How would you describe your trading stress?
Are you hunched forward while your eyes are glued to every tick of Bitcoin?
Can you feel your heart pounding in your ears as you try to decide whether to add or pare back a trade?
Maybe you are breathing quickly into your chest as you hyperventilate.
On the other hand, you might recognize the symptoms of your trading stress from a pharmaceutical ad.
Now, it wasn’t talking about day trading Bitcoin or Ether. The ad was describing the symptoms of a heart attack. And after hearing it a few times, you may laugh in sympathetic recognition.
After all, you’ve probably felt some of the things they are describing.
Your breathing was short and shallow.
Your eyesight narrowed.
Your heart felt like it was pounding out of your chest.
Your mind went blank.
And sometimes that sick feeling.
Now, heart attacks are no laughing matter. But neither is being intensely stressed when important trading decisions need to be made.
The good news is, you can do something about it.
The two kinds of trading stress
There are two kinds of stress, positive and negative.
As the market approached new highs in November 2020, how were you feeling? Probably pretty good.
You probably felt alive. But there’s also a little stress in there.
You might be eating peanut butter and jam sandwiches every day for good luck.
Your sleep may not be very good, but you feel dialed in.
That’s positive stress.
Now, when the market was taking a swan dive back in March 2020, that probably felt a lot different. If you were long Bitcoin, Ether (or DAI), you probably felt a bit like the symptoms in the pharmaceutical ad.
That’s negative stress.
And if you’re on the sidelines as Bitcoin or some other cryptocurrency climbs, that’s stressful too. Maybe you got hurt in one of the downdrafts since 2017. There may be some other reason why you’re watching rather than participating. Your FUD may have created a feeling of anxiety. That’s also negative stress.
Trading stress isn’t something that might happen. It’s a part of the job.
If you’re a day trader, learning how to manage this stress will be essential.
For other trading styles, managing stress will improve decision-making in all market conditions.
How experienced traders manage trading stress
Now, it’s always more fun to fly by the seat of your pants. But it’s not fun when suddenly (dun dun dun!) the position moves against you, and the internal alarm bells start going off.
Whatever the source of your stress, it needs to be managed effectively to make good trading decisions. Because the market doesn’t care how stressed you are or how you feel.
In fact, you probably feel like it’s “out to get you” sometimes. The reason you feel that way is because you are stressed and unprepared.
Now there are some things you can do to help your stressed-out trading self.
Traders that have been around awhile have learned to manage stress with a couple of key things.
One is, they have a series of trading rules to help guide them in any market condition. Even day traders have trading rules.
Experienced traders have also learned how to manage risk and use their emotions as information. They do this using a trading plan.
And they also keep records of their decisions and performance. This gives them more control over their progress.
Traders that want to excel will also be looking after their health. And number one on the list is sleep.
As a day trader, sleep is key
There are a surprising number of people who brag about functioning on little sleep. As a trader, you can get away with that for a while. But eventually, it will start to affect your decision-making. Because a tired body and mind will have trouble managing stress.
So sleep and rest is number one. This cannot be overstated.
Rest is an important component of every performer’s regimen. Professional athletes have sleep coaches, it’s so fundamental.
Carl Icahn sleeps in the middle part of the day and has all his negotiations in the afternoon. That way, he comes to a negotiation well-rested while his adversaries are tired after a full day of work. This gives him the advantage.
This is the kind of advantage a trader needs when negotiating the 24/7 crypto market.
Without adequate rest, a body and mind are prone to stress and anxiety, so adequate sleep should be a priority.
Traders should think about what they eat
Nobody likes to diet (or even the word diet). It’s a four letter word after all. But to function under stressful conditions, you should have a nutrition strategy.
Now, remember, you will be mostly sedentary during trading sessions. If you’re a day trader, you will be sitting, and your whole system will be on full throttle.
Eating strategies involving high doses of carbohydrates are going to jack up any stress you might already feel. When markets are good, lots of carbs will make positive stress overwhelming. In down markets, you will swing from anxious to sluggish and depressed.
A sugar rush is like stepping on the gas when you are stressed. Then your system kicks in and drains all that sugar, dragging you down. This internal stress is a distraction.
Esports athletes that use this dietary approach have found it doesn’t work very well. As a trader, especially as a day trader, it probably won’t work for you either.
You shouldn’t have to stuff your face with chocolate kisses or those mini chocolate bars left over from Halloween. You don’t need those to get through the trading session. And don’t be like my old trading buddy. He used to eat handfuls of cinnamon hearts like popcorn from a bag under his desk. It wasn’t pretty.
