are special. Returning to the list that I generated, note that it’s the stretches of time devoted to creative work; the special trips and joint activities; and the vigorous exercise that give energy. If we stay in routine, we fall prey to underuse. Our batteries inevitably drain. And that drains life, not just trading performance. ■■■ When you’re up to your eyeballs in heating bills, the first thing you do is stop turning up the heat when it’s all escaping through the gaps in your windows. And that’s what Calvin did. His first step, after meeting with me, was to take a vacation. He stopped trading and went to an amusement park destination with his son for a long weekend. It was quality time and, to Calvin’s surprise, his ex-wife approved of his taking time away from work to get closer to his son. When Calvin returned, he had a heart-to-heart talk with his girlfriend over a relaxing dinner and found out that it was his preoccupation with trading and markets that led her to distance from him. She felt that she was a number-two priority, and that hurt. Toward the end of the trading break, I met with Calvin and his assistant and I asked each of them, independently, to generate a list of what needed to be improved in trading. Not surprisingly, there was strong agreement between the lists. The number-one priority for both of them was the need to get off the desk and away from screens during the day to review ideas and positions and plan actions rather than react to price oscillations. Making that as a team commitment had particular force for Calvin: He liked his assistant and did not want to let him down. Another improvement that they targeted was the setting of very specific rules for entry execution. They were only allowed to BEST PROCESS #2: BUILDING ON STRENGTHS 164 add to positions on retracements, and initial entries had to be of a threshold size so that winning trades truly felt like winners. Every trade had a specific target, stop, and size and these could only be changed if the two of them identified specific developments that changed their market views. Calvin’s assistant was energized by being included in the coaching, and Calvin started to feel like he was returning to his old self. Was he doing anything unique or revolutionary? Of course not. By stepping away from markets, focusing on a key value (his relationship with his son), and using the coaching to return to basics, he simply created small wins—and those provided a degree of insulation. His days started providing more energy than they were consuming, particularly when our focus turned to lifestyle and exercise, healthy eating, and replacement of drinking with socializing with friends. In each case, we took the same approach that Calvin had taken with his assistant: developing a ‘‘ritual’’—a daily routine—that guided his exercise, eating, and social life. I was as much a cheerleader as a coach: Calvin had done all of these things well during much of his career. He was correct: He had gotten away from being himself. His ‘‘cure’’ was not to change, but rediscover, himself. Key Takeaway It is not enough to master stress; we must sustain life passion if we’re to energize our trading. What I saw in Calvin is what I see consistently in working with people: When engaged in the wrong activities, there is a downward spiral, and negativity is followed by increased negativity. When activities focus on well-being, the spiral turns upward and energy leads to fresh energy. The energy that Calvin gained through better sleep, weight loss, and exercise stimulated his social life, which in turn kept him positive and energized for markets. As he began making money again, he found himself wanting to keep the momentum going, so he eagerly continued his lifestyle changes. Had our work together been problem-focused—analyzing his past conflicts, tracking his self-defeating behaviors and thoughts—we would have never reinsulated his house. Calvin had to rediscover his happiness before he could rediscover his trading . www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 165 ■ Conscientiousness: The Underappreciated Ingredient of Success I recently wrote a two-part series of posts for the TraderFeed blog on why conscientiousness is important and how it can be cultivated. Recall that conscientiousness is one of the ‘‘big five’’ personality traits identified in the research literature. A conscientious person is one who is organized, responsible, and hardworking. When we refer to trading in a disciplined fashion, we are talking about approaching markets in a conscientious manner. A behavioral analysis from Jackson et al. (2010) identified a num- ber of behaviors negatively correlated with conscientiousness (avoid work; impulsivity; antisocial; and laziness) and ones positively corre- lated (organize, cleanliness, industrious, appearance, punctual, formality, responsibility). The authors found that conscientious people are goal- oriented and self-controlled; they are organized, hardworking, and think before acting. Because conscientious people are more likely to work hard, avoid acting on impulse, and pursue goals in an organized manner, they tend to achieve better grades in school than less conscientious people. They are also more likely to succeed in their careers. An interesting study from Kohn and Schooler (1982) found that two factors led to occupational success: ‘‘ideational flexibility’’—open mindedness—and a ‘‘self-directed orientation,’’ which is essential to conscientiousness. People who were self-directed versus non–self-directed were less likely to need close supervision in their work and were more likely to engage in higher paying, less physically demanding work. In other words, responsible people tend to be given more responsibility. The ‘‘industriousness’’ component of conscientiousness reflects per- sistence. The deliberate practice emphasized by Ericsson as a cardinal process in the genesis of expert performance presumes a high degree of persistence in learning. The conscientious person is particularly likely to seek detailed feedback about performance and use that feedback to make subsequent improvements. Compared with the lazy or distracted person, the conscientious trader is more likely to keep a journal, set goals, and systematically learn from experience. Conscientious traders are also apt to follow risk management rules and avoid impulsive behaviors that often undermine trading. BEST PROCESS #2: BUILDING ON STRENGTHS 166 Recall Calvin’s downward spiral, as one life area after another failed to renew his energy and provide psychological well-being. It was fascinating that the loss of well-being took a toll specifically on his rule-following as a trader. In a very important sense, Calvin became less conscientious over time: Diminished energy led to greater impulsivity and poorer decision making. Most of Calvin’s assistant’s concerns for his boss centered on his loss of discipline. Normally conscientious, Calvin fell into reactive patterns of what he called ‘‘rookie trading.’’ Michael Posner’s (2012) cognitive neuroscience research suggests that attention and the executive functioning of the frontal cortex are essential to conscientiousness, with self-regulation as the link. When willpower is high, we are more likely to behave in organized, disciplined ways than when we are at low ebb. To the degree that well-being restores energy and willpower, we would expect to see happiness, satisfaction, energy, and affection contributing to conscientious behavior and success in school and work. We are more likely to be consistent in our pursuit of ends if we derive well-being from the process. The striking aspect of Calvin’s turnaround is that he became more conscientious once he became happier, not the reverse . An understandable coaching approach would have been to focus on Calvin’s poor rule governance and encourage him to become more conscientious by completing journals, planning his trading, and so on. This, of course, would have failed: With his leaked energy, Calvin would have simply lacked follow-through on the journals and plans. His first step toward turnaround came not from working on his trading but from taking a break from markets and immersing himself in enjoyable and fulfilling activities with his son. He then followed up with activities that enhanced his connections to his girlfriend and personal friends, all of which contributed to the energy to revamp his eating, drinking, and exercise patterns. Once he was experiencing greater well- being, the increased energy fed increased discipline. No amount of effort to jumpstart discipline would have generated that well-being and energy. An intriguing conclusion is that we lack discipline and willpower because we live life at a suboptimal energy level . While most of us are not mired in depression and burnout, we also do not experience passionate interest and love for life on a regular basis. Most of daily experience is spent in routine, which is efficient in the short run but de-energizing in the long run. We bring our energy leaks to the trade station, falling short in our trading for many of the same reasons as Calvin. We then try to make ourselves more conscientious by filling out more journals and analyzing more trades, all the while depleting our energy further. www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 167 Key Takeaway Emotions of greed, fear, and frustration drain us of energy and lower our ability to sustain intention. A provocative study from Tang and colleagues found that even a short period of integrative mind–body meditation daily resulted in improved attention and emotional self-regulation. It makes sense that mindfulness would promote conscientiousness: We’re most likely to sustain our intentions if we remain mindful of them. What the study authors also found was that the daily meditation also led to enhanced emotional well- being and diminished stress. Meditation appears to be training not only for attention, but also for emotional self-control and enhanced emotional balance. By neutralizing sources of our energy leaks, meditation is an important tool in the cultivation of conscientiousness, as control over mind and body facilitates ongoing behavioral self-control. ■ Biofeedback as a Strategy for Enhancing Well-Being Imagine carrying out meditative activities—slowing the mind and body, focusing attention—while you are hooked up to monitors that track your blood pressure, heart rate, muscle tension, brain waves, and other measures of physiological and cognitive stress. Beeps from the monitors tell you whether you are succeeding at relaxing and focusing or whether you are getting out of the zone. Over time, you learn the kinds of physical and cognitive strategies needed to keep the beeps at zone levels, using the signals to guide your