Friday, February 07, 2020

Performance Anxiety: The Most Common Psychological Problem Traders Face

Performance anxiety is common in all fields where performers care about the outcomes of their performance.  Before a big game, baseball, football, and basketball players may experience performance anxiety.  The actor or actress before the play starts; the trader facing a volatile market--all can find that their stress levels get in the way of their performance.  Performance anxiety occurs when we become so focused on the outcomes of our performance that we no longer stay in the natural flow of performing.  It happens to golfers, it happens in the bedroom, and it happens to many traders.

When we learn trading the right way, we minimize performance pressures.  By starting with trading in simulation mode, then building consistency, then trading small, and only taking meaningful risk when we have a track record of consistent success, we give ourselves time to build the confidence that keeps performance anxiety at bay.  When I first began doing talks for groups, I became quite nervous, and that interfered with the effectiveness of my communication.  With gradual and repeated experience and learning what works and doesn't work in my public speaking, I've gotten to the point where talking with people is fun.  Some talks go better than other ones, but I know nothing catastrophic is going to occur.  

This is why losing the right way in trading is so important and why risk management is so important.  Once you trade and trade and see what works and doesn't work and see in your own experience that some trades will work better than others, the process becomes more familiar and less threatening.  If we're experiencing undue performance anxiety, we want to take risk off the table entirely, go back to simulated trading, and just focus on the process of trading well.  Traders I work with often maintain a checklist of their best practices that grounds them in what they do well in generating ideas, managing positions, managing risk, etc.  When we take risk off the table, we can get back to keeping score based on *process* and eventually letting wins and losses take care of themselves.  Gaining confidence in a learned trading process that draws upon our distinctive strengths is a major antidote to performance anxiety.

One of the most effective techniques for reducing performance anxiety is mentally rehearsing scenarios of positions going against us, staying calm and focused with deep breathing, and then imagining how we would handle those situations.  If we engage in that exercise routinely, the scenarios of loss become familiar, and we've trained ourselves to stay centered when they occur.  It's very difficult for something very familiar to be very threatening.

Below are posts and resources that discuss performance anxiety and ways of overcoming it.  Very often, the best approach is to take risk way down, refocus on consistency of process, and then only gradually put risk back on.  Once we can embrace normal, expectable losses as potential learning experiences, they become less threatening.  That allows us to simply enjoy the process of understanding markets and grounding our trading in that understanding.

Further Readings: