Stress, sleep and physical state: how your body changes your decisions

What you will learn

• How acute stress, lack of sleep, hunger and stimulants can change trading decisions.
• How to add physical-state items to your readiness check with clear thresholds.
• How to estimate how much caffeine is still active at bedtime using a half-life.
• Which simple habits support calm decisions, and where medical advice is needed instead.

Explanation

Lesson 1 explained the stress response: when the brain detects a threat, the body releases stress hormones, the heart rate rises and attention narrows. That is useful when you must react fast, but trading decisions need patience, planning and the ability to accept small losses. This lesson looks at the physical conditions that make that harder.

Sleep

The American Academy of Sleep Medicine and the Sleep Research Society published a consensus statement recommending that adults regularly sleep 7 or more hours per night. Short sleep is commonly linked with weaker attention, slower reactions and poorer emotional control. A tired trader may find it harder to wait for a setup and easier to act on impulse. Sleep needs vary between individuals, so watch your own pattern in your journal.

Stimulants and alcohol

Caffeine can increase alertness but also nervousness. The European Food Safety Authority (EFSA) concluded in 2015 that, for healthy adults, single doses of up to 200 mg and daily intakes of up to 400 mg do not raise safety concerns. Caffeine late in the day can reduce sleep quality. The half-life (the time the body needs to remove half of a substance) differs strongly between people. Alcohol reduces inhibition and judgement; do not trade after drinking.

HALT

A simple self-check used in many self-help programmes is HALT: Hungry, Angry, Lonely, Tired. If two or more apply, your decisions are likely to be more impulsive. Address the need first, then trade.

Body signals as information

A fast heartbeat, shallow breathing or tense shoulders while a trade is open can be a sign that the position is too large for you. Treat these signals as data: write them down and check whether they appear more often with larger positions.

Worked example

Hypothetical example: a trader drinks a strong coffee with about 200 mg of caffeine at 15:00 and wants to sleep at 22:00. For this example we assume a half-life of 5 hours; real half-lives vary widely.

1. Time between coffee and bedtime: 22:00 − 15:00 = 7 hours.
2. Number of half-lives: 7 ÷ 5 = 1.4.
3. Remaining caffeine = 200 mg × 0.51.4 ≈ 200 × 0.379 ≈ 76 mg, roughly a third of the dose.
4. If the coffee is moved to 13:00: 9 hours ÷ 5 = 1.8 half-lives; 200 × 0.51.8 ≈ 57 mg.

Second part: the trader's target is 7.5 hours of sleep but slept 6 hours on five nights. Sleep deficit = 5 × (7.5 − 6) = 7.5 hours for the week. Based on this, the trader adds a rule: "Less than 6 hours of sleep last night = half size; two nights in a row = no new trades."

Common mistake

Practice activity

On paper: (a) Add three physical-state items to your readiness check (for example sleep hours, HALT, caffeine after 14:00) with a concrete threshold for each. (b) Using an assumed half-life of 5 hours, calculate how much of a 100 mg dose taken at 18:00 remains at 23:00. (c) For one week, record sleep hours and rule adherence each day, then compare.

Key takeaways

• Your physical state is part of your trading system; sleep, stress, hunger and stimulants affect impulse control.
• Use written thresholds (for example sleep hours, HALT) that change size or stop trading.
• Caffeine late in the day can still be active at bedtime; timing matters.
• Physical signals during a trade can indicate that the position is too large.

Next step

In the next lesson you will design circuit breakers: daily loss limits, cooling-off periods and clear rules for when to stop.