Today we are talking about meditation for traders.
Many anecdotal claims and reports are saying that mediation does improve trading.
However, forum comments and blog posts can hardly be considered scientific evidence.
I have not seen definitive rigorous studies proving one side or the other.
Nevertheless, I think it has some positive effects.
If true, then how can something like meditation improve trading?
This is the topic we will explore.
Contents
The Ego Is The Enemy Of Trading
In short, meditation puts the ego aside.
The ego is the enemy of trading because it overrides our discipline to follow our system and plan.
The ego wants to be right, so we do not honor our stop-loss triggers.
The ego wants instant gratification, so we snatch at quick small profits.
The ego causes us to do stupid things like revenge trade, FOMO (see FAQs below), etc.
In a YouTube interview, David Paul says he manages his emotion in trading by:
- Having done trading for a long time
- Going to the gym
- Spend half an hour being quiet (but he doesn’t want to hype it up by saying it is meditation)
- Having a trading plan
- Be more than happy to have a loss, but it needs to be small in relation to his portfolio.
He concludes his answer by pointing out two books related to meditation… 1. The Power of Now by Eckhart Tolle 2. Zen in the Markets by Edwards Allen Toppel
The first book is quite well-known and generally speaks about the use of mindfulness in everyday life.
The second book may be particularly interesting to traders because it was written by a trader for traders and includes explanations of why mediation can help with trading.
Why Meditation Helps With Trading
The author Edwards Toppel writes:
“The benefit of this practice is a reduction in the role ego plays in the decision-making process. In trading, this can be most beneficial … The more dominated you are by your ego, the more unlikely it is that you will be able to hear, feel, and respond to the market’s clear signals… It is simply the willingness to let go of your ego and let the market guide you in your actions that will make the difference in your being a winner.”
This is from the book “Zen in the Markets – A Confession of a Samurai Trader.”
Just from its title, you can see how appropriate this book is to answer the question of meditation and trading.
For clarification, the book has a glossary to define the word “Zen” as being “Effortless Effort.
The religion of the Samurai.”
Edwards Toppel was a floor trader for many years and practiced what he preached.
He writes that he tries to meditate for 20 minutes every day.
You might say, That’s it. Just 20 minutes a day? I can do that.
That’s great if you can do it consistently.
There was a meditation instructor that once challenged us to do just one minute of meditation each day for 30 days.
I thought, no problem.
That was simple until I failed the challenge after about three days.
Meditation is simpl
e. But it is not easy.
Simple, just sit there.
But not easy to do it consistently.
Those who have tried mediation know this.
Trading is simple.
But it is not easy.
Those who have traded know this as well.
Certain rules in trading are simple to say but not necessarily easy to do.
Simple, But Not Easy
I’m reminded of a humorous sentence:
“Playing the market is the hardest way to make an easy living.”
It is from the book “The Zen Trader” by Peter Castle.
Peter is an ordained Zen priest.
He also trades and has taught trading for over ten years. Hence, he is well qualified to write a book that draws parallels between Zen practices and trading.
Peter says two obstacles are preventing the trader from success:
- Not having a system
- Not being able to execute the system consistently.
He says Zen teaches discipline, focus, and acceptance — all traits necessary for successful trading.
To be a successful trader, one must have calmness and peace of mind. And to some extent, those qualities can be facilitated by meditation.
Focus On The Present Moment
Meditation teaches us to focus only on the present moment, not think about the future, and forget the past.
This is helpful in trading because we no longer predict what the future price is going to be. We only see what it is doing at the present moment and respond to that which we see.
Seeing What Is
By not projecting into the future, we see the chart for what it is and not how we want to see it.
A trader that does not take their stops is not seeing the chart for what it is.
They see it as how they want it to be.
They are not seeing the price breaking through their stop.
What they are projecting onto the chart is that the price is about to stop and then reverse.
FAQs
Can other activities besides meditation produce the same effect?
It does not necessarily have to be meditation; some people prefer yoga, walking, running, or other activity — as long as that activity reduces the power of the ego over our decisions.
What is mindfulness meditation?
Mindfulness meditation is a form of meditation that is popularized in modern times without any religious or spiritual connotations.
A proponent of mindfulness meditation, Jon Kabat Zin defines mindfulness meditation as awareness that arises through paying attention, on purpose, in the present moment, non-judgementally.
Peter Castle says that mindfulness is necessary, but not sufficient, to becoming a master Zen trader.
What is FOMO?
FOMO is the “fear of missing out.” It is when you see a stock making a nice move up.
And you chase the stock because you fear that you will miss the trade that will make you big money.
This causes you to not get the stock at a favorable price, and it causes you to enter late — just when the stock is about to pull back or reverse.
FOMO is an emotion that, when acted upon, is considered a trading error.
Conclusion
I’ll conclude this article with this YouTube recorded livestream by Navin Prithyani, who can talk for an hour about meditation in relation to trading.
In the end, he teaches us his meditation technique.
He really does trade (albeit Forex instead of options).
He really does meditate. And he says, “Why anyone would not do this is beyond me.”
To Navin, the answer to the question is clear.
He obviously believes that meditation helps with trading.
If nothing else, at the very minimum, meditation has scientifically proven health benefits.
We hope you enjoyed this article on meditation for traders.
If you have any questions, please send an email or leave a comment below.
Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
