Here’s a great question I received recently:
Q. What do you do during a session to maintain a positive trading psych mindset?
What I do during a session cannot be talked about without also discussing the pre and post-session routines. It’s all a part of one whole approach.
I’ve shared an image previously which I’ll include here again, which gives a summary of how I see trading psychology (or performance psychology which is probably a better term).
You can see the article related to that image here if it interests you – https://yourtradingcoach.com/trader/creating-the-conditions-for-success/
What I want to do today is to approach this question from a different angle, by listing everything I do with a performance psychology focus as I work through my pre, during and post-session routines.
As noted though in the above image, I see there being two areas of priority for practical application of performance psychology:
- State Management
- Focus on process
State Management – My aim is achievement and maintenance of my Ideal Trading State. The Ideal Trading State will vary from individual to individual and will typically be found only through trial and error. But for myself, and I suspect most others, it’s a calm and focused environment with no distraction.
Focus on Process – My aim is to ensure I follow the process as outlined in my Procedures Manual. It’s commonly stated that we need to trade without emotion. That is rubbish. You’re human. You can’t trade without emotion. Your aim instead should be to ensure that you follow process, despite the presence of emotion which might otherwise interrupt or interfere with your process.
Everything I do pre, during and post-session is done with the intent of enhancing performance in one or both of these areas – state management and focus on process.
Before I step through my routine though, let’s first drop back a bit and set a foundation.
You need to study! There is no getting around it. Read. Learn. Absorb as much as you can. There is some great material related to performance psychology specifically for traders. I’ll list what I consider essential reading below. But don’t be afraid to branch out into other performance related fields. I have read books related to the psychology of achieving peak performance in golf, tennis, general sport and poker. Plus I have been lucky to take away many lessons from my past career, in terms of study of human performance in a military aviation environment. Search wider than trading. There is some great material awaiting you in the books, magazines, and of course online.
The trading essentials though:
- “The Psychology of Trading” by Dr Brett Steenbarger
- “Enhancing Trader Performance” by Dr Brett Steenbarger
- “The Daily Trading Coach” by Dr Brett Steenbarger
- “High Performance Trading” by Steve Ward
Start with these. Then seek further information based upon specific topics and areas of interest related to your own journey as a trader.
Expectations – This will be an Ongoing, Lifelong Journey
Book knowledge will not provide you with a solution. You can’t just buy and read the four books listed above and then… presto… all trading psych issues are solved.
But they will provide you with the clues as to the path forward.
Likewise, my routine listed below will not necessarily provide you with a solution. Developing your own trading psychology solution will be a personal journey. What works for me may not be the best option for you. Of course… it may serve as a starting template if you’re just beginning. Or it may provide new ideas for those with some experience. But ultimately you need to find your own way.
And, more than this, you need to expect that it will be a never-ending journey.
My trading psychology routine is not be a once-off plug and play system. And you should not see your plan in this way either.
My needs will change in future as my life circumstances change and as I personally grow and develop. As such, I constantly monitor and review my trading performance, and will work to further develop my trading psychology routine as new issues are uncovered, or as improvements in process are found.
It’s a constant process of growth and development. A never-ending journey!
But it’s a fascinating journey. So embrace this challenge and immerse yourself in not only study, but in performance monitoring and review.
You’ve Got to Have an Edge!
Most of what people complain about when they say they’re suffering from Trading Psychology issues, are not in fact psych issues at all.
Often it’s something more basic such as:
- An ineffective strategy, incapable of providing an edge
- Lack of belief in their strategy as a result of insufficient testing and development work
- Attempting to operate in a timeframe or market “niche” which does not suit their lifestyle or risk tolerance
- Inability to adapt tactics to suit changing market conditions
- Inappropriate management of risk
See here for a previous discussion of this topic, where I answer another traders email question asking, “How can I get more discipline”: https://yourtradingcoach.com/trader/how-can-i-get-more-discipline/
Ok… finally… let’s answer this question, “What do you do during a session to maintain a positive trading psych mindset?”
Trading is a decision making activity. And you CANNOT make effective decisions if you are suffering from fatigue.
If there is ONE THING that I could suggest that most traders need to do to improve their decision making edge, it would be to IMPROVE THE QUALITY AND QUANTITY OF THEIR SLEEP.
See here for some insight into my fatigue management plan and the 5/12 No-Trading Criteria: https://yourtradingcoach.com/trader/trader-fatigue-management/. (Please note: The 5/12 timings are not a recommendation for the right amount of sleep. It is solely used as an objective measurement of potential acute fatigue. It is the ABSOLUTE MINIMUM sleep I will accept. If my sleep does not meet this requirement then there is NO TRADING, regardless of how well I feel. Beyond this, I also apply both a subjective assessment, and seek the opinion of my wife. She’s the first to know when I’m fatigued because… apparently… I become quite intolerable! 🙂
See here also for one of the more unique things I’ve tried in overcoming the challenge of managing fatigue: https://yourtradingcoach.com/trader/my-biphasic-sleep-experiment/
Quality Diet And Exercise
Yes, psychology relates to the mind. But the mind does not work in isolation. It’s part of a complete mind-body system. And it gets it’s fuel from the body.
