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Trading Psychology Posted by Team Topstep April 5, 2022

3 Factors that Affect Your Trading

Trading Health

The books are closed on the first quarter of 2022. Q1 offered many surprises in terms of volatility, most notably the Russian invasion of Ukraine, which caused global equity, currency, and commodity markets to respond significantly. Meanwhile, central banking policies continue to garnish attention; in the United States, inflation is sustaining at remarkable levels, leading to ongoing concerns over long-term economic health.

With the close of this quarter, it is a good time for us to take a trading inventory. I realize that many traders are focusing on day-to-day types of evaluation. Eventually, as we mature in our craft, we start to look toward considering a week-to-week assessment and then a monthly pulse check.

However, we all should have set goals for 2022, and now that a fourth of the year has already flown by, it’s an excellent time to catch our breath and see where we stand.

3 Factors that Affect Your Trading

This article will provide reflective observations over elements pertinent for us to inventory and evaluate following Q1. While some of these items are directly related to trading, others are a bit nuanced, confronting the psychology that lies behind trading success and failures. Don’t worry – this checklist is more common sense than rocket science.

Time for a Mental Health Check-Up!

It is vital that our minds remain healthy. Therefore, a primary question is your mental health status. Trading can turn the best minds into jelly during the course of a year. So, after Q1, do you assess your mind to be strong and capable? 

If you believe your mind is still vibrant, then hurray! However, if you are detecting warning signs that you are heading toward exhaustion, now is the ideal time to intervene. Perhaps you need more sleep or less time in front of the screen. Maybe you need to do some strategic surgery, re-assessing how your trading habits may lead to mental fatigue and question the long-term sustainability of your approach. 

Everyone is different, so your needs will be unique. However, you need to maintain mental clarity regardless of who you are.

Emotional Health is Important Too!

Trading can bring out the full range of the emotional spectrum that we experience. Some of the darkest emotional times of a trader’s life come from P/L failures. In turn, some of the happiest times come from trading success. 

Likewise, I think we all agree that while trading affects our emotions, on the flip side, our emotions affect our trading – hence, the reflective opportunity after Q1 to take an emotional inventory. Surprisingly, I know traders who have grown concerned over a World War III breaking out over certain geopolitical events over the last six weeks. This has undoubtedly prompted stressful emotions that have created a less than ideal market environment for them to trade.

Sometimes it is not the external matters that cause the most emotional concern; it is the internal issues, including relationships with others. Equally important to mental health is emotional stability. This not only applies to trading but all facets of life. Going into Q2, make sure you have all the emotional support you need.

Don’t Forget Physical Health!

While mental and emotional health are often neglected elements of successful trading, they may still be more likely to be attended to than physical health. However, physical health is an equally vibrant component for successful living and trading

From a trading perspective, physical wellness deals with diet, exercise, and rest, among other things. In terms of relaxation and sleep habits, rest often directly correlates to trading. Likewise, diet affects mental and emotional energy as well as physical status. Finally, exercise is not only good for the body but is a helpful outlet for stress.

Simply put, if you are not physically healthy, then what is the use of trading successfully? Frankly, you want to be able to flourish in all elements of living. Therefore, I’m a firm believer that your trading habits benefit as a result of good physical habits.

So, after Q1 2022, how are you taking care of your body in terms of diet, exercise, and rest?