Trading online can be highly emotional.
Daniel Kahneman, a psychologist who won the Nobel Prize, used the loss aversion theory to show that people feel the pain of losing money more than the joy of gaining it.
It is the natural instinct of traders to flee the market when things start to plummet.
In fact, the stress level of lots of investors skyrockets when the market conditions don’t comply with their expectations.
High level of emotional stress depletes the ability of an investor to make a rational decision. Don’t want to end up like that?
No worries, there are ways you can fight the stress and not let emotions take the best of you.
The most common cause of stress is the risk of losing money.
A smart way to prevent that is to use stop loss orders. They are like an insurance policy. They let you sell your position at a pre-determined price if that price can hit during the trading day.
There is no “should I sell now or hold on to it” drama. It’s replaced with a disciplined strategy that protects you from loss.
It’s natural for the market to move up and down. Watching all that when trading online can cause stress.
It’s strongly recommended not to live stream your stocks.
Closing the streamer for a few hours is not going to harm anyone. You won’t miss out on anything either.
Just relax and don’t watch the news all the time. Often, when the news about a stock reaches TV channels, it is either to increase its prices or make people react.
This is the last thing you would want to do as a trader. Keeping yourself updated is a good thing but only follow trusted sources.
Lots of stock investors employ this strategy. The value of this strategy is that you can apply it to any market.
Imagine buying a stock and couldn’t sell it for the next 10 years. That’s how you should treat your investment. Just set it and forget it.
Every investment decision should be made on the basis of a plan, not emotions. A good plan must account for market volatility.
Experienced investors have little to no anxiety because they understand their goals, time horizon, risk tolerance and they are committed.
People experience anxiety when they lack a plan and speculate instead.
It must be understood that investing and speculating are two different subjects.
Be very mindful about what you eat. You need a healthy diet for nourishing your brain, improving mood, and increasing energy and focus.
Most people don’t know what to eat for keeping their brain chemistry in balance. No wonder their sugar level drops and spikes with the changes in the market conditions.
You must follow a high protein diet with minimum carbs and healthy fat to keep your mental and physical health in top condition.
You must have a fast-paced schedule which is exactly why it is important to manage your eating habits.
Adults need 6 to 8 hours of sleep each night. If you are barely sleeping for 4 to 5 hours, you will react more sensitively when the stock goes down.
Trust me, sleeping for an extra hour will make a huge impact in how you respond to the market changes throughout the day.
You end up behaving like those you spend the most time with. If you are too stressed out, maybe it’s time to have a look at people around you.
How do they handle stress? Are they found screaming at their computers’ screen and breaking stuff around?
If your answer is yes, consider changing your company.
The secret to successfully making money is to have an independent view on investment. Don’t follow the crowd.
Do your own market research and then make a decision. Be greedy when others are fearful.
There are many leadership books that will help you shape your view of the market. Get these books and learn from them.
Whenever you feel the jitters, picture your long-term goals. Remember why you started it.
It could be your child’s college tuition or buying a home or even an alternative to getting a business loan. Whatever your goal was, start daydreaming about it.
This will give you the courage to stay in the game.
Sometimes losses are inevitable. Whenever that happens, take a moment to look at your portfolio and compare the actual damage to your worst fear.
Has this financial loss messed up with your goal to retire early?
Or has it left you with nothing in your hands?
If the answer is no, then you are ok. Do not let the ups and downs of the market and changes in the prices of stock make you pull out your investments.
If Warren Buffett had done that, he wouldn’t be a billionaire. So try following his footsteps and remain as patient as you can be.
If you have a diversified portfolio of stock and bonds, you may not have to worry about the losses much.
One investment will cover the loss of another investment. Since you are in it for the long run, don’t let the market dips get the best of you.
By the time you retire, your future-self will thank you that you stayed patient.
Don’t forget that long-term stocks have the ability to outperform other assets. This will give you more reason to hang in there tight.
Originally published on Ideas Plus Business.