Stay open-minded and maintain a sense of curiosity; adopt an ‘experimental’ mindset when it comes to applying the strategies and techniques here. I have been involved in the field of performance enhancement for many years and I see it as very much about self-experimentation.
You get a hunch about something that might help you improve your trading. You test it, adapt it, refine it – or bin it if doesn’t work, and try something different.
A future bulletproof trader: you
You will already be bulletproof to some extent, thanks to a combination of life and trading experiences. Much of what you are already doing may well be very helpful. This book does not aim to replace that. But even in areas where things are going well, I would encourage you to read with an eye to opportunities to try new approaches.
What got you here may not get you there.
Imagine for a moment a future trading you: even more resilient and capable of handling the challenges and demands that you face in trading the markets. What would be different? What would you notice? What action would you be taking? How would you be feeling? What thoughts would you have?
Where are the opportunities for you to develop, to become a mentally stronger, more robust, composed and resilient trader than you currently are?
Training your mind to adapt to any circumstance
It took me a long time to finalise and organise the content of this book, and just as perfectionism is a dangerous trait in trading it can be equally debilitating in writing. But my intention is not to tell you what to do, but rather to help you to develop a framework: the skills and practices – mental, emotional and physical – that are most relevant and powerful for your trading.
That is what will truly help you meet the challenges and demands of trading the markets as they arise.
“In this way you must understand how laughable it is to say, ‘Tell me what to do!’ What advice could I possibly give? No, a far better request is, ‘Train my mind to adapt to any circumstance’… In this way if circumstances take you off script you won’t be desperate for a new prompting.”
— Epictetus
Each trader is like each moment in the market: unique. And what works for one person may not work for another. As you read through the book, I encourage you to keep reflecting on the question:
‘Could this be helpful for me in my own trading? And if so, when and how can I apply it?’
1 The Mindful and Effective Employee: An Acceptance and Commitment Therapy Training Manual For Improving Well-Being and Performance; Frank Bond, Paul Flaxman, Fredrik Livheim, New Harbinger, 2013.
2 The Hardy Executive: Health Under Stress; Burr Ridge, IL. Maddi, S. and Kobasa, S, Irwin Publishing, 1984.
3 Developing Mental Toughness: Coaching Strategies To Improve Performance, Resilience and Wellbeing; Doug Strycharczyk, Peter Clough, Kogan Page, 2015.
4 The Obstacle is the Way, Ryan Holiday, Profile Books, 2014.
5 www.si.com/nfl/2015/12/08/ryan-holiday-nfl-stoicism-book-pete-carroll-bill-belichick
Part Two: Ups and Downs
3. The Nature of Trading
Before you get into this chapter, take a few moments to reflect on these two questions:
What are the challenges and demands you face in trading the markets?
What do you need to be good at in order to meet those challenges and demands?
Trading as a high-performance activity
It was February 2005 when I first stepped onto a trading floor. It was the first Friday of the month, non-farm payrolls day (the release of US employment data – as I later found out, a significant day and a big market opportunity for traders).
I can remember the minutes leading up to the data release so clearly. The traders – well over 100 in total – all returned to their seats and began to prepare themselves for the upcoming announcement. Then came the countdown from the in-house analyst – “one minute”… the noise and hustle on the floor died down… “thirty seconds”… a focused hush… “ten seconds”… a feeling of anticipation, expectation, an obvious increase in adrenaline and energy… “five seconds”…
Then the data was read over the squawk box. There was an eruption of activity, noise, emotion. It was visible even within a few seconds that many traders were experiencing high levels of stress – and the emotions that came with it.
Over the coming hours I witnessed the highs and lows that trading the markets can bring. Some of the traders made large sums of money, others were flat, some were seriously down and nursing big losses on the day. It was my first encounter with trading. I became acutely aware that trading was a challenging, pressurised and often stressful occupation – something that only became more vivid as I spent time working with traders.
And I recognised that challenge, pressure and stress from another world entirely.
Before working with traders, I had spent a number of years as a sports psychology coach to elite athletes and teams. Trading was undoubtedly the nearest activity to sport that wasn’t a sport. Like elite sport, trading is a high-performance activity – and makes for a demanding environment in which traders must operate.
The trading performance environment
One of the core demands in trading is making risk-based decisions under conditions of uncertainty. Both risk and uncertainty are stressors. That is, they activate the stress response in our nervous system. The work of behavioural finance and neuropsychology shows clear challenges for the brain in making decisions under such conditions.
Humans prefer comfort, certainty, familiarity. A sense of control. Traders are continually exposed to a lack of control over market conditions and the outcomes they get on any given trade. Each trading decision has consequences and those consequences must be dealt with, not only financially but psychologically and physiologically. Traders must cope with the highs and lows of winning and losing – with strings of losses, with making mistakes, with being wrong, even with getting a bad outcome from a good process.
You did all the right things, prepared well, executed well, managed your risk, stayed
