Winning traders have learned to handle extreme levels of stress. The markets are chaotic and unpredictable; in other words, they are stressful. The mind has limited resources, and when you feel stressed, too much of your resources are devoted to managing the stress. Little energy is left to focus on trading. Did you ever “cram” for an exam in school? It takes twice as long to learn material when you cram.

Why? It’s because you are more stressed when you are trying to learn in a pinch. When traders are struggling to cope with the chaos of the markets, they are similarly trying to perform in a pinch, under less than ideal circumstances. As they push themselves to the limits, they sap up psychological energy. As they use up resources, they have little psychological energy left to trade effortlessly. They are more prone to panic and may ride an emotional roller coaster as they face winning and losing trades. It’s essential for survival to be able to cope with the ever-increasing demands of the markets.


Dr James Loehr in his book “Stress for Success” notes that if one can learn adequate coping skills, events that usually produce stress need not necessarily produce the stress response. One can develop “mental toughness” as Dr. Loehr calls it. The mentally tough person can endure high levels of stressful events, yet not feel it. Coping with stress is similar to weight lifting, according to Dr Loehr. If you lift more than your body can physically handle, your muscle tissue will be damaged. But, if on the other hand, you never push yourself to the limits, you’ll never develop additional strength. One must build up muscles gradually. Stress management works in much the same way.

You don’t want to damage your psyche by trying to handle too much stress, but on the other hand, if you shy away from stress, you’ll never be able to take the stresses and strains of the markets in stride and trade effortlessly, and in a peak performance mind state. The key is to learn how to handle greater levels of stress, but also find time to recover. When it comes to the markets, for example, it’s tempting to trade all day and work late into the night backtesting or learning about new trading strategies. Working tirelessly at such a pace is bound to wear you out eventually, however. It is vital to rest and recovers. That doesn’t mean shrinking back from the markets, but learning to deal with the pressures of the markets at a gradual, realistic pace.

By pushing yourself to greater levels of challenge, but at the same time, resting and recovering, you can build up mental toughness in the same way that a weight lifter can handle greater and greater loads. There are some basic steps that a person can take to prepare for stress and become inured to it. First, it is vital to get as much rest and relaxation as possible. People who do not get the proper amount of sleep have limited psychological resources to cope with daily stressful events. Getting extra rest is vital.

This may mean taking planned naps during the day to rejuvenate. Don’t make the mistake of thinking that you’ll be “missing out” on a trading opportunity by taking a break. Look at it this way: How much are you going to make if you are too tired and wiped out to focus on the market action and trade effortlessly? The proper amount of rest can increase your ability to cope with stress. Second, it is also important to exercise and eat nutritious meals. Emotions are physiological responses.

The more energy the body has to cope with stress, the more “tough” the body can be when extreme levels of stress are encountered. Regular exercise helps the body and mind release pent-up stressful emotions. By making sure you allow your stressful emotions to dissipate, your body and mind will recuperate and be ready to deal with extreme levels of stress.

Trading is stressful and demanding. It takes psychological energy to cope with the chaotic markets day in and day out. By taking preventative steps to prepare to cope with the stress, you can develop a sense of mental toughness that allows you to be more resilient during the trading day. The less impact stress has on your mind and body, the more energy you can devote to trading. You’ll trade more effortlessly, logically, and profitably.

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