Thursday, April 23, 2009

Secondary Anxiety and Trading Performance

A while back I wrote about performance anxiety as the most common emotional issue faced by traders and covered some of the techniques that are most effective in combating performance anxiety. There is, however, another variety of anxiety that affects traders that receives almost no attention. Psychologists call it secondary anxiety.

Let's say a person has a panic attack, an overwhelming experience of anxiety and dread that isn't connected to anything obvious. That panicky feeling may be so frightening that the person develops a fear of the attacks. That is how panic disorder patients often develop agoraphobia: they assume that their attacks are caused by something in their environment, so they avoid going places that (they think) might trigger further attacks.

Similarly, I've worked with students who have suffered from test anxiety, a very common form of performance anxiety. They become so fearful that they'll become anxious during a test that they generate the very fear that they hope to avoid!

When people become anxious about their own anxiety, that is called secondary anxiety. It is a particularly thorny problem, because it sets up a vicious cycle: more anxiety leads to more fears of anxiety leads to further nervousness.

A key element that perpetuates the cycle is avoidance of situations that might trigger anxiety. As long as we try to avoid what we fear, our fears control us. Psychologically, the only cure for anxiety is to directly confront our fears *while we remain under control*. That way, we learn in our experience that threatening situations are manageable.

What happens with traders is that they respond to losses (or threatened losses) with disruptive anxiety, often because they are trading excessive size/risk. As a result, they develop a fear of these disruptions and avoid situations that could lead to repeat incidents. One trader I worked with never increased his size in a way that was commensurate with his skills. He made money, but never as much as he should have. It turns out that this was his way of coping with large, painful losses early in his career. His small size was his way of keeping secondary anxiety at bay; he wasn't simply afraid of losing money, but was also afraid of losing his mind.

Another trader I worked with was so afraid of going on "tilt" that he overanalyzed trading opportunities, often missing good trades. The "tilt" that he feared had its roots in anxiety: losing control over trading, because of losing emotional control.

The approach I've found most helpful for such secondary anxiety is guided imagery, aided by biofeedback. In intensive sessions, I will have traders mentally rehearse scenarios of losing money *while they keep their bodies under control*. Heart rate variability biofeedback has been especially helpful in this regard; the Freeze Framer program that I refer to in this post is now known as emWave and has worked well for me.

The key is to use the biofeedback as a training device to help yourself stay physically calm and collected, even as you visualize the anxiety provoking situations that would normally trigger secondary anxiety. By repeating these situations in your mind again and again until you sustain physical control, you literally train yourself to master your responses, eliminating secondary anxiety by building self-efficacy.

We cannot avoid feelings of nervousness, fear, and anxiety, especially in situations that involve performance under conditions of risk and uncertainty. We can, however, avoid become nervous about our nervousness and fearful of our fear. We will always have emotions while trading; we don't have to be controlled by them.


expectingrain said...

Top 5 Post. Hope you dedicate more posts to this topic. When I was in college, I was ice skating and met a girl. I was so nervous that I literally forgot the name of the dorm I lived in. That moment stuck with me for many years. How could my stress/nervousness cause me to forget something as basic as where I lived? If stress/anxiety can do that, just think how it can hinder trading or other performance endeavors! I would love to learn the chemical reasons why this happens- I think it would help me to understand it much better. So how chemically does stress actually work to hinder performance?

SSK said...

Hello Brett, thanks for the germane links within your main body of commentary! That is really helpful! Thanks, Best, SSK

Lavonne said...

This is such an elegant way of encapsulating fears I'm all too familiar with.

Thanks to your work, I understand that I've inflicted trauma on myself with sporadic, large losses over the past 1 1/2 years. Part of me looks back in amazement at how blithely I traded much larger size then knowing not half of what I know now...yet then, I didn't suffer from the anxiety that now often leads me to sit out the trades that are most promising. But I'm working on it, taking small steps every day that build on my strengths. I loved the passage in the Daily Trading Coach about some traders being 'invisible' to themselves because they don't know what they're good at. That made me work on an ongoing self-inventory, that has been very helpful.

With great affection and appreciation,

Pierre said...

Hi Brett,

I'm a 21 year old guy from Sweden who's trying to learn the art of trading, and as the psychological aspect of it seems very important, I've followed your blog for a while with great interest. So first of all I would like to thank you for writing a very interesting blog!

This is my first comment on it, as I felt that you touched a subject that is very relevant in my day to day life. Even though I have not (yet) had an experience within trading that brings anxiety out of me, I really felt like what you wrote could be applied to another area in my life where I do experience this kind of secondary anxiety.

I have been struggling with asthma, and even though it's been a while since I had an actual attack now, I can still start to worry about getting an attack when I'm in locations where I do not feel safe. At places where I feel like no one would be able to take care of me if I would get an attack. This is very annoying as I am aware of that an asthma attack doesn't just occur out of the blue. But the thoughts are very difficult to get rid off. Being controlled emotionally instead of by logic drives me crazy!

I tried doing your exercise when I visualise myself having troubles breathing. However, it became a bit complicated. To try to put myself in to the situation mentally where I have troubles breathing, I noticed how my breathing changed. And if I tried to control it in the way where my breathing was good, it didn't feel real enough for me to relate. I don't know if maybe I should keep trying or do it while affecting my own breathing and still try to remain calm or something.

Either way, what you wrote was interesting, and I recognized the part you wrote about facing your fears. I almost developed agoraphobia for a year or two ago. Not because I thought the environments would cause an attack, but rather that the environment wouldn't be able to take care of me. It got worse when I one day sat at home all alone and received what I think was my first panic attack in all my life. That moment, I realised that being at home didn't mean that someone could take care of me.

Now days I try to do things I'm scared of, as you wrote! Just the other day I was feeling a bit out of breath while walking to the university, and there was a long staircase I had to walk up for. At first I felt that I didn't want to walk this staircase as it would make my breathing too strained. When I realised that I was scared of climbing stairs, I decided that I had no other options but to face this fear. And of course, it went fine.

I feel better now days, but the discomfort still lingers around. I view it as my inner demon, waiting to lash out at me when I show a sign of weakness. I would not be comfortable visiting another country by myself for example. Luckily enough, I've realised that my mental "weakness" is correlated with my physical weakness. If a longer period goes without any breathing problems, I get stronger mentally as well.

This comment became a lot longer than I anticipated! And very off track.

So to sum it up; Thank you for the great blog, thank you for this interesting post, and thank you for giving me advice that can prove valuable not only when it comes to my trading, but also in my life.

I hope my english was understandable to you,


kagame said...

Your English is better than most native speakers! Thank you for an enlightening response to an excellent original post.