The Third Week of More Mindful Trading

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

The Third Week of More Mindful Trading

In this post, I will continue my eight week experiment with cultivating mindfulness and trading. The first two posts in the series can be found here:

Eight Weeks to More Mindful Trading

The Second Week of More Mindful Trading

To bring new readers up to speed, here is 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 that afflict us 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 TraderMind 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 excellent roadmaps for anyone who wants to cultivate greater awareness and detachment in their trading.  I liked the material so much that I incorporated some of it into my own book, Peak Performance Trading and Investing. I liked the most Steve Ward’s definition of mindfulness in a markets context: “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 TraderMind 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 indicating 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

Week 3 mindfulness score: 48 [a bit of an improvement]

This week’s program, Week 3, is entitled “Embracing Emotions”. This week’s program is less about managing our attention and more about understanding our emotions. For traders and investors in general, emotions are actually a very unusual topic. Most of us feel very strongly that emotions have no role in the markets, that they can only hurt our decision-making, and that we would better served by not having any emotions at all.

This is a simplistic answer to a complicated question. First of all, we are human beings and we will always have emotions. No matter how hard we try, we cannot turn them off. As such, we will never become supremely rational decision-makers, removed from emotions. We can’t become robots. Sorry!

Secondly, this means that we will have to figure out a way to deal with emotions that accounts for their existence. Like it or not, we have to account for emotions when we make decisions. If we try to suppress them, then it’s like trying to submerge a balloon—they will inevitably pop back up, and not always where you would expect. As Steve Ward writes, “Emotions bring an urge to action but we do not have to take that action”. If you get mindfulness right, then you are creating a gap between that urge to act and the actual action, making it more likely that you avoid acting on any silly urges. That circuit breaker could you prevent you from making very poor decisions.

For instance, if you have anger management issues, then you don’t have to trade in an angry state. If you are at risk of getting angry with the market, then you want to avoid making decisions in that state, as that will obviously hurt your ability to make money. Knowing that emotions are there, we instead have to find robust ways to make decisions that dampen the effects of emotion and which allow our rational brains to overrule.

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

  • Re-reading Chapter 5, “Embracing Emotions”, and doing the exercises. This chapter is mostly concerned with recognizing and understanding your emotions, with the goal of working with them. There are several exercises which help you to manage your emotions better.
  • Practicing the Mindfulness of Body and Breath at least 5 times this week
  • Daily check ins, where you notice your emotions and describe them with the following language: “I am feeling the emotion of…”.
  • Complete the practice form.
  • Habit Releaser: Change the normal seat where you watch television.

I did all of these exercises during the past week. First of all, my overall mindfulness score just started to shift in the right direction. Actually, I was joking with Steve about my “score” not moving from Week 1 to Week 2 and he gave some good advice. He encouraged me to focus more on my experience and what I was noticing, rather than to pay attention to my evaluation. Or as some surfers would say, “Just go with the flow”.

This helped a bit, but for someone like me who gets distracted easily, it still takes a lot of conscious effort. This is the whole point of mindfulness- learning to master and control your attention, rather than having it pulled in numerous different directions. My biggest problem is doing simple tasks like writing emails or reading the newpaper without getting distracted. As soon as I get started, my mind races ahead to a related task or to something that I haven’t done, and before I know it, I’ve spent twenty aimless minutes. I am starting to see some improvement in this area, and I will be grateful if I can do better.

The Mindfulness of Body and Breath was an interesting exercise. The exercise consists of analyzing the sensations and feelings all throughout your body, starting from your feet and moving up. Then you shift to monitoring just your breath, and trying to keep your focus there. If your mind wanders, then it’s ok; but you should just bring your focus back to your breathing and keep it there. By doing the exercise, you learn to focus your attention on something seemingly minor, while developing the ability to block out everything else.

This exercise is deceptively simple. We think it will be easy, because it seems so inconsequential. Most of the time, we don’t pay attention to what we are feeling in our feet or to the temperature on our skin. But once we start, it becomes quite difficult—it is so unnatural that it feels awkward and strange to focus on the sensations in our feet. As we wrestle with this, it can be quite difficult to get completely comfortable and focused. This is why the exercise is so valuable- we learn to direct our attention consciously. We learn to focus where we want, even if it’s new to us, and also to recover from distraction.

The side benefit is that this kind of mindfulness training can also be quite relaxing. This self-observation is actually very similar to the relaxation exercises that I teach in my Visualization seminars. The very act of focusing on your breathing and blocking out distractions can be very soothing and allow you to get very relaxed. In fact, the relaxation comes from the ability to turn off the distractions and noise, focusing just on your body and your breathing. Have you ever been so absorbed in reading a book or listening to music or a hobby that the rest of the world just seemed to melt away? That is the same kind of effect we’re going for here.

This super-relaxed state is the ideal state from which to launch into visualization exercises and any other kind of mental fine-tuning. Relaxation and calm are the gateways to better brain functioning and to superior decision-making skills. But perhaps the bigger victory is knowing that you can relax at will and control your attention span. This means that you will become the master of your thoughts, feelings and emotions, rather than the other way around.

Anyway, I didn’t find this exercise as challenging as the previous week’s Thinking About Thinking, precisely because it is so relaxing. It takes some getting used to, but it doesn’t feel like you have to wrestle your brain under control, which is how I felt with the previous week’s activity. In summary, this exercise is relaxing, beneficial and easier to do than some of the others. You will enjoy this week.

In terms of noticing my emotions, I also found this doable. One of the things that you should be doing is keeping a journal, which covers all of the basics of the markets: what you are looking at in the markets; what positions you are putting on and taking off; and how you are feeling. I have a lot of practice describing my moods and emotions in the journal, thus I found this exercise quite doable. The only issue for me was being specific. While I can do an end-of-day dump and describe how I felt overall, it’s a different thing to figure out and describe what you are specifically feeling at any precise moment.

Men, in particular, have trouble talking about their feelings in emotions at all. It can be even more difficult to describe them in rich, precise language. For a lot of men, this type of exercise is a tough nut to crack. If you are having difficulty, then my advice would be to calibrate to something where you know how exactly you feel. For instance, if you feel really excited and enthusiastic after a good workout, then start this exercise after working out. Then you will know what enthusiastic feels like and can describe that. When you feel down by comparison, then you know that you’re probably feeling discouraged or frustrated. When you feel just as good but in the office, then you will have the right vocabulary to describe it. Start with what you know and work outwards from there. The emotional vocabulary will come with time.

In the chapter, Steve writes about the four-step process to deal with emotions. Similarly, he outlines the STOP Process for dealing with emotions:

S: Slow your breath, observe

T: Take time to notice

O: Open up breathe into them

P: Pursue effective action

These our steps are really designed to embrace our emotions and to take measured action. For instance, if we are holding a position that is just kind of sitting there, then we could get frustrated over the fact that hasn’t been going anywhere. If we are just acting on our emotions, then we might just close the position as soon as we notice the feeling of frustration, even if that isn’t the right decision to do. By practicing STOP, we are putting space in between our emotions and our actions. We are slowing down, taking to time to reflect, and only then taking action. This makes it less likely that we make an impulsive decision. This is the key benefit that mindfulness brings for traders.

Lastly, we have the habit breaker. Last week, I was working on being more attentive while brushing my teeth, without much change in the overall experience. This week was strange. I just followed instructions and changed the seat from which I watch TV. Now, I don’t watch much TV, so I wasn’t sure if this would even be worthwhile. Nevertheless, I made the change and watched a cumulative four hours of TV from a different seat. It felt…new. The experience wasn’t different, but it felt something like playing a different position on a soccer team. It was the same, but elements of it felt new. Nonetheless, I felt like I was slightly out of my normal routine and this had the effect of boosting my attentiveness. I felt more engaged in what I was watching and like I retained more.

While Steve doesn’t mention it in the book, I think that small shifts in your routine can cause you to be more attentive and engaged. Anything you do that causes you to switch off your normal autopilot will have the same effect, whether it be taking a different route home from work, having a strange cuisine for dinner or taking up a new sport. The novelty forces you to pay attention. This in turn helps you to be more aware, to enjoy it more and to retain more. The little action of changing your TV-watching position is a great example of how to boost your overall attentiveness by introducing novelty or variation.

I have another five 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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