Last week, I raised an interesting idea for you. What would happen if you could just pay attention to what the market is doing right now? What if you could just be totally in the present with no preconceived ideas or biases to influence you. Quite likely, trading that way would take your results to a totally new level. Well, you can trade that way if you practice mindfulness.

Last week, we talked about the first three aspects of mindfulness. These included:

1) creating new categories,

2) welcoming new information,

3) looking at things from more than one perspective,

I gave you some exercises to do to begin to practice these aspects of mindfulness. How did you do with them? Did you do the exercises at all?

This week I’d like to cover the last two aspects of mindfulness:

4) controlling the context, and

5) putting the process before the outcome.

4) Controlling the Context

Much of your behavior is context dependent. For example, many professional traders know it is quite possible to lose $20,000 in a trade—perhaps paying $1,500 in trade costs in doing so. However, the same traders are much less likely to pay $1,500 to attend a course that could dramatically reshape their trading and help them avoid many such losses. The thinking behind such logic is that the loss is a cost of doing business whereas the course is an unnecessary cost. Notice what happens to the logic if you switch it around and start to think of the course as being essential to doing business well. It becomes much more significant than the losing trades—especially since it may save the trader many thousands of dollars in just a single year.

People who practice mindfulness are aware of the context in which they are interpreting events. They are also quite willing to shift contexts to determine the impact upon their behavior and their thinking. As a result, they give themselves much more choice and are much more likely to make money.

Ask yourself the following questions:

  • How are you interpreting your losses?

  • What is the context in which you are viewing all of your trading?

  • How does trading fit into the scheme of things in your life?

  • And what if you shifted the context on just one of these questions?

5) Putting the Process Before the Outcome

People can imagine themselves taking gradual steps, while great heights seem totally forbidding. Yet, when you take enough gradual steps, you’ll reach great heights.

If you are concerned with the final result—the outcome—then you will probably have problems attaining the outcome. However, if you concentrate on the process of getting to the outcome, then you are much more likely to arrive at your destination.

Every outcome is preceded by a process. You will not make money trading unless you follow a predetermined plan and continually stick to that plan. That’s why you should pat yourself on the back every day if you can honestly say that you totally followed your rules throughout the day. Every “market wizard” arrives at that stature by taking one trade at a time. The primary difference between that person and the average trader is that the market wizard probably continued to follow his plan every single day.

So what can you do to practice mindfulness in your trading?

  1. Practice a 20-minute mindfulness meditation each day for at least a week. If you just practice watching your thoughts (and releasing them as soon as you notice them), you can be satisfied that you are doing the exercise appropriately.

  2. Keep a regular diary of what is going on in your life. Do it for a few days before you start the mindfulness meditation and then keep it up. When you’ve completed a week of mindfulness meditation, look at your diary and notice how your life is different.

  3. Bring mindfulness into your trading and investing by doing the following:

a)Imagine yourself taking the other side of every trade that you actually take. What does that position feel like? Also imagine yourself being a neutral observer who watches you and the other person both take a position in the market. What do you think that person would think?

b)Look for new information about each new trade. What information are you normally accepting and what information are you normally rejecting?

c)When you do something you don’t like in your trading, notice the context in which you are interpreting not liking it. How else might you interpret that behavior? What other intention might cause that behavior? Perhaps those other intentions are something you value highly.

d)Concentrate on the process of trading—following your rules. In fact, at the end of each day ask yourself a simple question—did I follow my rules? If you did, pat yourself on the back. If you don’t have any rules, then you obviously didn’t follow them. Think about it.

These exercises are powerful if you do them. If you don’t do them, they are meaningless. Are you doing to do them?