Creating Healthy Habits to Help Optimize Trading Performance

Being a successful trader involves more than just picking entry and exit points. There are emotional challenges (such as fear and greed) and mental hurdles (such as the need for discipline and perseverance). Beyond computer screens, chart analysis, and trading strategies, consider building healthy habits to help you form a solid foundation for trading success.

It Starts With Reducing Stress

For most traders, trading creates stress, says Dr. Gary Dayton, a trader, author, clinical psychologist, and founder of TradingPsychologyEdge.

"A healthy lifestyle is the number one way to combat stress.  A healthy lifestyle can make us feel better, have more stamina, get sick less often, and have a better emotional balance.  That all contributes to trading," Dayton says.

When it comes to the financial markets, many things are outside a trader's control. Focus on lifestyle choices that you can manage, such as exercise, mindfulness, and diet.

Trader Workout: Exercise

At its root, exercise may be good medicine for traders. Regular aerobic exercise does three important things that are all related to trading. Dayton explains:

“First, exercise helps us maintain an even keel with respect to our overall emotions. Solid research shows that exercise can be as effective in combating depression and anxiety as medication. That’s pretty powerful. It also helps us sleep better, which further contributes to good mental hygiene.

“Second, exercise is a great stress buster. Everyone has had the experience of taking a jog, playing a set of tennis, or just going to the gym after a stressful day. The workout brings quick relief. You can almost feel the stress melt away. 

“Third, exercise helps us learn. It’s been described as Miracle Gro for the brain. In one typical study, a period of exercise prior to classes improved overall test scores by 17% in one semester. We are always learning in trading. Exercise keeps our mind sharp so we can not only learn the patterns that work in trading, but also better pick up on the subtle market shifts before anyone else."

Mastering Emotions with Mindfulness

Mindfulness is today's buzzword. Recent research shows regular practice of mindfulness can make a physiological difference. For traders looking to achieve peak performance and "get in the zone," mindfulness could help. Here's how.

Impact the fear center. Mindfulness may be the most important mental practice for improving our minds, Dayton says. "Researchers have shown that practicing mindfulness alters the brain in important ways for traders. It directly affects the ‘fear center’ of the brain, the amygdala—not only physically changing the area, but making us much less susceptible to loss aversion, which can be the bane of many traders. Loss aversion is seen when the trader reacts to the normal fears of trading and liquidates profitable trades prematurely and holds losing trades too long," Dayton says.

Better clarity and focus. "We are less likely to be distracted by internal voices that tell us with certainty what the market would do next. We become more self-aware and better at executing the correct trading-relevant action rather than executing mistakes fostered by an unchecked mind," Dayton says.

Healthy Food, Healthy Trader

We've all heard the saying: you are what you eat. Will a better diet change a trader’s performance? Maybe not, Dayton says.

"But good traders look to excel. There is no doubt that diet contributes to overall health. No one can trade well while ill, and a healthy diet can help give a trader a strong physical foundation and provide protection from common, chronic diseases.

"In my personal research on diet, one thing that strikes me is that Kaiser Permanente, the country’s largest health care provider, encourages their physicians to recommend a plant-based diet to all patients. [Dr. Dayton is not affiliated with Kaiser.] They say that healthy eating may be best achieved with a plant-based diet, defined as a regimen that encourages whole, plant-based foods and discourages meats, dairy products, and eggs as well as all refined and processed foods. Kaiser notes that many of the diseases common to the west, like obesity, diabetes, hypertension, and cardiovascular disease, could be addressed with diet, including reducing or eliminating medications needed to treat these chronic conditions," Dayton says.

"Many will find this difficult to accept, as most of us have eaten meat and dairy products for decades. I encourage all traders interested in a healthy lifestyle to have an open mind, do their own research, and come to their own conclusions on diet," Dayton says.

Stay tuned for an in-depth look at trading stress and specific methods you can implement to manage it.