Meditation, visualization, and hypnosis are used by athletes and other professionals to improve performance and reach goals. But can meditation help traders? The short answer is, yes!
Meditation isn’t the woo-woo hippie practice many have been led to believe. Neuroscientists have actually found that it’s one of the best ways to rewire the brain to change behavior and emotional responses.
In Buddha’s Brain (a great book by a neurologist and psychologist), scientific evidence is laid out for how meditation can help anyone have a better quality of life and enhance their performance.
So we know it helps. Now let’s look at what meditation is, what it isn’t, and some simple practices you can get started on quickly.
What Meditation Is, and How it Relates to Trading
Meditation is simply focusing our attention on a specific idea, thought, picture, sound, or even focusing on nothing at all.
It can be done for a few minutes, or longer. It can be done sitting, standing, with eyes closed, or even with eyes open. Mediation is sinking into a state of mind where random thoughts don’t consume us.
Our mind is constantly accepting data, interpreting it, reacting to it, or filtering it out. When we slow down and meditate we can begin to make profound changes within ourselves because our energy is focused on a limited number of things…or not focused at all.
This process also helps with a few realizations:
- We are not our thoughts.
- We can attach and give focus to a thought or we can let it pass by.
- We can be still inside. When we slow down, we realize a lot of what we are worrying about just doesn’t matter.
The Mayo Clinic outlines many benefits of meditation, including reducing stress and managing medical conditions.
One of the general areas traders need help with is improving their performance.
Performance means different things to different people. It could mean building a strategy and staying focused on that goal. It could mean avoiding trading mistakes, reducing anxiety while in trade, making more money, increasing position size, only taking quality trades, or reducing the amount of time spent in front of the charts.
Meditation can aid in all these areas by helping us focus on what needs to be done, and avoiding distractions from what doesn’t help us. Meditation can also help us visualize an alternative/better way of doing things, making ourselves more comfortable with the changes we are making and speeding along the process.
Many don’t meditate because they say “I can’t concentrate/focus.” Or, “I can’t sit still that long.”
Well, almost one is “good” at meditation. Everyone’s mind wanders. Most of us want to get something done. That’s why we need meditation! And we don’t need much time. It is a practice, not a skill.
Do it when you can. Do it on your run, or while at the gym. You can drop out of the hectic mind into a quieter place. And when you have some time to sit down and spend 5-30 minutes, that will be even better.
As traders, we need to be able to focus, and meditation is a great way to practice that.
Using Meditation For Improved Trading
Almost every problem we face as traders can be aided by meditation. Several guided meditations are provided below. They will guide you through the process of accomplishing a certain task or reducing a certain issue. Then, you can replicate the meditation on your own, for specific issues you want to work on.
These exercises can be done anywhere and require no prep work. While spending 15-20 minutes on one or more exercises will be of great benefit, even 5 minutes is better than nothing. If you don’t have time for a whole video, do part of it.
I include a quick visualization or meditation before I start trading each day in my Pre-Trade Routine. Just a couple of minutes to sink into the mind frame I want for trading.
I actually feel and experience trading AS meditation..at least when I’m trading well. I’m focused and relaxed, alert to the information I choose to review while discarding the rest. As long as I’m in front of my computer I’m calmly swiping away thoughts, ideas, and biases that don’t serve the purpose of following my Trading Plan.
Meditation to prepare for the trading day
Whether we just woke up, or start our trading after having done some activities, we want to be in a calm neutral state for trading. This will allow us to perform at a higher level than if we simply rush into our trading with a cluttered mind, full of biases, expectations, fears, and wants.
Here’s a quicker five-minute version to prepare for the day.
Meditation on accepting trading losses
Trading losses are a part of trading. They simply can’t be avoided. We will have them. It’s not up to us.
But how those losses affect us and our trading is up to us. When we can accept losses gracefully, we can move on and take the next trading signals untethered by emotions of past losses which could negatively affect how we trade these new signals.
Disciplined trader meditation
This is an affirmation-based meditation. We re-enforce that we’re a disciplined trader, and why we need to be disciplined at all times. This is part of the Identify Work (a powerful catalyst for change) I discuss in Tactics for Improving Self-Discipline While Trading.
Meditation for letting go of obtrusive thoughts
We have a trading plan to follow, but thoughts are constantly drifting through our mind that could distract us, interfere, or tell us not to follow the plan. We can practice letting these thoughts go. They’re just thoughts; they don’t need to be acted on or even given our attention.
Being able to simply watch them float by, without attaching to them or letting them consume us, is an invaluable skill to have. But it takes practice.
We can easily practice this outside of trading, as it will improve our trading and help us avoid too many voices and conflicting information while we trade.
And below is another. By practicing these sorts of activities, during trades we’ll be better able to bring our focus back to our strategies and setups when other forces are pulling at us.
Trading is essentially an act of meditation. A process of continually bringing the mind back to the task at hand.
Headspace is one of my favorite guided meditation resources. If you have Netflix, Headspace has a series of guide meditations on there. They are great.
My entire method of swing trading stocks is covered in the Complete Method Stock Swing Trading Course. Now is a great time to review the material and prepare for the opportunities that are unfolding.
Creating Your Own Meditation
The above practices give you an idea of what a meditation is.
But it doesn’t have to be like that…
I have meditations where I visualize two parts of myself that are in conflict (such as the “trader” and the “perfectionist,” or the many other parts of ourselves that often pop up when we trade) having a discussion and working it out. I call this a Parts Negotiation.
I discussed Identify Work above. That’s where I focus on a behavior I want, thinking of every reason I want it and how I’ll implement it. I also take it a step further and think of all the reasons I hate the behavior I don’t want.
For example, I may think of all reasons I like keeping my losses small, and why. That’s who I am! I also think of all the reasons I hate taking large losses.
Below is another meditation that I’ve done when I wanted to increase my position size, but the larger dollar amounts were making me nervous and negatively affecting how I traded. Also, see How to Increase Position Size the Right Way for guidance on how to increase position size and what the objective should be when doing so.
Customizable Trading Meditation
You close your eyes and find yourself outside a downtown skyscraper (or whatever tall structure you prefer). Straining to see the top, you can’t, as it disappears into the clouds. Walking towards the front entrance of the building, you see that it’s your name above the door. This is your building, your success, your life.
You feel drawn into the building, and as you enter you see yourself in a familiar trading environment, doing what you have always done. If you make a couple of trades a day, you see yourself executing those trades as you have been doing with the same results you have always gotten. This first floor represents where you’re currently at in your trading career.
As you look around the room you notice an elevator. If you’re going to be successful in your trading you know that you need to step up your trading and to do so you must go into that elevator. You need to rise about what you’re currently doing.
As you get into the elevator, you notice there are hundreds of buttons representing each floor of the building, but right now only the second floor is lit up, so you press it and feel yourself moving higher. You’re leaving behind your old inhibitions and moving towards a more successful career.
As you get out of the elevator you once again see your trading environment, but this time your trading post is empty. As you take our place at the helm you feel empowered. You see yourself taking advantage of more trading opportunities as dictated by your plan. Everything seems clearer. Instead of only trading what you are used to trading, you begin to trade with what your capital will allow.
You’re used to trading X% of your account, but you’re working up to risking Y%. You take a trade risking Y%, and yes the position size is bigger than you’re used to. You accept this. You let the thought go, reminding yourself that you’re well within your risk parameters, your strategy is well-tested, and you are well-practiced at implementing it.
Despite any uncomfortableness, witness yourself holding the trade per your plan. Maybe it wins, maybe it losses. Imagine both scenarios. See yourself calm in both cases, simply continuing on to look for other trade setups. Wins and losses happen. Our job is simply to look for quality setups and execute. We don’t know the outcome, nor do we need to. Spend a few minutes here imagining several trades, winners and losers, see the bigger numbers on your screen and being ok with it. Imagine yourself letting any negative thoughts drift on by, and getting back to focusing on your plan.