efforts. That is biofeedback: It is meditation and stress management married to deliberate practice. For years, I have found biofeedback to be a highly useful tool for traders. This is why I emphasized its use in The Daily Trading Coach . With a few adaptations, biofeedback can be used to break a variety of negative patterns and instill new, positive ones. Here are a few of the most promising applications: ■ General training of the flow state —The combination of physical relaxation and intensified concentration is precisely the set of conditions needed to enter the flow state, in which we become pleasurably immersed in what we are doing. If we think of flow as a skill to be developed, rather BEST PROCESS #2: BUILDING ON STRENGTHS 168 than a state that simply occurs at random occasions, then biofeedback can be used as flow training . Through biofeedback, we learn to tune out distractions and regulate our minds and bodies. A short biofeedback exercise to enter the flow state can be a powerful way to start the trading day—and it makes a very useful break activity when you are finding yourself saturated and losing willpower. ■ Stress management —Part of the power of biofeedback training is that it teaches us to enter states of mind and body that are incompatible with stress and distress. It is very difficult to sustain the body’s flight-or-fight response if we are slowing our minds and bodies down and exercising enhanced self-control. Similarly, slowing down is incompatible with the impulsivity that typically results from negative emotional arousal. A particularly useful exercise is combining guided imagery with biofeedback, so that you are immersing your mind in something relaxing and quieting while keeping your body still and slowing and deepening your breathing. Through vivid imagery, we can create alternate realities and use those to short-circuit stress responses. ■ Exposure methods —Here we turn up the heat on imagery and vividly imagine situations that have the potential to stress us out. We re-experience those situations and recreate in as much detail as possible how we would like to think and behave. Throughout this visualization of stressful events, we keep our bodies still and our breathing deep and slow. This trains us to remain relaxed and focused—even as we are confronting our most stressful scenarios. Exposure methods are extremely useful for combating performance anxiety and for preparing for anticipated market challenges. Through biofeedback, we get real-time feedback about our state of arousal, so that we can see, firsthand, that we can keep ourselves under control in the most difficult situations. Although biofeedback is generally employed as an adjunct to stress management programs, it can be particularly useful in training us to cultivate positive emotional experience, as the example of the flow state suggests. In recent years, my biofeedback work has focused on measuring and controlling heart-rate variability (HRV), which is a measure of the normal variation in time between heart beats. As the MacArthur Research Network (1997) notes, HRV tends to decline with age and also decreases when we are under stress. People who report high degrees of anxiety and hostility also display lower HRV. Conversely, the activities www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 169 typically needed to increase HRV include relaxation, a low state of emotional arousal, and control over breathing. The quickest way to increase HRV, I have found, is to induce a state of high mindfulness, low arousal, and intensified focus. All of these are the very opposite of the frantic, distracted states that can make traders reactive. What is especially interesting is that sustaining heightened HRV for an extended time period does not lead to a neutral emotional state, but one that is experienced pleasurably. As already noted, it is a kind of flow state in which we tend to feel—not joyful and pumped up—but calm, at peace, and mentally/emotionally unburdened. Recall the components of well-being described earlier: happiness, satisfaction, energy, and affection. Not all positive states are high energy and high happiness. Calm satisfaction and warm affection can be equally positive, though not in as dramatic a fashion. Biofeedback training that teaches us to sustain high HRV is a kind of well-being training , very much connected to the earlier mentioned training of self-regulation and conscientiousness. Imagine Billy, a trader of multiple global assets. He typically wakes up early to check prices in Asia and Europe and then pours over news, research reports, and emails that have accumulated in the in-box. By the time he gets to work, he has actively processed a variety of developments and started to make adjustments to his trading plans and positions. This sequence of processing new developments, assessing their relevance, and tweaking views and positions proceeds throughout the day, enabling Billy to stay on top of fast-breaking developments. It is precisely this kind of fast, adaptive thinking that has contributed to Billy’s success across different market cycles. Billy’s work style works, but it is also productive of low HRV. The odds are good that Billy is jumping from development to development more in a rush than in the zone. Bombarded with inputs and needing to react rapidly to those, he has few opportunities for slowing mind and body and