Why We Choke Under Pressure and What We Can Do About It

Thanks to Crosshairs Trader for pointing out this excellent article on why people choke under pressure.  It turns out that how we frame situations helps determine our choke potential.  If we tend to be risk averse, we can handle losing situations, but can freeze up in the face of large possible wins.  Conversely, if we are risk seeking, we can handle gains, but fall down in the face of large potential losses.  In a sense, it's the outcomes we're least prepared for that can most interfere with our mindset and subsequent behavior.

Putting in golf is a great activity for studying choking.  Research suggests that skilled golfers have made their putting automatic.  They have done it so many times in so many situations that it is not a skill they need to think about.  It's when they start to think about (and overthink) the putting--perhaps because of the importance of the situation--that the automatic skill falls prey to cognitive and emotional interference.

A review of the research on choking in performance situations finds that many factors may lead to reduced performance under pressure, not just overthinking particular outcomes.  How we think about performance outcomes helps to determine the pressure that we experience.  Also, research finds that tasks that allow for the possibility of distraction may lead to choking for different reasons than tasks that encourage (over) monitoring of one's own performance. 

My general experience is that strategies to reduce or remove pressure are effective in addressing performance anxiety and choking.  If a trader clearly identifies risk and reward in advance and mentally prepares himself or herself for both, the odds are greatly increased that any outcome won't disrupt performance.  The key is emotional preparation for winning and losing, not just writing down price stops and targets.  Actively visualizing outcomes and making sure that you are comfortable with them is a great way to proactively address choking in trading situations.

It is very difficult to choke in situations in which you have "been there and done that" many times.  Making winning and losing routine normalizes our emotional responses and frees us to fully employ our skills.

Further Reading:  Overcoming Performance Anxiety
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