Subject: Stress and Pain

The creativity and coping methods of traders

Choose a quote by Abraham Maslow: If the goals you set are smaller than what you can achieve, then you may not be happy every day.

We often say that the psychological pressure of trading is really high. We want to try to minimize that pressure, but we often overlook one very important thing: the environment we are in requires us to face various risks and uncertainties every day. In such an environment, we inevitably experience psychological pressure when we operate daily. If you want to minimize that pressure, then you shouldn't be trading cryptocurrencies or stocks.

Most of us ordinary people confuse stress and suffering. Not all psychological stress leads to suffering, and not all psychological stress is bad.

Let me give you an example. In our daily lives, when we drive out for a trip and have been driving for a long time, we might feel very bored. Suddenly, the weather turns bad – it starts to rain, or snow, or there’s a sandstorm. At this point, shouldn't we first reduce our speed because visibility will decrease or the road will be slippery? Boredom quickly turns into alertness. At this moment, the difficulty of handling the vehicle is much higher than before.
This is psychological stress; the enhancement of physical and cognitive states prepares us to face challenges. Moderate stress mobilizes our body and mind, allowing us to demonstrate greater adaptability in trading. Our interpretation of the environment can turn stress into suffering.

So what does this have to do with trading? When you let your own money bear risks, such as encountering negative news or significant negative or positive impacts caused by local wars, the market starts to plunge or soar. It's like the example I mentioned earlier, where we encounter extreme weather during a road trip. You will be very alert; you won't be as bored as you were during the periods without extreme weather. You need to handle things promptly and make necessary adjustments quickly. Should you close your position immediately, or wait for the market to hit your stop loss? You might have been at the take profit position but didn't take profit due to greed, feeling that the price could still rise, and in the end, the profits you should have gained retraced, or you held on to your position until the impact of the news was over.

If you see losses as a natural part of trading and have experienced losses before but later recovered, and you have ways to limit your losses, then pressure is unlikely to become pain for you.

Loss aversion psychology: Losing trades are annoying, just like extreme weather delays your travel.

However, if you don't think that losses are a normal and natural phenomenon, and you only want to win without wanting to lose at all, especially when you are trading with large positions without limiting your position size and without a stop-loss to control risk, then when the market moves against you and goes in the opposite direction of your position, your pressure can easily turn into suffering. Your ability to focus and quickly adjust in the middle of the trade is also affected. You don't want to cut losses, and the large losses from heavy positions make you start to regret not trading with a larger position or setting a stop-loss. By this time, your emotions and mindset have already been significantly affected. Next, you start to get anxious and trade heavily without a plan. Frequent openings and slight market pullbacks make you anxious. Initially, you correctly judged the direction, but because of the heavy positions and lack of a trading plan, when the market pulls back slightly, you deny your own judgment, start to close positions, and then lead to further significant losses in your account.


Position size, trading plans, and stop-losses are like the snow chains on your car. Let’s use the snow chain as a metaphor. Because now we have snow tires, when everything goes smoothly, that is, when the market moves in the direction you envisioned, they are of no use to you at all. But when you face adverse conditions, when the market moves in the opposite direction of your position, they can definitely help you. In extreme weather, a panicked driver cannot control the car well, while an experienced driver knows how to manage it because they have gone through it many times. Similarly, a panicked trader cannot manage their stop-loss properly, while an experienced trader knows that losses are limited.

What we need to do is accept pressure and ensure that pressure does not turn into pain. Before each trading session, what we need to do is determine the principles of position size, the loss amount for each trade, the price target for each trade, and the daily loss amount. The risk you are willing to take for each trade should be less than the potential profit. The amount you are willing to lose each day should be significantly less than the profit from your most profitable day. If you trade frequently, the loss from a single trade should not affect your ability to make money that day. A single day’s loss should not be so large that it puts you in a losing position for the week. The preparation and familiarization process will not turn pressure into pain because they enhance your sense of control.

If you are prepared for adversity, then you only have pressure and will not feel pain.

Trading is always under pressure. Remember, your job is to maintain a mindset that keeps you highly confident and motivated. Under those conditions, you will work harder, learn more, and gradually grow your capital curve. Doing so does not mean eliminating pressure but instead establishing a firewall between pressure and pain. Risk management is one of the best firewalls.