Eliminate day trader's stress pays out big time in performance

How to Cope With Trader’s Stress

I just completed the 10K Christmas Run in Santa Monica, CA last weekend. My personal ambition is to fight my way back into competitive (age group) running; but, in addition to fitness, this activity also serves me in another way as a trader. To be honest, I was not always aware how much exercising might be an important performance factor in our profession.

Stress is an inherent component of trading, as we are working with probable outcomes instead of sure events. A loosing streak can make even successful traders nervous or unsure. We never know whether we weighed the variety of timeframes correctly, or when the market is going to choose a less probable path. We often hear the complaint that, “My stop was hit, then the market turned” or “the market turned just couple of ticks before my target.” Those realities, come with the territory, though – as traders, we should expect them to happen occasionally.

One way to deal with stress is to say no to second-rate trade patterns. It prevents tension by avoiding unnecessary risks of unconfirmed or mediocre setups where the odds are not tilted enough to our advantage. I often see my clients noting the low probability nature of a setup but instead of casting off the idea they still talk themselves into actually pulling the trigger with talk like, “it is going to be good enough for a quick scalp.” A trader who is unable to let go of these low probability ideas might live in constant fear, and has to be ready to dump most of her positions quickly given the low chances of success. Keep in mind that a trade idea that is confusing for us is usually a skip for the smart money too. It is always easier to be picky at the planning phase than take the emotional roller-coaster of a series of losses.

It is also necessary to eliminate stress by practicing our decision making process, as far as to the level of boredom. When I have gone through my decision tree hundreds of times analyzing a certain situation, I know the drill. It is now a routine job that I’ve learned to make automatically. That is why TraderSkillset.com is such an advocate of endless practice of trading decisions; many otherwise stressful calls can be turned into routine business decisions, saving your energy.

The third way of stress reduction gets us back to the opening thought of an active life and my running the 10K. Based on the scientific research of Sweden’s Karolinska Instituet physical activity protects our brain from the impact of stress including depression. You can read the study yourself, but without getting into the complicated details, here is the summary.

Exercise training converts the substance that accumulates during stress that is harmful to the brain. Physical activity triggers a protective biochemical change that shields the brain from being damaged due to stress.

In fact, as traders, we have to be present, focused, calm and unemotional at all times, regardless of the outcome of the previous trade. It seems that the best way to flush our mind and recreate our alertness is some type of physical activity – like running.

Remember our post about the qualities of the day trader, where we presented the “Traders Wheel.” One essential slice of the pie was about the well-being state of your mind and body. I mentioned that being a trader is a profession, a mindset which requires a certain lifestyle, if you will. Besides avoiding stress by being selective when it comes to trading setups, become a master of you your own decision making process, and try to make exercising part of your everyday life. You don’t have to go to the competitive level, but that wouldn’t hurt. Four hours a week of overall physical activity, in a regular manner, will likely make your brain ready to perform throughout the trading month.

The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.

About Laszlo Nagyferenczi

Laszlo Nagyferenczi is a day trader, analyst and instructor as well as the creator of the proprietary Context-Momentum-Signal concept. He has authored over 200 blog articles about his unique approach to trading and the Elliott Wave Theory. His clients appreciate his ability to go from the theoretical to the practical i.e. all the way to the actual trade set ups. Originally hailing from Hungary, Laszlo is fluent in English and Hungarian with a long list of education credentials including BA in Economics, Certified Elliott Wave Analyst (CEWA), Certified Adult Educator for T-Groups, Professional Co-Active Coach (PCC) at CTI. The real education, though, has been the trial by fire in the markets, with real capital at risk.

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