Using Coping Skills As Tools For Success

Stress and trading often go together. The markets are full of unknowns and uncertainty. So, why is it that one trader folds under all of the stress while another persists through all of the tension and pushes ahead?

A major difference between those of us that thrive under pressure and those that walk away hanging our heads in defeat is the way in which we approach stress management. If we can stick with it when the going gets tough, we have a very good chance of achieving the wealth we seek. If we can’t, we lose. Many traders get into trouble when they start to panic and give in to their impulses. They tend to swing from the highest high when they win, but when they lose, the feelings of disappointment are unbearable. Traders who win can make sense of and give order to what seems to be disorder. Their thinking is optimistic and they truly believe that if they stay with it long enough, they will profit.

Dr. Brett Steenbarger speaks about a study he conducted with sixty-four traders in “The Psychology of Trading”. His research revealed that we can predict whether a trader will be successful based upon the way in which they cope with stress. Dr. Steenbarger also measured the participants’ personality traits.

Some of us, he said, are problem-focused copers. In other words, we come up with coping strategies to deal with stress. We are tuned in to our experiences and take very specific steps to combat stress. If we are a problem-focused coper, we are likely to profit.

On the other hand, we have the less successful traders. If we are one of these traders, we are probably getting consumed by our emotions and spending more energy on controlling our negative emotions than we do on finding solutions to cope with our stress. We generally won’t admit that stress is even an issue and therefore, we can’t work on what we don’t believe is a problem. Of course, this distracts us from our trading, leads to abandoning our trading plans and thus, diminishes profitability.

Stress is a part of being a trader. None of us can escape it, but how we deal with it can make a difference between being successful and falling flat on our face and losing everything. Regardless of whether we are a novice or an experienced investor, it is possible to learn how to cope with the uncertain nature of the markets. First, we must recognise how stress can negatively affect our performance. Rather than avoiding the stress, we should have a game-plan to push through it. It takes a lot of effort, but remaining optimistic while remaining realistic will go a long way to combat the tension we feel. Actively problem-solving is also a key to overcoming stressful situations. We can achieve our goals and feel better about ourselves in the process.