1. Trade on a higher time frame. There is noise in market prices. The lower the time frame, the more noise that exists. Noise to me is similar to uncertainty. More uncertainty leads to more stress. Perhaps you should consider trading on a higher time frame where there is less noise in prices; less noise, less uncertainty, less stress.
2. Use stop loss orders and limit orders. One mistake traders make is that they do not minimize their losses. By using stop loss orders and limit orders you will reduce the stress that comes from taking large losses and making real-time trading decisions.
3. Have predetermined exit points, and ACT on them. Not only should a trader know what the profit objective is BEFORE the trade is placed, they need to ACT on it when prices get there.
4. Have predetermined entry points, and ACT on them. Not only should a trader know what the entry price is BEFORE the trade is placed, they need to ACT on it when prices get there.
5. Are you a discretionary trader or a systems trader? My opinion is that discretionary traders have to handle more stress in trading markets. This is because they have to make a decision. Making decisions in real-time trading creates a certain amount of stress. Systems traders, however, usually do not have to make a decision about entry or exit. It has already been programmed into the system.
6. Your position size on the next trade will also create stress. How do you make the decision on what size to trade? Understanding volatility, and having a way to quantify it, will allow you to adjust position sizes accordingly. For example, if the market’s volatility has increased, it may be reasonable to decrease position sizes, and vice versa.
7. Do not trade news releases. I trade the SP500 emini market. This market is considered more volatile relative to other markets. Nonetheless, when news items are released, the market will react. You may think the market will react in a certain way, and you may be right, but the problem is that the market can overreact to news. This can lead to losses because your stops will be hit; just before you are right. It is very difficult and stressful to trade news.
8. Are you overtrading? Studies have shown that more trading does not necessarily lead to more profits. It usually leads to more risk and losses. How many markets do you trade? Perhaps you are trading too many markets and creating unnecessary stress. Sometimes it is better to specialize than generalize. Reducing the number of markets you are trading will certainly reduce the amount of stress you are experiencing. Perhaps an analysis of your trades will reveal that you are more profitable in one market than another.
9. Similar to how many markets you trade is how many securities do you trade? Are you watching too many stocks? Do you have too many positions on at once? Reconsider these ideas.
10. Do you have a disciplined money management plan or money management system that you are using? If not, how are you determining position sizes? Perhaps using a disciplined money management system will decrease the stress that comes from position size uncertainty.
11. Have you done your homework? Are you trading a proven and historically backtested system? If so, then it is easier to trade the probabilities, and easier to handle losses when they occur.
12. Eat well, sleep well, and exercise. Stress comes from a variety of sources and can be reduced by eating well, sleeping well, and exercising. Perhaps meditating can be helpful.
13. Take a deep look at yourself and realize if you have any dependencies or problems. Drugs and alcohol can affect your stress levels. Perhaps you have some internal situations, or areas of your life that need attention. These need to be worked out. Seek help if you need it.
Thanks for reading this. I hope it helps. Feel free to contact me.