One of the most important tools we can own as a trader—especially in volatile times like these–is to be “mentally tough.”
In an article published by Journal of Applied Sport Psychology, in 2002, three professors, G. Jones, S. Hanton, and D. Connaughton asked three groups of people for the definition of “mental toughness.”
- High-performance athletes: “Mental toughness is the “ability to perform at consistently high levels in pressure situations.”
- High performing equity traders in large global bank: “Mental toughness is, “the ability to perform at consistently high levels through times of personal and professional pressure.”
- High-performing sales people: Mental toughness is the ability to respond positively to multiple and sometimes conflicting pressures and deliver a consistently successful performance.”
When we are mentally tough, we perform efficiently at high levels, with minimum stress. Please know that ninety-nine percent of the stress we endure as traders doesn’t need to happen. Start now and fix your trading challenges so that you don’t invite unnecessary stress and losses into your trading day.
- Do your homework. First and always, establish a trading plan for each trade.
- Get familiar with the market’s “mood and manner” as relates to geopolitical pressures and economic events.
- Keep an eye on the current trends of the major indices, such as the DIA, SPY and QQQ, as they tend to act as leaders for the majority of stocks
- Know what sector, what industry group your stock is in and know whether it works well in the current environment.
- Know when your stock’s earnings are posted.
If you are in long positions and the market opens sharply lower, don’t panic. Look at a daily chart and find support levels. Place automatic stops with your broker, then analyze the news to decide further actions.
Staying mentally tough and in control of your trades during times of stress comes with experience and practice. It comes with having a well-thought-out trading plan in place that you can live with. It comes from being mentally sharp and focused. It comes from a strong belief system– belief in yourself and your skill-set.
So ask yourself, “Am I mentally tough?” If not, you may want to review the points above and spend time training your brain to approach the market with a more muscular mindset. I promise, the time you invest in achieving mental toughness pays great dividends.