The Second Week of More Mindful Trading

bruce.bowerBruce Bower, General Comments, Health and Trading, Trader Development, Trading Ideas, Trading PsychologyLeave a Comment

In this post, I will continue my eight week experiment with cultivating mindfulness and trading. The first post in the series can be found in the post Eight Weeks to More Mindful Trading.

Just in case you missed that post, I will provide a brief refresher on mindfulness. The topic is all the rage right now because people want to take back control of their attention span and to beat back the numerous distractions in everyday life. Mindfulness is about learning to control your attention and your focus, so that you can observe your thoughts and feelings without necessarily acting on them.

When it comes to mindfulness applied to investing and trading, there was a burst of good material last year. Dr. Steenbarger put together a good review of the literature on mindfulness. There have also been several good books that have come out recently, focused on mindfulness for traders and investors. Two particularly good ones are Trader Mind by Steve Ward and Trade Mindfully by Gary Dayton.  Both take the existing literature and best practices on mindfulness and put it into a framework that is useable by investors and traders. These books are good roadmaps for anyone who wants to cultivate greater awareness and detachment in their trading.  Steve Ward describes mindfulness in a market context as “trading in the moment, paying attention to what the market is doing right now and the environment around you, being aware of your own thoughts, emotions, physical sensations and any impulses or tendencies to act”.

I am a friend of Steve Ward and a big fan of his work. His recent book featured an 8-week program on boosting mindfulness for traders. The goal is to make you a much calmer, more aware trader by the end of the eight weeks, no matter what your starting point is. The 8 weeks start with a self-inventory, where you evaluate your current level of mindfulness. You then re-evaluate your mindfulness level every week. From there, you undertake a series of exercises designed to boost your awareness and mindfulness with regards to yourself and the markets.

On the 15 question mindfulness survey, each question is on a scale of 1-6, with a higher score meaning more mindfulness. The maximum possible score is 90 (15 * 6). My first week score was 45, which means that I am somewhat aware but running on autopilot far too often. Here is my track record of scores:

Week 1 mindfulness score: 45

Week 2 mindfulness score: 45 [I know, not much of an improvement!]

In the first week, you were learning to snap out of automatic pilot and direct your attention. It was more about realizing what was under your control and what wasn’t—and how control your focus. If you’ve never done it before, focusing on your breathing can be extremely difficult.  Not only is it new and challenging, it even feels unnatural.

This week’s program, Week 2, is entitled “Thinking About Thinking”. This week’s program is a bit different to the last. It’s about directing your attention and your thoughts at the same time. As we all know, we can get random thoughts arising at any old time. Sometimes they serve us well, like “Eureka” moments. Other times, they can wear us down, especially if we can’t stop a negative thought.

Managing the relationship between our thoughts and our attention is critical, especially for people looking at the markets. We have to be able to distinguish between observations and our thoughts about them. The first is what “is” while the other is our interpretation of it.  Our observations are raw data, while the interpretations draw conclusions about that data. If we are not able to observe the market objectively, then we won’t be able to draw the most objective conclusions possible. That would lead to filtering our data incorrectly, jumping to the wrong conclusions and generally making a mess of it. Thin of the technical trader who sees a “cup and handle breakout” in every single chart pattern, erroneously; or the fundamental investor who can always find spurious facts to support why something is at a 30% discount to fair value. The bottom line: learn to observe properly, and only draw conclusions afterwards.

Moreover, we want to be able to shut off or switch on our brain at the right time. Have you ever gone on vacation, sat down at the beach…and then remembered a flood of things that you need to put on your to do list? Have you ever been in a meeting and been occupied with thoughts of everything except for the meeting?  If so, you know the importance of training your thoughts.

This week teaches us to manage our thoughts. It consists of:

  • Re-reading Chapter 4, “Thinking About Thinking”, and doing the exercises. This chapter is mostly concerned with learning to manage your thoughts. There are several exercises about linking your thoughts to the management of your attention and also about managing certain thoughts.
  • Practicing the Mindfulness of Sounds and Thoughts 5 times per week
  • Daily check ins, where you notice your thoughts but let them drift in and out of your consciousness without dwelling on them
  • Keeping a thoughts diary. The idea is that by observing your thoughts enough to write them down makes you more aware of all of the random thoughts bouncing around in your head. Furthermore, the very act of writing gives you the chance to evaluate them.
  • Habit Releaser: Bring moment-to-moment awareness into one habit that is normally a mindless exercise, such as brushing your teeth or eating breakfast.

