Michael Taylor looks beyond charts and risk management to explore how sleep, stress and lifestyle can affect trading performance and decision-making. He shares practical ways investors can improve their wellbeing to help stay sharper in the markets.
I was talking to one of the top UK YouTubers recently about an investment we both hold, and his operating business. He was talking about the importance of looking after yourself, something which I agree with, and have found a common trait of ambitious and high performers.
This is not always the case, as I recall Guy Hands in his book Terra Firma talked about his terrible diet and erratic sleeping habits, but I do wonder how much more effective he’d been in his business if he’d been looking after his mental and physical health.
30 years ago, nutrition and wellness was not part of elite sports players’ lives. Now, it’s not uncommon for teams to have a nutritional coach, physiotherapists, sleep coaches, and even psychological coaches.
I’ve found that the better I look after myself, the better I perform in the market overall. I’m no longer a young man so the body is less forgiving.
I’m also convinced that sleep is a superpower. It’s commonly worn as a badge of honour, in a weird game of “who sleeps less wins”, and a sign of productivity, but the merits of sleep are well documented.
There have been numerous studies on the benefits of being well-rested, and even Jeff Bezos has talked about why he believes eight hours of sleep is the key to boosting productivity and making high quality decisions.
The six-hour sleep delusion
A lot of people reckon they can run just fine on just five or six hours of sleep. The reality is most people are wrong. There’s even a landmark study showing they can’t even tell.
In 2003, Van Dongen and colleagues at the University of Pennsylvania restricted 48 healthy adults to 4, 6, or 8 hours in bed a night for two straight weeks, publishing this in the journal Sleep.
The people held to six hours or less built up cognitive performance deficits equivalent to going up to two full nights with no sleep at all. Reaction times, attention, judgement were all degraded. The damage stacked up night after night rather than levelling off.
However, there’s the scary part. The sleep-restricted subjects were largely unaware of how impaired they’d become. They felt more or less fine while performing terribly. So if you’re making big decisions after even a few nights of bad sleep, you’re simply not the sharp operator you think you are. And because you can’t feel the difference, this is exactly what makes it dangerous.
How to fix it
The common advice is to limit screen time two hours before sleep. Well, I like to watch some Netflix to wind down before sleep. But certainly checking your phone and responding to emails is a terrible idea.
Try to get into bed at a set time every night, to allow for plenty of time in bed (even if you’re lying awake).
I use the Oura ring to track my sleep. I’m not convinced that I actually need to track my sleep, as I know when I’ve slept badly or I’ve made decisions that will reduce the quality of my sleep (such as a load of chicken wings and blue cheese dip, washed down by a few bottles of Camden Helles and an Old Fashioned), but wearing the ring makes me more conscious of my day-to-day decisions, and makes it more likely that I’ll make decisions aimed at getting a good night’s sleep.
I’ve also found laying off the sparkling water in late afternoon/evening to help. And obviously coffee after 5pm is asking for it.
Stress in your personal life
Any stress in your personal life is going to carry over into your professional life and trading life.
Mitigating this should be your absolute priority, and, if it’s not possible, then potentially closing out positions and not opening any new ones may be the best course of action.
Stress is unfortunately unavoidable at certain points in your life, but how we react to it is our choice.
How to fix it
Deal with any hard conversations that need to be had. Physical exercise is a proven way of releasing endorphins and decreasing cortisol (the stress hormone). Diet also plays a huge part too.
I won’t pretend to be an expert nutritionist as firstly, I’m not, and secondly, that would be silly, but loading up on sugar before sleep is always going to end up badly.
Like most things, everything in moderation and eating healthy will play a big part in how you feel and how you perform.
Conclusion
There is plenty written on topics like risk management, position sizing, and psychology, how to go through the financial statements etc (all of which are on my YouTube already), but little attention is paid to lifestyle and performance.
That is now changing, but making positive changes to your lifestyle today is a good way to increase your P&L over the long term.
Michael Taylor
Free educational content: https://youtube.com/@shiftingshares
This article is for educational purposes only. It is not a recommendation to buy or sell shares or other investments. Do your own research before buying or selling any investment or seek professional financial advice.
This article is for educational purposes only. It is not a recommendation to buy or sell shares or other investments. Do your own research before buying or selling any investment or seek professional financial advice.
