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Forex Stress Management

stress_forexEveryone makes mistakes. This is a universal truth each and every one of us has to live with every day of our lives. Whether youre a doctor, a high profile lawyer, or a trader, you will make mistakes and your mistakes will have significant consequences you will have to deal with. Does this realization stress you? It should. The inevitability of the situation is enough to stress anyone. In order to be a good trader, however, you need to learn to control stress. In order to control stress, you need to understand it. You need to know why its there and how. Only then can you do something about it. So lets get to the point.

Stress Definition

stress-definitionWhat is stress? Stress is a normal physiological reaction of the organism in a challenging situation. The challenge might be real or imaginary – that doesnt matter. The reaction will be there either way. Stress is a the result of cortisol and adrenaline being pumped into the bloodstream by the adrenal gland (the biochemical reactions are much more complicated than this, but wed have to dedicate an entire section of th e site in order to explain the stress response in detail; this is all you need to know for now).

These hormones have many functions, some of which are related to various diseases, making stress rather dangerous. Not only that, but it also changes your brain chemistry, making you incapable of taking good and well thought-out decisions. As such, stress is a powerful enemy of any trader. Note that low levels of stress can be beneficial – they can keep you keen and help you stay alert. What we are talking about in this section is when the levels become higher and begin to completely trump performance and pose a health hazard.

Knowing that stress is a hormonal response has to tell you something – its a temporary reaction of your body which means that the effects can be mitigated. One of the brain centers that helps with that is the hippocampus. Sadly, though, high levels of stress also damage the cells of the hippocampus, making it harder to control stress levels later on. The hippocampus also has important functions in memory. Why are telling you all this is? Is this a site about trading or basic biology?

Well get to that. Think about this – have you ever been really angry? Of course you have – everyone has. Now think about something that has managed to completely change your mood and mitigate the effects of the anger. Anything? Perhaps a nice memory? Memory is a powerful tool that should never be underestimate. When youre stressed you can try to think nice thoughts to no avail. However, its much easier to remember something nice than to imagine something nice. Whenever you feel stressed out, try to recall a recent nice memory. This will put you in a much better mood and help you manage your stress levels.

Why is this important? Studies show that when a trader is stressed, he is much more prone to making bad decisions (remember what we talked about when touched on the subject of the emotions) in futile attempts to alleviate the psychological pressure. This means that stress can cause heavy losses if left unchecked. Not only that, but since it can suppress the immune system, it can also lead to various diseases, including some serious medical conditions such as diabetes. And as if that werent enough, the more stressed out you are, the more stressed out you get because you cant manage your stress.

Recognize IT!

recognize-itThats why its important to recognize stress early on and act on it. Take a break. For example, instead of performing real trades after a loss, go and make a few simulated ones so you dont risk your own money. When you see that youre making good decisions and your decision-making isnt compromised, go back to real trades. Always try to relax and keep those good memories in your mind. Realize that youre human and that you will make mistakes – these things happen.

The more full of yourself you are, the worse youre going to punish yourself for your perceived failures (that arent always failures) and this will hinge your performance. Self-criticism is good but like any other form of critique, it has to be real. If youre too critical to yourself, you will be much more stressed; this will lead to mistakes, then to more criticism. Its a vicious cycle and its very hard to escape it once you enter. So keep mindful of your stress levels. Know what gets you stressed up and how you can mitigate that. This is yet another crucial component of successful trading.

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