As a trader, do you find yourself under the gun to perform in high pressure trading situations? To be sure, it’s not easy. It requires a certain personality and the ability to focus intensely on the task at hand.

I feel pressure to perform each day. I’m always searching for trading ideas that fit my criteria so I can perform better than I did the day before. Note that I’m up against myself, not someone else. Trying to outdo the next guy (or gal) just adds to the pressure you already feel, and it makes your job that much harder. You don’t know what kind of experience, tools or capital they have. You can only control your own.

On top of that, there is no guarantee of success. The future is unknown and that creates a lot of pressure all by itself.

So, what should you do? I do my best to prepare for high pressure trading situations by recognizing they can arise out of the blue. When I’m in one, I shift to thinking about different trading scenarios and their consequences, and I resolve to be flexible.

How I recently handled a high pressure trading situation

The stock market recently experienced a nice run higher with strong price action and good volume. The indicators were turning upward in the intermediate term. This meant that 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.

But then a disappointing monthly CPI report came out, and futures fell like a rock before the markets opened. I was a bit surprised by the response and knew it was going to be a challenging day. The heat was on as I needed to make some changes to my short-term strategy or suffer severe consequences.

When the markets opened, I needed to change my bullish position quickly. I had some index puts working to protect my portfolio, but only a few. My call positions were down, so I cut those at the knees, took losses and started adding more puts. The SPX 500 was down 2%, and I added more puts (they call this “buying deep in the hole”).

As the minutes and hours ticked by, the market was not recovering. I added even more put positions, and suddenly my profit/loss ticker improved greatly. When the day started, I was getting beat up and pushed deeper into a deficit. When the day ended, my accounts were up strong even though the SPX 500 was down more than 4% on the day.

I faced that high pressure trading situation with an open mind and willingness to be flexible and accept being wrong. My mind was clear and ready to go that day, and fortunately I stayed on the right side of the market. I have learned over the years that the pressure of performing eases when my mind is set on one day, one task, one moment. In a bear market, that’s even more important.

Share