10 Top Tips For Making The Best Decisions Under Pressure
The most important decisions that we need to make in life and in work are not always in the easiest of circumstances, and many of us have stories of how the heat and pressure of a situation got to us.
In an ideal world, we would take as much time as we could to consider every single action, its consequences and every alternate action possible, but this is seldom the case.
Much like how if you wait for the right time to get started you will never get done, if you wait too long for the right time to make a decision, it will often be made for you, not always to your advantage.
However, pressure has a demonstrable negative effect on how we make decisions, and too much pressure in the wrong place at the wrong time can be disastrous when a lot is on the line.
A prop firm portfolio with significant amounts of money in it is a particularly notable example of this in action, and there are countless stories of investors under huge amounts of pressure who saw their investments plummet due to fear or greed, action or inaction.
Because pressure and stress are such a personal part of investing and affect everyone differently, here are ten top tips and strategies for navigating difficult decisions when the heat is on and you need to act now.
Take A Deep Breath
There are two speeds in investment: stationary and warp-speed. There will be many points during a trader’s day where they are waiting for action, and then when it comes time to make a decision there is such a breathless rush to do something that it is not always the right choice.
Even in a frantic situation, there is time to take a breath, pause for just a moment and give yourself time to take a view from a wider perspective.
This is an effective way to avoid emotional investing or falling into standard trading habits, as well as calm your mind.
Front-Load Your Decision-Making
Investors will often talk at great lengths about the value and virtues of having a robust trading plan as part of your investment setup and trading strategy, and whilst there are a lot of other reasons why you should make a plan, one of the most immediate benefits is when it comes to decision making.
A trading plan allows you to front-load the decisions you need to make and give yourself the time you need to make the right choices, allowing you to execute as quickly as you need to when the time comes.
Rather than agonise about whether you should get into or out of a position, check the trading plan, the conditions and whether these are the right circumstances and go from there.
It also means that rather than having to think about decisions every time you make them, you only need to consider whether your plan needs adjusting.
Ask If A Decision Needs To Be Made At All
In investing, a lot of the situations where you are under pressure to make a choice might potentially be illusionary, or examples of the random noise of the market spooking traders into making impulsive decisions.
Most securities and forex currency pairs oscillate up and down thousands of times a day but retain the same general value once the market closes. Look for the trend rather than the price action.
In particularly volatile markets, it may be best not to make any moves at all. Make sure your Stop Loss orders are set to avoid losing too much on your investment and wait for the market to settle.
Sometimes, the only winning move is not to play, but do not use this to make an excuse in situations where you have to make a choice.
Ultimately, not doing anything is a choice, and if a decision does need to be made, procrastinating on it could potentially lead to a worse outcome.
Focus On The Long Game
Ultimately, the goal for a funded trader is to hit their profit targets, which are usually far enough away that outside of a market meltdown, a constant string of losses or a huge miscalculated gamble, no individual trade is going to prove ruinous.
Instead of focusing on which trades made or lost money, look at the bigger picture and whether you are trending towards your goal or not.
Don’t Dwell On The Best
There are so many choices to make when on the market that it can cause inertia and paralysis. The biggest reason for this is that people want to make the best decision possible, but in a fast-paced volatile market, this might not be possible.
Much like with a trading plan, if you need to make a decision and make it quickly, move quickly through different stages.
If you cannot make the best course of action, make one that is good enough. If good enough is not possible, go for the least worst. Taking a loss now is far better than waiting for the market to rebound unless you have strong, objective reasoning to believe in a recovery.
Perfection is a luxury that requires a lot of time. Keep moving forward.
Seek Advice From Peers
The acute pressure and stress that comes from having to make a decision quickly often make us believe that we need to make this same decision alone, but that is not necessarily the case.
Keeping a network of friends and peers around can be really helpful if you are struggling to make a decision, and it is always worth asking whether something you are uncertain about might be a bad decision.
Even friends who are not in the industry can help simply by acting as a sounding board; you do not necessarily need to take their advice, but putting it into words and communicating it can often be enough to get your synapses working on a solution.
Start With A KISS
The market is complex and your wider trading strategy will often be complex out of necessity to factor in the millions of factors that shape the market every day.
However, when it comes to the actual decisions you need to make, the best advice is the old American aphorism “Keep It Simple, Stupid”.
In the original context of aircraft design, “stupid” means to keep it straightforward and effective
so that any mechanic can tweak it and repair it, and that principle applies to decision-making.
It is easy to tie yourself in knots trying to think too far ahead, especially if you are pressed and under pressure, so avoid overthinking and making a worse decision as a result.
Do Not Take It Personally
You are not your record, and absolutely no investor gets it right every single time. In fact, the one trader who claimed to have an almost bulletproof record of “winning” trades went bankrupt and ultimately spent time in prison.
With that said, seeing the line go down and a minus next to your portfolio’s balance for the day can be deeply dispiriting, the result of us being wired to be averse to losses. We are made sadder by a loss than made happy by a gain of the same worth
However, assigning your ego and worth as a trader to each trade you make is asking for trouble, so instead of seeing each position as a contest, look towards the prevailing trend.
Many established traders will have a really bad day, feel completely thrown off but then check their long-term targets and remain above target. Taking a loss is sometimes the right move.
Making the wrong decision under pressure is not failing, it is learning, and the more you work under pressure, the more learning experience you will get.
Avoid Piling On The Pressure
Much like how a trading plan is important for many reasons beyond pressure relief, risk management protocols are not only important for self-evident reasons, but they can also help to avoid unmanageable levels of pressure in investment situations.
The most stressful situations are those where there is a high price for failure, but in reality, there should not be a situation where a single bad move or swing of the pendulum wipes out a portfolio’s value.
Diversify, factor in the most likely outcomes as well as the most potentially impactful ones, and avoid certain types of investment such as short-selling, where a badly-timed squeeze could potentially lead to infinite losses.
Trust Yourself And Commit
Once you make a decision, act on it earnestly and wholeheartedly, because ultimately the people who make the best decisions in high-pressure scenarios are those who trust their instincts, decision-making and skills in relevant fields.
Some of the best decisions we make in life come from intuition, based on the subconscious processing of information, and used in combination with a trading plan and as much research as you can access can lead to some highly positive outcomes.
It is, however, important to know the difference between intuition and trading based on emotions and practice in trusting yourself and committing to trading tactics will help you parse the difference for yourself.