9 Ways to Fight Stock Market Stress
We all know stress is bad. As a Trader/Investor, it is imperative that you stay on your game from Monday to Friday. So how do we fight stress? The key is to stay calm and disciplined. Do not get too involved by the second-to-second moves, keep focusing in your bigger picture. And do not take on too much risk in any single trade. Here are our top ways to fight market stress:
Have a strategy.
If you work according to a plan then every buy and sell will fit into a bigger picture. This will greatly reduce stress as you have the knowledge that even if this one call doesn’t work out then you have provided for it in your plan.
Know your levels.
When you enter a trade you must already have your predetermined entry and profit and stop loss levels in place. Because when you get to those levels you should be ready to take action, whether it is taking profit or closing a losing position. You should never sit in hesitation of what to do.
Refresh your portfolio balance once a day.
Don’t get distracted by the quick intraday moves. You know your strategy and you have your risk management in place. You know the maximum loss for any individual trade. Why then sit and stare at the P/L screen all day? It the position goes south then you simply cut it and move on. Do not induce unnecessary stress.
Reward to risk ratio.
Always trade so that you can make at least 2x the amount in profit of what you stand to lose when the position goes to your stop loss level. With this 2:1 ratio you can be correct on less than half of your trading calls and you would still be in the money. This should give you peace of mind.
People around you.
Don’t surround yourself with stressed individuals. Look at how your colleagues handle stress. The people around you will have a big influence on your own mindset. Do not get sucked into negative thoughts or emotional investing. Always stay cool, calm, and collected. Be an example for others.
Consider the source.
If you have the TV switched on all day then you will inevitably hear a number of vastly contrasting opinions. Ignore then sensation and focus on the numbers. Don’t get sucked into the noise in-between. This alone will put you much more at ease.
Get enough sleep.
Aim for 6-8 hours every day. The extra rest will serve you well when you find your stocks opening the wrong way. You’ll be able to react and respond much better to the different trading challenges you will encounter during the day.
Avoid the junk food. If your body is not at ease then your mind will not be at ease and your stress levels will go up. This applies to more than just trading. Look after your body. And drink plenty of water to keep you alert and well-nourished.
Don’t start to panic in tense situations. These will come, you can count on it. Handle them with ease. It may be that you find your portfolio down several percent in a single day; or it may be that you have to act on a unexpected company event or earnings report for the stock that you trade. Stop. Think. Then act.