The profit showing on your trading software after several trades is larger than you have made before because you’re now utilizing your capital more effectively. It feels good. This is where you are supposed to be…for now.
You stay at this level in the building until you are comfortable and until you are actually implementing this action in your trading. You know that once you are comfortable at this level the elevator will allow you to move to the next floor, where once again you will be able to take your trading to the next level. But there’s no rush. You’re going to get comfortable and see results at this level first. You’re calm and in control, of yourself and your trading.
On the next level, you will once again see your profits rise through the same process of slightly increasing your position size and being disciplined in following your trading plan.
Bring your thoughts back to the current moment, remembering where you are.
You feel refreshed and confident that it’ll be a good trading day. Win or lose; because a good trading day is whether we follow our plan.
You have taken a step forward, and it is exciting, but also no big deal. You’re growing; we’re all meant to grow. Trading more profitably is the most natural thing for you to do.
Altering the Customizable Trading Meditation
With all the potential pitfalls traders face, maybe the context used above doesn’t fit your situation.
That’s fine. Alter it to suit your needs.
As you move up floors within the exercises, see yourself doing what it is you want to do in the real world. Maybe you overtrade, and so in the visualization, you see yourself allowing trades to pass by that don’t fit your trade criteria.
In your visualization, you feel satisfied and happy that you did this. See it. Feel it. Like you do in real trading.
Maybe you take too much risk on your trades. In this case, see yourself setting a stop loss and profit target and letting the trade ride out. You risked no more than 1% of your capital on the trade. Within the meditation, you feel very happy because you know that these are traits of profitable traders and if you follow them you will also be successful.
The potential uses are virtually endless, so use the exercise to help with your individual struggles. As you improve, keep moving up floors. Push yourself and see yourself improving at each new level.
How We Mediate Matters in Terms of Performance
The following is based on new research I discovered after writing the initial article.
Different meditation types may help or hinder performance, based on the activity performed. Trading is an open skill, meaning we need to adapt to changing conditions. Closed skills (shooting a gun at a range) are closed skills.
Focused attention meditation (FAM) helps with closed-skill activities. We just need to hold our attention. Open monitoring meditation (OOM) helps with open-skill activities where we need to adapt, be alert, and our call to action is at an unknown time.
FAM is focusing on an object or a thing, like a flame, or on our breath.
OMM is awareness without attachment. Awareness of awareness. The present moment without judgment or bias.
For trading, practice OMM. And trading IS meditation. We want that aware but detached state.
All forms of meditation are likely helpful, but it is more efficient to practice forms that align with something we are trying to accomplish. FAM doesn’t help with trading much. OMM is more likely to.
I will reiterate that I believe trading IS meditation. Therefore we want to essentially be practicing the right type of meditation while trading to reach our full potential.
Here is the article that showed me how different meditations affect performance and the brain. https://link.springer.com/article/10.1007/s41465-017-0018-3
And here is an article on OMM with an OOM practice…which just happens to be for traders as well!
Meditation for Traders – Final Word
Meditation is a powerful catalyst for change.
Contrary to popular belief, this process requires no strange postures and we can do it for a few minutes anytime we have a chance, or we can do longer sessions if we prefer.
We can adapt the above mediations to suit our individual needs, changing the focus of the exercise to help us with a particular problem. We can do this in our downtime and also right before we begin our day to condition ourselves to be disciplined and profitable overall.
The more we do the exercises the more anchored the beneficial aspects of the exercise will become in our mind.
By Cory Mitchell, CMT
For strategies, and an entire method of day trading the EURUSD, check out my EURUSD Day Trading Course. It outlines what you need to get started, tradable patterns that occur nearly every day, and how to improve along the way.