focusing attention. His work style is a kind of anti-biofeedback training, teaching him to sustain a state of low HRV. As we’ve seen from the prior discussions of use it or lose it, Billy is likely losing the ability to operate in the zone. This is likely to leave him vulnerable once markets pick up and the assembly line of information and market moves doubles its pace. When I first began my work with very active daytraders in Chicago, I wondered how consistently profitable traders could once in a while completely go off the rails and lose large amounts of money. As Billy’s example illustrates, that vulnerability is created when our approach to our work is not one that builds our self-control and capacity for well-being. BEST PROCESS #2: BUILDING ON STRENGTHS 170 Interestingly, many of those daytraders were not undone by busy markets but by boring ones. Having adapted to a breakneck pace of trading—many averaged 100 trades per day or more—they found it dif- ficult to throttle back during low-volatility periods. Especially at midday hours, there were many occasions in which the total amount of contracts being transacted in the futures products they were trading simply could not accommodate the traders’ position sizes. The boredom they experi- enced sitting back and waiting for greater liquidity was excruciating for them. The well-being they derived from market participation was one of activity and excitement. Indeed, several of them openly described them- selves as trading junkies: They realized that they, like some gamblers, got high on high-stakes action. The successful gambler knows when to fold a hand or not make a big bet. The conscientiousness of the professional gambler is controlling when to play and how much to bet. It is the gambler ‘‘on tilt’’ that makes outsized bets with undersized odds. I found it particularly interesting that slow markets put many of the daytraders on tilt. If they could not get an action fix, they tried desperately to manufacture one. That gave them action and drama—but of a negative sort. The flipside of use it or lose it is that everything we use trains us. We become what we consistently do . That can work very much to our favor, as when we cultivate positive habits, or it can work greatly against us, when we build harmful habits. The hyperactive daytraders literally trained themselves in a way that amplified their excitability and distractibility. They cultivated considerable strengths at reading market patterns over very short time frames, but they also failed to build strengths associated with focused calm and conscientiousness. They were like bodybuilders who became so adept at working their upper bodies that they looked like Mr. Universe, but only from the waist up. When they could not rely on their upper body development, their spindly legs betrayed them. Key Takeaway We are trained by our routines. Biofeedback and meditation can be viewed as tools for building the legs of attention, concentration, patience, mindfulness, and quiet, calm satisfaction. Through repeated biofeedback work, we can become quite www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 171 good at invoking the zone, but we also train ourselves to function well in that zone. If we cannot generate well-being without drama, we will gravitate toward drama. That, over time, will be hazardous to our emotional health and our trading wealth. Well-being training enables us to extract energy from situations that we cannot control. ■ Using Meditation to Build Positivity A 2008 study from Barbara Fredrickson and colleagues examined the psychological impact of an eight-week long training program in loving- kindness meditation. This is a distinctive form of meditation in that the meditator deliberately invokes images and feelings of love, contentment, and compassion while maintaining a stance of focused attention, physical calm, and mindfulness. The goal, therefore, is not simply to empty the mind but to fill it with thoughts, images, and feelings of well-being. In that sense, we can think of loving-kindness meditation as a kind of well-being training. I found this study particularly intriguing because it was precisely such an invocation of positive emotions that I discovered raises HRV during biofeedback sessions. For instance, when traders I worked with attempted to empty their minds, control their breathing, and stay physically still, their HRV readings were not as high as when they actively cultivated positive imagery. One of my favorite images during HRV sessions has been holding one of my cats, stroking her, and feeling her purr against my body. It turns out that this is exactly the kind of imagery invoked by loving-kindness meditation. A simple way to think of this is that relaxation training takes a car that is revving and stalling in high gear and brings it to lower gears, generating positive torque and movement. Instead of training ourselves to neutralize negative emotion, we can train ourselves to downshift and enter states that bring far better performance from our engines. As mentioned earlier, Fredrickson’s research, summarized in her 2009 book, Positivity , suggests that the development of positive emotional experience brings a host of benefits, including increased emotional resilience and improved health and social relationships. Her work finds that, under conditions of well-being, we broaden our minds and build new