Trading Psychology: How to Manage Trading Stress

April 30, 2022

Stress is a major problem for traders in volatile markets, where prices can fluctuate rapidly and unpredictably. In order to stay on top of the market and make profitable trades, it is important to be able to effectively manage your stress levels as stress can not only be distracting, but it can be detrimental to the human body. In fact, studies have shown that stress can impact everything from our cognitive function to our cardiovascular health. However, many people don't realize just how damaging stress can be, and how important it is to find ways to manage it. There are a number of different methods that you can use to control stress in a volatile market. Here are 7 of the most effective:

1. Have a clear trading plan

When you know what your goals are and have a clear plan for how to achieve them, it is much easier to stay calm and focused in a volatile market. Make sure that your trading plan is realistic and achievable. Before entering any trade, know exactly what you are hoping to achieve and what your exit strategy is. This will help you stay focused and avoid making impulsive decisions based on emotion. You do not want to place yourself under unnecessary pressure of not having clear direction. Relate this to a non-trading related activity. Have you ever assembled a piece of furniture with confusing directions? How frustrated were you? If your trading plan is clear, you may be able to avoid some negative feelings and you will have a clear vision of how to succeed!

2. Manage your risk

If you are worried about losing money in a volatile market, then make sure that you are managing your risk appropriately. This means setting stop-losses and taking profit levels into account before you enter any trade. Risk management is a safeguard while trading in a volatile market as the less you lose, the less overwhelmed you will become. Risk management is essential to keep you from getting overwhelmed.  

3. Set realistic goals and expectations

It is easy to feel overwhelmed when trading in a volatile market, especially if you don't have clear objectives or are expecting too much too soon. Taking the time to set realistic goals and expectations can help you stay focused on what really matters and avoid getting caught up in the frenzy of day-to-day price movements. Instead of setting your profit goal for the day at $1000 perhaps set your goal at $200. Like this, anything above the goal is a feeling of productivity rather than a stressor of trying to reach too high of a goal.

4. Practice good self-care

Self-care includes getting enough sleep, eating healthy meals, and exercising regularly. When you feel good physically, it is easier to keep your emotions in check and make rational decisions. Have you ever stayed awake for more than 24 hours? Do you remember how you felt? If you were awake multiple time throughout the night with your newborn, perhaps limiting your daytime trading activity would be advisable. Know when you are in a poor mental space and adjust your life activities appropriately. If you have a day that you do not meet your trading goals, work off your negative energy by going on a run or a bike ride. You will likely feel way better afterwards. This is a way better strategy than getting snappy with members of your family that will likely create more turbulence in mental health. Making good personal care choices is necessary. The better you feel, the better you will perform.

5. Stay informed

It is important to stay up to date on all the latest news and developments in the markets you are trading. This will help you anticipate price movements and make informed decisions about your trades. Being knowledgeable about the latest events influencing your investments is very important as a means to limit your losses and maximize your gains. Always be aware of your companies’ earnings summaries and annual reports. This will help you to succeed as a trader.

5. Keep a spreadsheet to analyze your performance

Have a spreadsheet that you record your personal trade performance. Have a notes section in the spreadsheet where you can write your thoughts and feelings about your trades. It will help you to identify what errors you are making in your performance and how to improve in the future. We all learn through our failures. This can be a helpful way to identify patterns in your behavior and find ways to improve over time.

6. Take breaks

It is important to take regular breaks throughout the day to clear your mind and recharge your energy levels. This will help you stay focused and diminish stress levels. Take time to eat a healthy lunch. Being hungry can diminish your focus. Taking yourself away from your computer screen for a few minutes also helps you to refocus your energy. It’s difficult to constantly stare at multiple computer screens. This creates eye strain that lends to headaches. Moving around and taking a break will help you to focus more intently when it is time to do so.

7. Ask for help

If you are struggling with managing stress in a turbulent market, don't be afraid to reach out for support from family, friends, or professional counselors who can provide guidance and tools for coping with these challenges effectively. With the right strategies in place, it is possible to maintain a healthy work-life balance even in times of high volatility and uncertainty.

Stress is an inevitable part of trading, but it doesn’t have to control you. These tools can help you manage stress so that you can stay in the game and make profitable decisions. Remember, you are not alone in this. Other traders are also dealing with stress, and they are looking for ways to overcome it. Use these techniques to improve your performance, and don’t be afraid to ask for help when you need it. Succeeding in a volatile market takes courage and determination, but with the right mindset and approach, you can do it.

We hope this article was helpful in providing some useful tips for managing stress in a volatile trading market. If you found this information helpful, please share it with others who might benefit from it