I heard an interesting interview the other day on Traderinterviews.com . According to a poll of 700 traders the amount of time you've been trading doesn't determine if you are profitable. A similar percent of traders were profitable after 6 months as those trading 5 years. After looking at several factors the conclusion was that unmanaged stress was the primary cause of losses. Paraphrasing " errors did not correlate well with profit but level of stress did. The more stressed we get the further from profits we get" Comments ? And what are you doing now or have you done in the past to manage stress ? http://www.traderinterviews.com/free/2011-02-01_Trader-Survey-Results.php i'll reply in another post
Steps i've been taking to reduce stress during trading. 1. Know my set ups and back test to have the confidence to act on quickly. 2. I have not had profit targets but exit based on PA and S/R. I recently concluded that this was contributing to too much indecision and stress. I will be looking into adding profit targets as an exit strategy. 3. Remembering to think in probablities. Losing trades are part of the business 4. Be aware of stress and it's physical manifestations. I know when i'm in a trade I tap my foot too much, forget to take deep breaths, begin to jump quickly from chart to chart. I'm reminding myself more to breath, stretch and to try to relax. I know from my limited experience playing music that the sense of stage fright decreases the more you play in front of other people. I would expect that stress in trading also decreases with more time in front of the screen (?) 5. Exercise after market hours. 6. Am considering meditation
Been practicing "power of now" helps to focus on NOW and stay objective. It explains that the stress results from Past experience (fear) and Future expectations (fear/Greed). At the end of the day its all about controling the Monkey (MIND).
I don't know whether the word stress is sufficient when such words as anxiety, dread, fear and panic are more accurate as the base reactions in the mentality of losing or being an overall loser. The nub of all this is trading without a plan or system. Or alternatively you are trading with a system which is insufficiently successful. In other words you have a system which is incomplete or just plain too faulty. Hence the resulting anxiety, dread, fear or panic. No amount of calm can overcome either incoherent trading or an insufficiently robust system for trading. Heres what you do. If you are naturally savvy and calm, you DO NOT TRADE until you have devised or adopted a methodology which is generally very reliable and provides your trading signals. You do the work and trial testing for however long it takes. The other option is that as an amateur you are not subject to any workplace discipline or job responsibility and so you can give full reign to your entire natural range of stupidity, rash impulses and base reactions of fear, catatonia and panic. Its your chance to show who you really are. You are someone who is always going nowhere but can also make the extra mile backwards with more losses.
Here is a good post on meditation from a few weeks ago...it is worth reading: http://traderx.blogspot.com/2011/04/just-say-om.html
Thanks for the link, newtoet. Very interesting. I'm currently reading " Real Happiness:The power of Meditation" looks like i'll have to make the time to start trying it.
I really like this list. Especially No.5. Exercise is essential for destressing and flushing out your system. Daily exercise is SO key!!
I agree, that stress is one of the worst internal enemies of a trader. Recipe to avoid it, is convince yourself that individual trades don't matter and as a result, don't care about outcome, only about long term results of your trading business. It's not easy task to achieve at first, but as in many other cases, practice definitely helps. And to practice to not have "wrong" emotions and grow "right" emotions within yourself is very important part of professional evolution of a trader.