Execution anxiety is a serious problem for a trader

Trading psychologyPerformance anxiety often leads to Substitution of real desires trader - instead of clearly executing the trading strategy and maintaining discipline, the speculator begins to worry about the end results of the trading process and loses concentration. Consider the following psychological examples:

1) A student must take a final exam in an anatomy course in order to successfully complete his first year of medical school. Since his first few exams were on the line between success and failure, this exam completely affects the final score. As the time for the big test approaches, the student becomes more and more anxious about the test, especially when he misses some questions. The anxiety affects his sleep, which in turn makes him even more anxious that fatigue will interfere with his ability to pass the exam. By the time he goes to take the exam, he is tired and overexcited and misses many questions, often by revising for the correct answers.

2) A young woman has never been particularly uncomfortable speaking in public, but now she is about to give the most important presentation of her career. As a result of this presentation, she will either gain a major client for her firm or lose it to a competitor. During the course of the talk, she notices that members of the audience from the client she is pursuing do not seem particularly attentive. This suddenly raises her anxiety, and she tries desperately to spice up the presentation. When she loses her thread of conversation, she becomes agitated and ends the presentation on an unsure note.

3) The trader has several winning trades in a row and feeling confident, increases the size of positionsto take advantage of a lucky streak. The market initially goes in his favor, but quickly reverses when big orders push him in the opposite direction. Looking at positionhe realizes that he has lost all profits from his previous winning trades. He re-enters the market only to capture this second wave. Now he feels as if he has entered a losing streak and begins to trade hesitantly, with a reduced position size. By the time the market closes, he gets a negative total for the day and for the week. He feels like a dumbass who has become overconfident after his accomplishments.

No doubt you can find a familiar pattern in each of these situations. The person is in a performance situation where he is under pressure to succeed. The situation plays an extremely important role in the person's eyes, and the person is now focused on the outcome of the performance rather than directly on the performance itself. This double centered anxiety--focusing on the result of the performance instead of remaining absorbed in the performance itself--is a common element underlying all performance anxiety. Such restlessness is the only the most common problem of tradeI encountered in my interviews with traders.

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