Coping strategies represent efforts we make to deal with stressful situations. When we employ combinations of strategies across situations, these are part of coping styles. Research suggests that active coping styles--ways of coping that directly address stressful situations--are more effective than avoidant coping styles. Active coping methods can be broken down into problem-focused strategies (ones that attempt to directly address problematic situations through analysis, planning, cooperation, restraint of extraneous activity) and emotion-focused strategies (ones that attempt to seek social support, positively reinterpret situations, use humor, accept situations). Avoidant coping can be avoidant both in behavioral and emotional ways (disengaging from stressful situations, suppressing emotions associated with stressful situations) and includes the use of drugs and alcohol to escape stress.
An exercise I like is to jot down five recent stressful situations in markets and the specific ways in which you dealt with those situations. Very often, a detailed look at your best coping will reveal how you string together coping strategies into an effective coping style.
For example, I recently took a loss on a short-term position when I became focused on longer-term market behavior and failed to enter the trade at a favorable short-term level. When the position went against me, I immediately became hyper-focused and pushed aside any emotional reaction. My entire focus was on whether the move against me was broad based, with increasing momentum or whether it was a weak move that could be expected to reverse. As soon as I determined that this was, indeed, a broad and strong move, I exited and took a small loss.
Upon taking the loss, I sat back and pulled away from the screen. My emotional reaction was "ouch". I also had the emotional reaction of "I'm not going to let this happen again." I reviewed the shorter term measures of strength and weakness that I track and identified the information that I had failed to integrate. I discussed this information with a trading friend and we agreed to monitor the information going forward. That monitoring became useful in entering the next trade, which was profitable. I revised my routine to ensure that I completed a review of short-term information prior to any future trade entry.
Notice how there is a sequencing of strategies in the coping. First, there is a suppression of emotional response and problem focused efforts. Then there is acceptance of emotional response and a channeling of the emotions in a constructive direction. That leads to larger efforts at solution and social strategies to run my ideas by others. Finally, the new problem solving and lessons learned are applied in real time.
My most successful coping in trading situations follows this pattern closely. My least successful coping occurs when I sit back, pull away from the screen, and simply withdraw from trading. That is what the previous post talked about. Withdrawing from problem situations was how I (successfully) coped as a child. It does not work in mature relationships; nor does it work in dealing constructively with markets.
No doubt, you have sequences of coping strategies--coping styles--different from mine. The important idea is not to adopt the coping styles of others, but to identify how you best handle adversity. By breaking down your successful coping into sequences of steps, you can create a "best practice" template that can powerfully prepare you for the next market setback.
Further Reading: Embracing Stress
.
Posts
