Trading is one of the most stressful careers one can pursue. Every day, traders are subjected to forces of the market which are out of their control. Large portfolio exposure during price fluctuations and swings in the market can result in significant losses if managed improperly.
The dynamic aspects of the market make trading very exciting, however, constantly worrying about small ticks of price can drive traders insane if they have no way to destress. At BetterTrader, we are aware of the complexity of trading and have created a document of healthy ways traders can alleviate stress.
According to multiple surveys, 2 out of every 5 traders feel as though they are under extreme stress every day, and 75% of traders quit after their first two years. Not only are traders who are able to successfully manage the stress of the job happier with their careers, but are on average more profitable s well. During times of uncertainty and complexity, traders may experience extreme cortisol levels, which translate to anxiety as well as physical symptoms such as high blood pressure and other nervous habits.
Understanding how much capital one can afford to lose is essential to managing one’s stress as a trader. Traders should always use stop losses on all their trades, and should never be comfortable losing more than 2-3% of their entire portfolio on a trade. Moreover, managing risk-reward ratios is also key to making sure that the trades one is engaging in are bound to be successful.
Traders cannot find themselves sitting at the computer screen all day, stating at ticker tapes and minute price fluctuations. It is important to remain active, and working out is a great way to reduce stress as well as staying physically fit. Cardio and weight training relax the mind and improve blood flow throughout the body. Studies show that working out increases the natural serotonin, dopamine, and norepinephrine in the brain, which equates to traders feeling better about themselves and their surroundings.
Traders must step away from their desks and enjoy life outside of the markets. Spending time with friends and family outside of the trading hours will equate to less stress, and higher profits in turn. Finding activities that one enjoys, such as going to concerts, sports events, or the beach significantly benefits traders mental complex.
When trading, do not try to focus on too many tasks at once. Trading is already stressful enough, and dividing one’s attention only further adds stress to the profession. During hours when one is trading, they should maintain their full attention on the markets. As mentioned above, devoting time outside of trading hours will further increase one’s focus during trading time. With complex markets, traders should be as locked-in as possible in order to best recognize candlestick patterns and execute on their decisions.
Lastly, traders must learn that every trade will not be profitable. Those that can win 50% of the time are the most famous hedge fund managers in the world. Be content with one’s earnings, and do not mindlessly trade to hope that you will be successful. Always execute with a plan and include time outside of the trading hours to enjoy activities to destress.