This is a guest from Jeff who is on twitter at @TSXtrad3r . This post originally appeared as Yoga and Day Trading: Improve Your Mental Game on www.livestreamtrading.com and is posted here with permission.
As many of you know, day trading is a business of discipline, patience, and execution. To be a professional in this field, like any other field, it takes many hours of dedication, practice, pain, and sacrifice. The same way that professional athletes train their body for marathons, day traders need to train their MINDS for the markets.
Those of you who trade with me know that I believe in the notion that a healthy body equates to a healthy mind, which in turn can help you maintain healthy trading habits.
About 5 months ago my girlfriend brought me to a hot yoga class. For those of you who don’t know what hot yoga is, its a vigorous form of yoga that is performed in a studio that is 105 degrees and is quite challenging, both physically and mentally.
I’ve never done any form of yoga in my life prior to this, but let me tell you, this room is HOT and it is a very challenging class to get through. Holding poses for minutes at a time with sweat literally pouring off your face, it feels very uncomfortable at first, but I love challenges, both physical and mental, so I was determined to get through this class without either passing out or giving up.
The instructor, Laura, who is an excellent teacher, teaches you how to breathe mindfully which is aimed at increasing vital energy in the body and mind. By focusing on your breath, “yogic breathing” (which is the practice of long deep breathing which calms you and helps remove your focus from the pain and discomfort you are experiencing) it allows you to be in the moment and embracing the discomfort as opposed to fighting it.
So, you might be wondering by now how this connects to day trading. Well, I found myself to be much more mindful in my trading after taking these classes. Being more patient with decision making, holding trades mindfully for my final profit targets, and overall being much more calm and relaxed in my process which has improved my performance, and of course, in return has improved the performance of my trading students who follow my live trades.
At the end of the day, I have a very systematic and business-like approach to my trading, which I should cover in another blog post, but when my system tells me to buy or short a stock, often the timing points I use to enter stocks will put me in the money almost immediately after pulling the trigger, but occasionally, you may have to embrace some chop or pain before the trade resolves.
The other day I took a short position on a stock expecting an immediate move that didn’t happen. I was sized into the trade and putting on a fair amount of risk. I had conviction in this trade, but the move I was looking for didn’t happen immediately as I had anticipated, which happens sometimes. The stock started to trade sideways and grind a bit around my entry point for 20-30 minutes which is often enough time for us to let our thoughts wonder into negative territory.
Look, at the end of the day, every trade I take has a risk plan with a stop loss and a target for profits, and I am always comfortable with that plan. When I pull the trigger I am willing to risk X amount of dollars to make 3R+ … however, when a stock doesn’t move as you expect, after 20-30 minutes of erratic spikes and sideways action, it can give you time to second guess your trade. You may start thinking “Did I take too much size here?” “Did I miss something on the chart?” “Maybe I should size down”… This is where yogic breathing and mindfulness has really helped me.
A stressed out, high strung, impulsive trader might start covering and adding back shares on every spike and dip not fully respecting their original trade plan, but I found that by thinking back to my yoga classes and just BREATHING mindfully, it brought me back to a place of peace where I know this trade has a 75% chance of working in my favor, I am comfortable with my risk profile on the trade, and the reward is going to far outweigh the risk that I took to place the trade.
Yes, the trade worked out. It took over an hour before the selling I anticipated came in and I can’t help but think without being mindful in my breathing, and being self aware of my emotions and process, I may have sized down that trade or even lost my patience after 30 minutes and taken it off for a flat. At that moment I realized that I had “hacked” a way of improving my performance and conviction by simply BREATHING and being more mindful of my emotions and process.
If you haven’t tried any form of yoga before, I highly recommend it. As day traders we require a huge amount of mental stamina and discipline, which often can be aggregated from your healthy and disciplined lifestyle outside of your trading office.
Thanks for reading, and I’ll see you on the LiveStream!