Dealing with stress when trading

stressful trader

In trading, stress is a very overlooked topic in our opinion and is the reason for the main discussion of this article because if unmanaged it can lead to big problems in terms of your performance and motivation.

Trading itself isn’t necessarily stressful per say, as you can make it as stressful as you like depending on your approach to the market, as everything is manageable and even though drawdowns can be the most stressful time for any trader you should know the expectancy of your drawdown so that you manage it accordingly. However, there of course is certain parts of trading which can at times be too much for a single individual to handle and the biggest contribution to stress through trading is when you are learning to take accountability for your actions and you must bear the consequences for such actions.

Unless you have been part of a business or self-employed prior to trading then accountability might be something you are yet to experience and in trading you must learn how to become accountable or you will not last in this industry. The reason you need to become accountable is because you are the only person in control (at least you should be), as you are the person analysing the markets to find opportunity and making the decision to execute a trade when you believe you have valid reason to do so and whatever the outcome is simply because of your actions good or bad.

In society, the majority of people who have 9-5 jobs are typically used to working in either a corporate environment or one for where they are surrounded by other individuals and due to this it is very easy to pass blame. Why as humans do we look to pass blame? The answer to that is simple. We do not want to admit we made an error or a mistake and that due to that decision something bad occurred. We personally believe this stems from schools, as throughout all your education if you made a mistake it had a negative connotation attached to it and instead your education would be focused on being right all the time. However in reality, life does not work like this as you will never be correct all the time but when you are wrong you can use these experience to learn, grow and adapt but for the majority they will not do this. Instead, they will just want to forget about it and move on or pass blame to someone else as they cannot bear the feeling of being wrong. However, unless you take ownership for a certain error or situation how do you expect to learn from it? You should always want to be accountable for your actions because when you are correct you feel the reward but when you are wrong you will be able to analyse what the cause was and how you can learn from it to prevent it from happening again. In our opinion, perfection does not exist but if you take accountability for your actions and continue to minimise the number of mistakes you make by learning from your mistakes then you can indeed become the best version of yourself.

If you do not take accountability for your actions it will result in you becoming stressed and the reason for why that will happen is because when you are correct and you have a winning trade you will put it all down to your actions, however when you lose a trade you will blame anything but yourself. Here are a few examples; the markets are to blame, news reports (fundamentals), volatility, time of the day, you listened to someone else’s opinion/analysis or even the weather. The point is you will literally try to blame anyone but yourself for taking a loss but do the complete opposite for when you are correct which is hypocritical.

If you do incur a loss more likely than not you will become angry, frustrated and become irrational in terms of your behaviour and the first thing on your mind will be to correct that error as fast as you can i.e. revenge trading as you want to make the money back you lost. At Fair Exchange, we never recommend revenge trading and the reason for that is because you are not focused in finding high probability opportunities that provide and edge but instead any reason to get involved in the market as you are only focused on the short-term objective which is to make back what you previously lost. When you do not have precision focus and are instead blind-sighted you will miss certain details, in which can result to further losses and you will get even more stressed from the situation. Trading requires precision focus, demands all your attention and the ability to remain disciplined and when you are making decisions for revenge trading not one of these qualities are taking into consideration. Therefore, all you are doing is making a bad situation worse than it needed to be simply by refusing to take accountability for your actions.

If you incur a loss, accept it was your fault. Regardless of why it was a loss, you have to accept it because it was at your discretion to execute the trade in the first place and to get involved in the market. Of course there will be times when fundamentals will result in your position being a loss but that is simply part of participation for trading the Forex market or any market for that matter. The loss itself does not matter what matters is what you do next and how you deal with it. We recommend if you do incur a losing trade to take needed time away from the charts for any hour or even a few if needed so that you do not put more capital at possible risk, by going for a walk, going to the gym or anything that can relax your mind and divert your attention from trading.

Once you have some needed time to relax we recommend that you re-evaluate the setup to analyse and come to a conclusion for these three things:

  1. Did you follow your trade plans rules of entry into the setup?

  2. Was there some information on the charts that you missed i.e. price action pattern, level of structure (support/resistance) or a fundamental announcement you did not consider?

  3. Was the outcome for the trade a good trade taken or a bad trade taken? Either one will require you to take ownership for your actions but if it was a good trade then you know it was simply part of your process for which you use to trade and is nothing more than a data point in a number of trades you will execute. However, if it was a bad trade then you need to understand why it was, so that you can identify why it was and so that you can prevent the same error from occurring again.

It is vital for your performance and focus that you relieve your stress from trading, as the last thing you want to do is take it out on other people such as; partner, friends or family as that is simply irresponsible of you, as again by doing that you are looking to diverge responsibility for your actions and by doing that you will never learn from the experience to prevent it from occurring again.

Trading can indeed be stressful for many as you are discovering new emotions, thought processes and how make money out of a market when its intention is for you to do the opposite and this demands a lot of mental energy to which should not be ignored. Trading is not a physically demanding job but it is mentally demanding, however many people thoroughly enjoy trading and would happily be looking at charts or learning 7 days a week and sacrifice whatever is needed to be successful. In our opinion, as the demand on you mentally is so great we strongly recommend taking 1 full day off from chart work for example at the weekend take one full day off either; Saturday or Sunday. This includes the entire day with no trading related matters, no chart work so that you completely detach yourself from anything in relation to trading and instead spend time on yourself, family or friends. It is vital to not neglect time for yourself or your mental health, as the demand in trading on your mental health will begin to take a toll if not managed accordingly as you simply burn out.

As with anything in life you need to find a balance and it is key to find that balance in your own life as the last thing you want to be doing is neglecting other aspects of your life. Of course, some sacrifices will need to be made and that is for you to figure out and understand what is more important and how you are as a person in managing your time to ensure you are being efficient in your time dedicated to trading.

Relaxation is essential for long-term success and overall health, as you need to mentally relax at least for one day out of the week be however you relax; if that be with your partner, children, family, friends, watching films or even playing video games as by doing so it will allow to sustain the needed focused, motivation and discipline when your attention and energy needs to be focused in to trading once again for the new week ahead.

We hope that this has helped for anyone who is dealing with stress.

Until next time,

Fair Exchange FX.

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