Unfortunately, many people who start trading find success difficult to achieve, especially early on. Trading is a challenging endeavour that has torn people from across the world across generations, from every extreme of their emotions.
It is our money that is directly involved in trading and therefore at risk, and the potential of making more money is our primary motivation for beginning this undertaking. Ironically, it is the money that encourages the vast majority to attempt to trade yet it is the money that causes most people to fail.
In his book, ‘Trade Your Way to Financial Freedom’, the renowned American psychologist Dr. Van Tharp discusses in several parts how important your psychology or mindset is to your trading success. He graphically depicts the significance of your psychology using a pie chart and explaining that there are three ‘Ingredients to Trading’. They are System, Money Management and Psychology. In the pie chart, the System is 10%, Money Management is 30% and the remaining 60% is psychology.
Why does a psychologist who has spent his entire professional life counseling traders of all experience levels say that so much of your trading hinges on your psychology?
The key is that your mind drives everything you do in your life and trading is no exception. Your emotions are a part of who you are and your decision-making process. Decision making is a large part of trading, as you need to make decisions often and many of them are difficult decisions. Furthermore, people like to break rules, even ones they set themselves. There are some simple trading rules that have stood the test of time, and will generally work yet most people cannot follow them. It is essential that you realise how important it is that you demand of yourself the highest level of discipline to ensure you implement the requirements of your trading plan ruthlessly and follow some of the time-tested trading rules.
I vividly recall a presentation I once gave to a group of about fifty fellow traders. After talking about topics such as emotions, sticking to a plan and the stresses associated with trading, I was asked about how I dealt with the stresses and emotion of trading that seem to jeopardise so many traders around the world. I answered, ‘Exercise’. I recall the presentation because of the number of puzzled looks I immediately received. Someone in the audience followed up and said, ‘You mean practicing trading?’
It appeared to me that many had never considered a regimen of physical exercise in order to prepare well for trading. You don’t have to run in order to trade — you just have to sit at a desk. However, when you consider the demons that haunt many traders and the obstacles we face, then think about the benefits of physical exercise: shouldn’t we mention the two together more often. More and more today, people not only mention the physical benefits of physical exercise, they also include the mental benefits of physical exercise. These are numerous.
Physical exercise can greatly improve both your mental and physical health. The physical benefits of aerobic exercise are well known and include improved muscle strength, flexibility and cardiovascular endurance. Exercise also helps lower your blood pressure. My belief in the benefits of physical exercise regarding trading is based on the ability of exercise to help combat stress, and to help you think more clearly when you are facing adversity.
Many traders would agree that you can experience certain levels of stress when trading and it is often at these times that we do not employ the best judgement in our decision making. Medically, when a person is experiencing stress, adrenaline pours into the bloodstream as part of a person’s ‘fight or flight’ response and muscles throughout the body tense in anticipation of a challenge. Immediate effects can range from a short temper and heightened emotions to difficulty sleeping.
There is no doubt that regular physical activity can help counter the potentially damaging effects of stress on the body. It may also help reduce the possibility of stress-related illnesses. Physical activity provides a natural way to release tension in the body and will often lead to an automatic state of relaxation that naturally follows a good work-out.
Medically speaking, during exercise the body starts to produce endorphins. Endorphins are chemicals that lead a person to feel peaceful and happy; they promote a sense of wellbeing. This is a perfectly natural and effective tool in helping to manage stress. Exercise can also help some people sleep better and raises their self-esteem. By increasing your self-esteem, your self-confidence grows and this can directly assist you with trading, as confidence is one of the more understated character attributes required by successful traders.
Of perhaps less importance, exercising can help you physically look better, as those who exercise regularly look more toned than those who don’t. Exercise is one of the most important ways of keeping your body at a healthy weight, and people generally feel much better and confident when they see themselves in a positive light. Again, those who feel more confident in themselves are likely to have more confidence in a trading plan they develop. The flow-on effect can be very positive for their trading.
Trading is generally decision making where we need to employ sound judgement on a regular basis. To this end, exercising can also help your brain to work better. Numerous academic papers and research support the notion that exercise can improve a person’s ability to think more clearly. A steady aerobic work-out will greatly assist the brain’s ability to solve problems and make decisions fast and effectively. Generally after exercise, people can concentrate and focus much better than before. They are better able to block information that is irrelevant to the task at hand and respond much faster to information relevant to the task.
Military forces all around the world engage in regular and demanding physical exercise in preparing for the demands of military operations. Officer training institutions generally enforce greater standards as officers are required to make decisions and often do so under pressure and hardship. The physical exercise they endure enables them to think more clearly than the average person and remain level-headed when the pressure is on and all seems lost.
Could we as traders not benefit from similar mindsets where we are always able to think clearly and make sound decisions based on solid judgement? Wouldn’t this help us take a step towards overcoming the adversities we can face with our emotions and stresses?
There is no doubt that regular and moderate aerobic exercise will help your brain to function more efficiently, and therefore reduce stress, think more clearly and remain level-headed in times of emotion and adversity. In an endeavour where very few people succeed, it is in our very best interests to do everything we can to increase our chances. I strongly believe that physical exercise can greatly assist traders to think more clearly, reduce the effects of stress, and ultimately make better and more timely trading decisions.
I continue to run regularly and one thing I do enjoy about it is clearing my mind. Whatever stresses, negative emotions or thoughts have surfaced during the day for me, they are almost immediately flushed out as I head out of my driveway and down the road for a solid run. It is an exhilarating and liberating feeling as my heart starts to pound faster in response to the extra demand on it, and the fresh air fills my lungs.
If this is of interest to you, I would strongly suggest you seek some professional advice regarding a tailored program, following an assessment of your current physical condition. The best strategy is to gradually increase the duration of your exercise sessions and, along with enhancing your physical fitness, your mental muscle will also begin to take shape.
The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.