I strongly believe in psychology and optimum mindset for trading success. It is way above technical indicators and perfect trade up. I have had very good setup and I did prematurely booked profits so as to not lose small profit or fear that trade will turn into loss. It is all mind game. Mind tricks us. Also we have to have big heart to accept profits. But generally traders accept small profits and big losses. Imagine these scenarios
  • You see breakout from range and then take the right trade. But after some time you close the trade in little loss because you thought this is false break
  • Doubled down on a losing trade
  • You see one trade which you thought of but did not took only to see it in direction of profit and then you jump in to fear of missing out only to lose.
Now I will touch base a little on Mindfulness with a recent example. Mindfulness technique of meditation is helpful to stay aware in present and it can be used in Micro or Macro level events. As you know trading is very dynamic and every minute trading base rate changes. Reacting to events being aware of micro and macro level reality is the key to be successful in trading. And it is better to be aware of our own internal state and around us so as to react rightly on trading setups. After all if we lose in market, it is our fault and not markets fault. Markets behave as it has to. I will illustrate a recent example of Sept 2016.

US Dollar and September seasonality

As September started and new season of trading I was reading an article that forex seasonality favors dollar weakness in September. In last 20 years of data EUR/USD has rallied 55% and GBP/USD 65% in September. Yet you can see what happened in September 2016 so far. The big theme now is US dollar interest rate increase and as many Fed officials were saying that they see increase rate in future and even data is supporting them. So we have to be aware of the market conditions even at a macro level and not be biased based on previous events and then choose the trade which has high probability of success.

And then the Intuitive mind and rational mind comes into picture.

Please note that Intuitive mind just see inadequate information and based on our cognitive biases (will cover this in next article). Also it does try to take mental shortcuts. Rational mind is the one which engage in making rational trading decisions. It can calculate probabilities, process disparate data and can make unbiased decisions. Through mindfulness we activate left side of brain and can make rational decisions. Mindfulness helps to focus on current price action and not makes irrational decisions of intuitive mind.

Mindfulness Exercise

Although there are many Mindfulness exercise and it is part of Meditation techniques. I will just briefly cover one exercise which you can do and if you want more you can take courses on Mindfulness courses across the world. Also there are many resources available for especially for trading. Sit down on a floor in upright position with hand on knee as the below picture:

Breathe In and breathe out. Focus on your breath, you breathe in cold air and exhale hot air. Just focus on breath. After a minute or so you will find your mind is wandering somewhere else. But do try and focus on your breath, It will be difficult but keep it doing for 5 minutes to start with. And with days increase it to 15 minutes. Be aware of your existence and focus more on your breath. With days of practice you will just stay with your breath only and your mind will not wander.

Through mindfulness process we become me aware of our thoughts and can focus on one constant that is breath. And we achieve to separate ourselves from our thoughts and feeling and becoming more aware on the present so to say present unbiased price action and on reality.

You will ask how it can be successful in trading. I have mentioned breakout trade which was closed as false breakout. It is just about being aware of trade and managing that trade. You will just focus on that as you focus on breath despite mind tricking us, even if it cast doubt on our trading decision and think you will have losing trade. Mindfulness practice will make you realize that that those are just thoughts and emotions. It will help you to stay in reality and you will not prematurely close out the winning trade.

Mindfulness is big topic to cover. I will cover next part in subsequent articles. You better be aware of your own existence and emotions rather than controlling it. And Mindfulness techniques certainly help. It goes a long way in successful trading. Athletes get successful because of their mindset and so do Traders.
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