Meditation for Traders


Meditation for Traders: Evidence for Numbing the Effects of Fear and Greed

This Meditation for Traders article applies to all markets not just Crypto and Forex: Stocks, options, futures, binary options, etc.

By the very fact we’re playing the market we enter a trade with the confident expectation to win. However, because of the random outcome of many news events, we begin with a sense of uncertainty. These two factors, positive expectation, and risk of events lead to a feeling of mild excitement which is the result of dopamine released in your brain. Cocaine, opiates, and nicotine activate the release of dopamine as well. This release is one of the reasons we find ourselves fixated with a forex chart after we’ve entered a trade. Dopamine is conducive to overtrading, risking too much, entering low probability trades. It’s related to what we call greed.

When a trade moves against us, or we feel we’ve missed an excellent opportunity, we experience discomfort. If this discomfort persists, it can change into stress. Stress can trigger the amygdala which always acts to warn us of potential threats. The problem is that the amygdala once triggered has no way of distinguishing between the real danger of a massive Grizzly bear running towards you or the market moving against you.

Granted the intensity of the perceived threat is less with the markets but the response is similar. If the stress continues unabated, then the amygdala will release cortisone. Cortisone prepares the body for fight or flight.  Thinking in the brain is hijacked at the expense of heightening those areas in the body that assist with fight or flight.

This heightening is related to what we call fear of losing or fear of missing out. We are no longer able to think clearly about the trade and will stay in a trade longer than the trade merits or enter a low probability trade.

Deep breathing exercises or mindfulness exercises seem to at least temper the fear side of trading. We find in a Scientific American article:

ic American arti

“It (mindfulness)doesn’t fit any of the classic models of pain relief, including drugs, where we see less activity in these areas,” says Joshua Grant, a postdoc at the Max Plank Institute for Human Cognitive and Brain Sciences in Leipzig, Germany.

The expert mindfulness meditators also showed “massive” reductions in activity in regions involved in appraising stimuli, emotion, and memory, says Grant.

“It seems Zen practitioners were able to remove or lessen the aversiveness of the stimulation – and thus the stressing nature of it – by altering the connectivity between two brain regions which are normally communicating with one another,” says Grant. “They certainly don’t seem to have blocked the experience. Rather, it seems they refrained from engaging in thought processes that make it painful.”

The full article is here:

http://blogs.scientificamerican.com/guest-blog/what-does-mindfulness-meditation-do-to-your-brain/

How to Practice Meditation for Traders with Laser Focus

I don’t personally refer to this as “meditation,” but a “deep breathing exercise focussed on my breath” and my exercise does not involve mantras or reflecting upon images of any sort. Again, it’s purely a focus on one’s breath. It’s not a religious meditation. It’s a learned skill used by other traders and other professionals involved in high performance-based skills.

If you are resting on a pillow, and your knees are not sitting flat on the ground, place some pillows below them. This practice helps you to stop tensing your muscles and hold your legs up.

Deep Breathing

For this meditation, I’d suggest deep breathing, and only in and out of your nostrils. Breathing this way keeps the mind focussed, slows your breath, and keeps the central nervous system calm. The brain then can enter into the mediation experience quickly.

Breathe in and out of your nose. You will begin to eventually calm down and continue to breathe at an even pace. After a few minutes of this, you will start the steps for focusing.

Controlling Where You Fix Your Attention

Your eyes should be relaxed and open. Relax just enough to relieve any stress.  There should be no distractions, close your laptop, no charts! Choose a point on the wall about eye level and hold your focus there. If you find yourself drifting, gently refocus your attention on the spot on the wall.  Don’t overthink it, quietly and gently redirect your attention. Too much concern over failing to be attentive only leads to more inattentiveness.

Again, the eyes should be open and relaxed. Avoid all possible interruptions. Find a point on the wall to fix your gaze. Your feet should be placed flat on the floor.

Your attention will not be on the wall but your breath. Focus on breathing in and out. You can practice on keeping your attention on your breathing and counting up to 20. At any time, if you find yourself not focusing on your breath then gently turn your attention back to it. Don’t panic about not concentrating on your breathing. You may feel underlying anxiety that you’re not doing anything but believe me, you are.

If you can count to 20 without losing focus, then you’re one of the few who can. I still can’t in some cases continue without becoming overly anxious and having to start again. The best traders tend to be very calm by nature. If you’re not calm by nature, then this is the way you must work on a calm disposition. Some of the top trading fund companies look for people with calm dispositions as criteria for a good trader.

The key is to remain objective and non-reactionary towards not being completely focused. You should meditate 15 minutes 3 times a week, five if you want to improve faster. I meditate about 10-15 min a day. You can do it at any time of the day. Be consistent, and it will pay off. You can combine this with mental contrasting and visualization as mentioned in an earlier article.

Visualization on the process of trading will help you improve upon your techniques and follow through with precision while meditation will help detach you from your thoughts and feelings. Meditation will help you to become more objective with the trade, especially when combined with good low-risk money management.

Only a small percentage of users will stick with the meditation for a long time because the art of trading makes it difficult to see which practices are actually useful or not. This stuff works. Using a small account, trying trading for three months before beginning mediation and then compare this to trading for three months while meditating. All other things held constant; the latter three months should prove to be more profitable.

 

Consistency

How long should you meditate? Again, 10-15 minutes is more than enough. If you want to pursue this, and you should, then choose a set time to do this each day. The best times are in the morning or just before bed as this may be the only free time you have.

Although both are good times to do the meditations, the best time is in the morning as this seems to place you in a mental state or zone that carries through the whole day.

The key is to be consistent with your practice. Don’t let a meditation day buy without making up for it. Too many skipped days becomes a habit. The minimum amount of training should be three times a week, and 4-5 times a week is much better.

 

Further Evidence of the Advantage of Practicing Meditation for Traders  

Here I'll mention the advantages of regular meditation practice. Remember consistency over time is the key. This type of meditation has benefits even for other areas of your mental health.

I'm going through just some of the evidence for the advantages gained, as supported by scientific investigations, in the practice of deep breathing exercises or what is commonly called mediation. Again, for those interested, I only practice what I call a deep breathing exercise. It is that simple. It doesn't involve conjuring up images of the Buddha as some sort of figure to emulate. It's a natural skill because of what it's focussed merely on: one's own breath.

Here is some interesting scientific evidence for the advantage of deep breathing exercises:

  • the brain structure actually changes within 8 weeks of meditating
  • there is notable increase in grey matter for meditators
  • the regions of the brain that physically improve are involved in tempering emotions, pattern recognition, memory and learning
  • researches have found actual changes in genes among meditators
  • these genomic changes were the opposite found in people experiencing high levels of stress
  • these changes help counteract the effect of stress or fight/flight reactions
  • anxiety levels tend to drop among those who begin to meditate
  • meditation regrows the brains important grey matter
meditation for traders

There is good evidence, as witnessed above, that deep breathing exercises help curb automatic reactions to fear and euphoria(temptations to be greedy). It allows you to take a step back when trading and access more information on the fly. Anxiety tends to lead to tunnel focus, but a relaxed state allows a broader access to ideas. Meditation and trading go hand in hand as one begins to master the ability of taking calculated manageable risks throughout one's life.

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John trades on a regular basis and publishes his trades weekly on both the blog and youtube. In these videos John explains how and why these trades were entered so people can get a feel for sentiment , fundamental and news trading.

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