How to deal with Stress during trading

By | May 21, 2014 4:39 pm

Recently During my training session trader asked me the following question:


How to cope and manage the stress that comes with trading. I have been able to cope with the stress for a while now, but in times of market volatility I have more trouble with dealing with stress and it spilling over into my personal life.

It’s a great question; let’s tackle it first by clarifying our terms.

Stress is the result of challenge.  When I lift 5 Kg more than my normal workout weight in the gym, I create stress for my body.  Distress is a breakdown resulting from a poorly managed stress.  If I try to lift twice my normal weight, I can damage muscles: that is distress.

Or, to take another example, If I want to take a vacation.  either I could go to a familiar location like Goa  and have a relaxing week.  That would be stress free.  Or we could go to Himalayas , navigate cold and steep height , and see things we’ve never encountered before.  That would have its stressful moments.   There is no growth and development without stress.  Stress is the natural result of testing our boundaries and moving out of our comfort zones.

When you are developing as a trader (and hopefully all of us are), you always want markets to challenge and stress you–just like you always want workouts in the gym to challenge and stress you.  Show me a stress-free workout and I’ll show you one that did not result in further aerobic fitness or strength.  We grow by taking the challenging path to Himalayas, not the well-worn path on the beach.

So when our developing trader laments recent stress in markets, he’s really saying that market action is overwhelming him, not just challenging him.  He isn’t simply going to Himalayas.  What he is experiencing is distress–a kind of breakdown when we can no longer manage a challenge.

Distress can provide painful and ultimately valuable learning experiences, but no one performs at their peak while in a state of distress.  We want markets to test us and make us elevate our game, but we don’t want markets to traumatize and impair us.  When stress morphs into distress, we are on the path to trauma.

All of this means that we have a twofold mandate:  maximizing the value of stress and minimizing the likelihood of distress.  We want to learn and grow in the face of trading challenges, but we don’t want those challenges to cripple us.  How we navigate that twofold mandate meaningfully shapes our learning curves–and our P/L curves.

Leave a Reply