A Trend to Avoid: Trader Stress

Recognizing Trader Stress

Traders are unique people. Just think about it. How many people can sit in front of a computer analyzing charts, watching numbers flash, making calculations, and risking money based on a prediction that a currency will move in a particular direction? No, it’s not a life that the general population dreams of living. But it’s a trader’s dream life. And many traders do this every day for a living.

While traders often experience highs and lows of trading, one factor is a constant threat: trader stress. Traders live under a high amount of stress in their daily lives. Of course, stress is also experienced in the general population in high and unhealthy levels. But trader stress is manifested differently so it often goes unrecognized and, therefore, uncontrolled. This can affect a trader’s health, trading capacity, and life. No one needs to experience trader stress. This article will discuss the unique signs of trader stress. Ways to control stress is discussed separately way.

The signs of trader stress

These three signs may surprise both novice and experienced traders alike, but as an experienced trader, I have engaged in these behaviors myself and witnessed them in other traders as well.

Breaking from a trading system
Every responsible trader has a trading system because it helps to identify potentially profitable trades, minimize losses on “bad” trades, and know when to take profits.

Why would a trader depart from his trading system? A trader can give many excuses, but it is basically a stress-based reaction. Perhaps he has experienced a series of losses and feels the need to quickly recoup those losses. Perhaps she needs more cash flow because a birthday, anniversary, or Christmas is coming soon. Whatever the reason, a departure from one’s trading system usually signals a high level of trader stress.

As an example, some of my Forex students were experiencing large losses in their trading accounts. When I reviewed their trades, I noticed that all had departed from the trading system. Their reasons ranged from fear of losing money to panic if their trade took a small downward dip. Or they wanted to make money quickly. At the root of all their responses was stress. If you’re tempted to stray from your trading system, stress may be at the root of your temptation.

Watching and reacting to every movement of your trades. 

Of course, a trader watches his or her trades very closely. We’re not investors who can buy, hold, and occasionally “take a quick look” at how the currency is performing.” Traders need to watch their trades and look for a price movement that will allow us to take our profit and move on to the next money-making trading opportunity. This kind of behavior is not a sign of trader stress.

The type of behavior that does signal trader stress is obsessively watching your trades. It’s the kind of behavior that makes a trader afraid to leave the computer. The trader begins to ignore basic needs and responsibilities so that he can watch his trades or monitor the market. The trader will often react to what he has watched by shouting at the computer, screaming at friends, or throwing something within reach.

In more extreme cases, reactions can include excessive drinking or abusing drugs. I know traders who can’t sit through a short meal without checking their trades. They constantly run to the computer or watch their mobile phones to check the status of their open trades.

Sometimes, they are quite happy. Other times, they are miserable. Or they are angry or frustrated. They are rarely happy. Imagine swinging from mood to mood in this manner throughout the trading day! Stress is at the root of this kind of obsessive behavior.

Getting swept up in trading waves or euphoria. 

As all traders know, the market will ebb and flow. In the morning, trading may be light and uneventful. After lunch, it may begin to move. Later in the day, the market could be hitting new highs. Or it could be dwindling to an uneventful close at the end of the week. Part of the excitement of trading is that traders never know exactly what will happen from one hour to the next.

The problem is that it is very easy for a trader to get caught up in the market’s rollercoaster ride. Rather than following the trading system or dispassionately watching the market, the trader becomes a part of the euphoric momentum of the market. While it may seem that the trader enjoys the excitement, the trader is actually experiencing a high degree of stress that can cause him or her to break from his trading system, jump into the market without properly researching the trade, or practicing many other types of irresponsible behavior. Stress is at the root of this behavior.

These are a just a three common signs of trader stress. Of course, there are many more signals that a trader is experiencing stress. Every trader is different, but with a level of awareness, each trader can learn to recognize his or her unique stress signals and respond to them in a healthy and appropriate manner.