You can measure a man’s character by the choices he makes under pressure.
– Winston Churchill
You’re in a good position, you have your plan and all is in place. Then you suddenly go off plan and close out the trade. You can’t explain the reason, you didn’t even consider what you were doing before you acted. So what is going on?
There are a multitude of reasons that can make a trader go off plan such as being concerned that the movement wouldn’t go as planned, it was all progressing nowhere fast and not worth sticking with it, or you worried that it was about to suddenly fall significantly etc. Whatever the cause doesn’t really matter, what is important is to understand that whilst we all understand that the ideal is to trade in a calm and detached manner, it is all too easy to succumb to impulse.
A typical cause of such behavior is stress and it is this that needs to be reviewed. Trading by its very nature is stressful as you watch you money ready to grow or reduce depending on how the trade goes. Losses themselves should be easy to weather as proper risk management means that you never risk more than a maximum amount on any given trade. However if the losses start to add up then the stress can mount with it. They are hard to leave behind or ignore and you worry about making up the losses and getting back on track.
In addition it is all too easy to have a bag full of worries and stresses that are nothing to do with trading. Individually none of them may be especially big or significant but when combined with a bad run or a set of other events it may all lead to an inability to focus or even cope. Family, houses, cars, friends and everything else in your life can be the thing that tips the balance because you begin to lose your rationality which influences your trading decisions. You may not even realize that there is anything particularly troubling you.
So what can you do to help protect yourself and your trading? Evidently it is impossible to erase all stress from our lives so you need to manage it. One of the best ways is to ensure that you are able to confide in friends or family about your concerns. Talk to someone about the things that are going wrong and admitting that there is a problem.
This alone may be sufficient to eliminate it or at least push it far enough into the background that it stops influencing your trading. Alternatively you can use external forces to remove as much of your stress as possible by physical release such as going to the gym, going for a run or some other form of exercise. These will help set you back on the track of detachment.
Trading can go one of two ways so making sure that you manage your stressors from the outside is a key way of helping you limit the risks. Not focusing on your planning and trade execution can lead you to greater risks and potentially perpetuating your downward spiral.
So focus on the mindset, reduce your perspective down to the current trade and enjoy the moment. The markets will over time throw everything at you and your life outside will be swamped by the normal ups and downs of life but when trading you need to get focused and leave all of it at the door. And then
Last but not least, remember that you need to focus on your own actions and it’s not a competition. So manage your own expectations and set it up so that you can enjoy what you do, and return you to the profits and fun side of trading.
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