Exercise and Understanding the Impact of Trading on your Emotions

jack

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This is the second installment of the On Professionalism thread series.

The index and first installment can be found here:
On Professionalism



I don't want to sound too harsh, but let me start by telling you something: You are normal.

You are human, and there's a really, really high chance that you are normal. Even if you dress up in all black and listen to death metal, you are normal. If you go skydiving every other weekend and enjoy eating exotic foods, you are normal. If you collect rocks and like folk music, you are normal. Even if you think you're weird, quirky, eccentric, or and odd-ball, you are a normal human being. (And since I think you get the point:) If you've ever felt fear, pain, joy, love, or euphoria, you are normal.

The average trader is normal. It's OK to be normal, but...

Normal doesn't work in the market.

The market feeds off normal. The market has to push people past their limits of pain, their limits of fear, make them greedy then fleece them for everything they have. The market thrives on slaughtering "normal". The market consumes "normal" for breakfast and asks for seconds.

It's normal to feel anxious about a winner and want to lock in profits. It's normal to hold onto losses (avoidance) in hopes it comes back into profit. It's normal to execute riskier trades in revenge for a loss while trying to make up the difference. It's especially normal to over-trade and ignore the very rules you likely spent a long time creating in a moment of emotional pain just to get back at the market. There are very well documented psychological reasons why this is normal and why we are wired to act like this. But...

Normal doesn't work.

Over the last few thousand years, as our brains have adapted to our environment, we've picked up instincts and pass them down over generations. A basic example would be how common it is to feel afraid of heights and how being high up can make people a little more aware of their surroundings and possibly a little anxious about the prospect of falling.

Another example is our pain memory. Like how burning yourself on a hot stove top causes you to be a little more careful when cooking. Our experiences in the market are no different, and what's worse, we treat market risk with the same emotional fears as we treat death.

I'm not kidding you here. Cognitive psychology studies have documented how the specific fear center within our brain that relate to mortal danger can also triggered by financial risk and loss. No other type of danger lights up the same fear center.

It makes sense, if you think about it. All our lives, we've had the same idea pounded into our heads: without money we'd be living a dismal existence filled with pain and suffering.

Our parents raised us to do well and be successful so we wouldn't end up a bum on the street. The nightly news broadcast shows images of deadbeats and criminals who look weathered and sickly as they are carted off to a life sentence in jail for stabbing someone over a few bucks in their wallet. The entire history of finance, dating as far back as the early days of barter and merchant trading all the way to our modern world of globalized capitalism, have molded our evolving brains to equate monetary failure with death and pain.

So, is it any wonder why trading can be stressful?

There are a lot of things your body does when stricken with panic and fear. When stressed, and with anxious mortal fear running through your system, your body will direct blood flow toward muscle tissue and your circulatory system. Be glad it does, for if you're ever faced with a wild cougar (or *insert dangerous animal here*) while venturing too far into the wilderness one day, you'll be thanking your two feet and heart beat for making you run faster than you've ever thought possible as you fee for safety.

Unfortunately this doesn't help you too much when trading, and considering your body has to get the extra blood flow from somewhere, places like your brain start to get a lack of much needed fuel just as you need critical and sharp thoughts the most. You've probably already experienced this; ever feel just completely frozen as you watch a position move against you quickly? Or, after a string of emotional trades and losses, ever stop and wonder why you were in such a daze and couldn't see the obvious right in front of you? This is why controlling emotion and knowing your emotional triggers actually matters. This is why we, as traders, have to overcome our 'normal-ness' if we want to truly excel.

At this point, you might be thinking: "How in the heck we are going to un-wire our brains if most of this is part of our genetic makeup?" The answer isn't simple. There's a fair chance that you weren't born as part of the <1% of the population that can naturally ignore such emotions when trading, but if you aren't so lucky there is hope. You just have to spend time working on understanding yourself, your emotional triggers, and how you can disassociate trading from emotion.

As I mentioned from the very start, being a professional trader is a lifestyle. And the foundation of this lifestyle is going to be a daily regiment, discipline and focus. If you can't trust yourself to follow a daily routine (such as very light exercise, doing chores, etc..) then how can you expect to trust yourself when your facing financial risk, getting pumped full of adrenaline, all while mortal fear throbs in your mind?



So let's start working on ourselves, and I'm talking about real basics here: Working out and keeping healthy. We MUST forum a solid foundation before we can take on greater tasks, and there's no better place to start than our physical bodies. These steps alone won't be your key to success, but they help build the foundation of discipline and will end up helping you with trade discipline as you apply the same repetition and ability to stick to a routine to your trading day.

There's good news: I'm not a health nut. I'm NOT going to preach to you that anything over a 6% level body fat is shameful. I honestly don't think you need to have a fit, model, body to trade well. All that matters is you TRY to improve yourself. And as you try, even if it's small steps at first, you'll notice improvements in many aspects of your life, so really you have little to lose here even if you end up failing as a trader.