Quality decision making comes from a quality mind-body system.
Your goal if you are deficient in this area is simple. Eat better than you currently eat. Exercise more than you currently exercise.
Improvements made so far this calendar year to my own routine:
- Increased the quantity of vegetables in main meals.
- Joined a local gym and have successfully maintained the habit for the first time in my life!
You can make this as simple or as complex as you wish. And as short or long as you wish.
At the very least I aim to do the following:
Visualisation – Conduct a quick visualisation of correct action related to my current daily process goal (an area identified during prior session reviews as requiring improvement or increased focus during the current session).
Affirmation – Review my Action Affirmation Statements (Chapter 10 pages 48-50).
Review my motivation journal (Chapter 10 pages 47-48). It only takes a couple of minutes to flick through… but damn this is motivating! 🙂
Physical Performance Activity
Pre session open… a quick sharp aerobic exercise routine. Get the blood flowing. Get the heart pumping!
I’ve been a fan of breathing exercises for years, through my training with Tai Chi. I said above that if I had to recommend ONE THING to improve your decision making edge, it would be to get more sleep. Perhaps just as important… learn to breath.
Yeah I’m serious. Almost no-one does it right.
I’m a big fan of Bruce Frantzis at http://www.energyarts.com/, but there is a ton of basic information online if you just want to google “breathing exercises”.
The aim is to ensure that I am in my calm and focused Ideal Trading State by the time the opening bell rings and my real work commences.
Clearly Documented Procedures For Pre-Session Prep
All of the above… plus all procedures for setting alarms and news alerts, opening my platform, connecting with my broker and data source, conducting pre-session analysis and submitting a test order… is done with reference to a checklist. The aim here is to ensure that when I am trading I can do so with confidence that NOTHING HAS BEEN FORGOTTEN.
Comfortable Room; No Distractions
Air-conditioning… quiet and set to a comfortable temperature… cool but not cold.
Absolutely NO-ONE else around.
No phone. No social media. Backup computer out of sight and out of reach to minimise temptation.
No radio. Absolutely NO TV.
I have a set of dumb-bells beside my desk. Perfect for keeping the blood flowing and my mind alert.
I’ve been using this for about a year now. And I LOVE IT.
Line the floor with yoga mats for a bit more comfort. And keep moving.
With my trading commencing around 11pm and running through till around 3am… this is essential in helping maintain focus and stopping me from dozing off during boring narrow-range sideways grind.
Try it… but don’t rush out and spend hundreds on a standing desk just to find you don’t like it. Start with just a couple of besser blocks (masonry building blocks) under the legs of your desk.
5 min Alarm For Focus
Every five minutes… three “loudish” beeps… to bring focus back to the charts if my mind has wandered. But also to prompt me to glance over the higher timeframe charts
Did you ever watch Lost in Space when you were a kid? I’ve got an audible alert of Robot saying “Danger, Danger!” which is set to go off a minute before any key news release.
Sure, this is not a mindset thing. But it is all a part of keeping focus on the right process. And that, is a key aim of my daily trading psychology routine.
All a part of that complete mind-body system. You MUST be appropriately hydrated.
Caffeine plays a part, especially given the hours I keep. But water is the primary go-to drink for during the session.
Glucose Lolly, Blueberries, Dark chocolate, Chewing gum
Yeah… glucose lollies… one as the session starts and then one more during session if I’m feeling a bit flat.
It’s all part of my plan to manage decision fatigue. See here – http://www.nytimes.com/2011/08/21/magazine/do-you-suffer-from-decision-fatigue.html?pagewanted=all
If I feel like an occasional snack I’ll look for something that offers a brain boost, such as blueberries or dark chocolate.
Chewing gum is a little different. That’s for when I’m feeling slightly anxious. It helps burn off some of that nervous energy through physical action.
Music – Ambient, Uptempo (120bpm)
We talked about this previously. See here: https://yourtradingcoach.com/trader/background-music-for-focus/
Right now my preference has drifted slightly away from the Ambient genre, more towards some uptempo background beats. Check out this for an example, by the people at Focus at Will:https://www.youtube.com/watch?v=vnHudUSzDuY
See here for the equipment I use – https://yourtradingcoach.com/trader/biofeedback-for-trader-psychology
While breathing exercises act to place me in a calm and focused state, and to maintain that state once achieved, what is lacking is some means of quickly alerting me when I’ve drifted from that ideal state.
