You no doubt would have heard people tell you about how bad stress is in trading, how stress is one of the worst feelings that you can have and you should do whatever you can to try and avoid stress completely or ways to help reduce it. However, could stress actually be a positive thing, could it actually help you when trading?
Stress can cause people to break down, it can reduce your attention and can make you make some bad decisions, especially when it comes to trading, however, in life, stress can actually be a good thing, stress is what gives you your fight or flight survival instincts and if you did not have it, you would probably be dead by now, stress will literally save your life.
The problem is that different people will react to stress in completely different ways, stress is like an injection of energy and feelings into your brain, it can make you freeze in place, it can make you jump out the way and it can completely confuse you, what it does to you depends on who you are and so for some, it can be a massive positive, but for others, it can be a disaster waiting to happen.
Before we get into some of the positives of stress, stress ultimately will cause you to automatically make some decisions, which you can imagine that when you are trading, it may not be the best scenario. So when people tell you that when trading you should be trying to avoid stress, you should believe them, while it does have some positives, trading is not something that you want to be making quick and rash decisions when doing, so when you are feeling stressed, if you do not react the right way naturally, try and avoid it completely.
We mentioned above about the fight or flight reaction that people have with stress, there is also the third thing that could happen, you could freeze in place, much like a deer does when it sees the headlights of an oncoming car, the deer freezes as a defense mechanism, although in this scenario it is actually the worst thing that it can do, that is what it has trained itself to do.
Think back to the last time you were in a scary situation, how did you react? Did you try to get away from the situation (run) or did you try to overcome it (fight)? This would be your natural reaction to stress, this is not a trained reaction, this is just6 how your brain automatically reacts to it, but how is this helpful for trading? Depending on your reaction, or your ability to train your reaction, we can use stress to really focus your mind on the thing that is causing it, finding ways to overcome it, rather than avoiding it.
It is important to understand that stress is a part of trading, it will always be there and will be impossible to avoid it completely, it will most likely rear its head when you make a loss, and you will make losses as they are a major part of trading. The thing that we need to do is to train ourselves to use that stress to our advantage. We want to use that stress to focus our mind and to calmly resolve the issues rather than freezing or panicking when something happens which can lead to rash uncalculated decisions and trades.
So now that you have a basic understanding of what stress can do and that losing and stress are unavoidable parts of trading, what do you do with this information? We need to be able to train your mind to react in a certain way when you start to feel some trading stress, a way to avoid making rash decisions, and instead focusing yourself on the issue that is causing the stress.
When we mention reacting to the stress, it does not necessarily mean taking action, for many of us, the best scenario would be to avoid stress entirely, or when it does start to show its ugly head, we are able to get out the way, so being able to recognise those signs is, in fact, a reaction to it, you need to get a good understanding of exactly what stress looks and feels like to you, this will enable you to know when it is starting to approach and will give you time to react accordingly.
For many, simply getting rid of it is perfect, when you start to feel it coming, use that as your time for a break, you always need breaks, so there is no better time to take one, it will give you a break and also help to remove any causes of stress at that point in time.
For those that thrive on stress, you need to use it to focus on whatever is the source, if it is low, use that time to learn why you lost, look at your journal or your trade history, getting an understanding of why something caused you stress will enable you to better understand it and have an understanding of why something happened often enables you to better deal with it in the future should it happen again.
Stress is not an easy emotion to deal with, but it is something that you will come across a lot when trading, in fact, it will be one of the most seen emotions, it is caused by losses, by the markets not moving the way you want it to, money issues, and even a lack of trades. There are many things that can cause it, what is important is how you deal with it, if you freeze or simply begin taking trades without thinking about it, it will only lead to more losses. You need to be able to control it, remove it, or use it to your advantage and focus your mind on the task at hand. Whatever works best for you, it is just important that it is under control, and you do not let this very powerful emotion and feeling get the better of you.