Profitable Trading with Meditation

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Profitable Trading with Meditation
Profitable Trading with Meditation

Meditation can be defined as a practice where an individual focuses their mind on a particular object, thought or activity to achieve a mentally clear and emotionally calm state. Although trading financial markets can be incredibly rewarding, there is no doubt that it can also be extremely stressful. Indeed, one of the major hurdles that traders must overcome in order to achieve success is leaning to control their emotions. Over-trading, avoiding trades, taking too much risk, taking too little risk and poor management of trades are all symptoms of a trader who is battling their emotions.

Many traders believe that finding the perfect strategy will help them achieve success. It sounds so simple to just learn a profitable strategy and apply it to the markets. However, once real money is on the line, and the trader alone is responsible for making decisions, it can be incredibly stressful, and many traders find themselves making the same mistakes over and over again.

This is where meditation can be extremely beneficial for traders.

Mediation can help traders learn to control their emotions to overcome the pressures they feel in certain situations such as avoiding the urge to move as a stop as price spikes on a news event or avoiding the urge to add to a losing trade or indeed, the urge to take profit on a trade which hasn’t hit target yet.  Each of these classic errors that new traders make and learning to control emotional responses in stressful situations can help traders achieve better profitability.

Meditation can also help traders sharpen their focus and improve their ability to avoid distraction and stay alert during key times. For retail traders who have access to social media and probably follow several different FX analysts as well as listening to financial news wires, it can be draining to sift through information, highlighting what is key, and still being able to operate efficiently in the market when called upon.  Practicing meditation can help traders improve their ability to focus and sift through information and to have the mental acuity to highlight and use what is important and valuable.

Another key area where meditation can be of great use to traders is in helping them conquer their fears both of losing and of adding size to their trades. Many new traders initially struggle with the idea of losses being a part of achieving success in trading. Losses provoke fear and doubt and can disrupt traders from sticking to their plan, however, meditation can help traders learn to stay calm and to stick to their plan and to not respond emotionally to losses.

In the same manner, more experienced traders tend to struggle with adding size to their positions. A trade that might usually risk 200 euros a trade, all of a sudden risking 500 euros a trade, can be struck with a similar emotional response that sees them making mistakes such as banking profits too soon on trades and not holding to target, or moving their stops to break even too soon to protect against losses, both of which can ultimately sabotage their returns in the long run.

Meditate Like The Pro’s

Meditation has been found to be so useful to traders that more and more hedge funds and banks are bringing in meditation classes for their traders to improve their performance. Some well know fund managers, such as Bill Gross of Pimco and Ray Dalio of Bridgewater, have long heralded meditation as a key part of their daily routines. Indeed, Dalio is quoted as having once said during an interview that “Meditation more than anything in my life was the biggest ingredient for whatever success I’ve had”.  To put this in context, Ray Dalio runs a $150 billion fund so, if he is saying that it has been instrumental in his success, maybe you should give it a try!

The great thing these days is that there are all sorts of meditation apps that you can use to help you get started, such as headspace, which helps you improve your mental condition in just 10 minutes a day. Or, if you prefer to do things the old fashioned way, here is a basic meditation practice that you can use to help you get started.

  • Sit comfortably in a quiet place, typically cross-legged with your back straight
  • Focus on your breathing and the “in -out” flow of breath
  • Count each breath up to 10 and then start again.

Do this for five or ten minutes a day and try and build your way up. If you are struggling to control your emotions with trading then hopefully a few weeks of this practice should make you much better at controlling your emotions and improve your trading performance!