Why It Happens and How to Conquer It
I posted on X that this week’s Blog wrote itself on Monday. Or at least the subject matter did.
On Monday the main move was over a post from US President Trump that he was cancelling all strikes for 5 days as countries involved in the Middle Eastern conflict continued negotiating towards a deal. The markets reacted as one would expect with equities flying higher, oil pricing lower and Dollar weakening.
One of our traders did very well on this. But I have to say I was confused as in the middle of this I did see him go long Oil. Not what I would expect. Clearly. I wondered if he had misheard then had to flip it round. Or what the deal was.
When I spoke to him later that day about the trade he said :
“Only thing that put me off was my fat finger long in oil instead of short. But otherwise, happy I didn't panic”
A fat finger! I was shocked. I was like “jeez, in the middle of that you fat fingered! You did unbelievably well to control yourself”.
I could not believe it. I really couldn’t. Imagine, you’d been planning that trade for a few days (note that part for later) now, the opportunity comes and you find out you’ve fat fingered it! To not panic, to reverse the trade cutting that loss and still getting into it post the fat finger. That, for me, was a new level of cool. That trade he took after was the one that made it all back, and then some, running it from mid $94’s to around $86’s.
Could I have responded in that fashion? Probably not! Speaking to him about it is a podcast in the making. Digging deeper would be fascinating as, personally, I think that was quite an extraordinary bit of trading skill.
Panic is a natural reaction when money is at risk and markets move quickly. Even experienced traders can feel it when a trade moves against them or the market spikes unexpectedly. It often shows as:
- Closing trades too early
- Moving stops impulsively
- Chasing entries
- Oversizing to “recover”
Why Panic Happens
Panic is less about personal weakness and more about how the brain reacts under stress:
- Neurological response: Stress activates the amygdala, reducing analytical thinking and overriding planned strategies.
- Speed of market movement: Rapid moves create urgency, forcing instinctive reactions instead of measured decisions.
- Drawdowns: Recent losses lower tolerance for risk, making even small adverse moves feel catastrophic.
- Identity pressure: Traders who link self-worth to outcomes are more prone to emotional overreactions.
- Lack of process: Without clear entry, exit, and risk rules, decisions default to impulse, which is rarely optimal.
Markets exploit uncertainty. When rules are unclear and stakes feel high, panic naturally takes over.
How to Conquer Panic
- Define risk clearly: Use predefined stops, daily loss limits, and account risk thresholds. Knowing the maximum loss calms the brain.
- Focus on process, not outcome: Stick to rules for entries, exits, and risk. When outcomes are secondary, panic has less power.
- Slow down under stress: Step back during volatility, wait for confirmation, and avoid impulsive moves.
- Mentally rehearse adversity: Visualize losing sequences and plan your response. Repetition builds confidence and reduces instinctive panic.
- Journal and review: Tracking both trades and emotional responses helps identify triggers and improve discipline.
My Overall Take
I think there are some areas of this more important than others. For example, if you are hitting news it becomes very difficult to perhaps define your risk clearly and one definitely cannot slow down! Under other circumstances, sure those you can do.
When I think back to what started this blog and the trader involved, I can say this. That trader in question has a plan. Always. He knows what he is looking for, he calibrates the options of what could be released, maps out the way the news will drop, what will be said and what he is going to trade. He knows size, he knows expected outcomes. This is all planned in advance. So the fat finger, whilst capable of throwing him, didn’t. Why? Because he had rehearsed what he should have been doing. So when it didn’t begin as planned the pivot was less mentally radical as he had engrained in himself what the plan actually was.
Whether this trader uses it or not, visualisation is a great tool for a trader.
He will then go on to review this trade in detail. I know he does this as when we speak he tells me things about what happened during what event that you couldn’t possibly just remember off the cuff.
The main factors here.
- Pre-planning
- Mentally rehearsing
- Journal and review
Bottom Line
Panic is predictable, not shameful. It arises from real stress and uncertainty. The key is to prepare your mind and structure your trades so that when emotions rise, your execution remains guided by rules, not reaction. Mastering this is what separates consistent traders from those who are reactive to every market spike.
Dan’s Weekly Wisdom:
“Panic is expensive; discipline is cheaper.”