Thursday, April 26, 2007

My Favorite Techniques for Overcoming Performance Anxiety in Trading

A little while back I made the observation that performance anxiety is the most common psychological problem that I encounter among traders. It occurs in many forms--during slumps, at times when traders attempt to raise their size/risk, when life's financial needs add pressure to trading outcomes--but the common element is that a concern with the results of trading interferes with the process of trading itself.

I thought that both the comments of readers and their emailed suggestions offered very useful ideas regarding the handling of performance pressures in trading. In this post, I'll add two suggestions of my own.

* Self-hypnosis - This builds on the ideas from my first trading book, The Psychology of Trading. When a trader is responding to a trading situation with anxiety, I ask the trader to close his eyes, breathe deeply and slowly, fix his attention on a musical selection, and hold his hands in front of him with palms facing each other a couple feet apart. The music, taken from Philip Glass' early works, has a highly repetitive structure and serves as an object of focus. After an extended period of the slow, rhythmical breathing and focus on the music, I then suggest to the trader to imagine that there is a magnet between his hands, pulling them slowly and steadily together. As his hands are drawn closer and closer, I suggest, he will find himself feeling more and more relaxed, calm, and confident. The exercise is brought to a close when the palms finally touch. Altogether the exercise lasts at least 15 minutes.

The exercise becomes a self-hypnosis routine when traders give themselves suggestions during the time that the hands are moving together. For example, they might suggest to themselves (internally or even via a self-made audio tape) that, as their hands move together, they will feel increasingly accepting of a recent loss and able to put it behind them. The key is to enter a highly focused and relaxed state prior to the self-suggestions and to perform the exercise thoroughly and regularly on a daily basis. Over time, traders find it easier to enter the focused state of relaxation and invoke their own suggestions. Eventually it's possible to get back to that state (and activate the suggestions) by merely taking a couple of deep breaths and bringing one's hands together. This makes the technique very practical for real-time trading situations, when all you have time for is perhaps a few deep breaths and a simple gesture. Repetition is essential to such mastery.

* Reprogramming Anxiety Through Biofeedback - Regular readers know that I consider biofeedback to be a best practice in trading, with broad application to a variety of emotional situations that affect performance. Of late, I've been making use of heart rate variability feedback through the Freeze-Framer program, which offers a nice graphical interface to help users track their progress and visually determine whether or not they're in "the zone". In the first step of biofeedback training, I simply teach traders how to enter the zone, as above, by regulating their breathing and sustaining a tight cognitive focus. This, by itself, is a very useful skill that can serve as a preventive measure regarding performance stress.

Once the trader becomes adept at this, I then add a second component to the exercise: The trader must vividly visualize a mildly anxiety-producing trading situation while hooked up to the biofeedback and maintaining the calm focus. Once the trader can repeatedly visualize this low-anxiety situation and sustain "the zone" on the biofeedback readout, we then move to a second, higher-level anxiety scenario. Often it's helpful to vividly imagine variations of the same scenario in separate biofeedback sessions. Eventually we move to the most anxiety-producing situations, repeating them over and over in variations, until the trader can sustain the calm focus even in the worst case scenarios. The added benefit of this method is that it teaches traders what they need to do to get their minds and bodies under control. This awareness can then filter down to real time, when all the trader needs to do is focus attention and regulate breathing during stressful market periods. A variation of the biofeedback work that is quite effective involves practicing constructive self-talk while staying in the zone.

Notice that both of these methods involve shifting one's state--physically, cognitively, and emotionally--as a way of dealing with performance pressure. By enhancing our control over our states, we can place ourselves in modes of thinking and feeling that are incompatible with performance anxiety. My experience is that traders can learn this competency on their own or with only a minimum of coaching intervention. With steady practice, one develops a degree of self-mastery that carries over to other areas of life. I believe I'm much more able to deal with life's various stresses as a result of what I've learned from managing my trades--and my reactions to those trades!


AnaTrader said...


The exercise becomes a self-hypnosis routine when traders give themselves suggestions during the time that the hands are moving together. Unquote

This exercise reminds me of Chi Kung, a Chinese traditional exercise, when the two palms facing each other will emit some magnetic force.

I use this exercise sometimes not only to relieve stress but to relieve pain of a bad back.

It is a universal panacea for all pains, including stress.

Brett Steenbarger, Ph.D. said...

Hi AnaTrader,

I wasn't aware of that traditional Chinese exercise; thanks so much for passing along!


MIsstrade said...

I try and take the testosterone out of my buddy and imagine myself as a female trader. Believe me patience is the utmost importance in making me more successful and that's what I need to do to put me in the right frame along with breathing.

Use my estrogen to get me in the right frame of mind, just what I wrote about today.

Brett Steenbarger, Ph.D. said...

Hi Misstrade,

Much to be said for patience and taking the ego out of trading; thanks!


AnaTrader said...


Here are the websites of Qigong or chi kung :

Hope you or your readers can benefit from them.

Deucalion said...

I lost 50% of my account in Aug/Sept. I also lost my mind getting up in the morning with a seething nihilistic rage and generally being an idiot everywhere and with just about everyone.

One day I got up and decided I wanted to refocus my rage so I went to the gym and burnt myself out with exhaustion.

But my rage was done, instead the steady and increased levels of endorphins in my body changed my rage without trying.

Today in one month my portfolio has no more losses and I am up on 3 of my 4positions.

I think doing something fun helps as does constant exhaustive physical exertion.

Patrick Glancy, CH said...

Good suggestions :) Biofeedback is a branch off of hypnosis. Different forms of exercises make a person focus on something for a short amount of and clears the mind for a moment - also a form of hypnosis. I've worked with lots of anxieties but never for trading!

Patrick Glancy, BCH