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Trading PsychologyStillness and The Art of Trading - Trading Game

Stillness and The Art of Trading – Trading Game

Following a few recent conversations with both new traders who don’t yet know the correct path and older traders who have strayed I thought this was worth a repop.

One of the most persistent things in traders is the desire to be doing something. There is a perennial confusion between effective activity and activity for entertainment. Traders feel that they must always be in action. Intriguingly decades of experience and countless academic papers point out that the more people trade the less they make. The estimates for successful day trading run between only 1% to 3% of traders. Yet despite this, there is always a cadre of traders who think they are different – the odds would say otherwise.

I view trading as a profession of stillness and patience, not activity. A series of Japanese philosophical concepts can best describe this notion. The first is known as Mushin or no mindedness. Such a notion is often confusing since the idea of no mindedness implies a vacuum with limited resources. This is incorrect, the closest Western concept is unconscious competence it is a mind that is free from extraneous considerations.

As such it is free to act unencumbered by emotion. Mushin by definition is also firmly rooted in the present so notions of past and present are irrelevant by extension fear and worry are not present. These concepts depend either on a concern about past events or a fear of future consequences. Therefore what has occurred with past trades is irrelevant, as is what might happen with future trades.

The second stage is Zanshin which is a state of mind that enables you to retain control of both your conscious and unconscious mind while engaged in a course of action. It is the ability to engage both the market and be aware of the impact of your engagement upon your subconscious mind. Zanshin is activity based you are aware of the trade and all the possible consequences of that trade. Yet the notion of Mushin still permeates this transition since both states of mind are fully present in the moment. Worry cannot seep into the trading system if it is set in the present.

The final phase is Jikishin or the taking of opportunity without fear or hesitation. Consider these moments within the context of a given trade. Trading systems consist of a generic set of principles. A set up followed by a trigger leading to an eventual exit. Mushin is our set up phase it is our point of stillness where we wait. Zanshin is the movement out of Mushin into an active phase. We have taken our trigger and are aware of all the things that could happen. The notion of Jikishin floats between entry and exit since both require action without fear.

It is easy to see how such a philosophy contradicts that put forward by Western ideals such as the need for a work ethic which in turn prompts traders to create activity for the sake of it. The basic philosophies are very different since one is activity-based, the other based on stillness followed by brief moments of action. Yet at all times your mind remains still and free.

Trading is an internal endevour since our trading only takes place in our mind. For example, as I write this, I might have an open dealing screen that tells me a position I have in the energy complex is substantially in profit. But my only representation of the market is my screen; my only perception is what my subconscious mind filters. My reality and the impact this move has upon me is of my choosing – if I wish to feel the fear of losing this potential profit then I will feel fear. if I wish to be an observer and not a participant then that is what will happen.

Too often traders look outwards for what is essentially an internal problem. The ability to create a calm still mind solves a myriad of trading problems, as does the creation of safe metaphors. While notions such as Mushin are difficult for those who are first exposed to them it is possible to build metaphors that are calm. Other traders have told me that they regard trading as surfing, sailing, or skiing, all endeavours they find pleasant, safe, and most importantly peaceful.

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