In the shorter term - high levels of emotion and stress cause lower intellectual performance.
Lower intellectual performance is, in other words, less efficient thinking. This is the reason that we generally perform less well on any exams, such as forgetting the simplest and most obvious things.
In the long term, constant stress - can lead to irritability, headaches, migraines, heart rhythm disturbances, stomach ulcers.
Some believe that the biochemical reactions that stress causes in our bodies can cause heart attacks, strokes, and may be one of the causes of the formation and development of cancer.
Attempts to relieve stressful situations with alcohol can lead to alcoholism.
In trading, stress can not only lead to losses, I know of traders who are unable to continue their profession at all due to high levels of stress, had to stop.
So this is a serious matter, and practically every trader I know has some way of dealing with stress and its effects.
And I know that what I'm going to say now may be taken as boring, but I really have hundreds of pieces of evidence for this... In which situation on the exam do you have more stress:
Those who are asked indicate that it is usually 3 or more, rarely anyone indicates less. That's why I say that good preparation, good, comprehensive knowledge of the system and practicing it in a myriad of equal situations is the best recipe for good results and low stress.
Because you will be very, very, very well prepared.
Causes of stress in trading
Losing money in the market can be a source of stress reaction. Especially if it is a significant sum for us. For everyone this sum can be different, and for everyone such a level exists, this is the so-called glass ceiling, which we will address in future texts.
Profit can be the cause of a strong stress reaction, the bigger the more likely. I know of cases of traders in whom a large profit caused a traumatic reaction (mental shock). In one extreme case, a trader who made a huge sum on options in one day experienced such a strong mental shock that he was unable to show up at his office for a year.
Just being in the market can cause a stress reaction. This is how it becomes associated in the trader's psyche at some point, so that later the stress reaction occurs constantly. We will soon see how this happens and how to change it to a positive reaction.
Being out of the market can be stressful, especially if you wait a long time for a signal. Another case is when we exited the market, for example, under the influence of emotions and the market continued to move strongly in our direction and "if we had stayed in position we would have made a very good profit." Yet another example of a stressful situation is a lost opportunity, a clean signal that passed us by.
Uncertainty is another source of stress, pointed out by virtually all researchers of the phenomenon. Trading is, in fact, the skill of managing uncertainty and risk - we enter the market with money not knowing "how it will turn out". It is necessary to become accustomed to this situation, experienced traders pay practically no attention at all to "uncertainty" - they know that the outcome of each individual order is not known, but nevertheless, at the end of the month, after a series of orders, they will still come out on top.
Two primary sources of stress: external triggers and imagination
The first is the very situation we are in, for example, with an open position in the market. The second source is our thoughts and the imaginations we create for ourselves. I have mentioned several times that our mind does not fully distinguish between reality and imagination. That is, the mere imagination, the memory of a stressful situation, can generate for us the same reaction as the event.
Example: If you stop reading for a moment and recall a situation: an exam, an accident, a difficult interview, for example, for a job... in a moment you may have the beginnings of a stress reaction in your body.
This is how worrying and uncontrollably imagining all kinds of negative scenarios works - it causes stress and robs you of your strength.
Note: What is different is mental preparation - imagining black scenarios with the intention of dealing with them, preparing your own psyche and sometimes coming up with a response and line of action - such a proactive approach builds mental strength and makes us feel in control.
Stress as the sum of stress from different sources
I will conclude this brief introduction with another important point: if you have other stressful situations besides investing and trading then your stress level will usually be the sum of stresses.
That is, other stressful life events, e.g., an argument, accident, illness, theft, stress in traffic on the street, jet-lag can also have a negative impact on your market performance, as can stress caused solely by factors related to investing.
It is worth knowing that strong noise, crowds of people can also be a source of stress. The U.S. stock market, where traders shout bids one by one, where there is a crowd and noise is even an icon of a stressful environment.
Each of us reacts differently to a potentially stressful event. There are those who will not experience a stress reaction in most of the situations described. According to researchers, their high resilience to stress may be related to the absence of several factors that foster stress: internal sabotage, internal conflicts, fear of success, tying the results.
Here we are not without specific techniques not only to directly affect your stress levels in investing and in general - but also to improve your outlook on life, building optimism, strength and inner resilience. They are also designed to help you become a more relaxed and happier person pursuing your goals by playing the markets with as little stress and emotion as possible.
High and low susceptibility to stress vs. performance on different time frames (TF)
Stress arises as a result of our reaction to external events, and we can also generate it ourselves - by thinking. People who worry have elevated stress levels because of this.
