If you freeze at critical moments of trading, it’s understandable, especially during uncertain times like these. You can intellectually understand what to do, but when it comes time to execute the trade, you can't do it. It is much like knowing how to make a golf swing in the abstract, but being unable to do it while playing an actual round of golf. When the psychological or financial stakes are high, you may choke, and all the preparation that went into your plan may be of little benefit if you cannot put your plan into action at the right moment. You don't have to let anxiety and uneasiness get the better of you, though. You can use the technique of mental rehearsal to cope with emotions that may thwart your ability to trade effortlessly.
When your money is on the line and you are not sure if you will lose precious capital, it may be hard to execute when you need to. A sudden fear reaction may catch you off guard and may seem mysterious. When caught off guard, the uncertainty of the markets can impact your ability to trade calmly and rationally. When you anticipate your potential fears, however, their potency will be greatly diminished.
Mental Edge Strategies
One of the best ways to cope with unexpected anxiety-provoking events is to use mental rehearsal. Mental rehearsal consists of pretending a series of events is unfolding occurring while in a safe, quiet place. It's much like making a videotape of a set of market events and replaying it in your head. For example, you can imagine having to make a profit during times of extreme uncertainty and feeling that you are not sure of what will happen in the long run. If you are the kind of person who would find making a trade while afraid of what will happen to your stake, you can try to practice making the trade effortlessly through your imagination. By replaying the events in your head at your own speed and under your own terms, you can learn to control your fear response. When you first replay the mental “movie” in your head, you may feel anxiety and apprehension. Your breathing may be heavy and difficult. When this happens, you can "pause" the "video" and practice relaxation exercises. Take deep breaths and relax your muscles. By replacing anxiety with feelings of peace and relaxation, previously stress-inducing events will lose their potency. Through practice, you will soon be able to replay the movie without stopping and without feeling any sense of anxiety or uneasiness. Eventually, you will be able to face actual stressful events during the trading day with a calm and relaxed response. You can imagine yourself trading under the most chaotic conditions with ease. You can imagine entering and exiting a trade calmly and effortlessly. By mentally rehearsing the event, you can face incidents that would be difficult to address during actual trading conditions. Rather than facing them in reality, and repeatedly experiencing stressful, paralyzing emotions, you can practice coping with approximations of the event until you can trade decisively and effortlessly. Don't let stressful emotions adversely impact your trading. Cope with them through mental rehearsal and neutralize them. Soon, you'll be trading effortlessly with the proper mental edge.
By Michael S. Shopshire, PhD. Mental Edge