I often get asked can you compare professional sportsman to professional traders, and if there are any similarities between the two professionals. It’s a question I have thought about a lot over the years and one that intrigues me to this day. The obvious answer is that they have both worked very hard at reaching the top of their profession, and have spent many hours practicing their skills. Both are dedicated and pick themselves up when the going gets tough. Both invest in personal coaches and are always looking to improve performance. Both bring in mind-coaches to improve optimal performance. I look back at my school days when I was playing for my local under 14 side, and I saw so many talented players who never went on to make professionals. Why was that? Maybe it was dedication, or maybe just luck and not being in the right place at the right time. I was lucky to have that knock on the door from a professional football club scout. Some were not.
However, there is one big reason people come into trading and never make it consistently. It’s not the new trading strategy, which most believes is the answer to it all or some trading pattern that sets up once in a while. It goes far deeper than that. For me it goes back to the Liverpool match when I was 17 and the pressure was on to perform in front of a sold out stadium, live on TV and against the best players in the country. It was all to do with performing under pressure. If you can’t do that, then you have no chance in trading or becoming successful in any high pressure job. We see new people coming into trading every day without any training or skills on dealing with pressurised situations. As soon as you place a trade your heart rate increases and you feel anxious. It’s natural, and what we should all be feeling because we are human beings and we all have a pulse. If you have a pulse, you will have emotions. However, it’s how you handle the pressure. I couldn’t when I was 17 years old at Anfield. Why do most believe they can come into trading and deal with the pressure from day 1? Mostly it’s not the trading strategy or systems fault why the person is not making money. They don’t know who is pulling the trigger on a trade. The indicator or system has no emotion. It’s all about handling pressurised situations in trading. And as I said, we are always in a high pressurise situation in trading because we are dealing with real money. Why do so many people make money in a demo account but can’t recreate this in a real account? It’s because they are not trained to handle high pressured moments in trading. This dilemma goes round in circles. They lose money and then think its someone else’s fault, or the markets, and so they over trade putting more pressure on themselves and subsequently lose more money. Feeling pressure can be a good thing. When I don’t feel any pressure whether I’m trading or presenting in front of 200 people I never perform well. I thrive on pressure. Most people don’t know how to handle pressure, especially when a trade starts going against them and they’re now losing money. Fight or flight starts to kick in and it normally end ups very ugly.
So how can I help you handle pressure when you’re trading? As human beings our mind can only process 3-5 things at once, and in trading we have a vast amount of information coming into our computer screens every day. The information you may think is helping you can also cause analysis paralysis. This is where we have too many trading indicators on our charts, and some are conflicting with others. This will lead to confusion. The best way I have found to reduce stress when trading is to know your strategy in detail. Know every component of the trading strategy that is going to make you money. Know what each indicator must be doing when there is a trade signal. Go into detail and pick every possible scenario with this strategy and replicate it in a demo account. The more time you spend doing this the better it will feel when you go live. Now you have mastered your strategy, it’s time to link a verbal cue to your strategy. So when it shows up on a chart right in front of you again your subconscious mind knows exactly what to do and what to look for as you have trained it to. In most cases you don’t have time to think for a few minutes to make sure the MACD is in the right place or that the stochastic is exactly over the 80. Your subconscious mind will know because it’s seen it so many times before. Now it’s all about perfecting the execution on the trade. This is the link that breaks down between successful traders and the-get-rich-quick brigade who expect to be given a trade strategy and to be able to make money from it immediately. It can’t be done because your mind is not trained to deal with the pressure. You haven’t spent time working on the strategy process and practised it a hundred times over. If you don’t do this you will place the trade and then you will panic, get frustrated, get angry, over trade and then self-sabotage sets in. You keep going round in circles and it never gets any better. We shouldn’t be dealing with the detail when we are placing trades. We just don’t have enough processing power to do that. With so many things going on when we are trading, it’s no wonder that so many people feel they can’t do it.
The markets are littered with people who blame everything and everybody else why they cannot make a living from trading. It’s the ones that recognise they have to be able to handle pressure and look within themselves for the answer. Because once you do that and you get good at following your trade strategy the anxiety levels decrease (they never go away) and you can trade with a free mind. Handling pressure can be taught. However, nothing replaces the real thing (live trading). Taking a penalty to win the FA cup final at Wembley could have been practised a thousand times on the training pitch, but you cannot 100% replicate the pressure at that moment. The penalty taker who has practiced a 1000 times on the training pitch will have a much better chance of scoring then the untrained player who didn’t practice. The untrained new trader that comes into trading thinking they will make millions has no chance in such a high pressure business. Failure is just a day away if they do not work on the process of their trade strategy, which will then help them when they next take the trade in a live market with real money. Dealing with pressure can be taught.
Hope it helps