Developing and maintaining healthy habits can help traders manage emotional and challenges in trading.
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.
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.
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."
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.
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.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.