Lessons from the Pros

Handling Trading Pressure

We, as traders, tend to put ourselves in pressure situations more often than we would like to admit. This has been going on for so long that for most of us, we feel there is no way to eliminate these situations, but there are many ways we can successfully react to the pressure. In this article, I would like to help you recognize these potential pressure situations and prepare you well in advance of when they actually occur.

A potential pressure situation is one in which the consequences of your actions are significant to you, like when you place a trade and all you are thinking about is, "How much money am I going to win or lose?" Trading like this will cause you to start trading with emotions and not follow your trading plan. Perhaps you are trading beyond your capabilities or risking more money than you can afford. Another rule that is broken very often is traders who trade with money that is used to pay bills. When you trade the markets with the mortgage or grocery money, you are going to be trading with scared money and we all know that scared money never wins.

Notice how I used the word "potential" in the previous paragraph referring to pressure situations. There is always a possibility of pressure to exist in a situation where the consequences of your actions are very important to you. Keep in mind when the losses due to failure are considerable, the potential for pressure becomes greater. Always use stops and manage your risk on each trade so as not to let your account take a large hit on any one trade. By having a maximum dollar loss per trading session, you can also eliminate some of this pressure.

Actual pressure is created when you begin to think of the consequences (losing or winning money) of your actions instead of concentrating on your actions themselves, such as following your plan and when you have a setup, you take the trade without any apprehension. When winning or losing is on your mind and you are thinking of these possible outcomes, then you try to override your subconscious mind with your conscious mind. Your subconscious mind houses your trading plan so there is no thinking involved when you see your setup; you just instinctively do the right thing. This is why simulator trading is so different from real time trading. There are no real penalties in the simulator. In real time trading, you can have both penalties and rewards. Simulator trading is a great way to get started in trading, but keep in mind that you are only learning the mechanics of trading while on the simulator and not the emotional side as much.

When you fear failure, your conscious mind does not trust the subconscious mind and will try and help as much as it can. This can be where ego comes in to play. You start hearing voices in your head about taking your profits early or letting that loss run – it will come back, etc. You will start to concentrate harder and then the tension will inevitably start to creep in. One of the winning traits in trading is relaxation as you trade. When you are concentrating so hard you become tense, relaxation is almost impossible.

By now, some general observations of pressure seem clear. Situations do not create tension and pressure, the personal reaction of the trader does. Since we are each unique individuals, pressure situations will impact each of us a little differently. Pressure is created when the trader’s thoughts switch from performance to consequences of performance, otherwise known as consequences of failure.

From this, we can see that pressure is self-induced. The trader brings pressure upon themselves. The market cannot put pressure on you. You will only feel pressure if you let it happen. With the proper mental and emotional control, you can decide when you want to feel pressure. I mention this because some people actually thrive under pressure. So they must be able to allow some pressure to reach a level of intensity that they can perform at.

Here is the trader’s definition of pressure: "Pressure is the self-induced tension created by thinking about the wins or losses of a trade instead of the trade itself." Tension and pressure are closely related. When we get tense we find ourselves squeezing the mouse very hard, getting sore muscles, and even feeling some emotional instability.

Do you ever feel like you need to do something special in your trade execution on particular trades? You should not feel this way at all. By executing your trades the exact same way each time, you will become more confident and less emotional in your execution. Confidence in your abilities, especially in subconscious execution, will allow you to make no change in the way you place your trades even when the markets do not appear to be rational.

Your ability to ignore potential pressure situations and to treat each trade in exactly the same manner as you treated your simulator trades (focused on execution and not results), will determine how much pressure you feel and how you react to it. A mantra you may want to remember is "There is nothing special about this trade." This may help you detach yourself from a potential pressure situation. If you will repeat this to yourself while preparing your trade and convince yourself that the statement is true, then you may be able to treat each trade equally.

The role of the conscious mind in any discussion of pressure is very important. As I mentioned earlier, pressure is self-induced by consciously thinking about consequences of performance. During pressure situations, the conscious mind takes over the subconscious mind. This conscious mental interference is what causes errors and tension. You end up concentrating too hard instead of letting the subconscious mind do what it was trained to do – execute your trading plan. Keep in mind the conscious mind cannot deliberately do what the subconscious mind can do automatically. If you don’t believe me, try playing a guitar and having to think about each note before you play it. It is very difficult and usually not a good sound.

The majority of successful traders accept pressure as a normal part of the business and learn to live with it. They find ways that allow them to perform well under pressure. They neither benefit from pressure nor are they intimidated by it.

As part of your subconscious mind training, spend time each day before the market opens visualizing how you will execute your trading plan; every little detail from the setup right to the profit targets of your trade. The objective is to burn this image into your subconscious mind so that it can react automatically with each and every trade you place. And finally, accentuate the positive and eliminate the negative. When faced with a pressure situation, if you must think of the consequences of your actions, think positively. Think of the success and the rewards of trading, but preferably think only of executing the perfect trade.

Pressure situations are a normal part of the mental side of trading. Having the ability to trade under pressure is the trademark of a truly successful trader. This is also a great test of self-control and mental growth.

Pressure is self-induced. It is consciously created in the mind of the trader feeling the pressure. Therefore, the trader can control this pressure if they have learned to control their emotions.

If you want to take one of the steps towards becoming a successful trader, you will have to accept, recognize, face and conquer pressure. And like every other obstacle you have conquered, you can do this, too.

"Confidence is contagious, so is lack of confidence."

- Don Dawson