Day trading can be a stressful way to make money whether you are working independently or as part of an organization.
There are many causes for this stress and depression, including poor performance and a strategy that isn’t working. This explains why Your mental health is very important.
In this article we will look at some of the causes of stress and how to reduce its level.
Stress and day trading
Day trading is the practice of buying and selling financial assets such as cryptocurrencies, forex, and stocks with the goal of making a profit on the same day. It is a different approach compared to investing, where people buy assets and hold them for weeks, months and years.
When done well, day trading can be a very profitable endeavor. For example, suppose a stock is trading at $10.25 and you use $10,000 to buy it. In this case, you would have 975.60 shares.
If the stock only goes up to $10.40, your shares will be worth $10,146. Since this movement can occur in minutes, this means that you have made a profit of $146.
When all goes well, trading can be very profitable and a person’s mental state will be fine. However, studies show that most day traders are not always profitable. In fact, nearly 90% of people who start trading fail within a few weeks.
the The biggest cause of stress and depression is a great loss. In the example above, if the stock suddenly drops to $7, that means you will have lost more than $3,100. Losing such an amount of money can lead to major psychological problems.
How to recognize emotional stress
stress It is not always easy to identify it. Most people experiencing emotional distress don’t even know the situation they’re in. However, you can look Some psychological signs To tell you if you are in distress. Some physical signs to look out for are:
In most cases, when you are going through a difficult phase, you will find it difficult to sleep a little bit.
Another sign that you are going through stress is What do you do in the market. For example, you will find yourself closing trades very quickly or doing what is known as panic selling. Sometimes, you will find it difficult to execute trades.
Furthermore, you may go through the burnout that occurs when there is physical and emotional stress. without any treatment, This situation can turn into depression. Psychologists have identified the stress curve, which is summarized below.
Triggers or causes of stress in day trading
There are several major causes of stress in day trading. Some of the most common causes of stress in your trading journey are:
learning difficulties
Learning about day trading can be comprehensive because Huge amount of material that need to be covered. In addition to the theoretical part, there is the practical section, where a person needs to use a demo account.
For many people, this learning process can be very difficult. Sometimes, you can create a trading strategy that just fails to work.
in such a situation, There is a possibility that you will go through stressespecially when you are passionate about trading.
trading losses
No trader is 100% perfect. In the past, we have seen some of the best traders in the world lose their money. So, as a day trader, you often lose money.
The challenge comes when there is a file Long losing streak in the market and when there is unexpected loss. When this happens, the stress level can be significantly high.
fluctuation or not
The other major cause of stress in day trading is market volatility. Volatility is defined as: The rate of change of assets. Some traders thrive when there is great volatility in the market. Others, like trend followers, tend to underperform when there is this volatility.
So, Market condition can lead to stress. For example, if you focus on following the trend, you can go through a rough period when the market is in consolidation mode.
Work environment
If you’re an employee of a trading floor, investment bank, or hedge fund, chances are you’re going through a tough time because of the work environment.
This can happen when the company has a toxic work environment or when they are under a lot of pressure to perform.
Related “ How to build a better working relationship
When you don’t reach your goal
Another important cause of stress in day trading is When you don’t reach your trading goals. For example, if your goal is to make a 10% return per month, going through a long losing streak can lead to stress, especially when you’ve been in the trade all day.
Financial management
Finally, there is the matter of financial management. For example, if you are using your emergency cash to trade, there is a possibility that you will get stressed if you lose money.
Stories have been told of people who have lost their retirement money, health, and education through day trading.
How to deal or reduce stress in day trading
There are many strategies that will help you avoid or reduce stress in day trading.
Have a good work-life balance
We recommend investing in a Work-life balance. This means that you should have time to trade and spend time with your family and friends.
You can achieve this by establishing a good work routine and making sure you make time for them. For example, you can decide to trade during the day and then hang out with your family members in the evening.
Having a good risk/reward ratio
Since losses are inevitable, we recommend a situation where you have a good risk-reward ratio.
For example, you can decide that the maximum loss you are willing to take on each trade is 5%. If you have a $50,000 account, that means your maximum loss per trade will be $2,500.
Always protect your trades
Another strategy is to always protect your trades by using stop loss and take profit.
A stop loss is a tool that stops a trade when it goes down to a certain level of loss while a take profit stops it when it reaches a predetermined profit level. Protecting your trades is a good thing as it will give you peace of mind.
Refine your trading strategy
You should spend some time Work on a trading strategy. For example, you should take several months to read about trading and come up with a good trading approach.
In doing so, you will likely know when to execute and protect trades.
other strategies
There are other strategies you can use to reduce stress when trading, including: Having a trading journalwe take Good business mindset Which realizes that losses are possible in the market.
Other approaches are Presence of a mentorAnd Work as part of the trading floor He can help you. Also, we recommend looking for experts when a situation seems to be getting out of hand.
summary
In this article, we have looked at one of the hottest topics in finance and trading. As you may have noticed, there are many causes of stress and depression on the market. At the same time, there are many remedies that you can use.
Useful external sources
- How you can benefit from stress management as a trader – mode
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