In extreme cases, people who worry can fund themselves with constant high levels of stress. Often these people perceive virtually any event as stressful. If this is the case, they will find it difficult to invest, not only because there are new stressors, but because the overall stress level can quickly spiral out of control. And high stress levels mean poorer market perception, poorer quality analysis, poorer quality decisions.
On the other side of the scale, we have people who can get through a lot of stressful situations without any special problems.
Putting things in perspective and generalizing slightly, we can say that people with higher levels of stress can achieve better results with higher time scales (weekly, daily, four-hourly) and worse results with speculation on lower TF: day trading, quarter-hour, five-minute, one-minute.
Tip: two phases of "getting by" in the market for people with high stress levels. I understand the situation of many investors who want to start with a small capital and "make a quick buck." This usually requires a lot of transactions in a short period of time, just to build up capital.
I don't want to comment on this right now, I just want to share one observation. If you are a less stress-resistant person - consider two phases of your game.
The first, when you accept a higher level of stress and actively apply the exercises and tips I give in the lessons - keeping an eye on your stress level.
The second - when you consciously move to higher TF, where the strain on your psyche will be lower.
The point is to make sure you don't overdo the level of stress on your psyche, because many traders had to leave the market for this reason and there was no one to get them out of trouble.
Another important point: if you have a high level of stress in your life think of some way to change it before you get serious about investing or trading because you may not work out mentally.
Stress levels decrease with increased experience and skill
Of course, it is also the case that the level of excitement and stress decreases over time. Recall what it's like after taking a driving course, when after a while driving is no longer stressful and often becomes a pleasure. In trading, it can be similar. The more competent you become, the more familiar you are with the system and the market, the less stress you will experience. Of course, we have a level of glass ceiling when stress suddenly builds up, but we'll address this topic too in future lessons.
How to recognize a stress reaction?
Read the following description very carefully, because based on it we will learn how to deal with stress: short-term and long-term.
When something sudden happens, you are the object of an attack on the street, you are about to be hit by a car your body reacts automatically with a reaction we call "fight or flight" or "fight or flight".
These reactions occur automatically:
This is a reaction inherited from ancestors, assisting a person at the time of danger.
Lower intellectual performance is, in other words, less efficient thinking. This is the reason that we generally perform less well on any exams, such as forgetting the simplest and most obvious things.
In the long term, constant stress - can lead to irritability, headaches, migraines, heart rhythm disturbances, stomach ulcers.
Some believe that the biochemical reactions that stress causes in our bodies can cause heart attacks, strokes, and may be one of the causes of the formation and development of cancer.
Attempts to relieve stressful situations with alcohol can lead to alcoholism.
In trading, stress can not only lead to losses, I know of traders who are unable to continue their profession at all due to high levels of stress, had to stop.
So this is a serious matter, and practically every trader I know has some way of dealing with stress and its effects.
And I know that what I'm going to say now may be taken as boring, but I really have hundreds of pieces of evidence for this... In which situation on the exam do you have more stress:
- out of a pool of 500 tasks, you have rewritten all 3 times
- out of a pool of 500 tasks, you only did 100.
Those who are asked indicate that it is usually 3 or more, rarely anyone indicates less. That's why I say that good preparation, good, comprehensive knowledge of the system and practicing it in a myriad of equal situations is the best recipe for good results and low stress.
Because you will be very, very, very well prepared.
Causes of stress in trading
Losing money in the market can be a source of stress reaction. Especially if it is a significant sum for us. For everyone this sum can be different, and for everyone such a level exists, this is the so-called glass ceiling, which we will address in future texts.
Profit can be the cause of a strong stress reaction, the bigger the more likely. I know of cases of traders in whom a large profit caused a traumatic reaction (mental shock). In one extreme case, a trader who made a huge sum on options in one day experienced such a strong mental shock that he was unable to show up at his office for a year.
Just being in the market can cause a stress reaction. This is how it becomes associated in the trader's psyche at some point, so that later the stress reaction occurs constantly. We will soon see how this happens and how to change it to a positive reaction.
Being out of the market can be stressful, especially if you wait a long time for a signal. Another case is when we exited the market, for example, under the influence of emotions and the market continued to move strongly in our direction and "if we had stayed in position we would have made a very good profit." Yet another example of a stressful situation is a lost opportunity, a clean signal that passed us by.
Uncertainty is another source of stress, pointed out by virtually all researchers of the phenomenon. Trading is, in fact, the skill of managing uncertainty and risk - we enter the market with money not knowing "how it will turn out". It is necessary to become accustomed to this situation, experienced traders pay practically no attention at all to "uncertainty" - they know that the outcome of each individual order is not known, but nevertheless, at the end of the month, after a series of orders, they will still come out on top.
