The benefits of meditation

Market Wizard Ray Dalio said:

“Meditation, more than any other factor, has been the reason for what success I’ve had.”

The daily practice of meditation is like exercise for the mind.

The more you meditate, the more you will notice your emotional capacity increases.

Things that used to bother you start to seem trivial, and you become happier and more peaceful.

Of course, it’s a matter of personal preference, time, and resources as to which relaxation method you choose.

What’s important is not the method you choose, but the ‘empty-minded’ state that relaxation helps you to achieve.

You want your mind quiet and focused on the task at hand.

In that state, any physical tension you feel will dissolve.

Catch your mind wandering

You will find your mind wandering.

That is okay. Don’t judge yourself; instead, bring your mind back to the task at hand.

Don’t try to resist any discomfort.

Rather, coolly detach and observe your mind as if you were an ‘objective outsider’ to your mind.

Practise being in this relaxed, calmly-aware state as much as possible.

For example:

• if you are doing the dishes, then do them calmly and consciously
• if you are taking the dog for a walk, concentrate on every tree and leaf and really observe what is going on around you
• if you are reading the news, read it with a calm, detached frame of mind

Exist in the moment, not in your past or future.

Work hard to eliminate any sources of stress from your life.

If you follow this advice, you will understand what it’s like to be ‘in the zone.’

Stress management for traders

When you feel anxious or depressed about your trading, your thoughts produce a stress response in your body.

This is a biological activation of the pituitary and adrenal glands, the thymus, the hypothalamus, and the thyroid system.

It is a physical bodily reaction to your thoughts.

This may be due to a traumatic experience such as a previous trading loss, or your fear of a future loss.

These bodily triggers cause emotions that can interfere with or hijack your decision-making.

They are also the enemy of a receptive state of mind.

This is because the focus shifts to whats stressing you and ignores other inputs.

The effect of stress on a trader

Needless to say, a highly stressed trader is going to have trouble getting into the zone.

In fact, stress does not exist when the trader is totally focused on the moment.

Stress arises out of thinking about the past or future, both of which do not exist in the present

When a trader is under stress, they are more prone to making irrational trades or breaking their own trading rules.

Talking about the stressed trader, trading psychologist Ari Kiev said:

“If stress increases without a corresponding increase in your ability to handle it, your adaptive mechanisms begin to break down, and you experience nervousness and decreased confidence.”

Stress negatively affects your performance as a trader on many fronts.

Therefore, dealing with stress by physically learning relaxation techniques is a key priority if you want to learn to trade in the zone.

Dealing with strong emotions

As well as stress, feeling strong emotions can distract you from getting ‘in the zone’ and trading like a professional.

The temptation is to either resist feeling strong emotions, or to distract yourself from them.

We use things like watching TV and eating to distract ourselves from really feeling those strong emotions.

Instead of resisting the emotion, one technique is to find a quiet space, and really try your hardest to feel the emotion.

Give yourself mental space to really experience what that emotion feels like. Let it wash over you like a giant wave.

Once you stop resisting and start to feel, it can cause the emotion to lose its charge and dissipate.

Again, practice is the key to becoming proficient at this powerful mental technique to deal with strong emotions.

Prepare your mind by using visualisation techniques

Preparing your mind for trading like an elite athlete does not just involve silencing the inner chatter, and learning to physically and mentally relax, or get ‘in the zone.’

It’s also about preparing your calm mind for the tasks it has ahead.

Trading coach and psychiatrist Ari Kiev said:

“It is like tennis. You have to know where your racquet is and keep your eye on the ball and then maximize the performance by playing intuitively.”

Visualisation is a very powerful technique which prepares your mind for the task ahead.

For example, master cricket batsman Ricky Ponting would say to himself ‘watch the ball’ over and over again as the bowler ran in to deliver.

By focusing on that one simple mantra, all distraction and preoccupation with his batting technique would disappear.

Ricky’s training would kick in, and he would play the ball on its merits.

Elite performers prepare themselves mentally

The important point here is that Ponting had prepared himself so well for whatever type of ball was bowled at him, that he was able to completely exist in the moment with it.

If Ponting had walked out to the pitch mentally ill-prepared for what was going to come his way, then no matter how much he focused on the ball, he would not have the reflexes to hit a fast-bowled cricket ball.

Similarly, if he was overly preoccupied with his technique, the century he wanted to score, or the duck he got last innings, then all the preparation in the world would not help him.

It is the same for traders.

• Traders need to have done their homework
• They need to have conviction in their ideas to be able to execute them
• They need mental discipline and consciousness so they don’t make emotional mistakes

Practice visualising perfect trade execution

As a trader, perfect execution of the basic trading skills will generate you surprising results (…not trying to learn increasingly complex techniques or theories.)

The markets are basically simple:

• the price moves up and down, and sometimes trends
• they form chart patterns based on human psychology
• they respond to fundamental developments in the country of that currency

Therefore, if you practice perfect trade execution in your mind, you will be mentally prepared to cope with any situation the market may throw at you.

Visualise and practice in your mind:

• sizing your positions in line with your conviction and your trading plan
• cutting your losses short
• letting your profits run
• being receptive to the information the market provides you

Time spent mastering these basics will be much better than studying market analysis methods.

It’s far better to ingrain the basics in your subconscious, so you perform them automatically without a moment’s hesitation or thought, even during situations that generate extreme levels of stress.

Market Wizard Dr Van Tharp said:

“Mental rehearsal will go a long way toward improving performance.”

Traders can use visualisation techniques to mentally rehearse both the perfect execution of their trading plan, and their response to a situation where one of their contingency plans needs to come into play.

When doing this as a trader, it is important not only to plan how to manage risk, but how you can potentially capitalise on a scenario.

Imagine the best possible trading scenario

Market Wizard Tom Basso said:

“I focus my total attention on trading well, and let the results take care of themselves.”

Take a moment to focus your total attention on trading well.

Imagine:

• You are relaxed, calm, and centred
• You’re aware of, yet detached from your goal
• You have a clearly defined plan to achieve your goal
• You have all your mental resources at your disposal, because you know exactly how to handle stress

Now imagine you are also able to implement your core trading skills unconsciously and automatically, without a moment’s hesitation.

Imagine you have practised the perfect execution of your plan thousands of times in your mind’s eye.

Finally, add to that, you have practised hundreds of times what you will do if one of your contingency plans needs to be executed.

Now, you feel ready for anything the market might throw at you.

Hold on to that mental picture, and answer this question:

How well do you think you would trade in this situation?

Put all these techniques together, and you’ll be trading ‘in the zone’

Trading in the zone is not just one thing you do to turn your trading around psychologically.

It is a combination of:

• dealing with any negative self-talk
• silencing the internal chatter in your head
• finding a place of inner calm
• centring yourself
• dealing with your physical tension
• visualising perfect trade execution
• mentally rehearsing performing like a winning trader

If you can master your own psychology, you will be well on your way to becoming a successful trader!

Happy trading!

Till next time,