This is where my emWave2 unit comes into play. I don’t use all it’s functions. But the visual lights on the unit provide a constant objective check of my current state.
If I’ve drifted from a “green” state… it’s time to again focus on my breathing.
Often when the emWave2 unit shows a loss of Ideal Trading State, it’s immediately apparent to me that something is wrong, not only with my emotions, but also my breathing. Often I’ll find I’ve been holding my breath.
My breathing exercises provide a way to calm my mind and relax my body. It typically only takes focus on this exercise for 10 to 15 seconds to get the emWave2 back to green. All systems GO!
Regroup and Recovery Procedure
Sometimes the markets get us all worked up. And from time to time we’ll really lose our way.
For these times I have a Recovery Procedure within my Procedures Manual (Chapter 13 pages 88-89), taking me through a process of relaxation, review of the situation and the lessons it offers, and then a releasing process. All primed and ready to return to the charts.
And of course… regular breaks. Get away from that screen at least once each half an hour.
Yeah… again! 🙂
Review Process To Include Any Mindset Issues
This is perhaps the most essential part of the whole process. Ensure your session review and journaling process includes consideration of any mindset or trading psych issues encountered during the session.
Trade -> Record -> Review -> Improve!
It’s a cycle of growth and development!
Release and Relaxation Process
The absolute last thing I do with my daily trading routine is to take myself through a relaxation process (2 to 3 minutes), visualisation of success (achievement of my outcome goals), forgiveness for imperfection and a release of today’s results (good or bad).
Well, that’s about it for a quick step through my daily routine, as it relates to maintenance of an effective trading mindset. Hopefully that helps you in some way. Feel free to add comments below the article to let me know what you do. I’m always open to trying new methods and techniques for improving my personal physical, mental and emotional performance.
Update: 10th May 2015
Body posture -> influences confidence -> influences trading results.
This is a new addition to my pre-session routine (yes… the psych routine I posted last week is already improved). I have added a short power-pose just prior to the session open. Plus I’ll attempt to monitor my body language throughout the session. Interestingly I recall something similar I used to do years ago (non-trading) which I found to have great effect in improving confidence. It was a technique from one of Tony Robbins books. A simple “fist pump” and strong verbal “YES”! I think I’ll add that to my trading routine as well.
See here if the video player is not showing: http://www.ted.com/talks/amy_cuddy_your_body_language_shapes_who_you_are
Loved it. 🙂
Thanks Jagadeesh! 🙂
Great article Mr Beggs.
Thanks Marcus! 🙂
this is a very good article, thank you!
I have a question, maybe it is over sophisticated:
Assuming, today you had a few losses and now you’re in a profitable trade that is just balancing all the previous losses. However, according to your analysis, the profit target is still far away and this could be a nice runner. Now, would you rather go for ‘peace of mind’ and liquidate the position or hold on for the profit target? Conflict of interest, so to say.
Best Regards, Sven
The “proper” answer is that you should trust your analysis and targets and hold the position for the target. But let’s be honest here – we’re human – and there are so many other factors. I’d be lying if I said I never took the exit. Particularly if it’s very late in the session; sometimes it’s better for the mindset to take the early exit to ensure you salvage a breakeven result rather than risk a losing session should it reverse from there. This is not about P&L. This is about mindset. It’s a big difference starting the next session coming off a breakeven result, as oppossed to coming off a loss.
So while the proper answer is to trust your analysis and hold for the target, the reality is that it depends upon the context.
Denise Shull once wrote a blog post which I liked (or it might have been an email), offering a good solution for exactly this kind of scenario.
As price gets to this “breakeven” area, ask yourself which of the following scenarios would you hate the most: (a) taking profits and finishing on breakeven, but then watch as the market moved to your target without you, or (b) holding for the target and missing it as the market reverses and stops you out for a worse result than (a).
Try to feel how each option would feel.
Now pick the option which doesn’t feel as bad!
Hope that helps,
Yes, I agree. Because of context and the human factor, the answer would be a judgment call. I just was curious how a very experienced trader would address this issue. Thanks a lot.
Thanks Lance for taking the time out educating fellow traders .. appreciate and love your observations.
Above is quite a detailed routine. 11 to 3 AM trading time .. on a lighter note, when do you catch up on the sleep you talking about 🙂
I’m glad you enjoyed the “Trading Psych Routine” article.
Yes, sleep is a challenge with the hours I keep. I’m usually in bed around 4-4:30am, asleep by 5am, waking by 2pm.
I’m not sure how many more years I can keep that up though.
All the best,
Thanks Lance for the detailed routine. So many great articles in your blog.
You’re welcome Tawfiq. I’m glad you found this useful.
Best of luck with your trading,
You’re welcome Hamid. Best of luck with your trading,