Recognizing Trader Condition

One of the biggest factors contributing to whether or not a trader is successful over the long run is a trader’s ability to execute their strategy correctly and make minor adjustments based on current trading activity. Trader condition, both physical and emotional, can affect the ability to execute and in fact, the level of impact this can have on performance is often significantly underestimated.

Performance factors

There is much written about trading psychology and the impact of emotions on your trading. Some suggest to try to be unemotional, whilst others advocate embracing emotions in trading. However, I think a sensible way to approach this is to recognize that when emotions are starting to disrupt your thinking you don’t have to act on them.

Physical condition is less talked about – but it has the potential to disrupt cognitive processing of market information and dramatically slow down a trader’s reactions when it’s low. Not only this, but many people will also find that the lower their physical state is, the more susceptible they become to emotional deterioration when trading goes wrong.

Managing condition

Generally in any profession where level of performance is critical, you’ll find people managing their condition. When they don’t do this effectively, it becomes apparent pretty quickly and their performance usually drops. Think of sportsmen who have had “off the field” problems. Think of singers who try to perform when they’re ill.

For traders it’s just as important to be aware of and manage their condition. They need to ensure that they eat well, get enough rest, exercise regularly and take the time to unwind and enjoy life – and doing this can help to raise their overall condition and smooth out the fluctuations that they or anyone else will inevitably experience.

Letting go

The trouble is that whilst a trader can assess their condition before they trade, it’s usually far more difficult to recognize a drop in condition in the heat of a trading battle. Fear of missing out when markets are moving around a great deal for example, can be a factor in keeping a trader active even when they should be stepping away from their desk. Elevated volatility not only provides greater opportunity, but also increases risk. This is especially true when a trader’s performance is dropping due to below par physical and/or emotional condition.

Being alert to trader condition as you trade is therefore going to potentially be of vital importance in assessing whether it’s at all sensible to continue trading in any given session. But then comes the need to let go. Seeing a market moving about a lot but knowing that your condition has dropped and so it is better to back off and protect yourself is something that can take a bit of experience – and this experience can either take a long time to build up or be augmented through habitual monitoring of the true impact of below par condition. But understanding just how important it can be will give you the resolve to act in your own best interests.

Objectify impacts

In the same way that knowing the true cost of trading errors can elicit change, understanding just how much underlying physical and emotional trader condition impacts on your bottom line can be a big motivation. Perhaps this is something that a trade log is less frequently used for, but keeping absolute track of trader condition and corresponding performance can be a powerful tool. Of course it takes time and discipline to ensure these metrics are accurately recorded, but once you have enough data you’ll have a much better idea of the issues that you face.

Recognizing Trader Condition

Trader condition inevitably fluctuates from one moment in time to the next. Managing and constantly evaluating it can make a vast difference between maintaining a high level of performance every session and getting less consistent results. If you’re serious about trading professionally, make sure you take trader condition seriously.

For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at NetPicks.com.