Trade Mindfully from Dr. Gary Dayton helped me a lot with trading psychology. This is not just a book, it is a textbook and a workbook in one. There are exercises in it and if you are serious about your business I recommend you finish all of these. It will all be for your own benefit.
The book is about emotions in trading and how to get psychological edge. Most of the exercises got done during reading the book, like how you prepare for your day, what habits you have, what you notice about your procedures, being in different roles in life etc.
But meditation is training mindfulness over the longer period. You can’t achieve good results by meditation for a day or two. This is like going to the gym to train your muscles – it takes time and discipline.
His meditation exercise is about focusing on your breath, but then your mind starts to wander and that’s normal; you shouldn’t fight against the thoughts coming to your mind but instead accept them and let them go by taking your focus back to breath. At first it was hard as all kinds of thoughts started to pop up in my mind, but after practicing for couple of weeks, it turned to be easier. I finished this 8-week daily meditation exercise by starting with meditating for 10 minutes a day, adding 2 minutes to the sessions every week, so during the last week of it I had like 25-minute sessions every day. I still do this meditation occasionally but not every day. The meaning of it is to train mindfulness, so if you are in front of the screen doing trading decisions, you accept your thoughts of fear and greed, let the thoughts go and bring mind back to the chart to make relevant decisions.
My key takeaways from this book are:
- Our intuitive mind is behind mental shortcuts and survival mechanism. In trading we need to use our deliberative mind to analyse and make rational decisions.
- You can’t eliminate emotions from trading cause you need them for decision-making. However, you should not let strong emotions control your trading.
- Traders cut winning trades short or chase the market to please their internal state not because of sound trade management. It’s a relief like giving candy to a crying kid.
- Try to see in your mind what you need the price / volume action to do on the chart for your trade to trigger.
- Before-During-After trading process – How you prepare before trading / How you act and follow the plan during trading / How you grade yourself and learn from your trades after trading.
- Our mind wants to protect us in situations of risk and uncertainty – it’s exactly why we can’t trust these thoughts in trading.
He gives a good example of the mind playing tricks on you. You place a trade and it’s working in your favor showing a small profit. Suddenly it starts pulling back in the opposite direction and your mind tells you to take profit or you’ll lose it. You exit the trade and feel good, the mind approves you for nice work. Then a minute later the price reverses back and starts going heavily in your favor, much farther than your exit was, just without you in it anymore. The mind starts ranting about the profits you left on the table, tells you’re no good and wonders if you ever learn to become a real trader. So how can we trust our minds in this situation?! It’s telling the opposite things. In trading, we can’t trust it. At least not in the beginning when there’s probably no gut feeling to the markets.
Trade Mindfully by Gary Dayton book link
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