Sunday, January 10, 2021

Why Your Trading Psychology Exercises Don't Work

In the most recent Forbes article, I make the case for mastering our trading psychology by literally engaging in brain training. When I refer to brain training, I am not talking about online exercises or apps that walk you through visualizations, breathing exercises, etc.  Rather, I am talking about directly measuring our body's functioning and training ourselves to control those measures through real time biofeedback.

Over the past two weeks, I have conducted focused experiments with heart rate and heart rate variability, electrodermal activity, and brain wave patterns, using the Fitbit Sense and Muse S units that I referenced in the earlier article.

Here are a few observations that were unexpected:

1)  Taking a Break Doesn't Necessarily Break Our Stress - When I feel stressed and take a break, calming myself and deepening my breathing, I succeed in taking my attention from what is troubling me and I feel more settled, but my body has often not recovered. My heart rate remains elevated, my electrodermal activity and heart rate variability still record stress, and my brain waves are not calm.  Simply taking a break and saying nice things to oneself feels good when we've been frustrated, but may not significantly aid performance.

2)  Less Stress Does Not Equal Greater Focus - This has been dramatic in my experiments thus far.  I can remain still, breathe deeply, and engage in calm imagery and that will reduce my heart rate over time.  (It takes longer than most of us allot to trading breaks.)  When I measure my brain waves, however, they do not show that I'm more focused.  Indeed, to achieve high focus readings with the brain waves, what I need to do is concentrate, not relax.  Interestingly, when I do a meditation routine and do it well, it helps my stress measures (i.e., I'm more relaxed), but my brain waves don't register as being in the zone.  A few minutes of a meditative exercise is very different from mastering the discipline of meditation.

3)  A Few Minutes of High Focus Changes Our Psychology - Most of us are familiar with the feeling of being calm and unstressed. That relaxed state can be helpful in winding down from a period of trading.  A highly focused state feels quite different.  When I'm unusually focused (and the brain wave feedback registers such focus), I feel a slight tension in my forehead and I feel distanced from the world around me.  It doesn't feel relaxed, as one might feel after an alcoholic beverage.  It feels quiet and I feel separated from the world, more like an observer than a participant in what is going on.  Perception is different in this mode, clearer and not at all distracted.  I'll have more to say about this in the next Three Minute Trading Coach video, but my sense is that I see markets much better when I'm highly focused than when I am simply stress free.

So what does all this mean?  Perhaps we're managing our trading psychology the wrong way.  Perhaps we're trying to de-stress when we need to be intensely focusing.  Perhaps we are setting up our trading days and processes in ways that increase distraction and actually prevent us from achieving the focus needed to quickly process evolving market patterns.  Our efforts at improving our trading psychology might not work because we're focusing on our feelings rather than strengthening our brains.

Further Resources: