult on ourselves through our thoughts and how we handle certain aspects of the trading process. With the right remedies, traders can become properly equipped to make stress from trading only a minor issue to deal with.
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