Pre-day Warm Up:

It's great to your blood flowing through activity. It increases the amount of oxygen in your blood stream, and really wakes you up if you're sleepy. Before sitting at a computer to trade, go out for a quick run around the block, even 5 minutes of jogging will get your heart rate up.

We're not talking about marathon training here. I mean, if I wanted to go "by the book" and quote you lines from an exercise manual, the ideal target is having an elevated heart rate for 30 minutes at a time to get the best results. But I'm not asking that of you, no, just focus on baby steps to start and aim for a 5 minute jog each morning. This makes it easy to include in your morning routine since you don't really have to plan much around it or get up any earlier than normal.. most people can fit 5 minutes of activity in by running around the block one, running to the transit station before work, or even just by parking the car a little further away from the office so you can jog into work.

If you live in a colder climate that makes running outside not so easy. Go to a discount store and pick up a skipping rope, they're one of the cheapest ways of getting your blood flowing while staying indoors. I use one myself during winter here in Canada because I hate the cold weather. Plus they help out during the summer when it's raining.

If you're a coffee drinker like myself, have your first cup BEFORE do anything that requires critical thought (like trading.) Drink it as you read the newspaper or watch morning TV. Make it part of your preparation for the day, not something you do while under pressure (having a caffeine surge while in the middle of an execution decision might not be the best thing.) Let your morning cup of Joe set in your system and feel that caffeine hit before you worry about making a financial transaction.

Some health nuts preach about cutting coffee out of your diet all together, since doing so can help with skin blemishes, anxiousness, sleep problems, etc... but again, I'm not a health nut, and frankly I love coffee too much to ever give it up.

Stretches:

If you're anything like me, you spend a lot of your day sitting at a computer desk or sitting in general. Our bodies weren't designed for this, and humanity's rate of technological advancement over the last few hundred years has pushed most city dwellers into jobs that involve very little physical activity and constrained into a sitting position that doesn't agree with our physical make up.

The first steps here involve simply standing up and stretching regularly. At least once an hour for each hour you spend at a computer or otherwise stationary. Ideally, you'll be doing a light stretch and moving around every 20 minutes, but I know that can be hard when you're sitting and focused on work.

To make things easier, I try and time out my water, coffee, bathroom, social, etc.. breaks around the office with stretching. That way I don't have to think about it, I just get up often and stretch it out as I walk to whatever I was going to do away from my desk.

A side benefit of this 'up and stretch' routine is eye health: It's good to focus away from your computer screen every 20 minutes or so, else your eyes get strained easily. While you might not think your eyes have a problem now, it creeps up on you, and one day you might find yourself facing CVS:
http://en.wikipedia.org/wiki/Computer_vision_syndrome

So set an alarm on your watch, or get in the habit of checking the time, and keep on top of it.

REMEMBER: It isn't just about the stretches, it's also about being able to follow a simple routine. Building up your willpower over the lazy person embedded deep inside of you (we all have have it.)

Post-day harder workout:

So you've been trading or working all day and now it's time to blow off some steam.

Working out can be one of the easiest ways for your body to deal with stress. Pushing your body harder, working muscles, etc.. results burning chemicals like cortisol and norepinephrine which can be a cause of stress. As well, working out releases natural endorphins in the body, balances out dopamine and serotonin in the brain, and the result is a sense of safety and security, lower levels of anxiety, and reduced feelings of stress.

Now, as I mentioned, I'm not a health nut. I'm not asking you to go become a body builder and look like Arnold Schwarzenegger in his body sculpting (pre-terminator) years.

But... Here's where you want to push yourself a little harder than the light jog I was talking about during your morning routine. Maybe get a gym membership, or at least pick up a home workout DVD. You don't have to work out every single day you trade (everything in moderation,) but I highly suggest working out after a frustrating and stressful day in the markets. It's a great outlet for your frustration and stress. Not to mention it's healthier than bottling your stress up and blowing up on someone later out of the blue.

Like I said, you don't have to be a body builder; I'm not suggesting every trader should turn into a gym-head. Even something as simple as the warm up I talked about--running around the block-- combined with a set of push ups and sit ups in the comfort of your living room can help get you started.

I'll stress this again: We're doing this not only for the physical activity, but to build discipline with routine following.

Diet:

This one is a bit tricky since everyone has different tastes and will like some foods over others, but the basics here are: If you're not already eating somewhat healthy, you're going to have to start.

If you fill your stomach full of fast food day in and day out, you're going to feel like garbage, and it will reflect on your trading decisions and mental capacity. You've probably heard it before, but FEED YOUR BRAIN!

Professional athletes will go through great lengths to make sure their diet is in order, and traders shouldn't be any different. I will say this though, habits aren't broken overnight, and even I loves me some greasy, fatty, foods...so it's ok to indulge once in a while. The idea is not to have anything in excess.

Personally, I stick to a high protein (chicken, tuna, salmon, pork, eggs, etc..) low carb, and high greens (spinach is awesome) diet during most weekdays. And I let myself pig out for a meal or two during the week and one day on the weekend where anything goes. I love food, I won't deny myself what I crave, but I know during the week I must focus on eating right and feeling good.

