If you want to understand the benefits of becoming more mindful in situations of stress, risk and uncertainty - i.e. in trading the financial markets - then this summary of some of the key findings from research done with the US Marine Corp by Jha and Stanley should help. They had the Marines complete an eight-week Mindfulness Based Stress Reduction (MBSR) course prior to deployment to combat zones and found that those who completed the course in comparison with those who did not showed raised levels of cognitive control, increased self-awareness, more situational awareness and improved emotional regulation.

The following are excerpts from the paper highlighting the benefits in more detail.

‘Extended their working memory under stress.’

‘Safeguards them against distraction and emotional reactivity and lets them maintain a mental workspace that ensures quick and considered decisions and action’.

‘Besides offering some protection to combatants from post - traumatic stress and other anxiety disorders, the mindfulness training enhanced the clarity of thinking needed for soldiers fighting in challenging and ambiguous counter-insurgency zones.’

When you read through the list of benefits and the US Marine study findings it would be hard to find any of those abilities that you would not want to have as a trader; and the great news is that you can train yourself to develop them.

The Awareness Advantage

“…without self-awareness, you would have little ability to moderate and direct your behaviour... You need this capacity to free yourself from the automatic flow of experience, and to choose where to direct your attention. Without a director you are a mere automaton, driven by greed, fear or habit.” David Rock, ‘Your Brain At Work’.

A primary reason for developing your mindful awareness and attention is to raise your level of self-awareness to a new level, beyond reflection, to actually being able to notice your experience in real time, recognising in that moment the impact of your thoughts and emotions, noticing any impulses or urges that you may have and being aware of any habits that may be at play.

From Socrates to the self-help era the maxim ‘Know Thyself’ has been banded around as a key principle to being happier, healthier and wealthier, to performing at a high level. But what exactly is it? Kevin Oschner, Head of Social Cognitive Neuroscience Laboratory, Columbia University, New York explains it as “Self-awareness is the capacity to step outside your own skin and look at yourself with as close to an objective eye as is possible.”. Neuroscientists have coined this ability as having an ‘impartial spectator’ and former fund manager Tom Basso who appears in New Market Wizards by Jack Schwager provides an interesting insight into his own self-awareness in Van K. Tharps book ‘Super Trader’…

“In situations where I felt I needed improvement or in which I wanted to improve my interactions with other people, I would just play key events back in my head – figuring out how others had handled the situation… I’ve always thought of it as some Tom Basso up in the corner of the room watching Tom Basso here talking to you in the room. The funny thing about this secondary observer was that as time went on, I found the observer showing up a lot more. It wasn’t just at the end of the day anymore. As I got into stressful situations, as I started trading, doing more interacting with a lot of people, getting our business off the ground, dealing with clients, and so on. I found that this observer was there to help me through it. If I felt awkward or uneasy, then I was able to watch myself do it. Now I have this observer there all the time.”

As a trader one of your goals is most likely to be disciplined, which is in essence the ability to be able to shape your behaviour, to be able to direct your thinking and your feelings. John Whitmore in ‘Coaching For Performance’ makes the point “I am able to control only that of which I am aware. That of which I am unaware controls me.”. In order to develop discipline, we need control, and to develop control you need to develop awareness.

“Since practicing the mindfulness exercises I have become more attentive both in and out of trading. My awareness has increased and I feel that I have calmed down a lot and have more discipline. The emotional swings have reduced.” Trader, Multi Asset Classes, Following A Program Of Mindfulness Training.

Mindfulness and Trading

“For trading, I think it’s just unbelievable how mindfulness helps you to stay here and not to think about past or future.” FX Trader after 4 Weeks Mindfulness Practise

I have been using Mindfulness approaches with my clients over the last 12-18 months and as I stated earlier have noticed a slowly increasing trend of traders and portfolio managers taking up yoga and meditation in order to enhance their well-being and performance.

In his presentation at the NeuroPsychoEconomics Conference in Rotterdam in 2012, Mark van Overveld from the Rotterdam School of Management, Erasmus University Rotterdam, presented the findings of research done with traders utilising mindfulness based approaches to enhance trading performance.  His key findings were:

• Mindfulness is associated with changes in areas of the brain relating to emotion regulation, response control and deliberate decision-making.

• Mindfulness seems very relevant for traders

• Increased attention

• Reduced stress

• Useful for managing emotions (such as fear and anger)

• Helps learning to accept emotions instead of acting on them

• Awareness of emotions allows for adequate emotion regulation

• Mindfulness facilitated financial decision-making in terms of risk-taking and timely loss-aversion

• Mindfulness helped individuals balance risk-taking and loss prevention.

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