Meditative Man

A day trader friend of mine invited me to talk about meditation in his trading room. Below is a talk I gave to these traders.

Most of you have read Trading In The Zone by Mark Douglas by now. Some of you often comment on how Mitch trades with ease whether he is up $200K or down $170K on a given day. Many people will freak out if they go through that kind of ups and downs every week. So what is the secret to keeping calm when we are trading? We know when we are calm, we tend not to make unforced errors. Kind of errors when we meant to buy puts but ended up buying calls. Or did not close out your entire position and let some options expire worthlessly! We have all made some versions of these errors in our trading routine. Today, I want to talk about training our minds to make sure that we begin to reduce these errors and eventually completely stop making unforced errors. More importantly, make sure that our trading activities do not cause any mental and physical harm.

A major cause of these errors is our mental state. It usually begins with anxiety. So let’s start with what causes anxiety. We live in a fast pace world. People have way too many balls in the air so stress, in general, is at an elevated level in our society. You bring the fast-paced world of trading in the mix and your stress goes through the roof. I mean you are putting thousands of dollars on the line and you are going in and out within minutes if not seconds sometimes. It is natural to cause stress. Our brain is designed to protect what it thinks is ours. So when it seems that a trade is going against us, its fight or flight response kicks in. You begin to panic sometimes and all of a sudden you get out of a trade before letting it play out based on your indicators. I heard last week someone say on daily wrap-up that they decided to stop using the 30-second chart. I think that was brilliant. Mitch keeps telling us that we trade a 2-minute chart and a 30-second chart is just used as an aid. For this person, seeing that trade was going against them in a 30-second chart even when all other indicators were telling them to stay in the trade, they got out and lost money. It was so smart of them to figure out what was causing the issue and stop looking at 30 seconds chart. Now, the stress of trade going against you is no longer there.

So how do we address the anxiety that flares up any time of the day with no warning? Anxiety comes because we provide inappropriate attention to a subject. What is inappropriate attention you might ask? It simply means we are exaggerating a problem we may be facing or blowing out of proportion the negative impacts of that problem and so forth. This happened recently. A friend’s son called me in panic. He had recently received a full-time job and his employer asked for a drug test. He went for the drug test and they took his social security number and date of birth. When he was leaving the facility, he noticed that they had a piece of paper with all his personal information in plain sight for everyone to see. He could not say anything but as soon as he went home he told his parents he was worried about his personal information being out there. They asked him to call me. Anyway, we started to talk and his anxiety was flaring up. So we went about breaking it down. And this is very important to get rid of anxiety. People who are going through anxiety episodes tend to talk about generality and how everything is going to be bad or worse. After talking it through, I asked him what the worst-case scenario? Another useful technic is when you know the worst-case scenario, it defines the problem and you can begin to address the problem. So he said the worst case is someone can steal his identity. So I asked him to put a freeze on his credit report with all three credit bureau.  As soon as he completed this step, his anxiety disappeared because now he knew his problem was solved. The point here is that if we break down the problem and begin to work on it, it reduces or eliminates anxiety.

This is what I call short term solution. Longer-term, we must learn how not to let our outer problems disturb our inner peace. This is where meditation comes in. If we have a meditation practice that allows us to find our peaceful selves, it can become our go-to solution.

Another way to address this is to realize that there is no inherent existence. Our anxiety about trading comes from our attachment to our money and our things. Once we realize there is no inherent existence, our attachment will drastically reduce even go away allowing us to just focus on the task at hand – trading.

Let’s look at an example. A friend of mine used to have anxiety issues. He would be in the car in a rush hour and would get upset about the traffic. We had an interesting discussion maybe 10 years ago. I asked him if he would consider just ignoring the traffic around him and focus on music or something during his drive. He said, well, that’s not me. That is not personality. I said maybe you should consider changing. He took a big offense he said that is my identity how can I change who I am. I let the subject go. Fast forward 10 years and he has calmed down considerably. Things don’t bother him as much in traffic. He adopted. What he thought was his identity changed. 10 years ago, he thought that was inherent existence. Today it is clear that it was not since he has changed.

Let’s look at another example. Have you ever been absorbed in a movie? I know I certainly have. If it is a well-made gripping movie and you are fully captivated by the plot; you can feel everything being real. You even get a physical reaction if there is an unexpected gunshot or something as if it just happened in front of our eyes. Even though we know we are watching a movie, at that moment we think it is inherently existent. We feel everything that is happening is real. We know it is just fiction.

Let’s say someone loses their months’ worth of income. Now by all means, if there is a possibility of getting it back do it. If not, the first thing you do is to learn not to make that mistake again. Beyond that though if you let it bother you, it will start affecting your health and your relationships. So it certainly does not make sense to let that keep bothering you.