Saturday, April 06, 2024

Positive Trading Psychology - I: Flourishing


In the next several posts, I will outline an approach to trading psychology based upon recent research in the field of "positive psychology".  I believe this can be a game-changer for many traders and trading teams.

To use the analogy of positive psychology's founding researcher, Dr. Martin Seligman, the goal of positive psychology is not to go from -5 to 0, but to go from +2 to +5.  This means that feeling good and performing well is not enough.  We are meant to "flourish" by amplifying what is already positive.  According to Dr. Seligman's research, there are five dimensions of flourishing, known by their acronym PERMA:

1)  Positive Emotion
2)  Engagement
3)  Relationships
4)  Meaning
5)  Accomplishments

As the Positive Psychology site explains, flourishing is not something we have or don't have.  Rather, it's a process that can wax and wane at various points in our lives.

Think about what this means:  We think about trading processes, and we might even follow personal processes regarding what/how we eat, our sleep and exercise, etc.  How many of us, however, explicitly follow processes of flourishing in how we approach markets?  Consider a simple PERMA review for traders:

1)  Are your reviews and research efforts generating positive emotion, by focusing on opportunities, learning, and insights?

2)  Are you constructively engaged with markets?  With other traders?  With learning?  Are you focused and operating in a "flow state", or are you distracted and jumping from screen to screen and idea to idea?

3)  Who is mentoring you and how are you learning?  Who are you mentoring and how are you improving them and cementing your ideas?  What are you doing to nourish your friendships and personal relationships, and how are they nourishing you?  If there is no nourishing, there can be no flourishing.

4)  What is meaningful to you in your trading beyond short-term P/L?  What in markets captures your interests and passions and helps you find unique opportunity?  What is meaningful in your life outside of trading that keeps you emotionally and spiritually nourished?

5)  What have you accomplished recently and how can you build upon it?  What have you learned from the accomplishments of others?  How are you celebrating your accomplishments and who are you celebrating with?  How are your achievements in all areas of life keeping you energized and focused?

We develop a flourishing life by focusing on flourishing each dayEach day is a miniature lifetime.  We are born in the morning and by nighttime we lose energy and lie down to rest.  In between, our challenge is to live the most meaningful and successful life possible.  It's great to cope and correct our mistakes, but the key question is:  How can we flourish today and be all that we're capable of being?  One hint:  a large, recent research review finds that mind-body applications of positive psychology are especially effective.  Maximizing our daily, physical well-being may be the best way to flourish emotionally and in our trading.

Further Reading: