As the online trading landscape continues to expand, so too does the mental and emotional burden it places on traders. Recent research indicates that academics engaging in cryptocurrency trading are experiencing a decline in their overall quality of life. These traders report poorer sleep quality and heightened stress levels compared to their non-trading counterparts. This mental strain, especially during periods of heightened market volatility, often leads to impulsive decision-making that can severely impact long-term success.
October marks Mental Health Awareness Month in South Africa, Roger Eskinazi, Managing Partner at Tickmill, emphasises the importance of recognising emotional trading—where decisions are predominantly influenced by feelings rather than logical analysis. “Emotional trading, where choices are driven by feelings rather than logic, is a common result of unmanaged stress. This behaviour can cause traders to deviate from their investment objectives, buy or sell based on fear, and ultimately damage their portfolio,” Eskinazi warns.
With this in mind, there are several proactive measures that traders can adopt to better manage stress and enhance their mental fortitude:
Maintain a healthy work-life balance: Online trading can easily become all-consuming, especially given the global nature of markets that operate outside standard working hours. This can lead to excessive monitoring of portfolios and inadequate rest. Eskinazi advocates for establishing clear boundaries between work and personal time. “Allocate specific times for trading and ensure you take breaks to recharge. Maintaining a healthy lifestyle, including regular exercise, meals, and proper sleep can significantly reduce stress and improve decision-making abilities,” he says.
Stick to your trading plan: A thoroughly developed trading plan is fundamental in combatting emotional decision-making. It defines key objectives, risk tolerance, and clear strategies for entering and exiting trades. During periods of market volatility, adhering to this plan helps mitigate impulsive reactions that may result in critical errors.
“Having a solid trading plan in place provides a sense of structure and helps mitigate the effects of market uncertainty,” says Eskinazi. “But having total trust in this plan is key, even – and especially - when the market becomes unpredictable.”
Join a trading community or forum: Trading can often feel isolating, particularly for independent traders. Eskinazi recommends engaging with a trading community or forum for valuable support and shared insights. Being part of a community not only fosters professional development but also offers emotional and mental support. This connection can alleviate stress by providing shared experiences and perspectives.
Focus on what you can control: The unpredictable nature of markets can lead to stress stemming from aspects beyond a trader's control. Eskinazi encourages focusing on controllable elements, such as sticking to one's plan and managing risk. “This means sticking to your plan, managing your risk, and maintaining discipline. By concentrating on controllable factors, you can reduce the psychological strain caused by unpredictable market swings,” he says.
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