The Empowered Trader by Mark Fechner

Learning to Respond to the Market, not just React

Six Sources of Trader Burnout (pt. 1)

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To say that trading is hard is stating an obvious fact.  The apocryphal factoid that 95% of all traders fail is in the back of most traders’ minds as they experience the roller coaster that is the financial market.  Regardless of this fact’s accuracy, trading amongst professional and retail traders alike experience a higher then normal turnover rate compared to other activities.

So it’s important to occasionally assess your state of mind and see if you are experiencing signs of trader burnout.  Trader burnout isn’t about having a bad trading day, but is, as Paula Davis-Laack defines in Psychology Today, “the chronic state of being out of sync with one or more aspects of your life.”  The result of this misalignment is a lack of energy, enthusiasm, and confidence in your trading activities.

So to help you understand what might cause a lack of enthusiasm for entering the market, I’ve adapted a list of six sources of potential burnout.  The first three are presented here.

  • Lack of Control – Lack of control is sort of the epitome of trading.  The very act of trading suggests that we are, at some point, willing to “give up” control to let the market do what it will with our money.  That being said, there comes a point where increase stress over a trade and the lack of control can have a detrimental effect on more than just our decision process.  Prolonged periods of stress can lead to a higher risk of coronary disease, stroke, depression, and a host of other medical conditions.  Monitoring how you are coping with stress is primary to successful trading.
  • Conflict with Values – One of the biggest challenges traders face is reconciling core values with the decisions they are making.  This often reveals itself around money, since money often has a lot of emotional significance attached to it. The challenge is understanding which core value is conflicting with a particular decision.  We know that there’s a conflict when we feel uncomfortable while making a decision, or experience immediate regret once a decision has been made.  Ignoring these feeling over the long haul can create the same amount of stress as a Lack of Control.  Creating awareness and acknowledging these feeling can lead to valuable information about how,  and more importantly why, you’re trading.
  • Insufficient Reward – There’s a old adage that says, “Sometimes you eat the bear, and sometimes the bear eats you.”  Most traders have a pretty good understanding of what this means. There will be days when everything goes in your favor, and then there will be days we’d rather forget. Overall, though, there should be some reward for the effort we’re putting forth.  A novice’s reward might be valuable knowledge about the market and their engagement in it, while veteran’s reward might be financial.  Either way, the trader should walk away with something of value.  When that is no longer the case, it’s time to reevaluate the motivations regarding your reasons for trading.

Stay tuned for the next three sources of trader burnout.


Written by etradingcoach

February 7, 2014 at 10:09 am

One Response

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  1. […] In my previous posting I had presented 6 potential sources of trader burnout.  Here are the final three sources. […]

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