Trading is a stressful business, none of us would deny this. This article looks at ways of reducing stress levels to ultimately make us more relaxed and profitable traders.
The Health & Safety Executive defines stress as ?The adverse reaction people have to excessive pressure or other types of demand placed on them?.
Trading is precisely the kind of profession that provides plenty of ?the excessive pressure? that causes stress. And unless managed properly, stress can have an extremely negative effect on your ability to trade effectively.
Stress can make you excitable, anxious, jumpy and irritable ? not exactly the ideal attributes conducive to profitable trading. Stress can interfere with your ability to formulate judgments and makes you more accident-prone and less able to make good decisions.
Proper management of stress can significantly help with many of the classic mistakes in trading such as letting losses run, cutting profits too early, being too fearful to take a trade, and so on.
This article looks at stress in more details and discusses practical ways to manage and reduce stress so as to make you a calmer, more relaxed and, ultimately, a more effective and profitable trader.
The Physical Effects of Stress
When you?re under stress, a number of physiological changes take place in your body.
- Chemicals, such as adrenaline and nor-adrenaline, are produced to fuel you for the required response.
- Non-critical physiological responses, such as digestion, are shut down.
- Critical responses, such as pumping oxygenated blood to the arms and legs in preparation for fight or flight, are ramped up.
- Sweating increases in an effort to cool muscles and help them stay efficient.
In times past when we were hunters and gatherers, it was this exact response that kept us alive. If you were trekking through the jungle and came across a tiger, you needed to decide immediately if this situation was a threat.
Once you had decided that this was indeed a threat, your body would go on "red alert" and you would fight the tiger or run away. And herein lies the modern dilemma. We are still coming across those "tigers" in everyday life. The difference is now we can’t choose to fight or flee.
But When Was The Last Time You Saw A Tiger ?
It?s easy to think that this fight-or-flight, or adrenaline, response is only triggered by obviously life-threatening danger. On the contrary, recent research shows that we experience the fight-or-flight response when simply encountering something unexpected.
The situation does not have to be dramatic: People experience this response when frustrated or interrupted, or when they experience a situation that is new or in some way challenging.
And the situation doesn?t have to have a physical cause, like a tiger. It can be caused by a more abstract threat, such as a potential loss of status, self-esteem ? or,( of particular relevance to traders), money.
Imagine you?ve put on trade and it starts to move against you. You?re starting to lose money and the stress reaction kicks in. You?ve planned a stop level, but remember that one of the effects of stress is that it clouds your judgment and weakens your ability to make good decisions. Instead of getting out at your stop level, you let your position run. The trade continues to move against you and your losses increase. This leads to greater stress and even greater losses.
You can see how a downwards spiral quickly builds up.
In a stressful situation like the one described, your mind and body are using the process that in past times kept you alive. The problem, however, is that you can?t respond by fighting the threat or fleeing from it. You need to discover an outlet for releasing the pressure that has built up in your body. Fight or flight was a release valve. Now you need to find modern day equivalents.
Taming the Tiger
Here are some ideas that will help you to reduce and manage stress.
1. Relaxation Breathing
It?s long been known that breathing can affect your mental state. Yoga and many martial arts include breathing exercises as an important part of their practice.
One of the most beneficial breathing exercises is ?Alternate Nostril Breathing?. Many yogis consider it to be the best technique for calming the mind and nervous system. Practice it before the start of your trading session and, if possible, once or twice more during the day.
- Close the right nostril with your right thumb and inhale through the left nostril. Do this to the count of four seconds.
- Immediately close the left nostril with your right index finger and hold your breath for a count of eight. Now remove your thumb from the right nostril, and exhale through this nostril. Do this to the count of eight seconds. This completes a half round.
- Inhale through the right nostril to the count of four seconds. Close the right nostril with your right thumb and hold your breath for a count of eight. Now remove your finger from the left nostril and exhale through this nostril to the count of eight seconds. This completes one full round.
- Start by doing three rounds, adding one per week until you are doing seven rounds.
2. Creative Imagery
Imagery is a potent method of stress reduction.
