Thursday, January 05, 2017

The Importance of Trading With Focus

I inadvertently conducted an interesting experiment yesterday while trading.  I traded from an enclosed office that was totally quiet and free of distraction.  Interestingly, that's similar to the setting in which I typically conduct my meditation and biofeedback work.  Indeed, when I work on maintaining relaxed, concentration using biofeedback equipment, I select an isolated setting that allows me to maintain an unbroken focus.  The resulting "zone" state is one that I have found to be helpful for clarity of thought and decision-making.

So in trading from the removed office, I unwittingly recreated my cognitive gym environment.  Within a few minutes of following the market, I found myself doing *exactly* what I do in biofeedback:  slowing my breathing, making it more rhythmical, keeping still, sustaining a high degree of focus, and shutting off most internal dialogue.  

What I found was that, in this state, market movement seemed slower and clearer than usual.  When I am distracted--and especially if I'm frustrated--it seems as though I'm several steps behind the market.  Things happen before I make sense of market behavior, so I'm in a reactive mode.  When I was in the zone during yesterday's trading, I felt on top of what the market was doing, where I was feeling the flow of buyers and sellers.  I was not thinking about buying, selling, making money, losing money, or P/L.  I was wholly immersed in the ebb and flow of what the market was doing.  At times, it felt as though I was one with the market.  In fact, the feeling was very similar to the feeling I've had when doing self-hypnosis exercises.

Relatively early in the session, the market pulled back and I could feel the attempts at selling fail to push prices lower.  I said out loud to myself, "We can't break the opening lows.  The buyers are in control."  That turned out to be a key insight for the day's trading.

Trading psychology gurus emphasize the need to control emotion and negative thinking during trading, and I think that's important.  Emotional self-control is necessary for good trading, but perhaps not sufficient.  What I was additionally observing was that a state of hyper-focus and enhanced concentration completely changed my experience of the market as well as my processing of market-related information.  In essence, I had turned the trading session into a biofeedback session and the calm focus changed how I viewed and responded to market activity.  I did not plan trades; I simply joined the flow of activity and exited when that flow shifted.

What if short-term trading is a function of pattern recognition and pattern recognition hinges upon our state of awareness?  How much effectiveness do we lose in trading by dividing our attention and so watering down our focus that we never truly enter the "zone" of information processing?  When we are super-focused, perhaps we create a cognitive environment in which trading psychology problems *cannot* dominate.

Further Reading:  What It Takes to Trade in the Zone