Meditation for Traders: Evidence for Numbing the Effects of Fear and Greed
Unlock the benefits of "Meditation for Traders" in various markets, including stocks, options, futures, binary options, crypto, and forex trading. Entering the market inherently comes with a confident expectation of winning; however, the unpredictable nature of news events often introduces a sense of uncertainty.
This combination of positive expectation and event risk creates a mild excitement, fueled by dopamine release in the brain. As with substances like cocaine, opiates, and nicotine, this surge of dopamine can lead traders to become fixated on forex charts post-trade. This chemical reaction promotes overtrading, excessive risk-taking, and entering low-probability trades—all manifestations of trading greed.
When trades don't go as planned or missed opportunities arise, discomfort sets in. Persistent discomfort can escalate into stress, activating the amygdala, the brain's threat-detection center. Unfortunately, the amygdala doesn't distinguish between the real danger of a charging bear and the market moving against you. While the perceived threat in trading is less intense, the physiological response remains similar, impairing decision-making and potentially leading to poor trading choices.
Incorporating meditation and mindfulness practices can help mitigate these emotional responses, providing traders with the clarity needed to make strategic decisions across all trading platforms.
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.
Even though the intensity of perceived threats in the trading world is generally lower than in life-threatening situations, the body's response can be quite similar. Continuous stress triggers the amygdala to release cortisone, a hormone that prepares the body for fight-or-flight responses. This process hijacks rational thinking, prioritizing physical response over cognitive clarity.
This heightened state often leads to a fear of losing or missing out on opportunities, impairing a trader's ability to make clear decisions. As a result, traders might remain in a trade longer than warranted or enter trades with low probabilities of success.
Incorporating deep breathing and mindfulness exercises can help temper these fear-based responses in trading. These practices aid in maintaining emotional balance, enabling traders to approach the market with a calm and strategic mindset.
"Mindfulness doesn't align with traditional pain relief models, such as medications, which typically reduce activity in certain brain areas," explains Joshua Grant, a postdoctoral researcher at the Max Planck Institute for Human Cognitive and Brain Sciences in Leipzig, Germany.
Grant notes that expert mindfulness meditators exhibit "massive" reductions in brain activity in regions associated with evaluating stimuli, emotion, and memory.
"It appears that Zen practitioners can diminish the aversiveness of stimulation—and consequently its stressful nature—by altering the connectivity between two brain regions that usually communicate," says Grant. "They don't block the experience; rather, they seem to avoid engaging in thought processes that render 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 prefer to describe my practice not as "meditation," but as a "deep breathing exercise focused on my breath." This method does not involve mantras or visualizations; instead, it's a straightforward focus on breathing. It's not a religious practice but a learned skill utilized by traders and other professionals engaged in high-performance activities.
When practicing, if you're seated on a pillow and your knees don't rest flat on the ground, place additional pillows under them. This adjustment prevents muscle tension, allowing your legs to relax.
Deep Breathing Technique
For this exercise, I recommend deep breathing exclusively through your nostrils. This approach helps maintain focus, slows your breathing, and keeps the central nervous system calm, allowing the brain to quickly enter a meditative state.
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
Keep your eyes open and relaxed during this exercise, and aim to eliminate all possible interruptions. Choose a spot on the wall to softly fix your gaze, while ensuring your feet are flat on the floor.
The primary focus should be on your breath, not the wall. Concentrate on inhaling and exhaling, and practice maintaining your attention on this breathing rhythm by counting up to 20. If you notice your mind wandering, gently redirect your focus back to your breath.
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, you're among the few who can. Even I sometimes struggle to maintain focus without becoming anxious and needing to start over. The best traders are typically very calm by nature.
If calmness isn’t your natural state, this exercise is essential for developing a composed disposition. Top trading fund companies often seek individuals with calm natures as a key criterion for successful trading.
The goal is to remain objective and non-reactionary when you lose focus. Aim to meditate for 15 minutes, three times a week, or five times if you're looking to improve more rapidly.
I personally meditate for about 10-15 minutes daily. You can choose any time of day to practice. Consistency will yield results. You can also combine this practice with mental contrasting and visualization techniques mentioned in a previous 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 traders will maintain a long-term meditation practice, as the art of trading often obscures which practices are truly beneficial. However, meditation is effective.
