Guest Contributor: 3 Tips for Stressed-Out Traders To Bolster Financial Success (Part 1)

By David Rosenblatt, Psy.D., MarketPsych

 

Guest Contributor: 3 Tips for Stressed-Out Traders To Bolster Financial Success (Part 1) - stress2

I’m a psychologist in a hospital for the criminally insane. 

 

You might wonder why I’m writing about financial markets.

 

Most traders acknowledge there is a “soft” side to trading. Yet it is anecdotal and generally ill-defined. I assert that that soft side is all about how we handle uncertainty in a rapidly changing environment.  In other words, stress management.

 

Traders’ need for stress management surged last year. The plot below shows the price of the S&P 500 and Stress about the S&P 500 expressed in social media (a 500-day average represented by the blue line). Data is provided by the Thomson Reuters MarketPsych Indices and covers financial social media such as tweets, message boards, and blogs.

 

Guest Contributor: 3 Tips for Stressed-Out Traders To Bolster Financial Success (Part 1) - rosenblatt image

 

Data show that stress about the S&P 500 expressed in social media hit a two-year high last year, despite the bullish environment for stocks.

 

Working in the hospital environment I became a specialist in stress management. Success required navigating uncertainty, managing risk, and following a plan. In short, making the unpredictable predictable.

 

And my stress reaction to a patient’s glare is the same – biologically speaking – as a trader’s stress response to investment uncertainty. The reaction can be visceral and distracting. However, predicting the unpredictable is best done with a clear mind.

Dealing with Stress: Identify What Can You Control

In this 4-article series I will share what I’ve learned about stress management that can be of benefit to traders. To illustrate this point, I’ll share a story about an incarcerated young man with whom I worked named John.

 

John came from a broken home and he spent most of his time on the streets where he assaulted numerous people. Once locked up, he had difficulty adjusting. All day he scanned people and the surroundings for danger. All night he was tormented by visions of his maimed victims. Conversation was difficult because his mind was either racing or blank. Once he could trust me, he tried a few simple stress-management techniques.

 

Guest Contributor: 3 Tips for Stressed-Out Traders To Bolster Financial Success (Part 1) - rosenblatt callout

 

John learned that to manage his stress. He needed to take control.  Being incarcerated, however, he could not control his environment. So, what could he control?  Features of his thought process and specific behaviors.

 

This is also true for traders in the market. Traders cannot control prices, but they can intervene in their thought processes and take specific actions. Domains where they can take control include directing focus, managing downtime, and engaging in deliberate mental exercises.

3 Tips For A Stronger Mind, Stronger Trades

First, focus needs to be flexible. To help keep the mind loose and limber, vary the eyes’ focal point a few times an hour. Look away from the screen, to the wall near you, then gaze out the window.  Setting a periodic alarm as a reminder to look away can be helpful to break unhelpful thought patterns that form during a day of looking at screens.

 

Second, quality sleep is paramount to health. With constant scanning and thinking, the mind becomes a runaway train. Sleep is a station blown past. A winding-down ritual cues the mind and body that sleep is the destination. To slow that mental momentum, dim the lights, make some herbal tea, and jot down a few light-hearted ideas.

 

Third, and paradoxically, one way to take control is to let go of control. A clear mind allows one to choose the contents. To create clarity, find a quiet space, close the eyes, and focus on breathing for two minutes.

 

So, what happened to John? He’s still in prison. But once he learned to manage his mind, he was able to obtain a formal education and get a job. He could read for pleasure. His sleep improved.

 

You can take control of your psychological well-being to bolster financial success. This article is a brief introduction into taking control. I’ll follow up with three articles that further explore each mental dimension - focus, sleep, and mindfulness.

 

EDITOR'S NOTE

This is a Hedgeye Guest Contributor piece written by David M. Rosenblatt Psy.D. Dr. Rosenblatt is an investor coach for MarketPsych, an expert in stress management, and an avid individual investor. Additionally he works with the California Department of State Hospitals treating Mentally Disordered Offenders. This piece does not necessarily reflect the opinion of Hedgeye.


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more