In this section we?ll discuss how to practice creative imagery and also show you a technique that will enable you to trigger relaxing thoughts at potentially stressful times in your trading day.
You will be aware of how particular environments can be very relaxing, while others can be intensely stressful. The idea behind the use of imagery in stress reduction is that you use your imagination to recreate and enjoy a situation that is very relaxing. The more intensely you imagine the situation, the more relaxing the experience will be.
Practice using imagery for a few minutes before you start your trading session to put you into a calm, relaxed state.
- Imagine a scene, place or event that you remember as safe, peaceful, restful, beautiful and happy. You can bring all your senses into the image with, for example, sounds of running water and birds, the smell of cut grass, the taste of cool white wine, the warmth of the sun, and so on. Use the imagined place as a retreat from stress and pressure.
- Scenes can involve complex images such as lying on a beach in a deserted cove. You may ?see? cliffs, sea and sand around you, ?hear? the waves crashing against rocks, ?smell? the salt in the air, and ?feel? the warmth of the sun and a gentle breeze on your body. Other images might include looking at a mountain view, swimming in a tropical pool, or whatever you want. You will be able to come up with the most effective images for yourself.
- As you practice this technique, mentally say to yourself ?Calm mind, calm body?. This not only deepens the feeling relaxation, but will also start to act as a ?trigger? for calming you. Eventually, you will be able to relax at any time and in any situation simply by saying to yourself mentally ?Calm mind, calm body?.
For example, get into the habit of saying it before you enter a trade to calm your mind enabling you to base your trading decision on clear-headed thinking. Keep repeating it frequently whilst in your position to reduce and manage stress so that you can use your best levels of judgment to decide when to close the trade.
Meditation is a technique which gives a unique quality of rest to mind and body. It allows stress and tiredness to be released in a natural way, resulting in greater energy and enjoyment of life.
Traditionally meditation was (and still is) used for spiritual growth. Meditation can bring on increased awareness, greater ability to live in the moment, freedom from the ego, inner peace and many other spiritual benefits.
More recently, meditation has become a valuable tool for finding a peaceful oasis of relaxation and stress relief in a demanding, fast-paced world. After meditating, you will feel more relaxed, calmer and have a greater sense of well-being. You will notice that your reaction to stressful events changes and that you act with greater control and in more constructive ways. Meditation has a cumulative effect; after a time you will find that the qualities of calmness, inner-peace and tranquility will integrate with all aspects of your life.
Thousands of research studies indicate that meditating for as little as fifteen or twenty minutes a day promotes improved mental and physical health and well-being.
Many doctors now recommend meditation to patients suffering from stress and stress-related conditions. For example, here?s a quote from Herbert Benson, M.D. of Harvard Medical School and author of The Relaxation Response; "Meditation decreases oxygen consumption, heart rate, respiratory rate and blood pressure, and increases the intensity of alpha, theta and delta brainwaves – the opposite of the physiological changes that occur during stress".
Meditation and Trading
The impact of learning to meditate on your trading performance will be enormous. It?s the best method of reducing and coping with stress and will enable you to trade with greater clarity and insight.
Using traditional techniques, however, it can take many years of difficult practice before you gain control of your mind and attain meditative states.
Fortunately, there are now technology-led aids that enable you to shortcut the learning process and put you on a fast-track to meditation.
The most effective of these new aids are Meditation Machines.
Meditation Machines are small, light, highly-portable machines that present pulsed audio and visual stimulation to the brain via headphones and special glasses. After a short period of time, the brain begins to resonate at the same frequency as the stimulus. In this way, Meditation Machines can slow down brainwaves producing the effect of meditation. In fact, with only fifteen or twenty minutes use of a Meditation Machine, it is possible to experience the same peace and tranquility as an experienced practitioner of meditation.
Meditation Machines are now available at very affordable prices and provide the means to unlock your incredible potential for relaxing, learning, healing, remembering, creating and so much more.
And as a not unimportant by-product, using a Meditation Machine could make you a calmer, more relaxed and, ultimately, a more effective and profitable trader.