If you have any concerns, please consult a dietitian or your doctor before making any drastic changes to your diet.

An interesting read for both light workouts and diet without all that crud commonly found in fitness material is 'The 4 Hour Body' by Timothy Ferris. Although again, do consult with a professional before doing anything you're not comfortable with in regards to diet and exercise.



The next installment in the On Professionalism thread series can be found here:

Meditation, Visualization, and Positive Self-Dialogue
 
I wanted to mention something.

I noticed that readership tends to drop off a bit after this post, and I think it has to do with recommending that people exercise and watch their diet.

There's a reason I put this as the 2nd thread in the series (and placed it before the majority of good meaty content later on,) and it relates to discipline.

Following an exercise routine is not going to make you a better trader on its own. I'm not suggesting that eating right and working out means you'll be Mr Super Trader. BUT.. it will help you with building self discipline, and most traders fail hard when it comes to discipline.

So, if I'm going to recommend anything to help work on your self discipline (books, experiments, exercises and mental tricks, etc..), then it's going to be:

Firstly, and before anything else: What I do myself. I can't stand reading advice on trading websites that obviously is not followed by the author. So I'm not going to ask you to do anything I'm not already doing myself, and I haven't already identified as something that helped me as I developed.

Secondly, if possible, something that has positive impacts on your life outside of trading. Exercise (even if you're only going for a 30 minute walk everyday as a start,) can drastically improve your health, well-being, can release endorphins and have many positive mental effects in the long run.

So exercise fits well here when aiming to start a routine outside of trading that helps you with building discipline (which is a skill used later in all kinds of ways related to trading...)

And since I'm only asking that you start increasing your activity level (again, even starting with a brisk 30 minute walk everyday would be awesome if you normally have little-to-no activity in your lifestyle,) it's not like I'm saying you need to become body builders or world-class athlete.

So, it really boils down to this: If you couldn't be bothered to commit to a very minimal increase in your daily physical activity, one that has nothing but positive benefits to multiple aspects of your life and makes you feel good in the process... Then how am I ever going to expect you to follow a routine of harder and more emotionally/physically draining tasks like that we find throughout trading? How can I expect you to follow through with the advice I give after this section?

Think about that.
 
Trading is fundamentally about discipline. Many, many other things very important to Life are also based around it. Your own personal finances, also, show up on this topic. No amount of Trading income will make up for terrible personal finance decisions, either. ("You can't out-earn stupid" is the saying, I believe)

Now, as I would be qualified as a "health nut", in and of the fact I know far more than all but the true experts in the field, let me toss out a few other ideas in-line with Jack's post.

A few books that are legitimately good:

Starting Strength
Overcoming Gravity

If you want to know how to do an exercise properly, you'll love ExRx.

On the diet end of things, LeanGains will serve most people pretty well. If you want a bit of a different take, look up BulletProof diet. Especially for the coffee lovers.

I'll skip a massively long discussion of different aspects of Physiological & Neurological stress, but needless to say, your current physical condition dictates how well you can handle them. If you happen to know someone with Fibromyalgia, realize that the disorder is *caused* by a collapse of the body's stress response system. It's a disorder that causes massive physiological pain, all caused by Stress Response dysfunction. (It's a lot easier to diagnosis than to fix, unfortunately)

Though, the one place I would disagree with Jack is on the "stretching". Some light calisthenics would be better. "Stretching" as most understand it isn't actually helpful. You need blood flow to the joints, which light exercise will do.

Arm Circles, Jumping Jacks, Push-ups and the like. For a certain segment, it's those things thought in grade school for P.E. There is actually a reason they taught those: it was based off the programs used to train soldiers for many years. They're very functional.

And jump ropes (skipping rope) is very good. Wonderful little workout condensed to 10 minutes.
 
Great thread! Excercise and diet really helps to de-stress after a long day at the charts, alongside a good healthy diet and plentiful sleep this keeps me in top trading performance. Add to this yoga, meditation and sunday walks too! ;)
 
I just wanted to mention that I agree with Jack on the importance of stretching, but not in the quick 3 minute version that most people probably do before exercise. I have personally seen yoga transform the lives and physiques of people who were so overweight / otherwise disabled, that they could not do traditional exercise. When practiced regularly (daily!), yoga will make you strong, limber, and lithe. It just feels great and there is a reason that so many people have jumped on the yoga bandwagon. Just my two cents. For those out there who don't really want to go to the gym, it's easy to learn and practice yoga in the privacy of your own home - and many people testify to its power to calm the mind and center a person and their focus. Many benefits that carry over to your trading as well as personal well being.
 
Dear all,
New to fxgears and absolutely impressed with Jack, Michael J H and sqa (and others I haven't met yet) for everything presented here.

Noting the comment... "reading beyond this part trails off..." I suspect all thos people without discipline have stopped reading. I find that ironic.:)

I'm keen to join the ranks of the professional, disciplined traders and can only thank you most sincerely for showing me a new path to achieve that goal.

Stay Happy

Garry (from the land of Oz - Downunder)
 
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