Trading in the markets is one of the most stressful professions on the planet. Prices are constantly in motion, and you need to be consistently and effectively processing an amount of information that would leave the average person dizzy and reeling. On top of all this you are competing with some of the smartest people in the world who are also trying to capitalize on every single trading opportunity that you find.
Traders know what havoc can trading stress create in both professional and personal life, so trading stress needs to be controlled. Lets discuss few steps which will help in stress mitigation.
Controlling trader stress requires only a few simple steps. But you must also make a commitment to change bad trading habits and constantly monitor your behavior as a trader.
Every trader is different. Every trade is different. The market is constantly changing. This constant change can be a major source of stress for any trader. Most traders hold multiple open trades at any one time. The market is constantly changing and moving. Events happen: war, peace, elections, natural disasters, weather, and even holidays. Almost any event can affect the market and your trades. Change can be very stressful—all change even happy events. Every trader’s life is constantly full of change. Does that mean that a trader’s life is constantly full of stress? Not necessarily.
These are the top three sources of stress reported by traders.
• Dealing with uncertainty everyday: Most people have a pretty good idea of what the day, week and month will bring. Traders know that everything can change in a matter of hours if not minutes…or even seconds! The markets will quickly overwhelm any trader who gets complacent and is not constantly on their toes.
• Risk of failure: Making the right call on a trade is one of the greatest feelings in the world, and the rewards from trading are hard to beat. However, the corollary to this upside are the enormous potential losses from failure. Every decision in trading can have significant negative consequences.
• High expectations: Whether it is workplace targets or the goals that you have set for yourself, the market is not always going to cooperate when you want it to. Riding out the inevitable market lows can really take its toll after a while.
Three Steps to Controlling Stress
There are many things that traders can do to control stress, including implementing the stress-free trade. However, three basic steps should help the trader to manage trader stress. Let’s review the three steps to controlling stress.
This is very important! One way to control change and stress is to use a trading system. A trading system can limit your response to change. It can also remove stress from the trader’s life by preparing for any event in the market.A trading system can help a trader know when to buy and sell at certain prices, know how long to hold, know when to take a profit and when to cut losses, and know when to do nothing. A lot of events might still be happening, but the trader who follows a system has his eyes and attention on the trading system rather than the fluctuating events.
A trading system is an empowering and consistently stress-reducing tool for all traders.
Make a trading schedule.
Many traders hold the belief that they must be constantly trading. Instead of trading on one’s own schedule, they feel that they must trade whenever the market is open and slow down only when the market closes. Without a schedule for one’s trading, a trader can feel guilty, overwhelmed, and panicky.A trading schedule helps the trader regain control over his day and trading activities. The schedule can be a daily or weekly schedule though I don’t recommend a monthly schedule because it’s not specific enough to be helpful.
Most importantly, when you’ve made a schedule, stick with it. Hold it sacred. Consider it your work schedule (actually, it is!) so you have control over your trading day.
Set goals for trading.
This is an incredibly powerful way to stay focused. Traders often get buried in the minor details of trading that cause them to forget their ultimate goals. Having trading goals will help to place every trade in perspective. Each trade is not a life or death event when placed in the context of one’s long-term and short-term goals. The problem is that goals are often vague or ill-defined.A goal is tangible and achievable. A trader can have many goals—related and unrelated to trading. An example of a goal: To earn 50,000 a month trading, to master trading stratergy, or to work full-time as a trader. Many people add a time element to their goal setting, but this is optional.
Finally, write down your goals and review them on a regular basis otherwise, it’s very easy to forget your goals and start focusing on the daily details.
So, yes, there are a few stress-controlling tools every trader can use even when the trades go badly. I must emphasize, though, that stress is caused only by one’s response to an event or situation. Control the response. Control the stress!
A Few Reminders
Let’s conclude with a few reminders:
Traders can control stress regardless of what is happening in the market.
Traders can live healthy, enjoyable, and stress-managed lives — forget what you see on television or in movies!
Either stress controls you or you control the stress. You decide.