Performance anxiety

Mental errors produced by anxiety can lead to increased tension, narrowing of attention, and yet more errors. Anxiety may cause traders to neither respond effectively to incoming data nor rely on internal models to recall past successful patterns. As a trader, any increase in anxiety may distract you from the stock activity you are following and lead to excessive focusing on your own internal bodily reactions, further increasing your anxiety.

Efforts to reduce anxiety, paradoxically, may create a new set of programmed responses that can undermine trading flexibility. These can be temporary or permanent handicaps to good performance or to the capacity to keep growing and improving as a trader. These behaviors may be adaptive temporarily in the present, but once they become fixed patterns they have a rigidity of their own. As a trader, you must maintain a certain level of consciousness about what you are doing, so that you can keep adapting to new circumstances rather than continuing to repeat what you have just learned to do.

Typical symptoms of performance anxiety include palpitations, difficulty breathing, distractibility, muscle tension and cramps, noise sensitivity, severe hand trembling, and loss of appetite. These symptoms usually recede as trading begins. Indeed, performance anxiety seems to occur mostly before and after the trading day, not so much during it. The better the trader, the more he or she can tune these negative thoughts out and fine-tune excessive stress responses to focus all his or her professional skill on the task of trading.

Stopping Points in Trading

The stopping point is the whole sequence of events, reactions, interpretations, and automatic decisions that may keep you from being fully engaged in trading opportunities. You may rationalize your position because it appears to be consistent with your goals, when in fact it may be a cover for a life principle of risk avoidance.

All trading is influenced by lifelong beliefs and habits that are operating for you when you trade. It is important to consider these distinctions. To the extent that your trading is dominated by long-standing life principles you may not be maximizing

some, fears of going broke or trading beyond the comfort zone are related to anxiety about attaining positive results and competing with others.

Different situations present different challenges and trigger different reactions. Some traders have trouble accepting success and experience significant anxiety as their profits rise, often sabotaging themselves as soon as their profits exceed certain amounts. Most traders also agree that they lose more often when they worry about losing. This may be related to performance anxiety.

your opportunities. Instead, you may be limited or stopped by your underlying assumptions of the world.

Traders can be stopped for a day or longer by their fearful automatic thoughts of losing, which may be consistent with their self-concept. Such fear leads to the misinterpretation of events, greater distractibility, and the inclination to focus on past mistakes or to worry about future events. In this state of mind, traders cannot analyze the market and plan their trading objectives clearly.

Such traders often buy small volumes of numerous low beta-stocks or trade more stocks than they can handle. Their knowledge of stocks and their continued failure to play up to their abilities perpetuate a self-image of being "bright losers," which may be a reenactment of a central emotional theme from childhood. Some of these overly cautious traders are afraid to use all their own market assessments. Paradoxically, some wont buy a stock if others are in it because they do not want to be thought of as being a "follower" or being "late to the party."

Trading to win is to risk going beyond the familiar and to enter the zone of uncertainty. A stopping point prevents these traders from committing to their trading objectives and maintaining sufficient discipline to follow a winning trading strategy.

Trapped by their own anxiety, these stopped traders are unable to follow the market trend, cut their losses, or let their profits run. They are unable to follow their own rules and have trouble recognizing that their greatest asset is their ability to control their own actions. The stopped trader does not recognize that his fears and emotional reactions to market fluctuations significantly influence his trading.

Some traders are stopped by their egotism. They are often aggressive but inflexible and unwilling to admit error. They may be able to ride out considerable pain and uncertainty on the way down to make a profit by selling short, but are unable to switch positions and take a long position on the same stock when it reverses direction. They may be stopped by the same conviction that enables them to stay short for a long time, and they may lose all profit on the upside that they made on the downside.

Beneath this inflexibility is a false sense of self based on past successes. After bad days, one trader I know looked back to his successful choices to demonstrate he was right in his perception. He defended himself by having a self-concept as a home-run hitter who had a "few" bad days. He blamed his precipitous losses on "bad luck," tended to avoid preparation, and got in too soon and out too late. He was easily influenced by criticism and kept seeking approval, while simultaneously rebelling to gain reassurance. His stopping point is his need to receive support and approval, his inability to acknowledge support when it is given, and his inclination to blame his failure on the advice of others.

Another pattern of egotism can be seen among contrarians who refuse to use stop losses. An erroneous sense of their own ability prevents them from developing flexibility. Their sense of self repeatedly asserts, " Thats the way I am and always will be." They are invariably frustrated because their self-concept (which they believe is not modifiable), not their trading strategy, governs their trading.

Know Your stopping Points

Recognizing your own stopping points is the first step to managing fear and building trading discipline. Traders may find it difficult to relinquish old habits because doing so means acting contrary to their underlying negative self-concepts. While this may be rationalized as the fear of failure, it is really the fear of change. These traders are afraid to commit to a larger objective.

The second step is to ask yourself a series of questions about whether you are functioning in terms of your potential:

• Are you willing to let go of the life principles that keep you from learning new trading techniques?

• Are you willing to define a larger trading objective and strategy and then commit to trading in those terms?

• Are you willing to record entry and exit points as well as a stop point for the trades you want to make?

• Are you willing to mark your profits and losses to the market so you know where you are at the end of the day?

• Are you willing to analyze your trades to see what strategic elements are missing from your unsuccessful trades?

• Are you willing to develop parameters of measuring your performance so you know what you need to do?

Stopping points keep traders from maximizing their results. To overcome these stopping points, you must begin to view market events as neutral and learn to handle them in terms of your conscious objectives, not in terms of old beliefs. Remember, the stopping point is that point in time where your fears and belief keep you from entering fully into the next moment and keep you trading in repetitive and possibly destructive patterns.

Recovery from the Last Trade

Trading is a complex activity that requires increasing self-correction in the face of ever-changing market conditions. To reach trading mastery, you must learn how to recover from previous trades, profitable or not, to relinquish the emotional impact of your most recent success and failures, and to focus on upcoming trades. This entails learning psychological skills designed to access the mind-set of successful trading.

Relaxation or meditation is particularly useful in quieting the mind of self-doubts and focusing positively on the next moment. For example, tennis players begin their recovery process by shifting their racquets to their nonplaying hands between points. Then they walk back from the net consciously adopting a confident