Friday, August 12, 2016

How Can We Train Our Brains for Trading Success?

The most common reason traders encounter problems with discipline pertains to willpower as a limited resource.  Reading, following prices, conducting analyses, and managing risk all day taxes our capacities for focused concentration.  Like any muscle, our willpower can become fatigued.  That's when we lose focus, and that's when we are most likely to take action in ways that we did not plan or intend.

An up-and-coming trader recently pointed out to me that he understands physical exercise and what he can get out of it, but has trouble understanding the benefits of cognitive exercise, such as meditation.  As it turns out, brain training is critical for success for anyone who is in the business of decision-making throughout the day.

There are two enemies of trading success:  distraction and arousal.  Distraction occurs when our focus wavers--either because of fatigue or overuse--and we have trouble filtering out extraneous information and concentrating on essentials.  Arousal occurs when our bodies go into fight-or-flight mode, generally in response to a perceived threat.  At such times, our bodies are primed to act when, very often, what we need to do is think, plan, and respond in measured fashion.

The purpose of cognitive exercise, such as meditation and biofeedback training, is to provide us with greater control, so that we're less likely to fall victim to distraction and hyperarousal.

There are three primary purposes for brain training:  helping us relax in performance situations; helping us build our capacity for concentration, and helping us build our resilience to stressful situations.  The most common goal of brain training is the achievement of a state of calm focus.  In the calm, focused state, we sustain a physical level of relaxation while we are in a heightened state of concentration.  When we remain in such a state for a period of time, we experience that as being "in the zone."  That state of flow is associated with creativity as well as superior decision-making and emotional well-being.

Biofeedback devices and programs, such as Wild Divine, provide users with constant feedback about their achievement of the flow state, so that they can figure out what they need to do to stay in the zone.  Video game interfaces, where winning is based upon staying in the zone, make it easy and fun to practice mindfulness and self-control.  When we sustain the calm, focused state for longer and longer periods of time, we achieve deeper and deeper levels of stillness in our minds.  Very often, when meditation doesn't seem to work for people, it's because they haven't spent enough time with it to achieve their second wind of consciousness.  Once in that state, we achieve a clarity of perception and awareness that is exceedingly helpful for real-time pattern recognition and decision-making.

Sustaining calm focus for increasing periods of time and during periods of increasing distraction and challenge is the cognitive equivalent of going into the weight room and building our physical strength.  What we're building is our willpower: our ability to act with intentionality rather than randomness.  Brain training is so much more than simply going into a quiet room to take deep breaths and relax.  When approached in true training mode, it is our way of building our capacity to enter and operate in the zone.

Training to sustain calm focus and build our capacity to stay in the zone is the most basic exercise in the cognitive gym.  In the next post, I will outline more advanced exercises that can move our trading forward.

Further Reading:  The Power of Implicit Learning