Emotional Mindfulness In Trading

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Chances are, you may or may not have heard the term “Mindfulness” in relation to trading.

According to Wikipedia, “Mindfulness” is the practice of purposely bringing one’s attention to experiences occurring in the present moment without judgment.

But what exactly is Emotional Mindfulness in trading?

And how can we effectively use this technique to benefit our trading endeavors?

 

 

 

EMOTIONAL SELF DESTRUCTION IN TRADING

 

First and foremost, we need to understand and address the inherent emotional issues faced by all traders during trading.

Personally, I like to call these the “FRIGHT” concept, namely :

  • Fear
  • Revenge
  • Impatient ( Impulsive )
  • Greed
  • Hope
  • Thrill

These are typically the “6 Pillars of Emotional Self-Destruction” almost every trader goes through.

 

 

 

THE TYPICAL EMOTIONAL ROLLER COASTER RIDE

 

Unfortunately, many retail traders are largely speculators when it comes to trading the financial markets.

Sad to say, I have came across many fellow traders who are literally “Thrill” seekers.

Folks who enter into trades apparently without any valid strategies, often betting speculatively just for the sake of being in the game.

 

Instead of doing one’s due diligence, these seemingly less informed traders are more concerned about the “Fear” of missing out  (FOMO).

Especially when it comes to over-hyped next big thing or market move that is currently being sensationalized on social media.

 

While experienced and more disciplined traders patiently wait for price to retrace to their desired entry levels before taking risk limited calculated trades.

Most speculative traders are typically more “Impatient” in their trading endeavors, often seeking “Instant” gratifications instead of longer term wealth accumulation.

They are likely more “Impulsive” and aggressive when entering trades with over-hyped media interests.

 

Armed with the “Hope” that their very next trade or investment will reward them with a hefty 10X , 100X or even 1000X returns.

They are often over-optimistic that the next trade will be the one that would solve all their financial woes.

 

When things are rosy and smooth sailing, instead of gradual profit taking where money is at least safely in the bag, most succumb to “Greed”.

One of the darkest desire of the heart where more is never enough.

 

But when the markets abruptly takes back what is easily given, that is where the ugly “Revenge” factor kicks in.

Anger and rage will often entice traders to chase after the markets to gain back what is initially lost.

 

As far as my personal experiences goes, revenge trading always never end up the way you planned, period.

 

 

 

BENEFITS OF MINDFULNESS IN TRADING

 

Learning to trade without emotional distress should be one of the most important skills that all traders must incorporate into their trading arsenal.

Emotional mindfulness in trading is my personal version of using mindfulness techniques to curb these 6 deadly sins that are detrimental to our trading results.

 

My personal belief is that trading without emotions (or at least with almost no emotions) may just be the next closest thing to a holy grail in trading.

 

Generally speaking, the practice of mindfulness can reap numerous psychological benefits “IF” it is done correctly.

Some of the wide ranging benefits may include decreased stress and sadness to increased levels focus and happiness.

 

Essentially, it is a skill one develops through meditation or other forms of training to clam and clear the mind of all distractions.

Once “In The Zone”, which is what I like to call it, it allows the practitioner the ability to be fully immersed in the moment and be laser focused on the task at hand.

And in this case, trading the highly volatile FX markets.

 

 

 

PRACTISE MAKES PERFECT

 

However, do be warned!

The practice of mindfulness in trading may not be such an easy task in the beginning stages.

 

I can still recall when I initially completed my maiden mindfulness course, I was pretty sure it was a “Piece Of Cake” to practice it on my own.

But, boy was I totally wrong.

 

The first 2 weeks of mindfulness practice was downright frustrating and simply “Time-Consuming”.

It practically took me almost an hour to “Clear” my mind down and get into the groove of things.

Way much longer than I initially allocated and planned for my daily trading preparation routine.

 

During my initial mindfulness practice stages, I often missed the anticipated daily London market open session while trying to get my mind up to literally “Calm” down.

Luckily, it does gets better with repeated practice and time.

 

 

 

MY PERSONAL MINDFULNESS ROUTINE

 

Do take note that everyone’s personality, psychology and habits varies but this is what works best for me after much trial and error.

It is basically a +/- 30 minute prep session before I start trading for the day.

 

I have broken it down into 3 steps and nicknamed it my daily D-C-A preparation ritual, namely “Detach” ; “Clam” & “Anticipate”.

So what does my D-C-A preparation ritual entail :

 

 

(1) Detach : 

Typically takes less than 1 to 2 minutes.