To test its impact, try trading with a small account for three months without meditation, then compare the results with three months of trading while meditating. With all other factors constant, the latter period is likely to be more profitable.
CONSISTENCY
Consistency is key. How long should you meditate? Just 10-15 minutes daily is sufficient. If you're committed to pursuing this practice, establish a set time each day. The best times are often in the morning or just before bed, as these may be the only free moments available.
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 highlight the advantages of maintaining a regular meditation practice. Remember, consistency over time is crucial. This form of meditation not only benefits trading but also supports various aspects of mental health.
I'll review some evidence-backed benefits, as shown in scientific studies, of deep breathing exercises, commonly referred to as meditation. For those interested, I practice what I call a deep breathing exercise. It's a straightforward technique that doesn't involve visualizing figures like the Buddha. It's a natural skill because it focuses solely on one's 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
As mentioned earlier, there's strong evidence that deep breathing exercises can help curb automatic reactions to fear and the temptations of greed. This practice allows traders to take a step back, enabling them to access more information in real-time. While anxiety can lead to tunnel vision, a relaxed state opens the door to a wider range of ideas. Meditation and trading complement each other, as mastering meditation can enhance one's ability to take calculated, manageable risks across various aspects of life.
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FAQ
Q: Why do traders need a meditation practice?
A: Trading can be stressful and requires a lot of focus. A regular meditation practice can help traders stay more focused, reduce stress, improve decision-making abilities, and enhance their overall trading performance. It creates a productive trading mindset and positively alters trading psychology which is essential for good trading.
Q: Can meditation help improve my trading plan?
A: Yes. Meditation can help in improving the clarity of thoughts and decision-making process. This could, in turn, help you to develop a more effective and profitable trading plan, enhancing your forex trading or day trading results.
Q: What forms of meditation can be beneficial for Forex traders?
A: Types like mindfulness meditation, transcendental meditation, and guided meditation are popular forms. Each form of meditation has unique qualities to keep your eyes closed, mind calm and sharp, helping to improve trading psychology and subsequently, results in forex trading.
Q: How does the visualization technique in meditation help traders?
A: Visualization in meditation can greatly enhance a trader's performance. With eyes closed, you can visualize successful trades, reactions to different scenarios, and adherence to a trading plan or strategy. This practice can help in reinforcing good trading habits and improve trading performance.
Q: I'm mostly into day trading, how can meditation help me?
A: Day trading often requires quick decisions and can cause stress. Regular meditation practice can calm the mind, improve concentration and enable better decision-making abilities. It can help you maintain a calm mind, even when you’re trading in a high-stress environment.
Q: Does practicing meditation help prevent trading losses?
A: While meditation itself can't prevent losses, it can make you more aware of your emotional reactions and help you handle losses better. With a calm and focused mind, you might make fewer mistakes and react more logically to losses.
Q: How can I integrate meditation for improved trading into my daily routine?
A: Integrating meditation into your daily routine can be as simple as setting aside a specific time each day for meditative practice. It could be early morning before the markets open, or in the evening after your trading day ends. Regular practice of meditation can have positive effects on your trading performance.
Q: How long do I need to meditate each day for improved trading?
A: There's no fixed time limit, but many successful traders meditate for 15-30 minutes each day. The key is consistency. Even a few minutes of meditation daily can make a difference in your trading mindset and performance.
Q: I don't like sitting still, can I still meditate?
A: Yes, you can. Meditation doesn't necessarily mean you have to sit still in one place. There are different meditation practices like walking meditation or guided visualization that you can try. The goal is to achieve a clarity of mind that can improve your trading performance.
To be honest, I’ve never seen a content like this before. Your content on meditation is just what I need now. I really don’t know how you found out that I just started trading forex. I can’t really begin to explain here the feeling I have particularly when my trade goes the wrong way. Thank God the market has closed. Now I have a better approach next week when it opens. I will have to bookmark this article so I can do this and relax before I start placing trades. No one thought me this and you just gave it all for free. Thank you so much for all the effort and input. Thanks also for sharing.
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