What does Stress, Emotions and Feelings have to do with Trading?

Fear, Greed, Hope, Impatience, Anxiety… I can understand, but what has Stress got to do with Trading? Nothing.  At least that is how it should be.  You buy low, sell high.  The buying and the selling is what we call trading.  When to buy and when to sell are both determined by a system. If your system is good, it makes money. That is called “Positive Expectancy”, you stick to the system and you make money.  What exactly is a system? A system has straight forward rules on what to do and when to do things.  For example Casinos have a system that gives them an edge over the average customer. They may lose some of the time, but on average, overall, they make money. That is why there are so many casinos and that is why they stay in business.  McDonalds restaurants have a system too.  That is how they produce identical food wherever you go.  Franchises, successful businesses, great chess players, football teams, tennis and golf pros have systems also.  That is how they keep on winning.  Professional Traders, Super Traders have systems too.  Whether they trade stocks, options, Contracts For Difference, Futures Contracts, they have systems. These system, when followed make them consistent money.  Don’t fuss too much about the term trader.  It is the same thing as investing except the buying and selling happens more frequently (compared with an investor). So where is this Stress we are talking about?

Let’s look at a case study.  Jack and Jill have $5,000.00 (add more zeroes if you want to make the story more intense). They hear that there is a new financial stock about to be listed, Babcock and Brown in October 2004.  They buy 625 stocks at $8.00. They are content as they believe they made a smart move.  About seven months later, the stock doubles and their portfolio is now worth $10,000.00.  They hear that they are better off protecting their profits so they decide if the price falls down to $14.00 then they will sell. They watch their chares go to $20.00 then to $21.85, pull back, then to $25.00, $28.00 $30.00. They keep locking in more and more profit by moving their sell price higher.  At its height the stocks reach $34.78 and Jack and Jill can not be happier.  They move their sell point to $30.00.  The stock prices start falling from $34.78 to $33.00 then to $32, then to $31.00.  Just before they hit $30.00 (their sell price) they cancel their sell order.  They are both stressed but they are hoping that prices will go up.  After all they are told stocks always go up in the long run. The Babcock and Brown stocks do not go up, they keep falling. They fall past Jack and Jill’s “profit lock-in point”.  They are very emotional and stressed beyond measure. What should they do? Should they wait? Should they sell?  They keep hoping, wishing praying but the prices continue their fall. They keep renegotiating, only in their heads, the sell price. What should it be? Should they sell at all? Two months of nightmare and then the prices recover, all the way up to $31.00. Jack and Jill are relieved.  But the roller coaster starts again and the prices keep falling.  Jack and Jill have no “profit lock-in” anymore. The prices go lower than before. Jack and Jill’s pain is immense.  June 2008 Babcock and Brown stock prices reach Jack and Jill’s break even.  Their portfolio, once as high as $21,700.00 is now back to $5,000.00.  They say, in a very stressed way: “It can’t go any further”.  Seven months later the stocks stop trading, the final price $0.33. Jack and Jill now have $200.00 in their account. They not only lost their profit of $16,700.00, they have lost their starting capital of $5,000.00. You may rationalize and say “well, $5,000.00 is nothing!” What if it was $50,000.00? What if it was $5,000,000.00?

What is the answer? The answer is to stick to the plan of selling the stocks at a profit locking price, in this case $30.00. They did not Recognise they are being emotional. They could not Release the Stress they were under. They were unable to Re-Focus and protect their profits.  Their fear of being wrong about their opinion costs them $18,750.00 Their greed of wanting more profits clouded their judgement.  That is what Stress does to people.  If Jack and Jill were able to Recognise their Stress and their emotional decision making; Release it and Re-Focus on their plan, they would be better off financially.

Babcock and Brown is not the only example. Citigroup has fallen from heights of $59.13 to $3.18. Prices of stocks have tumbled many times before and they will again.

What Jack and Jill experienced is only one of the pitfalls of emotional trading. One can also get very emotional, trade more by feel, brake their rules, take profits early, let losses run, get distracted, be unable to make any decisions, over trade, close up and countless, emotional, irrational and stressed mistakes.

Our aim at Trading Stress Free is to provide you with tools, techniques, programs, systems, coaching, seminars, and training for you to remove Stress from your buying and selling decisions.  We are here to help you with your thoughts, feelings and emotions so you can potentially perform at the same level as professional and super traders.

In order to improve your performance you first need to Recognise where you are at, your strengths and weaknesses. You then use tools, techniques, programs, systems, coaching, seminars, and training to release what is getting in your way. You finally Re-Focus on your System, buy and sell when it tells you to.  This way you reduce and eliminate Stress, Fear, Greed, Hope, Impatience and Anxiety.  This allows you to have more time, to live the life you want with your family, friends and loved ones, to enjoy the finer things in life.  You have the security, safety, comfort and peace of mind.

We provide FREE Resources (see the right hand column), FREE newsletters (click on the button to the left), email and face to face coaching, workshops, seminars and home study programs.  A good starting point is to download and watch the “12 Powerful Techniques To Reduce Stress” Resource. We look forward to being your trusted advisor on your journey of Financial Abundance and Freedom.

Sinan Koray

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