12 Thoughts on Trading Stress and Emotion

* Everyone has a stop-loss level: For some, it's a price; for others, it's a pain threshold.

* It's not stress and emotion that get in the way of trading; it's the stress and emotion that results when trading becomes personal: about you, rather than about supply and demand.

* The measure of a trader is how hard he or she works when markets are closed.

* Much bad trading is hormonal: too much testosterone, too little.

* When traders don't track their results, it's because they don't want to know them.

* The best traders have a passion for markets; the worst have a passion for trading.

* When it comes to market history, there are only two choices: trading with awareness of it, or trading in ignorance of it.

* I recently encountered a daytrader of currencies who was trading EUR/USD with high leverage. News came out in Europe and the market blew through the trader's mental stop-loss. The trader had no idea that an economic report was due at that time; he was only looking at chart patterns. That represents trading at its worst.

* Losing a job or not wanting a 9-to-5 one is not the right reason to pursue trading.

* Markets tend to move in the direction of the greatest number of stops.

* The best traders are not relaxed *and* they are not anxious. They are alert.

* Deep down, traders who don't prepare don't feel they deserve to win. We always gravitate toward our just desserts.

Comments

[MSmailbox:]

I need to take a step back, cool down, read this list, think things over, read the list, again and regroup... I was becoming a very poor trader and I hope (and pray) to correct this, before I get corrected. Very good, concise, food for thought. Thank you, Sir.

2008 Aug 14 09:28 AM

[adan:]

great info, love your periodic posts on trading and psychology - thanks!

2008 Aug 14 09:40 AM

[Zircon - 212:]

Your 12 point list directly addresses the point that MSmailbox seems to be missing. 'Becoming a very poor trader' is not something like catching a cold. I believe one is either improving through accurate record keeping and learning from mistakes or alternatively relying on the 'hope and pray method'. Unfortunately in my experience turning toward a higher divine power does little in bringing a losing position back to break even or goes back and executes a mental stop or cancelled hard stop. Of course this person could be trading Olive Oil futures and I may be completely wrong.

2008 Aug 14 01:52 PM

[Fabien Hug:]

One point; money is made when markets are closed. Preparation is key, like in everything else.

2008 Aug 14 02:31 PM