Dealing with trading stress and anxiety

Well, I'm back on board after a refreshing week away from the markets. We had a fantastic time snorkeling and scuba diving on the Great Barrier Reef, and then a few relaxing days in the beautiful Daintree Rainforest.



I'm feeling far from stressed right now...the holiday has left me mentally fresh and ready to attack the market once again. I felt like I was still trading pretty well in the zone before I left, so I probably didn't really need the break, but hopefully I'll be better off for it anyway. In the past I probably haven't taken enough breaks from trading, especially when I was losing my edge...and trading when not mentally or emotionally "healthy" is a very dangerous thing in my opinion

I made a post here and on a public forum a few months ago in response to a question regarding trading stress. It was part of the blog that I accidentally deleted recently, so I thought I'd rehash it here:

For me the psychological and emotional side of trading is paramount...something I probably spend as much time on improving now as the technical and systematical side of trading.

I've been trading for a living full time now for around 8 years and for a few before that part time, and I'm sure during that time I've pretty much ridden all of the emotional roller coasters that trading can send you on. There's been times that just felt too easy, and others where nothing I did seemed to work and I questioned my ability to trade.

The stress that comes from trading though seems nothing to me compared with the prospect of a "real job", dealing with real customers, real bosses and real co workers. I control my stress, no one else. I can embrace it and learn from it when I want, and I can walk away from it and sit by the pool, or attack the punching bag until it subsides.

I also try to trade in a manner that keeps that stress to a manageable level. I trade a lot...I'm talking 20+ positions at a time, and often over 100 transactions in a session. To me this feels manageable...I like the hectic nature of my day, but that doesn't mean it's how anyone else should trade. If you don't feel comfortable with more than 1 or 2 positions at once, then that is right for YOU.

I try not to take position sizes that are so large that they trigger that stress attack. Similarly I try to keep my overnight exposure long or short, within my boundaries of acceptability.

I sleep like a baby at night (and I don't mean I wake up 3 or 4 times crying!). If you're unable to sleep at night, fretting over what the U.S will do, checking the market on your IPhone every 15 minutes, then chances are you are too heavily invested. OK I admit, I "might" check the DOW at 3am if I happen to wake up for a toilet stop, but I guarantee no matter what it tells me I'll be asleep again in seconds. Believe me though it wasn't always that way...I definitely learnt from my mistakes there!

The difference between my trading now, and when I started full time, is that I can now start to recognise when I'm falling into the habits that destroy my discipline and my profits, and cause me that anxiety. The longer I trade, and the longer I practice, the quicker I recognise the signals that the wheels are threatening to fall off. I then make a concious effort to get back to basics. This may include reducing the frequency of trades I make, sticking more tightly to my ideal trading set ups, and concentrating on being ultra disciplined. I may also start trading smaller position sizes when I do trade.

I focus on the process not the outcome, knowing that if I do so, the result will eventually look after itself.