I did all of these during the week. First of all, I realized that my overall mindfulness score hadn’t shifted. I attribute that to…habit. A lot of my daily routine or my typical actions during the day are hard-wired habits. Moreover, as the Power of Habit discusses, every habit has a cue. I was mindlessly taking the cues all throughout my day, rather than putting more time in between. Habits are very powerful and can make it easy to do various tasks without any thinking. I need to work much harder on breaking the automaticity of many habits and paying attention better.

The Mindfulness of Sounds and Thoughts was an interesting exercise, in which you tried to give your undivided attention just to sounds. You don’t even seek out sounds, but rather you wait for them to register in your awareness. Then you take note of them, but without paying them any more attention. You just left them drift in, take note, and then let those drift out of consciousness.  The reason that you start by being mindful of sounds is to improve your overall sensory awareness. You want to train up your observational abilities through sounds, because that’s easier, then move on to something more challenging.

The exercise then shifts to you noticing your thoughts. Just like with sounds, you practice letting them drift in and out of consciousness, taking temporary note of them but not concentrating on them or getting too sucked in by them. Sounds are easy enough to practice letting go off, because they are temporary. It can be very difficult to treat thoughts similarly. Many people have a tendency to enter into dialogue with or grapple with their thoughts, rather than

In my case, I am usually indulging my thoughts, over-thinking them and having flights of fancy. Frankly, this exercise was extremely difficult for me the first couple of times. I could be mindful of sounds with some difficulty, but it was extremely difficult to be more mindful of my thoughts. The first couple of times through the exercise, I could let a few initial thoughts drift out of my consciousness, but gave in to my other thoughts quickly. Thus, I was back in the same stuck mode as before. By the last time through the exercise, I could stay on track for a couple of minutes, but no more than that. Overall, I found this exercise to be extremely challenging…

Another exercise that Steve recommends in the chapter is defusion, in which you detach yourself from a troubling thought or emotion. Basically, you take an annoying or unhelpful thought and you try to reduce its emotional impact so that you are able to cope with it much better. In the book, he uses the example of a client who believes that “the markets are impossible to trade right now”. Obviously, this statement is not a useful belief, as it would drive a trader toward inaction and paralysis as opposed to a proactive approach. What Steve had the client do was to write it on a piece of paper and look it up close, right in front of his nose. This led to a strong emotional link to the thought, as it seemed to dominate his field of vision. Then he gradually had the client move the piece of paper farther and farther away, until the arm that held it was fully extended. Then the client reported that the emotional gravity of the thought was much lower, as it was further away and just a minor point in his field of vision.

This type of exercise is goes by the catch-all name of dissociation in performance psychology. With dissociation, the more you are physically removed and distant from the issue or the experience, then the more you deaden its emotional impact. I talk about dissociation and its opposite, association, in my series for SMB on Visualization Exercises, so I embraced this exercise as well.  If you don’t believe me about its effectiveness, then try it with thoughts that are stuck in your head and really bothering you.  I guarantee you’ll notice a change.

Lastly, we have the habit breaker. This week was surprising. Last week, I felt completely different about brushing my teeth. This week, I can’t say that I noticed anything different about my new habit to “break”, which was taking the train. I guess that I am still easily distracted and thus my focus goes off course. I didn’t notice anything different, nor did I even attempt to, while taking the train or walking home at night or going through my other normal activities. This is one area where I need to make a stronger push next week. I intend to carefully observe three habits, rather than just one. This should help me to appreciate the moment, instead of just sleepwalking.

I have another six weeks left of Steve Ward’s Mindfulness Program. I hope that you watch this space and do the exercises along with me. Let’s hope that our mindfulness improves together.

No relevant positions


By Bruce Bower | E-mail: Bruce [at]

Blog: | Twitter: @HowOfTrading

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