Long ago psychologists mapped out something called the inverted U theory of stress and performance. The impact of stress depends on the difficulty of the task you are trying to perform. If a task is relatively easy, a little bit of stressful arousal can enhance performance. But if the task is difficult, even a little bit of stressful arousal can impede performance.
When a task is difficult like trading , High stress can lead to frustration, anger, or despair.Think about the time you lost 20% of your capital in single trade. You were in Stress to recover the lost amount and get back your trading account to breakeven. This additional stress further deteriorates your performance as you indulge in High Risk trade and eventually increase your loss.
Trading is hard. It requires lots of mental energy. Trading is lot like learning to drive for the first time, you need focus and concentration. With enough practice, however, you can drive almost without thinking. Trading isn’t simply a matter of continuing to try harder when you are beaten. Trading is a psychological endeavor that requires analyzing complex information, honing your intuition, and putting your money and ego on the line. When you feel beaten by the markets, it is often wise to stand aside for a little while, and return when you are rested, relaxed and ready for action.
Every trader has a different mental stamina, Some Traders can take loss after loss and remains unperturbed because they have belief on their trading system and also have lot of trading capital which act as cushion in difficult times typically when market goes sideways.Everyone has his or her own psychological makeup. It’s useful to know what yours is and work with it. During my trading sessions typically when we talk on trading psychology, Many traders have the false assumption, “Real traders trade all day, everyday. They keep going, no matter what.” That kind of macho attitude can get you into trouble, though.
Another reason for failure among traders is setting high standards for themselves to achieve, and feeling beaten when they fail to meet their expectations. Traders want to double capital typically trading Options. Suddenly, they are disappointed, stressed out, and prone to make trading errors. Losses start to mount, and their mood worsens. Soon, they find themselves in a deep psychological hole of despair. They are ready to give up. In many ways, it’s like having a big psychological drawdown. You can’t just snap out of it. It will take a lot of extra effort and psychological energy to get back up to par. SO its always necessary to learn and earn if you do not know the rules of the game.
An important trait in profitable traders is they monitor their moods, and when they start feeling tired, worn out, and ready to give up, they stand aside. They acknowledge that trading the markets can be stressful, and they take care of themselves. Everyone’s threshold is different. Some people can take a lot of stress; other people need to take breaks more frequently. But whatever your tolerance level, it is vital that you learn to identify it, and take a break when you reach it. You could just jump back on the horse and get ready to ride. If you do, though, you may do more harm than good.
If you want to trade the markets skillfully, you must be ready to face endless setbacks. But you don’t need to let these setbacks get the better of you. How you get back up is more important than how many times you get knocked down. It you pretend you are invincible when you aren’t, you will make things worse. But if you take a break, relax, and rebuild your psychological resources, you’ll be ready to ride like a champion when you again start your trading.