Psychological Traps in Trading

Psychological Traps in Trading

When you make the final decision to make trading your main profession, you may encounter some difficulties on this exciting path that you previously knew nothing about. Today, I would like to talk about such an unpleasant thing as “emotional burnout.”

There is a difference between stress and burnout, but both deviations are very dangerous. Burnout is a state in which you completely lose interest in trading due to accumulated constant emotional, mental, and physical exhaustion. In this case, it’s very easy to fall into a vicious circle. Being in this state, you make rash decisions that lead to poor trading results, which, in turn, causes even more emotional and psychological exhaustion. How can you prevent or correct such a situation?

How to Properly Recognize Warning Signs?

Identifying a psychological disorder in time is almost like preventing it. Understanding that you’re on the path to burnout before it fully takes over your consciousness is very beneficial. Here are some alarming symptoms indicating the possible imminent onset of real psychological exhaustion:

  1. You feel that the upcoming day will not be lucky or productive, that it will not bring success in trading. You’re not expecting anything good.
  2. You find it morally difficult to trade. There’s a feeling that you’re wasting time, only receiving emptiness and fatigue in return.
  3. You constantly feel completely devoid of energy.
  4. You’re tired of everything you do, and you’re not thrilled about it.
  5. You feel like you’re doing very hard and utterly useless work (even if that’s not the case).
  6. You start communicating less with friends and loved ones, immersing yourself more in work, but productivity only decreases. The more you focus on work, the worse you perform.
  7. In an attempt to get some joy out of life, you may start eating a lot, or, even worse, abusing alcohol.

Unfortunately, burnout is dangerous not only for professional activities. It has a devastating impact on all areas of a trader’s life, even to the point that it can lower immunity, make your body more susceptible to various diseases, and affect the quality of personal life and family relationships.

Understanding the Difference Between Stress and Burnout

Trading is a demanding job, often accompanied by constant stress and psychological pressure. That’s true. And stress can indeed be dangerous if not managed or harnessed effectively. However, it’s essential to distinguish between stress and burnout:

Stress is a state characterized by excessive activity and internal psychological tension. You feel a sense of urgency, time pressure, anxiety, and it’s more about physical exhaustion. There’s a feeling that you’re trying to achieve something that isn’t worth your effort and time.

Burnout, on the other hand, is a state marked by a withdrawal from activity, detachment, and depression. Instead of being hyperactive, you’ll feel the desire to give up, abandon everything, and walk away. Feelings of helplessness, worthlessness, and loss of hope arise. Emptiness and disillusionment in what you’re doing become prevalent.

It’s crucial to mitigate both stress and burnout, but the latter typically inflicts more damage. While stress can be turned into an ally by learning to use it effectively, the same approach doesn’t work with burnout. Moreover, in severe cases, burnout can transition into full-blown depression.

Recognizing the Causes of Trader Burnout

You might be smiling now, thinking, “The reasons are obvious: too much work under time pressure. There’s not enough time, but everything needs to be done at once!” To some extent, that’s true, but it’s an oversimplification. With such an approach, solving the problem will be challenging. Here are some more specific reasons to consider:

Unclear expectations and vague or unrealistic goals. You don’t know what you want, why, or for what purpose. If you’re constantly striving for something unattainable, you’ll always feel disappointed because you can never achieve what you desire. This also applies to the tasks you set for yourself. If they are poorly defined, you’ll end up very disillusioned.

Monotony. Trading is a rather monotonous activity. You don’t have much variety during your workday; you don’t switch from task to task.

Workaholism. Are you spending 100% of your time trying to trade? If so, you’re likely sacrificing other areas of your life. There’s no balance between work and life. You spend too little time with family, friends, or doing anything besides trading.

The desire to do everything yourself. Isolation increases the risk of burnout. If you have people you can talk to about your trading and get feedback from, the likelihood of burnout decreases. Communication is essential, but it’s very important to carefully choose whom to interact with.

Chronic sleep deprivation and lack of physical exercise. Taking care of your health should be a priority!

Unhealthy perfectionism. If you have unrealistic expectations, and the energy you put into your work consistently exceeds the results obtained, you’re likely to burn yourself out.

Pessimism. A negative view of the world and yourself can drain your energy and lead you to despair.

Intolerance of uncertainty. Life is full of endless uncertainty, and if you struggle with this, you’ll be prone to burnout. Tolerance for uncertainty is a skill you can gradually acquire, thus moving away from the need to constantly control everything.

How to Prevent Burnout?

There are several actions a trader can take to reduce the likelihood of experiencing emotional burnout. Of course, it’s very important to invest energy and time to learn how to trade, but you should never do this at the expense of your own health and a balanced life. 

Allocate time every day to relax and do what you enjoy. Get plenty of sleep, eat healthy food, and exercise. If necessary, learn to set boundaries for yourself. Set aside a specific time for trading, and then stop. Make sure you’re thinking about something other than trading. This might be a challenging task, but it’s worth it.

You can start by slowing down your work or even stopping trading altogether. Don’t think that just changing your attitude will be enough; it won’t. You need to practically stop trading for a while. Although you might want to isolate yourself from people, don’t. Spend more time with those who are dear to you and to whom you are dear, with those who care about you.

After you’ve rested, it will be time to sit down and assess your goals, daily tasks, and expectations. Make the necessary changes to return to trading with a fresh perspective. Here are some possible topics for review and reconsideration:

  • What are your short-term goals? Do you have short-term goals that are realistic and specifically set? Do you have goals for this month? For this week? For each day? How can you actually achieve these goals?
  • Are the tasks you set for yourself each day realistically meaningful, achievable, and something you can accomplish without going insane?
  • Can you connect with other traders or people whose communication would allow you to receive support and feedback?
  • Are you ready to plan your time in a way that not only allows you to work more efficiently but also have the opportunity to interact with family and friends, fully rest, creating the necessary balance in life?
  • What else can you do to improve your trading results while avoiding emotional burnout, based on the information you’ve received?

Expert Opinion

Emotional burnout is a rather unpleasant condition that anyone can experience from time to time, regardless of their profession. It’s also common among traders, especially beginners. Over time, with experience, such emotional breakdowns will happen less and less frequently. But for now, as you wade through a swamp of complex emotions, it’s very important to remember that you are not alone in your problem, and you are not helpless in solving it and preventing its occurrence.

If you’ve encountered burnout, carefully read what’s written in this article again, rethink your own behavior, thoughts, and emerging ideas. Take a break, make the appropriate changes, and then return to trading with renewed strength and confidence in yourself!