Mindfulness Is Essential

Jan 25, 2021

There is more to trading and there is more to life. How do we become better at both?

Mindfulness is the basic human ability to be fully present, aware of where we are, what we are doing and not overly reactive or overwhelmed by what is happening around us. It is a quality that every person possesses. It is not something you have to evoke, you just have to learn how to access it.

Whenever you bring awareness to what you are directly experiencing via your senses, or to your state of mind via your thoughts and emotions, you are being mindful.

There is a growing research showing that when you train your brain to be mindful you are remodeling the physical structure of your brain.

The goal is to wake up the inner makings of our mental, emotional and physical processes.

By now you are asking yourself where is this conversation going in an FX trading environment.

I promise that I will get to that after a few more thoughts. Hang in there with me.

In life, the best strategy for getting better at skills in any area or at anything is deliberate targeted practice. Once you begin practicing, the next steps are getting feedback and focusing on what worked.

Athletes practice with discipline to improve skill set, strength, endurance, speed, balance, flexibility, fitness and mental conditioning among many other things.

So where does this take us… traders, mental sprinters, marathoners ,hustlers??

I promised I would get here…So, when was the last time you practiced with discipline on one of the foundations of trading? I am referring  to your mind and emotions!

The mental aspect of trading is often overlooked but it is a foundational part of any trader’s skill set. It is complex and takes time to fully master.

Would you try to run a marathon without training? I didn’t think so!

Quiet often traders focus on the negative effects of trading on the mind than the positive aspects.

Think when one closes losing trades prematurely as the fear of loss becomes too much or simply becoming more aggressive on losing positions when the fear of realizing a loss turns into greed.

This fear of missing out (FOMO) is one of the most dangerous emotions.

Parabolic rises tempt the trader to trade after the move has peaked leading to a deep emotional stress when the market reverses and moves in the opposite direction.

Fear, greed, excitement, overconfidence, external influences and nervousness fuel the emotional roller coaster.

Avoiding trade mistakes, overcoming greed, needing to trade consistently, managing risk, ego, having a trading plan, trading in the right market, trading with the correct size become very important.

And let's not forget that before you are a trader, you are a human being with many responsibilities. Family, work, friends, bosses, significant others and many other responsibilities and the pressures that come with them.

Where is your mind when you begin trading? When people tell me they turn the switch off I stop talking to them. They are liars. You can't lock your feelings and emotions in a thumb drive.

It is a lot to manage. Managing these emotions can become the difference between growing the account or going bust.

Let's get back to athletes. They train to improve their performance with dedication and discipline starting with the foundation. It is just like building a house. But first and foremost they must be committed. Commitment is a “mind thing.” It does not need any skill.

It all starts with the mind. It all starts with being in a positive zone to be able to make the right decisions. Being in the zone is what matters.

Years ago I heard of a concept that I think applies to all areas of our lives. It is called the mood elevator. So simple. So easy to use. The only fuel is commitment and you do need a plan.

 

According to Dr. Senn, The Mood Elevator is a concept and awareness tool to describe our moment-to-moment experience of life. It encompasses a wide range of feelings and together, these emotions play a major role in defining the quality of our lives as well as our effectiveness as traders, parents, significant others, friends, co-workers, leaders or many other roles we take on in life.

 

In any of the above roles we have a great obligation for how we show up each and every day. In simple words, if we show up in a bad mood (including to ourselves) to anyone we are interacting with we can ruin that moment, fast.

 

The impact to ourselves is greater than anyone else.

Dr. Senn explains that we all ride “the mood elevator” every day. At the top are positive traits such as gratitude, resourcefulness, curiosity and purpose. At the bottom is depression. In between are the various moods that strike us all day.

The real work is being at our best, at the top of the mood elevator, and limiting the damage  done when we are not in the right set of mind. How are our results when we are trading and we have a lot in our minds? Have you ever tracked and scored your trading based on your emotional condition? Think about trading on the top of the mood elevator. Would you make better decisions?....hmmm?

Have you ever said something to a loved one you wish you could take back? Have you ever written an email you shouldn’t have written? Well, I guarantee you that in those instances you were in the lower levels, below the midpoint, on the mood elevator. It has been proven that people make much better decisions when they are in a better frame of mind.

When we learn to spend more time on the upper levels, we do less damage to ourselves and others than while on the lower levels.

The moment we control the emotions  we can have a better life, better relationships, a better marriage — the list goes on. With a free mind we can be better traders. In other words, “Take control of your emotions and be a better you.” Probably you are asking yourself, ”all great, but where do I start?” I say begin by being curious, not judgmental. But the most important question is….are you committed?

When you are faced with a situation that affects you emotionally and causes disagreement or unhappiness, you’ve got a choice; you can go to judgment, you can go to anger, or you can go to curiosity and say, “Huh? I wonder why? Why and how do they see it?” Trying to understand will get you to the state of curiosity and bypass the potential negative impact to you. The goal is to move up the elevator before making decisions.

So…my 2 cents here…a better trader is the one who is in better control of understanding and managing the emotional aspect of life.

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