Trading under Pressure

Have you ever watched the last few moments of a tense sporting event? Sometimes the last few seconds can make all the difference, like when a quarterback throws a Hail Mary pass for the winning touchdown in the last few seconds of a football game. Depending on how much talent is involved, a great deal of stress can increase performance or hinder it. If you are extremely talented, a little bit of stress may compel you to push your talents to the limits and pull off a miracle. But for most people, it is hard to perform under extreme pressure. Most people choke under the strain. Ideally, it is easier to perform when you feel you can take it easy, calmly assess what you want to do next, and take decisive action. Whether you are trying to live up to someone else's expectations or are trying to reach self-imposed high standards, trading under pressure is bound to put you on edge.

How can you feel more relaxed and creative? The first step is to identify sources of pressure. The second step is to minimize the sources of stress either through taking action to relieve the stress or using thinking strategies. There are at least three sources of pressure: Financial, social, and self-imposed unrealistic standards.

Most of us could use a little extra money these days, so there is always a little financial pressure to trade profitably. But financial strain can adversely impact your ability to trade with a calm, relaxed, focused mindset. If possible, it is useful to relieve some of the financial strain. A straightforward way to lessen financial pressure is to reduce the size of your trades. The less money you risk on any single trade, the less stress you will feel. Thinking in terms of probabilities can also relieve financial pressure. That is, if you remind yourself that any single trade is just one trade across a series of trades, and that the profits across a series of trades are all that matter, you will feel more relaxed.

Social pressure can also tax your limited psychological resources. At its worst, we may continually feel that someone is watching us. Our family, friends, or spouse may expect us to make profits. It's natural to care what they think, but caring too much can gnaw at us. The social pressure to perform can upset us so much that we make trading errors, or hold on to losing trades to avoid having to admit that we have been mounting losses. If you feel social pressure, you may want to get into the habit of keeping how you are doing to yourself. But if you must tell close friends or loved ones how you are doing, make sure they understand that the trading business has ups and downs, and that it is best to not feel too excited during the ups or not feel too upset during the downs.

Finally, perhaps the biggest source of stress is the expectations you place on yourself to do well. If you want to master the markets, you have to be ambitious, but on the other hand, too much ambition can put unnecessary pressure on you. It's better to take it easy. Don't try to be perfect. Try to work hard, but at the same time, just do your best.

When the heat is on, it's hard to perform at your beat. So why push yourself too hard? Why not take some of the pressure off? The less pressure you feel, the more free you will trade. And the more profits you will make.

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