But literally the most important part of the ritual.

 

First and foremost, temporarily switch off the top 3 everyday distractions before trading.

And the usual culprits are non other than :

  • Cell Phone ( switch to voice mail )
  • Email ( Just set a designated time slot for replies later )
  • Social Media ( WhatsApp, Facebook, Twitter, Telegram etc. )

To some, this simple procedure might seem easy enough.

But for those who can’t live without social media, it might just be their Achilles heels when it comes to trading.

 

 

(B) Calm : 

Timing varies, can take between 30 minutes to even an hour, depending on your level of meditation progress.

Start off by finding  yourself a nice quite spot where you will not be disturbed.

Reckon many folks believe they need to sit cross legged and assume a “Lotus” position in order to achieve “Zen” like status.

 

However, that is not my cup of tea and also not a necessary requirement in my opinion.

Always go for the mediation position setup that bests works for yourself, period.

After much trial and error, I have found that sitting upright works best for me.

A good comfortable chair with a stable back rest is highly recommended.

 

My personal Mindfulness calming routine is as follows :

  • Sit up straight with back comfortably rested on the chair’s back rest.
  • Head facing forward position.
  • Chest forward with squared off shoulders.
  • Both hands on your knees.
  • Both feet firmly flat on the ground set at shoulder’s distance apart.
  • Eyes closed.
  • Empty all thoughts and clear your mind.
  • Concentrate on your breathing ( inhale and exhale sequence )
  • Relax your body while maintaining active consciousness ( a.k.a try not to fall asleep )

 

For some, you will usually achieve a calm state of mind when you are able to “visualize” a white light at the “Glabella” position of your forehead.

I usually set a 30 minute timer and put on my head phones and listen to some of my favorite Alpha Wave music while performing this particular task.

 

 

 

 

 

 

There May Be Plenty Of “Free” Meditation Type Music On YouTube But Most Come With Paid Advertising Which Abruptly Pops Up In The Middle Of The Track. Better To Select A Track That You Prefer & Have Somewhat More Control Over Like One Of My Favorites Titled “DEEP CONCENTRATION” By Ennora.

 

 

(C) Anticipate  :

Typically takes less than 5 minutes.

This last session is “Optional” but it works well for me.

And I love it for its anticipation to the start of a new trading session.

 

It kind of serves as a short and sweet “Warm Up” prelude to the London / US market opening session.

Typically, to end off my personal mindfulness session, I  listen to an additional “Countdown” type voice spoken audio track.

Usually a 60 second count down works well but I personally prefer the slightly longer 100 second countdown sequence.

 

The key here is to have the countdown sequence recorded by a smoothing and relaxed voice in order to achieve the desire effect.

You do not want one of those “Techno” ; “Blast-Off” or “Ticking” time bomb type count downs.

A definite “No-No” in this situation.

 

 

 

CONCLUSION

 

Trust me, it is going to be a challenge to get into the “Zone” if you are constantly hampered down by the daily mundane challenges of everyday life in general.

Mindfulness in trading has enabled me to calm my over-active mind and keep my emotions in check.

Allowing me to able to observe the underlying price action of the markets with an “Unbiased” opinion.

And once we are able to effectively incorporate emotional mindfulness into our trading routine.

The benefits will gradually be evident especially in our trading results.

In my opinion, practicing “Mindfulness” is an essential “Skill” all traders should have in their arsenal no matter which financial assets one is trading.

Trade Mindfully

Nothing Beats Attending An In-Person Mindfulness Class. But If That Is Not Possible Due To The Ongoing Pandemic. The Next Best Thing Is Perhaps Reading A Book Like “Trade Mindfully”  By Gary Dayton.

 

 

 

Shorten your learning curve by downloading our complimentary Elliott Wave Cheat Sheets.

 

 

For more articles on the Elliott Wave Principle, check out our other posts in our  Elliott Wave Blog.

 

 

 

About Admin

Short Term Trader & Long Term Investor Using The Elliott Wave Principle.

Comments

    • Hi Alvin,

      To be frank, practicing Mindfulness in trading is really not that easy in the starting stages, needs lots of practice to get into the correct calm state of mind. Once in the zone, I believe your trading results will show for itself.

      Trade safe and prosper.

    • Hi Wang,

      If you are new to mind development and empowerment, a good start will be the Silva Method.

      And if you just happen to reside in in Singapore, perhaps you can try a more trading oriented Mindfulness class by Dr. Foo Loon Sung.

      Hope the information is useful.

      Trade safe and prosper.

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