Straightforward ways to reduce stress when trading - Daily FX Tips & Picks

Feeling stressed? When your profits are consistent, all your stress goes away (Source: Getty)
I'm regularly asked how I reduce stress when trading.

A simple solution is to have every angle covered and then to let go. What does this mean? It means that, when trading, we should have a time-tested plan for choosing our entry level, profit target, stop loss, and how much to risk per trade.

We can also add other conditions, like only trading markets that are trending, or only trading markets with a compelling macro theme.

You should be able to measure or somehow quantify the conditions you apply, so that you can test them against historical data. After testing something many times, you will have a good idea of whether the condition is worth following or not. You will also know what the typical outcome will be, and how long it usually takes from the inception of the idea until the end. Knowing this will naturally reduce the stress.

While this might sound quite straightforward, most people who trade have no idea how to act most of the time. They might have a long-term bias but, as the markets are random in the short term, it’s hard to separate a true trading signal from noise.

We can also say that the better your research, the more consistent your trading results will be.

There is therefore a direct relationship between the time you invest in your research and the quality of your trading. When your profits are consistent, all your stress goes away, as you will know what you are doing.

Alejandro Zambrano is a currency strategy analyst at DailyFX.com.