In terms of neurology, there is a type of stress known as performance stress, which occurs when the outcome of a task is extremely important to a person. For example, imagine someone who wants to speak about a topic they are well-versed in and knowledgeable about (such as giving a scientific presentation at a university in front of friends and professors). Despite extensive practice, the person might struggle with the presentation or forget some details.
Even with a lot of practice, this individual might experience performance stress because they are exposed to many people, and sometimes a camera and microphone. When this happens, it disrupts the neural connections in the brain (commonly referred to as neurons burning out). The neurons responsible for connecting the brain’s loops become affected, leading to a disruption in the connection between the part of the brain related to training, experiences, and skills and the mid-brain loop responsible for processing information and observations, which ultimately leads to decisions. However, this disruption can be repaired with proper rest, nutrition, and sleep.
In trading, performance stress can manifest in several ways:
Decision-Making Pressure: Traders often face high-pressure situations where the outcome of their decisions can have significant financial consequences. This pressure can lead to stress, especially when the stakes are high
Fear of Loss: The fear of losing money or making a wrong decision can create a heightened sense of anxiety, impacting the trader’s ability to think clearly and make rational choices.
Overthinking: Stress can lead traders to overanalyze market data and signals, which can result in hesitation or indecision.
Impact on Performance: Just like in public speaking, when traders are stressed, their brain’s neural pathways can be disrupted, affecting their ability to process information effectively and make sound decisions.
Emotional Responses: Stress can lead to emotional reactions like frustration, anger, or desperation, which can further impair judgment and trading performance.
Physical Symptoms: Stress may also cause physical symptoms such as fatigue, headaches, or insomnia, which can negatively impact a trader’s overall performance.
Managing performance stress in trading involves developing strong mental resilience, maintaining a balanced lifestyle, and implementing strategies for stress management, such as regular exercise, mindfulness practices, and ensuring adequate rest.
When a trader experiences performance stress and the results of their trades are not satisfactory, they might reflect and say, “I knew what the right action was and I was aware of it, but I don’t know why I couldn’t make the right decision during the trade (such as sticking to my stop loss).” This confusion often stems from the neural disruption mentioned earlier.
It’s crucial to engage in trading without the paralyzing fear, stress, and concerns that can arise from high stakes. For instance, if someone enters the financial markets with money from selling their house, car, or taking out loans, the fear of losing this significant amount of money can lead to performance stress. This stress can disrupt neural pathways, impairing decision-making abilities and leading to poor trading performance.
Managing this stress involves ensuring that trading capital is not money that you can’t afford to lose or that is critical for your personal well-being. By reducing the emotional stakes involved, traders can make more rational decisions and better manage performance stress.
People who offer insightful advice about others often do so because they are not emotionally or personally invested in the issues at hand. This detachment allows them to provide better advice and perspectives compared to those directly involved. When we reflect on and give opinions about someone else’s work, life, or choices, our perspective is usually clearer and more objective than theirs.
One reason people intrude or meddle in others’ lives is that offering what seems like better advice can provide a sense of personal satisfaction. For instance, feeling good about spotting something someone else missed and helping them act correctly can be fulfilling.
This phenomenon also applies to ourselves. Others can often offer more valuable perspectives on our situations than we can ourselves. This creates a cycle where being outside a situation allows for clearer insight and better advice. This is why having a trading mentor or an observer can be crucial—they provide an external, objective viewpoint that can help improve decision-making.
Intelligence and acumen do play a role in trading, though their impact might be less significant compared to other factors like emotional control and risk management. For instance, a highly intelligent person might still perform poorly if they do not apply their experiences, engage in mental exercises to strengthen neural connections, or if their neurons are damaged due to performance stress, which can ultimately impair their performance.
To become wiser, it’s crucial to leverage our experiences more effectively and to deepen self-awareness. Fear significantly impacts wisdom as well. One reason others can often provide better perspectives on our situations is that they are not personally invested and therefore do not experience the same fears. Fear is a fundamental survival mechanism; it helps us avoid danger and prompts us to think of solutions to prevent harm or death.
In trading, managing fear effectively can help improve performance. It allows us to stay alert and make better decisions by avoiding impulsive actions driven by stress. Balancing fear so it acts as a motivator rather than a paralyzer is key to leveraging intelligence and experience for better trading outcomes.
ndeed, many of the deficiencies and unresolved issues we encounter throughout different stages of life can manifest in our trading behavior. These issues might not be immediately apparent or tangible, making them harder to address. In many cultures, including ours, there is often a lack of focus on mental health and psychological well-being, which can exacerbate these problems.
Understanding and addressing these underlying issues can significantly improve trading performance. Being aware of how past deficiencies or mental blockages impact your trading can lead to better strategies for overcoming them. It might involve seeking professional help, engaging in self-reflection, or developing coping mechanisms to manage stress and improve decision-making. Addressing these issues proactively can lead to more consistent and effective trading outcomes.
