Risk and uncertainty are hallmarks of trading, but they create stress. Learn four ways to manage stress in trading and investing.
Sometimes the best starting point for a trading system or even a general approach to the markets is to look within. No matter what your trading style, the way you manage stress could make a difference in your profit and loss.
Last week we talked about three lifestyle factors that traders can control. This week, we dive deeper into a specific challenge most traders face: stress.
Risk and uncertainty are hallmarks of trading, and they create stress, says Dr. Gary Dayton, a trader, clinical psychologist, and the founder of TradingPsychologyEdge. He is also the author of Trade Mindfully: Achieve Your Optimum Trading Performance with Mindfulness and Cutting-Edge Psychology.
"Stress rises when we feel we lack control over a situation. We cannot control the markets, and we assume risk on every trade—the outcome of which is always uncertain. The changing nature of the markets also adds stress. We may adapt to a certain market direction or volatility, and when that changes, our confidence can crumble and stress rises as we scramble to understand a new market environment," Dayton says.
Stress levels can vary from trader to trader. "I have seen some traders experience very mild levels of stress. Others—and this may be more common—can experience moderate to high levels of stress. Stress can be so serious for some traders that their blood pressure shoots up while trading but remains normal while not trading," Dayton says.
Why should traders care? Stress can affect you both physically and mentally:
Dayton offers four tips for managing trading stress:
You can read more on the mental aspects of trading in “How To Avoid Brain Freeze.”
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