Thursday, October 08, 2009

Overcoming Mood Problems in Trading

A reader recently commented on the post that described three life problems that can become trading obstacles. The reader described intense anxiety experiences even when trading in simulation mode. To the reader's credit, he is wanting to resolve this problem before putting his capital at risk.

If the anxiety problem is one that also interferes with other spheres of life and/or does not respond to the kinds of self-help interventions described in my book, the answer is to get professional help for anxiety. Cognitive-behavioral therapy is quite effective in the research literature and would be my preference for treatment of first choice. One referral list of trained professionals can be found here.

In particularly debilitating circumstances, including those that do not respond to talk therapy, medication can be effective and consultation with an experienced, board-certified psychiatrist can be useful. Sometimes medications can get the problem under control sufficiently that the person can then begin the cognitive behavioral work to learn skills and master the anxiety.

One area to explore with a trained professional in cognitive-behavioral work is one's expectations going into trading. Many times, expectations are so high and the need for success so great that traders place undue performance pressure on themselves. (See this post and its links for more on performance anxiety). If trading success is equated with one's personal worth and success, the pressures of taking losses will be greatly magnified.

Where cognitive techniques are effective is in reframing these expectations and needs so that traders can more readily divorce their self-esteem (and their feelings about their future) from the outcomes of specific trades. Very often, traders are less afraid of losing trades than losing trading. Their anxiety stems from seeing normal losses as threats, not opportunities for learning and development.