Handling Pressure Situations

As a trader or investor, do you find yourself under the gun to perform at the highest level?  To be sure, it's not easy and requires a special type of personality and focus.  But some traders and investors put undue pressure on themselves to win, fighting it out with others who may be more capable, have more resources or just better access to information.  

 

It's fun to be the little guy and be the big whale in this game.  We all know the story David vs Goliath, slaying the 'beast' is nothing short of thrilling.  But is that where our focus should be, or elsewhere?  

 

I feel pressure to perform each day, searching for trading ideas that fit my criteria, scanning the field for opportunities and perhaps just sitting there doing nothing.  But that pressure is applied by me to perform better than I did the day before, and not against someone else who may have access to better tools and capital.  I can only control the things that are in my grasp, the tools that help me gain  an edge. 

 

Of course, there is no guarantee of success, the future is unknown and that creates internal pressure on us to perform at a level.  So, what do we do?  We prepare for situations that can arise out of the blue, think about scenarios and the consequences, and be flexible or face a bad situation.

 

A recent example, the stock market had started a nice run up with strong price action, good volume and the indicators were turning upward in the intermediate term.  This means any modest hit to the stock market was not tragic and likely to be picked up by the dip buyers.  I was a positioned bullishly, as one should have been following those indicators.  

 

But that monthly CPI figure came out hot and the market futures fell like a rock.  I was a bit surprised by the immediate response and knew it was going to be a challenging day.  The heat was on as I needed to make some changes in my short term strategy or suffer severe consequences.  The pressure cooker was becoming intense as the day was just getting started.  

 

I knew I was out of position, so when the market opened the objective was to get back on side.  I had some puts on, but only a few.  My  call positions were down and I simply cut those at the knees, took losses and started adding more puts.  Yes, while the market was down 2% I added more puts (they call this buying deep in the hole).  It felt right and the market was not recovering so I continued this drill and added more put positions, suddenly my profit/loss ticker improved greatly.  When the day started, I was getting beat up and deep in a deficit.  When the day ended, my accounts were up strong as  the market was down more than 4% on the day.  It was a great save, but only one day.

 

I faced the pressure of a bad situation that with an open mind, flexibility and willingness to accept being wrong.  My mind was clear and ready to go that day, and fortunately stayed on the right side of the market.  The pressure of performing eases when your mind is set on one day, one task, one moment.