Find a way to eat that keeps you performing at a high level for hours. That means stable blood sugar. There are lots of ways to do that from, carnivore to paleo and keto to vegetarian.
Now, if you drink, I don’t have to tell you what hangovers can do to your stress levels. Besides, what was the last good decision you made when you were drunk or hungover?
Fitness is an advantage for the day trader
Stress can also be managed with various forms of exercise but there are some challenges.
I hear you. You have responsibilities, and it’s tough to get some movement in some days. That’s one challenge.
The other challenge is the choice between high and low-intensity activities, especially for day traders. Let’s look at that.
If you are in a chaotic market period, your body is already heavily stressed, so a lower intensity approach is probably a better option. Aerobic activity with a low heart rate will allow your body to recover from a tough trading session.
A higher intensity approach can keep you sharp without taking away valuable energy for the trading session in other periods.
You can use a tool like a heart rate monitor to help you get the ranges dialed. You can also use Heart Rate Variability (HRV). HRV measures your anatomic nervous system, which is a way of measuring whether you are rested or stressed.
Accumulated stress from day trading activities will show up with a reduced HRV score and a rising heart rate. Knowing this before you train can help you determine what strategy might work best that day.
Whatever approach you take, movement is fundamental for stress management. So find a way to work that into your routine.
Now, there are other stress-related problems you may have to deal with. Neediness is one of them.
Neediness is a silent killer of day traders
Have you ever said to yourself you need something to happen while you were trading?
You need to get this price.
You need to make this money.
You need to make it back.
You need a win.
Or you need this to work out.
This is called neediness, and it is a symptom of uncontrolled trading stress. These are expressions of emotional pain and distress. And they will have a negative impact on your trading decisions.
Banish the word “need” from your trading vocabulary.
Every trade is simply information. You don’t need an outcome.
What you will do is follow your trading plan and execute it. Then take the information and evaluate it. If you can get back to focusing on your process, you can relieve the stress leading to neediness.
Even when you’ve done most things right, stress will happen. In some cases, you can easily…
Cut your stress by making a sacrifice to the trading gods
Now let’s say your trading plan has taken into account the possible trading range, and your stop-loss point remains intact. But you are feeling more stressed than you expected.
To reduce the stress, sell a little. Just a little. You can add it back later as the market figures out what it wants to do. This is known as making a sacrifice to the trading gods.
Now, you may also have on a multi-day swing trade with a well-established plan and limits. Here you may, for some reason, start to feel anxious. Something may be bothering you.
You may not be able to sleep at night because you are stressed about your position. In this case, you can sell your position down to what Livermore called the sleeping point.
There’s no need to sell it all if your trading thesis remains intact. You might only have to sell a couple Satoshis to get your head right. You’ll still be in the trade, but a small sale will relieve the pressure and the stress.
Relieve the other negative stress
And then there’s that other time when the market looks like it’s leaving you behind. You know, that time when BTC took off without you.
Maybe you “knew” it was going to go. Or you knew that was the low.
But the problem is you didn’t put on the position.
Then it goes higher and higher…and you wait, thinking it will come back.
But it never does.
Now, you can continue to sit there, do nothing and allow the stress, disappointment, and regret to build.
If you do that, here’s what is going to happen next.
You are probably going to succumb to stress and emotion and do something you might regret.
Because you HAVE to do something, right? You NEED to?
And if you wait long enough, you might find yourself seeking relief with a nice fat buy at what turns out to be the top.
That’s when needing to have a position can damage your account, and your confidence.
Remember, someone has to buy the top and sell the bottom, but that doesn’t have to be you. At least not with a full position.
So if the pressure becomes too much, make a very small buy just to make sure you have something on. That one action will reduce the emotional pressure and enough stress to let you think clearly.
Without the stress and the neediness, you will be able to go back to focusing on your plan instead of what you missed.
Day trade don’t stress trade
Life is filled with stress of one kind or another. Especially when it comes to money.
As a market performer, taking steps to manage stress with tools within your control is great preparation.
Using sleep, nutrition, and fitness in conjunction with a trading plan sets you up for success. Add in some trading rules and some records, and you’re trading like a pro.
You’ll also be more emotionally durable in adverse market conditions.
Bitcoin isn’t going to disappear. The market will be there tomorrow.
There will be lots of chances to make some coin if you stay liquid, solvent, and manage how stress influences your behaviour.
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