Why is this likely? What
is interesting about trading is that anyone can access the markets. It takes no degree, no connections, and no
superior level of intelligence to start placing trades. This leads to a
fascinating fact: most people who get into the markets are wildly unqualified. Many
of these individuals would not find success in another endeavor, and so they also
don’t find success in trading. However,
simply because it is so easy to get into, novices think that the business of
trading must be easy to succeed at. This
presumption often leads to complete emotional and financial devastation for
those who aren’t fit to be traders.
What about those who are the right type? By “right type” I mean the kinds of people
who would likely find success in another career such as law, medicine,
academia, or sports. These are the kinds of people who often have an extremely
high level of emotional intelligence, akin to that of a pilot or an air traffic
controller. These are the kinds of
people who work hard, have discipline, and lead balanced lives. These types of people are far more likely to
succeed in trading, but their path to success is still a very long one that
will inevitably be laden with sweat and tears, but hopefully not blood.
Would you feel confident going under the knife for a major
surgery if the surgeon was a person who was “giving it a try” as a potential
career. I sure wouldn’t. But this is the attitude a lot of traders. They just “give it a try.” They don’t come in ready for years of hard
work, emotional toil, and the horrific feeling of total self-doubt that one
inevitably must endure while trying to make it in trading. Successful traders approach their trading
education like it is medical or law school.
Their tuition is the money they are prepared to lose while learning, in
addition to the hard work and sacrifices they will have to make.
Anyone who has a realistic expectation of the trading game knows
that they will be directly competing with some of the most intelligent people
in the world. Trading can pay big bucks,
so naturally it attracts the best and brightest alongside those with little
more than trading hopes and dreams. This
means that, in order to rise, a trader must have every single possible edge in
addition to the will to work harder and be more disciplined than the next
person.
Any day that you sit down in front of your computer to trade
you must be 100 percent, absolutely no exceptions. Problems at home? The market doesn’t care and will gladly part
you from your money while your attention is elsewhere. A bit tired from being out late? Mr. Market says “thank you.” 99 percent is not good enough.
So what other edge,
outside of the statistical meaning, do you need to succeed? I call it “holistic trading.” Normally when I think of the term “holistic”
I think of all of the vegans (why do they always look so angry?) I see at Whole
Foods. Frankly, the term is a bit of a
turn off because of this association, but the term truly is best to describe my
approach to trading. Essentially, this
approach rests on the idea that the body and mind are one entity. The healthier the body, the healthier the
mind, and vice versa. This healthy
reciprocity can be gained in a myriad of ways.
It isn’t necessary to look like you belong on the cover of
Men’s Health to make it as a trader, but having the energy that comes from
being in shape is a definite edge.
Trading requires intense focus, and as studies have shown, exerting
self-control actually requires a lot of energy.
If you aren’t eating properly, that is going to be a disadvantage. If you aren’t spending some time every day
getting exercise, then that is also a disadvantage. I love to think of things in terms of
evolutionary biology. If cavemen did it,
then it is probably good to do. Our DNA
hasn’t changed much at all since their time, so it is important to respect
that. This isn’t hippy-speak, it’s
simple logic. Our ancestors had to run
and were constantly on the move.
Processed foods loaded with chemicals and sugar didn’t exist
either. So, to boil this down: exercise
and don’t eat that crap. The
relationship to trading is actually pretty simple: feeling more awake and alert
every day is going to be a big benefit to your bottom line.
Meditation is also a powerful tool, with short-term and
long-term benefits for traders (as well as others). Ray Dalio is one of many large fund
managers/traders who are into meditation. According to Ray, who, mind you, is
worth $10 billion and manages around $154 billion, meditation is the single
biggest contributor to his success. It
“makes him feel like a ninja,” allowing him to better process things as they
happen. Sound important to a
trader? He is not alone in his view on
meditation either, but you can google that on your own. One description that I have heard about
meditation is that it is like a shower for the brain. I think this is accurate based on my
experience. Meditation is also a useful
exercise to help relax in the morning before the trading day begins. Again, this can be a big advantage for the
trader.
Your relationships with friends, family and significant
others is also important. Negative
relationships sap your energy. Positive
relationships have the opposite effect. If
you are in some type of relationship that isn’t healthy or positive, either
change it or end it. Because, guess what? The market doesn’t care what else you have to
worry about. If you need to, take some
time off from trading while you resolve whatever issues need resolving, so you
can give 100 percent of your focus to your trading.
To consider this approach in action, let’s take a look at a
day in the life of a trader, Gus, who doesn’t find value in this “holistic”
approach. Gus might wake up and have a
breakfast consisting of coffee and a donut or something else with a hefty dose
of sugar. Actually, let’s make it an
energy drink instead of coffee, just to ensure that a sugar crash is inevitable
a few hours down the road. Gus trades
for a bit, gets tired, and takes his lunch break. For lunch, a deli sandwich is something that most
people seem to think is mildly healthy, so a deli sandwich it is. After lunch, Gus comes back and finishes up
the trading day and heads home. Chances
are that, at this point, Gus is tired. When
he gets home, maybe he will take a nap or watch some TV. Exercise is not on the agenda, but a fight
with the significant other is. Perhaps
not even a fight, just the usual, dull, interaction. Dinner time finally arrives and Gus orders a
pizza and has a few beers. Due to that
nap he took earlier, he has trouble getting to sleep after dinner, and when he
finally does his quality of sleep is slightly diminished because, well, that is
the effect that alcohol has on sleep. So,
the next day he wakes up, grabs his energy drink and donut breakfast, and the
routine repeats.
It is easy to see how this negative cycle easily perpetuates
itself. If you feel crappy after work,
you probably won’t want to hit the gym.
If you don’t hit the gym, you don’t get that extra boost of energy and
confidence. You don’t sleep as well, and
then…well you can take it from here.
Now onto the next trader, Marsha, who lives a more healthful
lifestyle. Marsha recognizes the
advantages of having extra alertness and clarity of thought. Marsha wakes up, probably a bit earlier than
Gus. She might start out her day with a
run or a quick meditation session.
Either way, she is already setting up to have more energy in the morning
than Gus. She cooks some eggs and blends
a veggie juice. Marsha doesn’t eat a
huge breakfast that will take inordinate amounts of energy to digest. Instead she eats a bit more lightly than Gus,
and brings a snack to have mid-morning, perhaps after the European close at
10:30 AM. Lunch time comes around and
Marsha meets up with her trader friend, Archie.
They grab Chipotle (avoiding the tortilla and sour cream), talk as
friends do, and then go back to work.
Marsha finishes up the trading day and goes home. At this point, she is probably a bit mentally
exhausted, but not in dire need of a nap.
She might go for a walk or review her trading day. She chooses to forgo the mindless exercise of
watching TV. Marsha eats a dinner of
quality, real food, maybe has a glass of wine, and then gets a good night of
high-quality REM sleep.
In contrast to Gus’ situation, here we can see how this
positive cycle perpetuates itself.
Marsha will wake up feeling more energized and more likely to have a
positive mentality toward engaging in her healthy habits, and therefore her
positive cycle is more likely to continue.
So, summing up this approach is simple: eat well, exercise,
and meditate. Keep wary of things that introduce stress or negativity: Don’t drink too much or do drugs. Don’t eat crap. Understand that all of the elements in your
life are connected to your success as a trader and the importance of building a
positive cycle.
Note: While some of this “wisdom” comes from my own
experience, the book “Market Mind Games” by Denise Shull touches on a lot of
these topics. Additionally, basically
any modern book you read about evolutionary biology or performance will
highlight the connection between mind and body.
Feel free to email me for some names.
