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Online trading can be a great deal of fun and, naturally, there is always the distinct possibility of enjoying substantial returns over time. Some approach investing as a hobby while others focus on making it their primary income source. Regardless of intentions, emotion always plays a role in trading. It should also be mentioned that “trader anxiety” is actually much more common than many believe. Are there any ways to mitigate the effects of such an emotion and how can you “pay it cool” when the heat is on?
Trading Anxiety 101: What You Need to Know
Anxiety is primarily the result of emotionally projecting a specific outcome and anticipating the way you will feel if such a situation occurs. However, the sticking point is that anxiety leads to a certain amount of stress. In turn, your decision-making capabilities are affected. Now that we have a basic definition of trading anxiety, how can you cope with its damaging effects?
The majority of traders will experience anxiety if they are overly exposed to a specific position. So, be certain to hedge your bets and to always have a cut-off point in regards to your investing limits. This will help to ensure that even if a loss occurs, you will not suddenly become insolvent. Another benefit to this approach is that as you will not worrying about a “what-if” situation, you are able to make clearer decisions when the time is right.
This is another way of putting a bit of “slack” into your overall trading strategy. This will partially depend on your tolerance for risk but never forget that the level of risk will tend to correlate with how much anxiety you experience. Diversifying a portfolio helps to ensure that you will not lose a great deal of money if the value of one holding suddenly drops (which inevitably occurs from time to time). As a result, you will spend less time fretting over a potential loss and more time looking towards the next investment opportunity.
The Past Does Not Dictate the Future
This is arguably the most important point to be made. Anxiety often stems from a past negative experience. In the world of investing, this could be a substantial financial loss or the failure to recognize a clear market trend. Such mistakes can be a blow to the ego and ultimately, your confidence could become shaken. Always remember that even experts lose money from time to time and that there is no such concept as a “sure thing” in terms of trading. Leave the past where it belongs, learn from it and move on.
Feelings of anxiety can likewise be alleviated by using the best tools in the industry. CMC Markets has put together a comprehensive network of trading instruments that can be leveraged in order to enjoy a lucrative investment career. Take a look and remember that you are ultimately in control of your anxiety.
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