It’s no secret that trading can be a stressful profession. A game that involves your ego, money and a lot of uncertainty will inevitably lead to anxiety.
But there are several simple techniques and changes that can SIGNIFICANTLY lower stress levels and make you less anxious in your decision making. Before talking about how to combat anxiety, let’s start by discussing why its there in the first place:
What Causes Trading Anxiety?
Anxiety is defined as “a feeling of worry, nervousness, or unease, typically about an imminent event or something with an uncertain outcome.” In trading, there is no shortage of uncertainty. And this uncertainty is the primary cause of all trading anxiety.
The uncertainty of trading is the trade-off for all the freedom and scalability of income you can achieve in this profession. In order to become a successful trader, it is crucial to learn how to deal with the trading anxiety not just to improve your decision making, but to make trading a less stressful and more enjoyable experience. Here are 5 ways to reduce trading anxiety:
Trade Slower Moving Stocks
Many traders get stressed out because they are trading stocks that are extremely volatile because they want to make big returns in a short period of time. But instead, they freeze up because of the wild swings in their PNL, and they start to panic and make poor decisions with their capital.
Instead of trading volatile low float stocks, try trading some slower higher float, slower moving stocks instead. The extra volatility and range in stock aren’t useful for you if it makes you too emotional to capitalize on it. Just because I or other traders can make money on a certain stock doesn't mean that you can or will.
Reduce Your Position Sizes
Trading too much size causes you to focus on how much money you are making or losing instead of the market signals of where it is actually going. When you focusing on how much money you are up or down on a current position, you will inevitably become anxious. Focusing primarily on making and losing money makes anyone fearful and greedy. You should hide your unrealized PNL when you trade to reduce trade anxiety and minimize emotions.
Have A Defined Trading System
Having a backtested system with a positive expectancy will significantly increase the probability of you being less anxious. Why? Because you know that as long as you stick to your system, you know you will make money in the long run.
This makes entering and exiting positions a lot more black and white. You always know what you SHOULD be doing, and therefore have a lot less anxiety and stress in your trading. When you have defined rules, you will always know what you should and should not do throughout the trading day. Without defined trading rules you are just gambling.
Try A Different Trading Style
I’ve worked with thousands of students who have tried to be day traders. Some of them failed miserably at day trading but found great success in swing trading. It was because they weren’t fast decision makers, and got anxious trading volatile stocks. Once they started swing trading, they focused on larger time frames and slower moving stocks. They became less perturbed by small fluctuations in the stock when they were focused on the bigger picture moves. Learn more about how to find a trading niche here, and see if swing trading is right for you.
Hard Stops and Limit Orders
This solution isn’t for all trading styles, but automating your trading decisions can help reduce anxiety and indecision. Placing hard stop losses and using limit orders for entries and exits makes it black and white whether you enter or exit the market. This requires having a defined trading system so you know where to place your orders, but it will immensely help you reduce your trading stress and anxiety.
Free Trading Assessment
If you want more direct feedback on how to improve your consistency, click here to fill out our free trader assessment and we will go through all of your goals in detail. Don’t procrastinate on your success. Make this the year where you hit and exceed all of your trading goals.