- High pressure and stress is a part of the trading environment. Stress reduction is not a viable strategy. The approach instead is to build a person’s resilience and ability to cope more effectively with the pressure and stress that they are encountering.
- This is done by a process of exposure to the stressful events, and then recovery. The recovery process will prepare you to engage again but with a higher stress threshold.
- Build your stress exposure over time by gradually building the demands on your trading — slowly increasing your position sizing, complexity of trades, diversification, etc.
- Use relaxation techniques to enter a restorative state where your mind and body can recover.
- Look after your nutrition, exercise, sleep, get balance in your life with friends, family, other hobbies.
- Consistent performance is achieved when you have a healthy oscillation between positive peak performance states, and periods of recovery.
Be careful how you use the following words and phrases as they become road blocks or worse take you down the wrong path.
Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.
Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and either do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.
Will– Phrases include: “The market will..” and “I will make money”. Once again the market does not like to be told what to do. It is the bratty kid screaming at the tops of his lungs. The word “will” relaxes your mind, similar to “should”, people use it to be lazy instead of a black background in an otherwise light picture. You can do everything right and still lose money. That is why trading is so effective at diminishing confidence. In most every activity, if you do everything right you are going to get the desired result. Doing the “right” things is bare minimum. Of course, over time you will get paid for doing the right things but it is never when you think it should be and hardly how much you anticipated.
Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. The market is a one way walkie talkie, you listen, it talks.
Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.
Impossible– Phrase includes: “It is impossible to make money”. Once again someone, somewhere is making money. It may not end up being an efficient use of your time or capital but it is possible. You are substituting an excuse for execution.
Sense– Phrase includes: “The market does not make sense”. Many fortunes are made in an illogical market. Logic is a bigger driver than risk controls for most people. It is easier to ignore your P/L when you can see or touch the catalysis. For example, it is cold buy natural gas. By the time you change your view or are forced to change, the market flips. Logic will eventually prevail, with or without you.
Books and films often dramatize financial-market traders as macho gamblers. Now there may be scientific evidence to back up differently as two researchers have linked testosterone levels to the success of traders in one London market while another researcher has linked testosterone and cortisol able to increase financial risk and may destabilize markets.
According to researchers stressful and competitive working environments could be increasing hormone levels and having an impact on decision-making. Experts agreed it was important to know how hormones affected traders.
Both cortisol and testosterone occur naturally in the body. The levels of cortisol do increase when we experience psychological or physical stress. This causes the blood sugar levels to rise and prepares the body for a “fight or flight” response.
The hormones testosterone and cortisol may reflect different stress triggers.
Changes in hormone levels may affect success in the financial markets.
As soon as we sense danger, our body will release adrenaline and cortisol. The adrenaline increases our blood pressure and heart rate and boosts our energy supplies, whereas cortisol has a different job.
Cortisol is also known as the stress hormone. It is a steroid hormone made in the cortex of the adrenal glands, which is released into the blood and transported all over the body. This release in our body leads to our senses being heightened and our heart rate rising. It primes us for our ‘fight or flight’ state to help us survive and get away from danger.
Cortisol is very good for the body in terms of the benefits it provides, unless you have too much of it. Our body is set to react to danger, release cortisol and adrenaline, before calming down once the danger is gone. But, if you are constantly in a state of stress, the cortisol is going to
stay being produced in your body and that’s when it can cause problems.
Nearly every cell has receptors for cortisol and this can cause different reactions taking place. When our body is preparing for fight or flight, there are functions that aren’t needed at that point in time, which means other important systems shut down. Our immune system, digestive system and reproductive system all start to shut down. These reactions are great if you’re just needing that fight or flight mode to escape a predator, but not so good if you spend all day being stressed-out about your trades.
One other issue is that you will be more susceptible to getting ill, while your immune system is
down. It goes without saying that if you’re recovering in bed, you’re not going to be trading Continue reading »