How to Deal with Stress when Trading

Tell me if you have ever found yourself in the following trading scenario:

You have just suffered a big loss, the biggest you have ever had and are feeling averse to risk- nearly to a level where you see nothing good or safe to trade in.

There is a biological origin to this experience that is very common amongst traders and it, more often than not, creates a negative psychological effect on you. These biological, as well as psychological causes, may have a great impact on your mindset in trading, possibly setting the basis for the future moves in your trading career. However, the great thing is that your brain alongside your trading future can be altered.

Risk in trading

Losses will have an effect on your trading psychology and brain. Cumulative losses will lead to growth of cortisol in your system, too much of this can cause your neurons to fire – which will result in the inability to concentrate and make good trading decisions by re-wiring your brain.

Afterwards of risk in trading

The hippocampus area of the brain records the facts regarding the big losses while, the amygdala records their significance emotionally. The effect of the latter on your trading can be read here.

Stress affects both – releasing hormones, which can heavily affect the performance of your brain. The tendency to recall these trading events increases with exposure to loss and results in increased cortisol and stress levels.

The intensity of these hormones imprints the events in your memory, thus corroding your trading mindset.  This makes you draw upon the negative experience whenever a new setup arises when analyzing price action in real time; thus making you greatly risk averse even in the presence of a high-quality signal, thus paralyzing you.

You may also be ‘Shell-shocked’ from the event, but still capable of making a trade – however, these trading decisions may not yield consequences because you would realize when reviewing your trades that there was no setup or pattern at all.

This is as a result of a biological reaction to the stress you experienced and to some traders, without the proper tools; it may affect them for several years or even, they may never recover from it at all, remembering it whenever they trade.

How to change them?

The positive side is that your brain can be rewired and the neural connections can be rebuilt and tuned for success with new connections that overpower this event- making you regain your confidence and make great trades.

One great way of re-wiring your brain for success is by entering a ‘whole-brain state’ where; both hemispheres of your brain operate in an integrated balance that prevents the pumping of stress hormones into your system. This can be avoided by being overly emotional or too emotional. Yoga is another effective way of achieving this.

If you have experienced the aforementioned events and are still experiencing them, then this is a great tool to help you build a successful trading mindset.