Trading Psychology

Managing Stress and Trading Performance

Stress directly impairs decision-making — managing your mental state is as important as managing positions.

Key rules

1. Sleep deprivation impairs trading decisions severely
2. Exercise reduces cortisol and improves emotional regulation
3. Have a consistent pre-market preparation routine
4. Set strict session end times to prevent over-exposure
5. If you feel emotionally activated before trading, reduce position size

Cortisol (the stress hormone) impairs the prefrontal cortex — the part responsible for rational decisions. Elevated stress causes tunnel vision, risk aversion or risk-seeking, and reactive rather than planned responses.

Professional traders treat physical and mental health as performance tools: sleep, exercise, limiting screen time outside sessions, and a clear pre-market routine are all performance-enhancing habits.