Empower Your Trading by Empowering Your Mind

Has it ever occurred to you that Trading is in effect a mental exercise? And a challenging one at that. Trading is really exercise for your brain, and for your body-mind balance because the way we react to the ever changing market environment, and the way we react to the swings in our Profit/Loss statement, have a profound impact on our bodies.

Moreover, it is very easy to let our trading results cloud our mind, interrupt our objectivity, cause us to react differently with others, and start negative self-talk. And it gets worse: researchers have also demonstrated that stress can actually cause the brain to shrink. Gaining weight also causes the brain to shrink.

I did not study medicine, so the pieces of research I have used to assist me with this article can be found at the bottom of the page. I did however study to become a professional in the fitness industry, so I’m quite experienced in translating scientific discoveries into practical solutions or suggestions. So what is this article really about? It’s about taking care of your brain, so you can help your brain take care of you in the things that matter most – including your trading.

 

Your Brain is Always Active

Every thought you have; every word you say; every feeling you experience; every movement you make; and every single thing you do consciously and unconsciously is orchestrated by your brain. It is your brain that decides whether you manage your money or spend it impulsively; if you should get married, or if you need to file for divorce. It is your brain that drives you to excel or fail in school, or gives you the will and perseverance for a successful career.

When your brain is healthy you are much more likely to be happier, physically healthier, wealthier, and more successful in everything you do. This is largely because with a healthy brain, you are able to make better deci­sions in all aspects of your life. Including, of course, Trading.

The good news is that the brain has a certain plasticity to it. It can be moulded depending on the stimulus it receives, and the results can be seen after only 2 months of practice. This should be a very exciting piece of news because it also means we can positively impact our Trading within 2 months of helping our brain function better.

So the questions become clear:

  • What hurts the brain – and should be avoided?
  • What helps the brain – and should be embraced?

Are You Hurting or Helping Your Brain?

Beyond the more logical ways to impair correct brain functionality (head traumas, pesticides, molds, carbon monoxide, heavy metals, drugs, alcohol), research indicates there are also many other not-so-obvious ways to hurt your brain, including:

Obesity à this is key for traders because sitting in front of screens is harmful to your health. That’s why, for retail traders that do not have to trade every move, every day, there are better options. Most likely, if you “watch every market mover, you’ll trade like a loser”. Sitting debilitates the body and the mind. Being sedentary can lead to weight-gain, which in turn affects your brain. It has been demonstrated that your brain shrinks, when you put on weight.

Hypertension, and even high normal blood pressure levels à this is another key area for traders. The early mornings associated with Forex Trading often see traders getting out of bed without appropriate rest, awaken by their alarm clocks, and the first thing that becomes a necessity is to have a nice dose of caffeine running through the veins. While this is OK up to a  certain point, it can be debilitating in the longer term. Moreover, if you have a tendency to be uptight, nervous or anxious, trading is not the right activity to perform. You will only make things worse.

Diabetes, prediabetes, and even high normal blood sugar levels à it’s a fact that more stable blood sugar levels help you maintain your focus. Your diet has a direct impact on your brain functionality, and hence on your trading results.

Standard American Diet (SAD), filled with processed foods, sugar, and artificial colors and sweeteners à it is critical to embrace the lessons taught by so many modern scientists and nutritionists. Reduce and substitute refined carbohydrates (white pasta, white bread, white sugar) with complex/high-fiber ones (spelt, kamut). Avoid soft-drinks. Avoid processed foods as much as possible. Augment the amount of fresh fruits and vegetables and cook them wisely. Reduce fats.

Chronic stress à this can come from many places. I’d like to talk about the stress that Trading itself can create if you do not approach it correctly. We’ve discussed the role of having the right personal situation for pursuing trading. That entails being well capitalized and not depending on your trading profits to pay the bills. The more pressure you’re under when you trade, the more you are actually hurting yourself – not only financially but also physically.

Why is Trading not adequate for everyone? Because if you are under constant stress from trading, if trading provokes constant anxiety, you will damage your brain. You will impair it’s ability to function correctly and you will affect other aspects of your life.

Automatic negative thoughts à This has everything to do with our internal self-talk. More on this further along in the article.

Spending time with unhealthy people à do you spend time with people that life you up, or that shoot you down? Do you spend time with like-minded individuals that help you stick to your routines, or that drive you off track? Do you spend time with people that help you, that understand you and empower you? Or do you spend time with people that criticize you, attempt to tell you what the best path is , and ultimately debilitate you?

Loving your brain means protecting it! With a good brain, not only can you see things more clearly in the markets, and trade in a more disciplined and consistent manner, but you can also have better relationships, do more good for others, have more fun, be better at sports, be able to make and keep more money.

What enhances brain health?

  • Functional social connections
  • Learning new things
  • Healthy diet
  • 7-8 hours of sleep every night
  • Physical Exercize
  • Healthy anxiety
  • Meditation
  • Gratitude
  • Killing Automatic Negative Thoughts

Self-Esteem or Self-Sabotage?

I’d like to address a common fault of many traders: negative self-talk. Negative self-talk can cause people to be depressed and fatalistic. “I know this trade won’t work.” This kind of thinking makes for a self-fulfilling prophecy: If you have already convinced yourself that you won’t have a good trade, you probably won’t identify the most evident situation; or you will self-sabotage the filtering process that leads to identifying good trades. So you start to get a string of losses. Your trading results depress you. If you are depressed all the time, you don’t expect good things to happen, so you don’t try very hard to make them happen.

Here are some other examples of typical automatic negative thoughts I’ve personally had:

  • “Just because I’ve  had a good year, it doesn’t mean anything.”
  • “This situation is not going to work out. I know something bad will happen.”
  •  “I should have done much better. I’m a failure.”
  •  “It’s my fault.”

Did you know that every thought you have sends electrical signals throughout your brain? Thoughts have actual physical properties. They are real! They have significant influence on every cell in your body. This is why the first step to turning your internal self-talk around is to become aware of these thoughts. Thoughts affect your body.

When I was still unaware of these dynamics, I got incredibly angry when I had a losing trade. What would happen? My muscles would become tense, my heart would beat faster, my hands would start to sweat. The body reacts to these thoughts in a very real way. Fortunately, the body also reacts to positive thoughts! When most people are happy, their muscles relax, their hearts beat more slowly, their hands become dry, and they breathe more slowly.

Bad thoughts are pollution for your mind and body. Every cell in your body is affected by every thought you have. That is why when people get emotionally upset, they frequently develop physical symptoms, such as headaches or stomachaches. If you can think about good things, you will feel better.

Also, understand that your automatic thoughts don’t always tell the truth . Unless you think about your thoughts, they are automatic – “they just happen.” Sometimes they even lie to you. It’s key to notice and exterminate these automatic negative thoughts whenever possible. Here are some examples:

“Always/never” thinking . This happens when you think something that happened will “always” repeat itself, or that you’ll “never” get what you want. “I’ll never be a consistent trader”. “I always get stopped out”. “I’m never going to make a living with my trading”. “My wins are always smaller than my losses”, etc.

Focusing on the negative . This occurs when your thoughts reflect only the bad in a situation and ignore any of the good.  For example, it’s true that we need to learn from our errors. But we also need to understand what we are doing right. We need not criticize ourselves constantly. We also need to praise ourselves for a job well done, or for being disciplined, etc. It’s important to learn from others, but in a balanced, positive way.

Fortune-telling . This is where you predict the worst possible outcome to a situation. For example, before entering a trade, you predict that the trade will be a loser.  Just having this thought will make you feel tense. When you predict bad things, you help make them happen. How to correct this? Simply remind yourself that if you could really predict the future, you’d be a billionaire by now. Understand that your mind is fooling you.

Thinking with your feelings. This occurs when you believe your negative feelings without ever questioning them. You tell yourself, “I feel this way, so it must be so. Feelings are not always about truth. They are just feelings. But many people believe their feelings even though they have no evidence for them. “I feel stupid.” “I feel like a failure.” Whenever you have a strong negative feeling, check it out. Look for the evidence behind the feeling.

Blaming . Blame is very harmful. When you blame something or someone else for the problems in your life, you become a passive victim of circumstances and you make it very difficult to do anything to change your situation.  You let go of your own power to change things, and you attribute power to externalities. For example: “Losing always makes me mad”. In reality, the loss and your reaction are two distinct things. You can change your reaction.

“This loss wouldn’t have happened if only (insert your favourite excuse here)”. There are so many things we cannot control in trading. Yet we are often unable to fully accept the uncertainty in the markets and this upsets us. It is a delicate balance, but we need to take responsibility for the things we can control (pre-trade analysis, position size, stop loss distance) and let go of those things that we cannot control (what happens once we enter into a trade).

The bottom line is that you should actively question your thoughts, and seek evidence that they are true. With time, this will become an automatic process and you will find yourself much more in-sync with reality. Instead of interpreting reality through a pair of distorted glasses, you will see reality through your true eyes. And this will enormously benefit your decision-making.

Over to You

Are you prepared to “fix” your brain, and increase your odds of becoming a successful market participant? Let me restate the functional habits that allow you to do this:

Functional social connections: don’t isolate yourself. Seek company of people that lift you up, that make you laugh, that make life more enjoyable, that don’t criticize or gossip and that understand your situation.

Learning new things: this can even be “learn how to trade” if you do not have a solid plan already. Brain games are useful. Learning a new language is useful. Learning how to dance is useful.

Healthy diet: avoid the “SAD” diet. Embrace fruits & vegetables. Reduce the amount of carbohydrates in your daily diet and substitute them with complex carbs. Cut out refined foods and start cooking!

Get your 7-8 hours of sleep every night: it’s a fact that we “absorb and digest” information when we’re sleeping.

Physical Exercize:  exercise gives you more energy and keeps you from feeling lethargic. Exercise increases metabolism, will help keep your appetite in check, and will therefore keep your weight down. Exercise helps to normalize melatonin production in your brain and enhances the sleep cycle. Exercise allows more of the natural amino acid tryptophan to enter the brain, enhancing mood. Tryptophan is the precursor to the neurotransmitter serotonin, which has been found to be low in many depressed patients.  Tryptophan is a relatively small amino acid, and it often has to compete with larger amino acids to cross the blood channels into the brain. With exercise, the muscles of the body utilize the larger amino acids and decrease the competition for tryptophan to enter the brain. Exercise makes you feel better.

Healthy anxiety : have a goal, be motivated but not stressed out!

Meditation:  find time to calm your mind, use breathing exercises or practice Qi-Gong or similar routines.

Gratitude:  It’s one of the main “cures” for depression. When everything seems most dark, you can simply recognize what you have to be grateful for, and you can turn on the light!

Killing Automatic Negative Thoughts: we’ve discussed this in length already.

If you can work your way into a habit, and make time in your day for these suggestions, I promise you that your Trading (and your life!) will never be the same, for the better.

Sources: Daniel Amen “Change your Brain, Change Your Life”; Filippo Ongaro “Mangia che ti Passa”; Denise Shull “Market Mind Games”.

About the Author

Justin Paolini is a Forex trader and member of the team at  www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.