strengths. This broaden-and-build process suggests that people who experience themselves and life positively will be more likely to develop in constructive ways compared to those who lack well-being. BEST PROCESS #2: BUILDING ON STRENGTHS 172 Fredrickson a nd Branigan (2005) conducted a clever study in which they showed subjects films that either had positive or negative emotional content. They then had the subjects perform a task of visual attention that identified whether perception was broader and more global or narrower and more local. The subjects given the positive films tendedtoperceive the figures on the test in global ways: They responded to the bigger picture. Those who viewed the negative films responded more to the narrow, local aspects of the figures. The implication is that, under conditions of positive emotion, we literally broaden our views of the world. In yet another study, Wadlinger and Isaacowitz (2006) found that subjects in a positive emotional state tended to perceive the peripheral areas of a visual field, while those in a negative state attended primarily to the center of the visual field. When we are negatively focused, we tend to operate in tunnel-vision mode. Positivity broadens our view, enabling us t o process information that remains hidden to those in more negative states. Nor are the broadening effects of positivity limited to perception. As Fredrickson notes in a 2013 research review, people who experience high levels of well-being are more behaviorally flexible when confronted with novel situations. They also tend to be more inclusive socially, broadening their favorable views of others—including those different from themselves. Clearly these benefits of well-being have important implications for trading. A broader, more flexible view enables traders to quickly attend to changing market conditions and make adaptive decisions. Traders mired in negativity are more likely to be tunnel- visioned and unable to generate fresh ideas and adaptive responses to rapidly changing circumstances. This broadening under positive experience also leads to a building of strengths. In Positivity , Fredrickson cites research that shows how positive emotional experience helps to ‘‘undo’’ the negative effects of stress. Those with high well-being react physiologically to stress as do other people, but bounce back much quicker. This resilience is an important element in preventing setbacks from turning into slumps. Positivity also helps to build social networks, which in turn help people learn from each other and benefit from fresh interactions and perspectives. In the 2013 review, Fredrickson reports on research that shows how positive emotion leads to broader approaches to coping, which in turn helped to generate future positive emotional experience. These upward spirals of well-being lead to improved functioning, which in turn brings further well-being. This helps people build fresh capacities in ways that could never occur with the downward spirals of negative emotionality. www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 173 One of the upward spirals particularly linked to meditation and biofeedback involves vagal tone, a measure of the earlier mentioned heart rate variability (HRV). In a 2010 study, Kok and Fredrickson found that high vagal tone leads to positive social and psychological outcomes, which in turn lead to further improvements in vagal tone. By training ourselves to sustain high states of emotional well-being and vagal tone, we create conditions in which we are likely to respond to situations with heightened flexibility and adaptability and benefit from enhanced levels of social connectedness. In the loving-kindness meditation study, those who spent the most time with the meditation received the greatest results in terms of increased positive emotion. Most promisingly, when subjects spent significant time with the meditation activity, the positive effects were more likely to persist in subsequent days, even when they did not meditate. Among the strengths built by participation in meditation were mindful attention, self- acceptance, positive social relations, and good health. Evoking positive images and experiences in a state of heightened focus and self-control not only led to further positive emotional experiences, but also positive life outcomes that added to further well-being. The implications are clear: You want your trading process to be a well-being building process . ■ Using Self-Hypnosis to Feed Positivity A wealth of studies cited by the International Certification Board of Clinical Hypnotherapy concludes that self-hypnosis can be very effective for such problems as weight loss, pain management, and smoking cessation. Hammond’s 2010 review of research found that self-hypnosis is a rapid and effective intervention for overcoming anxiety and stress disorders. These findings are important, because they suggest that the emotional and behavioral self-control problems often faced by traders can be addressed through self-hypnosis. In The Daily Trading Coach , I outlined a simple self-hypnosis strategy that I found to be effective in calming emotional arousal, focusing attention, and cementing discipline. The exercise involves taking a seated position with your hands in front of you and palms facing each other. You breathe deeply and slowly and focus all your attention on your hands. Once you feel