New traders tend to believe that the recipe for success in trading is a system or technique that can generate buy and sell signals. Initial intent is to look at myriad of indicators like Stochastic, Bollinger bands, RSI, Momentum, Money Flow Index and what not. The reality is, building a strategy around this will work, if the trader creates a plan and sticks to it. Infact any simple trading strategy will work, if you stick to the trading plan. If you give a system that will only pick winning trades, traders who are not disciplined will still loose money. The problem here is, instead of waiting for the system to generate signals, the undisciplined trader will start chasing market, making impulsive trades, get emotional and eventually drain his trading account.
The common trait in every successful trader is consistency. Consistency is the traders ability to stick with the trading plan and avoid impulsive trades. But what is stopping you from being consistent ?. What is preventing you from following a plan ?. Why are you unable to keep a steady emotional state ?. The answer to this is your own personal journey. When you look deeper inside, you will see this behavioral trait in every aspect of your life, every decisions you make. You may observe that you make emotional decisions, jump to conclusions and react impulsively in lot of real life situations.
I was reading The Psychology of Trading by Dr Brett N. Steenbarger, which gave me lot of insights into my own behavior patterns. An interesting solution to impulsive behavior is Meditation. Meditation here strictly means being in a coherent state, where you breath slow and steady, your heart beats in harmony and overall you maintain a positive attitude. Watch this video to learn more about coherence.
The best way to Meditate is the natural way, learning to control your breath and thoughts. There are different schools of meditation and if you are already following one you are in good hands. For the rest of us who are not consistent at meditation, there is a high tech and fun way to get into this habit. The technique uses biofeedback. Biofeedback gives real time readouts of your heart rate and coherent state (low, medium, high). Your goal is to stay in the high coherent state as long as you can. To get into that state you have to breath slow and steady, visualize a glow in your heart chakra, feel the air moving in and out of your heart and have some happy thoughts. It is that simple. The visual readouts and the real time charts of your progress will help you maintain the coherent state and warn you when there is a shift in the coherent state. I tried emwave2 from heartmath.com and it is a treat. Please note there are other less expensive alternatives.
I found some other practical uses for the emwave2. Everyday I drive close to 10 miles on a congested highway (CA 237) to drop my kid at school. It is a rush to school and takes practice to avoid aggressive driving. These days, I connect emwave and it provides real time feed back on my driving. I can see the lights go red when I jump the double white lines to get into the express lane ;).
I was listening to a speech by a saint at SRF (Self Realization Fellowship). He gave some practical advice regarding random thoughts. Here it goes, may help some of you who may have issues with thoughts:
“We do not have control over the birds that fly over our head when we are outside. But we do have control over a bird trying to make a nest on our head. Similarly we do not have control over the passing thoughts in our mind. But we do have control over picking one thought and going over it. Once you pick a thought, it is not just a thought anymore, it is an action. You are emotionally invested in it. One easy way to get rid of this thought is to pick another thought, a happy one. Once mind goes behind the happy thought drop the old one.”
Another way to control your thoughts is to observe them. Observe them but do not act on them or get involved. Once you start observing your thoughts, you will realize that you are not your thoughts or mind. Once you have this realization, separate YOU from your mind, your thoughts will loose power over you and they subside. When there is that gap in thoughts, your mind is still, you are in touch with your consciousness, your being. Power of now by Eckhart Tollie is a really good book to learn more about this.
Start your trading day in a coherent state of mind. Observe your emotions. If you notice impulsive or emotional behavior, take a 5 minutes break and try to reenter the coherent state. Daily meditation will help you enter and stay in the coherent state with ease during a volatile trading day.
Before knowing the market, know yourself to be successful in trading !!!.