Many mental health
professionals define an "uncertain" condition as being
stressful. Uncertainty occurs because of too much information or
because of too little capacity. The very fact that we cannot deal
with available information is stressful.
information far exceeds one’s capacity for making basic
trading decisions, so one can only attend to some of this data.
Limited capacity is a major factor in trading success and in
Three factors are
essential to successful trading:
to make accurate decisions from a large amount of information,
management and discipline.
A weakness in any of
these areas reduces one’s capacity for processing information,
resulting in stress, poor trading decisions, and losses. Losses, in
turn, can produce stress, resulting in more losses.
Readers who have taken the Investment Psychology Inventory Profile™
may recall that their test results were split into these three
psychological profile might easily encompass all aspects of trading.
However, certain psychological characteristics appear distinct from
decision making and money management.
Everyone has a
different set of past experiences. As a result of those experiences,
one develops certain attitudes toward life. These attitudes may be
open or restrictive. Open attitudes produce growth, encompass change
readily, orient people toward self-improvement, and produce
happiness and success. The successful trader, for example, might
describe himself as follows:
I enjoy life to
the fullest. I am constantly exploring new ideas, visiting new
places, experiencing change, and having fun. I try to get
everything I can out of life, and I eagerly look
forward to each day.
I am in the best
of health because I eat proper foods, get plenty of exercise,
and sleep well. I am never overly stressed because I do not feel
Although an open
attitude is not essential to trading success, most successful
traders are quite open. An open attitude will help a trader in the
market because it enhances information processing capacity. Although
the successful trader still has a limited capacity, his attitudes
toward life keep his capacity at the highest possible level.
The losing trader, by
contrast, often has a closed attitude toward life. Part of this
closed attitude includes a number of defense mechanisms against
winning, such as the fear of success or the fear of failure. Any
form of defensiveness results in isolation, building protective
walls, and resisting change. Consider the following statements that
a losing trader might use to describe himself:
I am really
unlucky. Every time I try to trade, something goes wrong. I end
up losing. Other people make it impossible for little guys like
me to be a winner. Perhaps that is why I am so depressed all
the time. Money sure has been my downfall.
Trading is very
stressful to me, perhaps because I worry about what will happen
all the time. But I also worry about what will happen if I get
out of the markets. I’ll probably never be able to get ahead
The losing trader has closed himself off from the world. Some information
still gets through, but it is all darkly colored by his restrictive
attitude. His closed mind severely restricts his capacity for
dealing with information, and he feels "stressed."
is only a brief introduction to this concept. To learn more
about the relationship between stress and capacity, and how this
relationship affects you as a trader, refer to Chapter V in Volume
Two of the Peak Performance Home Study Course for more.
the Author: Trading Coach Dr. Van K Tharp, is widely recognized for
his best-selling book Trade Your Way to Financial Freedom and
his classic Peak Performance Home Study Course for traders
and investors. Visit him at www.iitm.com
for a FREE trading game or to sign up for his FREE weekly