Shinken Trader

Stuart McPhee, private trader, author and trading coach,
explains how traders can prepare their minds for top performance
through physical exercise. I therefore suggest Shinkendo…

Unfortunately, many people who start trading find success difficult
to achieve, certainly in the period of time immediately after
starting.  Trading is a challenging endeavour that has torn people
from all across the world across generations, from every extreme of
their emotions.  It is our money that is directly involved in
trading and therefore at risk, and the potential of making more
money is our primary motivation for beginning this undertaking.
Therefore any emotions that we may associate with other endeavours
are heightened because money is something that seems to accentuate
any natural human emotions that we have.  Ironically, it is the
money that encourages the vast majority to attempt to trade yet it
is the money that causes most people to fail.

The renowned American psychologist Dr. Van Tharp has often said how
important your psychology or mindset is to your trading success.
He has previously graphically depicted the significance of your
psychology using a pie chart and explaining that there are three
‘Ingredients to Trading’.  They are System, Money Management and
Psychology.  In the pie chart, the System is 10%, Money Management
is 30% and the remaining 60% is psychology.

Why does a psychologist who has spent his entire professional life
counselling traders of all experience levels say that so much of
your trading hinges on your psychology?

The key is that your mind drives everything you do in your life and
trading is no exception.  Your emotions are a part of who you are
and your decision making process.  Decision making is a large part
of trading, as you need to make decisions often and many of them
are difficult decisions.  Furthermore, people like to break rules,
even ones they set themselves.  There are some simple trading rules
that have stood the test of time, and will always work yet most
people cannot follow them.  It is essential that you realise how
important it is that you demand of yourself the highest level of
discipline to ensure you implement the requirements of your trading
plan ruthlessly and follow some of the time tested trading rules.

At a presentation I gave a few months ago to a group of about 50
fellow traders, I was asked several questions, as per usual.  After
discussing the items above about emotions, sticking to a plan and
the stresses associated with trading, I was asked about how you
overcome the stresses and emotion of trading that seem to
jeopardise so many traders around the world.  I answered,
“Exercise”.  I immediately received many puzzled looks and someone
said, “you mean practicing trading?”

It appeared to me that many had never considered a regimen of
physical exercise in order to prepare well for trading.  You don’t
have to run in order to trade - you just have to sit at a desk.
However when you consider the demons that haunt many traders and
the obstacles we face, then think about the benefits of physical
exercise, shouldn’t we mention the two together more often.  More
and more today, people not only mention the physical benefits of
physical exercise, they also include now the mental benefits of
physical exercise.  These are numerous.

Physical exercise can greatly improve both your mental and physical
health.  The physical benefits of aerobic exercise are well known
and include improved muscle strength, flexibility, and
cardiovascular endurance.  Exercise also helps lower your blood
pressure.  My belief in the benefits of physical exercise with
regards to trading is based on the ability of exercise to help
combat stress, and help you think more clearly when you are facing
adversity.

Generally speaking, the lives of many have never been busier and
more stressful.  It has become a driving force behind most visits
to doctors for people of all ages.  Medically, when a person is
experiencing stress, adrenaline pours into the blood stream as part
of a person’s ‘fight or flight’ response and muscles throughout the
body tense in anticipation of a challenge.  Immediate effects can
range from a short temper and heightened emotions to difficulty
sleeping.

Many traders would agree that you can experience certain levels of
stress when trading and it is often at these times that we do not
employ the best judgement in our decision making.  John McCarthy,
executive director of the International Health Racquet & Sportsclub
Association (IHRSA), says, “Regular physical activity can help
counter the potentially damaging effects of stress on the body and
may help prevent stress-related illnesses.  These activities
provide a natural way to release tension in the body and will often
lead to an automatic state of relaxation that naturally follows a
good workout.”

Medically, during exercise the body starts to produce endorphins.
Endorphins are chemicals that lead a person to feel peaceful and
happy; they promote a sense of well being.  This is a perfectly
natural and effective tool in helping to manage stress.  Exercise
can also help some people sleep better and raises their
self-esteem.  By increasing your self-esteem, your self confidence
grows and this can directly assist you with trading, as confidence
is one of the more understated character attributes required by
successful traders.

Of perhaps less importance, exercising can help you physically look
better, as those who exercise regularly, look more toned than those
who don’t.  Exercise is one of the most important parts of keeping
your body at a healthy weight, and people generally feel much
better and confident when they see themselves in a positive light.
Again, those who feel more confident in themselves are likely to
have more confidence in a trading plan they develop.  The flow on
effect can be very positive for their trading.

Trading is generally decision making where we need to employ sound
judgement on a regular basis.  Along these lines, exercising can
also help your brain to work better.  There have been numerous
academic papers and research done to support the notion that
exercise can improve a person’s ability to think more clearly.
Exercise has been found to increase a person’s mood state and an
overall improved sense of well-being, which in turn helps to keep
stress, anxiety and depression to a minimum.

Military forces all around the world engage in regular and
demanding physical exercise in preparing for the demands of
military operations.  Officer training institutions generally
enforce greater standards as officers are often required to make
decisions and often do so under pressure and hardship.  The
physical exercise they endure enables them to think more clearly
than the average person and remain level headed when the pressure
is on and all seems lost.  Could we as traders not benefit from a
similar mindset where we are able to think clearly at all times and
make sound decisions based on solid judgement?  Wouldn’t this help
us take a step towards overcoming the adversities we can face with
our emotions and stresses?

Focussing on the type of exercise, it is important that people
don’t exert themselves too much.  It has been found that a steady
aerobic workout will produce far greater results than those that
exhaust the body and leave a person folded over in pain and out of
breath.  A steady aerobic workout will greatly assist the brain’s
ability to solve problems and make decisions fast and effectively.
Generally after exercise, people are able to concentrate and focus
much better than before.  They are better able to block information
that is irrelevant to the task at hand, and respond much faster to
information relevant to the task.

From a motivation perspective, it is important for those who have
never really exercised before or where there has been a lengthy
layoff, that they start off easy.   Many unfit people set out to
begin an exercise routine with great ambition and enthusiasm and
then find that they cannot stick to the routine and their
motivation quickly disappears.  These people end up on a
never-ending cycle of great ambition, loss of motivation, and a
steady slump back to where they started.  This is often because
they are not enjoying the exercising they are doing.  This is a
problem.

Exercise is supposed to be a fun activity, even for the whole
family and when you arrive back home feeling terrible, the
motivation to go back out and do it again takes a big hit.  This is
when you will begin to think of all the reasons not to go again and
then, you have taken a turn down the wrong road.  Naturally, the
fitter a person is, the more they will reap the rewards from
aerobic exercise.  Physical fitness does not come easy.  The best
strategy is to gradually increase the duration of your exercise
sessions and, along with enhancing your physical fitness, your
mental muscle will also begin to take shape.

There is no doubt that regular and moderate aerobic exercise will
help your brain to function more efficiently, and therefore reduce
stress, think more clearly and remain level headed in times of
emotion and adversity.  In an endeavour where very few people
succeed, it is in our very best interests to do everything we can
to increase our chances.  I strongly believe that physical exercise
can greatly assist traders to think more clearly, reduce the
effects of stress, and ultimately make better and timelier trading
decisions.