Last year I got a call from one of the traders I recently worked with to improve their technical and trading psychology skills. He first sought my help because of fear in pulling the trigger. He also had questions about trade setups and developing a trading plan.
I didn’t spend weeks and months with this trader. We talked five or six times. Some of that work was on the mental side and some involved key trade setups.
The trader called to tell me how he was doing. “Gary, it’s unbelievable,” he said. “I made 47 trades last month and 44 were winners.” And, these weren’t just scalps. He had traded the S&P e-minis for several points a trade.
What made the difference in this trader’s turn-around? Two things: Perseverance and developing the mental skill of awareness, or what we call mindfulness.
This trader is a heck of a worker. He has a tremendous work ethic and a straightforward way of seeing trading, which he learned from his father who ran a store. He studied, analyzed, and marked-up chart after chart. Very few people would do the amount of work this trader does. And, he has a family and other business interests which are important to him and also consume his time.
He did so much work that he began to see certain things occur in the charts over and over again – things many traders do not see. He cleverly equated these with the way in which his father made money as a merchant: “I can buy it at 50 – a discount, and sell it for the asking price at 100.” Moreover, he learned that he can make a living on just two simple trade setups. Unknowingly, this trader undertakes what we call ‘deep’ or ‘deliberate practice’ – he kept working the charts and trading on a simulator until he developed such an understanding of market action that he created his own trade setup. He became so intimate with reading the market that he has a special name for the setup he discovered. This is persistence in action. He was willing to do whatever it takes, which is probably the most important quality a trader can have.
The second thing he did was to begin practicing mindfulness. This is a mental skill that has multiple benefits for the trader. Mindfulness enhances concentration and can lead to a greater clarity of seeing exactly what is on the chart. As this trader discovered, we can even begin to see things that were neglected or remained unnoticed earlier.
Mindfulness has another important feature. More than just concentration and clarity, mindfulness helps us develop mental awareness. The trader can learn that what the mind is telling us through that voice in our heads is only temporary, very often inaccurate, and need not be followed slavishly. The practice of mindfulness helps in developing distance from thoughts. The mind may say the same things it did before, but our relationship with our internal voice can change. The trader struggling with over-trading, for example, may still hear the voice say, “Oh, the market is moving. You better get in before it runs away!” But the mindful trader will also be able to decide that the trade is not part of the trading plan, and let the trade pass.