Lessons from the Pros

Specialty Skills

Pressuring Yourself Can Squeeze Your Trades

Ralph didn’t want to open his eyes for fear of what he would see. He had placed a market order on the 5 minute YM E-mini chart at a Demand Zone to go long. On the 60 minute chart he had identified a fresh level as the price was coming into the Demand Zone for the first time, since it had sharply risen significantly about a week earlier. He checked the odds enhancers, calculated his risk, and was ready to execute what he thought was a high probability trade.  He placed his stop-loss 4 ticks below the distal line of the zone.  Unfortunately, due to the pressure he was feeling to make a substantial profit, he got caught up in putting on too much size.  This desire to hit a home run increased his anxiety, self-doubt and worry about the outcome of the trade.  Additionally, after the trade was filled and the price action began to breath, Ralph became more and more agitated and fearful.  In fact, at one point the price action neared his stop and he was a split second from violating his rule and moving the stop but the price action turned upward again.  His emotions were firing fast and furiously as he felt like a yo-yo in a trick contest; so much in fact that when the trade went just above break-even rather than wait to see if it would hit his target Ralph exited the trade prematurely for a small profit.  Immediately afterwards he watched angrily as the price action kept rising and hit what would have been his target had he not liquidated his position.  He slumped in his chair dejected, depressed and disheartened because not only had he moved against his best interests in the trade by not keeping his commitments; he also had done this several times before which caused him additional distress.  You see, the pressure that Ralph had leveled on himself exacerbated his stress levels and made it nearly impossible for him to maintain a focus on what mattered most in the trade.

Ralph’s situation is a common one, especially for novice traders.  When you place unnecessary pressures on your trading process, it causes confusion, distorted judgment and jumbled thinking; not to mention the added negative emotions of anxiety, fear and worry.  The pressures of “needing” to make a big profit, or having to be right, or telling yourself that you simply “can’t” lose, are prescriptions for high stress levels; and they often destroy your ability to trade with your highest and best trader … your A-Game. 

Usually the first thing that you’ll notice when in the midst of self-induced pressure is the feelings/emotions that it generates.  You might notice that your stomach has butterflies, or your neck is stiff, or you’re feeling anxious and fearful as you dread what might happen in the trade.  One thing to be aware of is that just because you’ve noticed this first that doesn’t mean that the feelings came first.  Actually, the pressure began with a bias, belief or statement such as; “I’ve got to make up for that last loss and since this looks like a good trade I’m going to put on more size.”  This statement in many cases is out of your awareness…it is unconscious to you; but it will prompt you to “feel” those butterflies or that anxiety because part of you knows that you are violating your commitments and placing yourself at greater risk.  So, when you notice this feeling or emotion, stop what you are doing.  As with Ralph in the example above, this is a “signal” that a “pattern” of thinking, feeling and doing is emerging.  In other words, you have done this before.  So you must “interrupt” the pattern by stopping.  You might take some deep breaths, count to 10, leave the room momentarily, change your posture or do something to shake you out of that bad habit.  Now, it doesn’t end there.  Once you have removed yourself from this “automatic” way of reacting in this situation; the next thing is to begin to identify what bias, belief, or statements are prompting these feelings/emotions.   Ask yourself what are you telling yourself or believing to feel that way?  This gives you more of the information that you need to address this pattern so that you eventually resolve it.  You can begin to discover the motivation…the bias or belief…and challenge/neutralize/change it.  Also, you’ll want to identify the facts of the situation.  In other words, what is really going on?  In the case of thinking that you need to double your size in order to make up for the last loss, the reality is that you have rules about risk that are there to protect you…that’s why they are there.    There’s more.  After you have determined fact from fiction, then you’ll want to challenge the conclusion about violating that rule and pressuring yourself.  If before you concluded that it was OK to double your size because you “might” win; you can come up with an alternative interpretation; for instance, the new interpretation might be “when I violate those rules I am undermining my ability to become successful.”  Now, after you are more stable, have interrupted and challenged the pattern that was at the core of the pressure then you can choose a response that is in keeping with your A-Game, your highest and best trader.

Pressure and stress are a part of living.  You are not going to do away with them, but you can manage the pressure that you level on yourself and maintain a focus on thoughts and behaviors that will take you to the results that you want.  It all begins with becoming self-aware and monitoring what’s going on in your head and in your heart.  In other words you must be deliberate in how you approach your trading.  If you are operating in a fog and if you are doing things by default; that is, not thinking about what you are doing and barreling forward throwing caution to the wind, then you are destined for lots of results that you don’t want.  Make sure that you are giving yourself the edge that you deserve and that you are creating the success that you want.  Online Trading Academy offers a course entitled Mastering the Mental Game which is designed to help you give yourself that mental edge.  Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading.

DISCLAIMER 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.

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