The markets can be uncertain, and one of the best ways to cope with uncertainty is to remain flexible and open. How do you react to change? Does it frighten you? Do you fall back into old habits or do you seek out new experiences? How you answer these questions indicate how well you tend to cope with uncertainty and change.
When you first start out trading, it’s useful to stick with what you know. For example, you might find that you like to wait for the middle of the trading day and hold a short trade that goes up or down a point. Others may prefer to find a stock moving with a lot of momentum, and use a simple buy-and-hold strategy to make a swing trade. It can be comforting to make a few simple trades. You can build the confidence that is essential for long-term trading success. That said, there comes a time when you have to expand your vision. Making huge profits consistently demands that you find new ways to trade the markets. Nothing stays the same in the markets, and if you assume that the markets don’t change, you’ll get caught off-guard.
You have two choices when it comes to approaching change: You can embrace the constant changes with enthusiasm or you can rigidly shrink back. Many people prefer rigidity. New challenges are scary, and the most natural reaction to fear is to stick with what is familiar. There’s something safe and secure about routine. Our favourite pair of jeans can make us feel relaxed. Eating some comfort food at the local diner reminds us that not everything in life has to change.
But as much as familiarity allows us to feel safe and secure, it can also lead to stagnation. It’s vital that you embrace change. Change is often hard to face, but ignoring it won’t make it go away. If you try to pretend changes are irrelevant, you usually make things worse. You know deep down that something has changed, and that your survival depends on finding a way to adapt. For example, when market conditions change, don’t waste time getting angry and frustrated and think, “I can’t possibly trade these new markets.” Instead, think positively, “I may not know how to trade these markets right now, but I’m going to figure it out.”
Dr Bruce Eimer, a psychologist and an assistant clinical professor at Widener University, has outlined a guide for coping with uncertainty and change. He uses the acronym, AWARE, to describe his five-step approach: Accept uncertainty. Watch what is happening in your environment and ongoing experience. Act functionally and problem-solve even though you are afraid. Remove yourself from anxiety and conflict. Expect the best.
Rather than follow the five-stage AWARE plan, many traders react to uncertainty by hoping it would just go away. They fruitlessly try to deny the implications of change. But change is commonplace in trading, and it’s vital that you accept change and think of creative ways to deal with it. Don’t recoil in fear. You’ll find that if you cultivate a fighting spirit, you’ll calm down, assess the situation, and think of creative ways to trade new markets and take home huge profits.