Specialty Skills

Are You Asleep at the Trading Wheel?

Dr. Woody Johnson

Well, actually, in all likelihood you have never fallen asleep while trading…or have you? Many traders, along with countless people in all walks of life, are mentally, emotionally and physiologically impaired as a result of not getting enough sleep. This is referred to as sleep deprivation. On the surface this may not appear to be a major issue; but if we look a little closer there are a huge number of accidents, from traffic to operating heavy machinery to the many other mishaps that put life and limb in danger due to people being drowsy, which indicates that it is a big problem. And, of course, your trading can be greatly compromised by not getting enough sleep…and that is definitely an issue.

Let’s take a look at some of the major mental, emotional and physiological resources that we need in order to trade successfully. Trading requires the ability to think clearly and maintain a critical level of attention in order process and analyze pertinent information either in the chart or the news. Decision making is a mainstay of trading and clear cognition is required for good decision making. Memory is important; you must be able to not only remember what you have learned but be able to apply that knowledge effectively. Your emotions must be on an even keel; that is, balanced while remaining patient and calm. Because stress is part and parcel to trading, it is crucial that you are able to manage stress levels proficiently. Physiologically, it’s important to be healthy with good circulation, heart function and have other organs working well for stamina, endurance and overall physical performance. These are just a few of those internal “resources” that make trading possible.

Free Trading WorkshopNow, let’s take a look at just some of the issues that sleep deprivation can cause in your mind, brain and body. When you’re deprived of sleep you can’t function cognitively in a clear and coherent way. The brain’s prefrontal cortex (the executive part of your neocortex or gray matter in front of the brain) is involved in judgment and impulse control, and when it’s feeling the strain of sleep deprivation your decision-making and cognitive abilities feel the strain. Studies have shown that without proper sleep you are more likely to make risky decisions. While sleep deprived you are prone to act more aggressively and violate rules in the pursuit of illusory quick profits.1 When well-rested you’re more likely to remain true to the plan and follow your rules.

Memory is negatively affected as well. The hippocampus is a part of the brain that is involved with consolidation of long-term memory and this takes place mainly during sleep; for this and other reasons memory is impaired when you don’t get enough sleep. Now if that isn’t enough, your emotions and stress levels are negatively impacted too. Some of the ill effects of sleep deprivation are irritability, frustration intolerance, emotional volatility, moodiness and depression; to name a few. Also, when stress levels get beyond the threshold it reduces immune functions and lowers resistance to airborne pathogens making you susceptible to frequent colds and other infectious viruses along with increasing blood pressure and the potential for hypertension. While your body will forcibly shut itself down to catch up on sleep long before you could possibly die from sleep deprivation, sleeping less than four hours a night may put you at higher risk of death within the next six years.2

Here are a few other items to consider. According to studies done by Harvard Medical School, a link between sleep deficiency and becoming overweight has been found. Lack of sleep lowers leptin, a hormone which tells your brain that you’ve had enough to eat; and it raises ghrelin, a biochemical appetite stimulant.3 This neurochemical imbalance prompts a craving for high carbs, salt and sugar which means that not only are you eating more, but you’re also eating unhealthy foods that lead to quick weight gain and the risk of obesity.

The above is just the tip of the iceberg with regard to the ravages of sleep deprivation. The normal healthy sleep duration as recommended by the National Sleep Foundation is between 7 – 9 hours.4 When you’re in the trader trenches you need and want every edge that you can get by optimizing your resources so that your highest and best trader is trading in your highest and best interests. This is what we teach in “Mastering the Mental Game” Online, On-location and XLT courses. Ask your Online Trading Academy representative for more information. Also, get my book: “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading

Dr. Woody Johnson


1. “Sleep Deprivation Biases the Neural Mechanisms Underlying Economic Preferences” Vinod Venkatraman; The Journal of Neuroscience, 9 March 2011, 31(10): 3712-3718; doi: 10.1523/JNEUROSCI.4407-10.2011
2. A resource from the Division of Sleep Medicine at Harvard Medical School “Sleep and Disease Risk” 
3. The National Sleep Foundation “How Much Sleep Do We Really Need?
4. The National Sleep Foundation “How Much Sleep Do We Really Need?

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.