The main two issues which can lead to performance anxiety are lack of preparation and fear of making a mistake. These often go hand in hand. Another common problem or fear is worrying too much about what the audience might think of not only your playing, but also physical appearence.
The main cause of my performance anxiety was fear of what people might think of me. This generally gets better with age as people become more comfortable with themselves, I know this was the case in my situation. I still spent massive amounts of time working on it though. One thing that I used to try in a wedding band I worked in is to really go crazy on stage and just go for it without caring, making silly faces at band members and gradually branching out until you really look your audience in the face. This was a truly daunting prospect at first and the one realization I came to is that people are often either a) not looking or b) think it's cool. The more confident I became, the less I feared people and the more enjoyable performing on stage was. Instead of an experience filled with stress, torture and self loathing performing had suddenly become exciting and enjoyable. None of this is possible if you are obsessing over which chord comes next or wondering if your fly is down.
In order to truly relax on stage you must be prepared in terms of your playing. My motto is that if you think you know a song, go ahead and practice it 20% more then you believe necessary. Then proceed and practice even more on top of that! Once you are truly relaxed in regards to your playing you will be able to let go of that anxiety and really let loose and enjoy yourself on the stage. The audience will pick up on that enjoyment and confidence and kick up their energy level too.
Another technique that I find works very well is actually visualizing yourself on stage with a confident look, imagining yourself really putting on a great show and people just eating up your powerful stage presence. Seeing yourself as a strong and inspirational figure on stage is the first step towards actually making it happen in the real world. Every action starts with a dream!
Breathing is another very important, and often overlooked topic! Many musicians think breathing matters only for the singer in a group, but this could not be farther from the truth. Human beings have a tendency to stop breathing normally when put in a stressful situation, this is self perpetuating feedback loop as shallow breathing or hyperventilation can introduce stress or increase it's effects dramatically. It is all psychological. If we clam up before going on stage, our breathing can change which makes the muscles tense up and therefore affects our playing. I realize it's easy to tell someone to relax – but I believe to actually relax, we need to make conscious efforts to focus on our breathing as this affects our brains, our muscles and ultimately our stress levels.
Going for a walk and getting a bit of fresh air before going on stage can be a great way to decompress and relax before a show. I personally like to be alone for a while if it’s a big performance. Never forget that you are not the only one to experience these feelings and they may never fully go away. You can however minimize them so you can perform your best and actually enjoy playing.
I personally believe that a little stress is healthy and may actually increase the level of play. A lot of the time I actually play better in a live gig than I would do in the studio as I feed of the energy and adrenalin from the audience. It is so important to enjoy music and performance – after all that is the reason we started in the first place. So go out there, have fun and spread the joy!