I recently spoke with an experienced, insightful trader who was experiencing performance anxiety. He was so concerned with losing money that he failed to follow his own rules regarding entering positions, taking profits, etc. As a result, he chronically felt frustrated, because his ideas were good, but his trading was mediocre.
It turns out that this trader had a pretty small account and was trying to use his trading to support himself and his family. As a result, he was taking positions that were quite large–quite leveraged–relative to his capital base. This ensured that, if he had a normal and expectable run of losing trades, his account would draw down meaningfully.
He knew that he could not afford to draw down significantly, so he was caught between a rock and a hard place. He had to take risk to make the money he needed; he could not lose much of the money at all.
In such a case, anxiety is a normal and healthy response. It is information, not a problem. It is telling us that the trader’s goals are not realistic and are placing too much pressure on him and his performance. He either needs to find other ways to support his family while developing his trading or find a position as a funded trader. Most important, he needs to trade without the fear of risk of ruin.
Many times, the negative emotions of rational people are themselves rational responses to irrational situations. If a spouse experiences emotional abuse from a partner, reactions of fear and anger are normal and natural–and they are telling us something! Negative emotions can become prods to get us to look at our circumstances and expectations and make constructive changes in those. Too often, we look to rid ourselves of negativity rather than looking into it and learning from it.
