5 steps to handle trading stress

Stress is a major obstacle that every trader must learn to manage in order for his/her performance to be constant. Stress pushes a trader to react irrationally – rarely to his advantage, and strongly influences his emotional state, concentration and motivation. Let’s see how we can better control this trading stress to earn more money.

The FOREX market is open 24 hours a day, 5 days a week, which gives to FOREX traders tremendous opportunities to trade around the clock. The flip side to this constant access is that it can be very stressful, especially if you’re obsessed by your trading.

In trading, stress or anxiety can make you doubt your abilities, which can lead to taking excessive risks just to prove to yourself that you know what you’re doing. You may be tempted to take positions without any underlying logic and without following your trading plan…at this point, your goal is not to succeed but to overcome this anxiety, and prove it wrong.

Your decisions are affected by this harmful behaviour, because you are much more impatient, you have a lot more expectations from your results, and your decisions are emotionally biased.

Patience in trading

5 steps to handle trading stress

1. Know yourself and improve your mental and physical well-being

It is necessary to learn to control your emotions, if you don’t want them to work against you. You must be able to analyse yourself in order to correct harmful behaviour preventing you from making money consistently. It is necessary to be patient and to acquire the knowledge needed to invest in the financial markets.

2. Follow your trading plan and apply sound money management

Once you have determined your trader profile according to your capital, your goals, your time horizon, the assets on which to invest, the degree of risk you are willing to take, you need to think about your investment strategy. Then, you can establish a trading plan to follow: what leverage to use depending on the size of your account, which entry/exit signals to follow, where to place your stop-loss and limit, determine a risk-reward ratio, etc.

3. Boost your self-confidence and strengthen your knowledge

A lack of confidence can strongly affect your trading performance – if you doubt every decision you make, you will be constantly second-guessing yourself.  You will then be more indecisive, especially if you have already suffered losses. You need to develop a positive and dynamic mindset that will help you to be more successful. To be more confident, it helps to have sound knowledge about how financial markets work, how they interact with each other, what their main properties are…in addition to that, you should also know the main characteristics of the financial products you’re using (leverage effect, lot size, value of the point or the PIP…).

4. Acknowledge a stressful trading situation and try to calm down

Trading is a very stressful activity because it requires very high concentration, you can experience high volatility and you are investing your own money…you need to recognize when you’re more anxious or impatient, when you feel overwhelmed or irrational, when you’re impulsive in your trading etc. Then you have to observe how you react to those stressful situations (deep exhaustion, being more aggressive…) in order to control them.

5. Understand the sources of this stress

Once you’ve noticed those stressful trading situations, you should think about what triggers your stress: are you not confident enough about your trading plan? About your chart analysis? Has the volatility increased suddenly? Have you forgotten to check the economic calendar? You need to objectively assess the situation to be able to put things into perspective and know if you really should stress about it…

Conclusion: Those are 5 steps to handle trading stress, but you shouldn’t stop here and find other ways that can help you better control your emotions. Yoga, meditation, breathing exercises, automating certain aspects of your trading and sticking to a regular trading schedule are all ways to help better manage trading stress.

For further reading, you should check out: The power of patience in trading: why it will help you achieve lifelong goals

Happy Trading!

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Muhammad Awais

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