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Managing Trading Anxiety Means Allowing Yourself To Be Human

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Managing Trading Anxiety Means Allowing Yourself To Be Human

Trading anxiety is not as uncommon as many people in high finance might think.

When your trading account is not where you want it and you have taken more losses than you care to admit even to yourself, it can take as much of a psychological toll as it can a financial one.

Anxiety and trading are like water and oil. Actually, they are worse than that. They are like fire and gasoline. Your emotions are the fire and the losses you take from bad trades are the gasoline. You are doing yourself and your portfolio a tremendous disservice if you allow your emotions to get the best of you after a poor trading decision.

The downward spiral that can potentially result from not having your head in the game while making trades is one that is extremely difficult to recover from. The best advice is to disallow that spiral from ever being allowed to take shape, and the best way to do that is to keep your emotions in check whenever you are trading.

Keep the Trading World at Arm's Length

This is metaphorical of course but it makes an essential point: maintain a safe psychological distance from trading no matter how well or how poorly the game has been treating you recently.

It is important to be able to separate yourself from what you are doing so that in the event of an occasional setback, you have not invested all of yourself in the endeavor, and therefore have nothing of yourself left.

That goes for the emotional highs as well. Enjoy them. When we make a good trade and see our bottom line increase, it's a rush like no other. It can provide the confidence that we sometimes need as traders - to take good risks that pay good dividends. But enjoy it in moderation and with a tempered enthusiasm.

It is easy to incorporate bravado rather than wisdom, or machismo rather than insight when making your trades. Don't go too high or too low with your emotions. Find the happy medium.

Properly Manage Risk

Risk management is one of the oldest and most heavily clichéd buzz terms in the history of finance. But there is a reason for that. The proper management of risk is essential in order to both establish and maintain a healthy psyche when going about your day-to-day trading activities.

Whether it is controlling your losses, using correct size lots, or tracking your overall exposure and keeping it limited, risk management can make the difference between a successful trader and…well, the other guy. Begin with a well-thought out (and written out) trading plan, and from there determine overall risk.

Finally, incorporate your day-to-day risk assessment into your overall plan. That little bit of foresight can make a huge difference.

Forgive Yourself

Like any setback in life, you have to be able to effectively move forward from your trading losses. It is one of the worst things in the financial world to live your trading life glancing in the rearview mirror all the time.

Even the most seasoned trading veterans make bad choices and suffer huge losses. Understand and accept the fact that you are not perfect, probably never will be (because there is no such thing as the perfect trader) that you are going to make mistakes, and that some of them are going to hurt more than others.

As soon as you come to terms with this, the sooner your mind will be at ease about your overall trading. You know you do not aspire to make mistakes. No one does.

So with that in mind, be confident enough in your skills and abilities to know that mistakes happen to the best of us. But the best of us do not dwell on them, we learn from them.

 

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