Good preparation, good comprehensive knowledge of the system and practicing it in a multitude of equal situations is the best recipe for good results and low stress. Because you will be very, very, very well prepared.
Stress, losses and their consequences
Inthis lesson we will begin the subject of stress and its impact on the trading results — in the short and the long term. In addition, you will get the first tasks/exercises, which will lead to long-term reduction in stress level.
In the short term — high level of emotions and stress cause reduction in your intellectual ability. Lower intellectual ability, in other words, is less efficient thinking. This is the reason that we, in general, do worse at exams, e.g. we forget the simplest and most obviously things.
In the long term — constant stress may lead you to irritability, headaches, migraines, cardiac arrhythmias, gastric ulcers, and more! Some believe that biochemical reactions, that cause stress in our body, can cause heart attacks, strokes and may be one of the reason for the emerging and development of cancer.
Attempts to discharge stressful situations with alcohol can lead straight to alcoholism. Only few people know that William Griffith Wilson, founder of Anonymous Alcoholics, was a professional broker on Wall Street and even succeed some time ago.
Trading-related stress is not just a loss on the market! It has a broader impact on your life. I know traders who, because of high level of stress, are not able to perform their profession — they had to stop trading. So, there is a serious matter. All the active traders I know, have their own solutions of dealing with stress and its effects.
Because our goal in this course is long term profitability — we will deal with all sources of stress one after another. Are you ready? 😉 Let’s start!
The causes of stress in trading
Loss of money on the market can be a source of stress. Especially if it is a signification sum for you. For each one this sum can be different, but it exists for everyone. It is the so-called glass ceiling that we will deal with in future lessons.
Interestingly, profit can also be a reason for a strong stress response. The biggest profit, the higher probability of stress. I know traders whose large profits have cased traumatic reactions (psychological shock). In one extreme case, a trader, who in one day earned a huge sum on options, experienced such a strong psychological shock that for a year (!) he was unable to appear in his office.
Just being on the market can cause stress reaction. At some point it is associated in the psyche of the trader in such a way that later the stress response appears constantly. Soon you are going to learn how this happens and how to change that to positive reactions.
Being out of the market may be stressful, especially if you wait for the signal for a long time. Another case is a situation when you exit from the market, e.g. under the influence of emotions, and the market continued a strong move in your direction so, if you were in position you would earn very good money. Another example of stressful situation is a lost opportunity, a clear signal, which you missed.
Uncertainty is a next source of stress, indicated by practically all researchers. Trading is essentially the ability to manage uncertainty and risk — you enter the market with money not knowing “how will it end”. You should get used to this situation. Experienced traders practically do not pay attention to “uncertainty” — they know that the result of the single order is unknown but nevertheless, at the end of the month, after a series of orders, they will be on the profit.
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