Two primary sources of stress: external triggers and imagination
The first is the very situation we are in, for example, with an open position in the market. The second source is our thoughts and the imaginations we create for ourselves. I have mentioned several times that our mind does not fully distinguish between reality and imagination. That is, the mere imagination, the memory of a stressful situation, can generate for us the same reaction as the event.
Example: If you stop reading for a moment and recall a situation: an exam, an accident, a difficult interview, for example, for a job... in a moment you may have the beginnings of a stress reaction in your body.
This is how worrying and uncontrollably imagining all kinds of negative scenarios works - it causes stress and robs you of your strength.
Note: What is different is mental preparation - imagining black scenarios with the intention of dealing with them, preparing your own psyche and sometimes coming up with a response and line of action - such a proactive approach builds mental strength and makes us feel in control.
Stress as the sum of stress from different sources
I will conclude this brief introduction with another important point: if you have other stressful situations besides investing and trading then your stress level will usually be the sum of stresses.
That is, other stressful life events, e.g., an argument, accident, illness, theft, stress in traffic on the street, jet-lag can also have a negative impact on your market performance, as can stress caused solely by factors related to investing.
It is worth knowing that strong noise, crowds of people can also be a source of stress. The U.S. stock market, where traders shout bids one by one, where there is a crowd and noise is even an icon of a stressful environment.
Each of us reacts differently to a potentially stressful event. There are those who will not experience a stress reaction in most of the situations described. According to researchers, their high resilience to stress may be related to the absence of several factors that foster stress: internal sabotage, internal conflicts, fear of success, tying the results.
Here we are not without specific techniques not only to directly affect your stress levels in investing and in general - but also to improve your outlook on life, building optimism, strength and inner resilience. They are also designed to help you become a more relaxed and happier person pursuing your goals by playing the markets with as little stress and emotion as possible.
High and low susceptibility to stress vs. performance on different time frames (TF)
Stress arises as a result of our reaction to external events, and we can also generate it ourselves - by thinking. People who worry have elevated stress levels because of this.
In extreme cases, people who worry can fund themselves with constant high levels of stress. Often these people perceive virtually any event as stressful. If this is the case, they will find it difficult to invest, not only because there are new stressors, but because the overall stress level can quickly spiral out of control. And high stress levels mean poorer market perception, poorer quality analysis, poorer quality decisions.
On the other side of the scale, we have people who can get through a lot of stressful situations without any special problems.
Putting things in perspective and generalizing slightly, we can say that people with higher levels of stress can achieve better results with higher time scales (weekly, daily, four-hourly) and worse results with speculation on lower TF: day trading, quarter-hour, five-minute, one-minute.
Tip: two phases of "getting by" in the market for people with high stress levels. I understand the situation of many investors who want to start with a small capital and "make a quick buck." This usually requires a lot of transactions in a short period of time, just to build up capital.
I don't want to comment on this right now, I just want to share one observation. If you are a less stress-resistant person - consider two phases of your game.
The first, when you accept a higher level of stress and actively apply the exercises and tips I give in the lessons - keeping an eye on your stress level.
The second - when you consciously move to higher TF, where the strain on your psyche will be lower.
The point is to make sure you don't overdo the level of stress on your psyche, because many traders had to leave the market for this reason and there was no one to get them out of trouble.
Another important point: if you have a high level of stress in your life think of some way to change it before you get serious about investing or trading because you may not work out mentally.
Stress levels decrease with increased experience and skill
Of course, it is also the case that the level of excitement and stress decreases over time. Recall what it's like after taking a driving course, when after a while driving is no longer stressful and often becomes a pleasure. In trading, it can be similar. The more competent you become, the more familiar you are with the system and the market, the less stress you will experience. Of course, we have a level of glass ceiling when stress suddenly builds up, but we'll address this topic too in future lessons.
How to recognize a stress reaction?
Read the following description very carefully, because based on it we will learn how to deal with stress: short-term and long-term.
When something sudden happens, you are the object of an attack on the street, you are about to be hit by a car your body reacts automatically with a reaction we call "fight or flight" or "fight or flight".
These reactions occur automatically:
- Muscles tighten in anticipation of action.
- Breathing speeds up and deepens. You may also hold your breath for a moment in a situation of imminent danger.
- The heart rate increases, the volume of blood ejected during each contraction increases, and blood pressure rises.
- The glands inject hormones into the blood that speed up the heart rate, respiratory rate, muscle activity, and the breakdown of nutrients needed by the muscles.
- Pulmonary tubules dilate, blood vessels in the muscles and brain expand.
- Pupils dilate and auditory sensitivity increases.
- The body prepares itself for action: fight, defend or flee.
This is a reaction inherited from ancestors, assisting a person at the time of danger.