completely focused, you tell yourself that there are magnets slowly, slowly, slowly pulling your hands together. As your hands get closer and BEST PROCESS #2: BUILDING ON STRENGTHS 174 closer, you tell yourself that you are feeling more and more relaxed, more and more focused, and more and more patient and in control. Your gaze never wavers from your hands, which slowly begin to come together as you breathe deeply and slowly and keep telling yourself that, as your hands come together, you are feeling more and more in the zone. When your hands touch, you tell yourself, you will feel wholly absorbed in the present, with a clear, calm focus. (You can give the suggestions in your head, but it’s easy to make a recording and use it for the induction.) As you progress with the exercise, you add one more suggestion: My hands are a gateway to the zone. Any time I bring my hands together, I will find myself breathing slowly and returning to the clear, calm focus. With repetition, I find that traders can become very adept at this exercise. I have been using it for years, with the result that I can typically reach a state of high focus within a minute or two. The beauty of the exercise is its portability. The suggestions are twofold: (1) you will become relaxed and focused when you bring your hands together; and (2) you will become relaxed and focused any time you focus on your hands and bring them together. In other words, you are programming yourself to use a gesture—the bringing together of hands—to achieve a shift in your cognitive, emotional, and physical state. That shift is one from lower to higher levels of well-being . By now, you’ve no doubt observed common elements among medita- tion practices, biofeedback exercises, and s elf-hypnosis routines such as the one above. In each case, you are altering breathing, slowing the body, and focusing attention in order to access a higher level of well-being. Sustained relaxed focus is the common ingredient linking these methods. My experience with each of these techniques is that minutes per day of consistent practice yields significant benefits that carry on through the day. In the heat of battle, the traders who have practiced these methods daily are much more able to take a few breaths, center themselves, and stay focused on markets than traders who react to the arousal of mind and body and unwittingly wind themselves up. As Fredrickson’s work with loving-kindness meditation suggests, we can use these techniques to access a variety of positive states. In the above example, you can use self-hypnosis to achieve a state of calm focus. In a different variation, however, you can stay focused on a single visual point while performing callisthenic exercises, such as pushing your hands together with force or interlocking your fingers and pulling outward with force. As you perform the exercises, you tell yourself that, as you finish each repetition, you are feeling more and more energized, more and more filled with energy www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 175 and enthusiasm. Once you’re feeling invigorated, you then suggest to yourself that any time you focus your attention and perform the exercises, you will bring that energy back, as if you’ve been connected to a power source. (Once again, prerecorded suggestions can be quite effective.) It is not unusual, during business meetings or long periods of workingor trading, that I bring my hands together slowly and focus my (wandering) attention. Similarly, when I start to feel at low ebb, I will take a break, stand up, walk around, and perform a few callisthenic exercises while keeping my attention focused. In each case, I am relying on self-hypnosis as a training process, entering a desired state whenever I find myself functioning suboptimally. Key Takeaway Through training, we can become the masters of our cognitive, emotional, and physical states. I cannot emphasize this strongly enough: It is not sufficient to train ourselves to reduce negative emotions such as anxiety and frustration. We can learn to access and sustain optimal emotional states, improving the quality of our lives and our work performance. Many techniques asso- ciated with biofeedback, meditation, and self-hypnosis can be repeated throughout the day, meaning that we are using repetition to turn posi- tivity into a habit pattern. We don’t have to wait for good things to happen to us in order to sustain well-being . ■■■ Nolan was a successful trader, but he had one overwhelming problem: procrastination. It didn’t seem to matter what the responsibility was: Nolan would find a way to put it off until the last minute—and sometimes not until a deadline had passed. Nolan’s wife despaired of his lateness to social events and putting off of errands. She learned long ago in their marriage that she would have to pay the bills if their credit wasn’t going to be ruined. Interestingly, Nolan was always punctual for markets and had no problem coming in early for data releases or fast-moving markets. While trading, he stayed focused on multiple markets and took few breaks. He worked with strict risk limits and BEST PROCESS #2: BUILDING ON STRENGTHS 176 never blew up. Fellow traders considered Nolan to be a paragon of discipline. Everywhere else, however, Nolan was all over the place. Over time, Nolan’s procrastination problem began to catch up with him. He knew he should review and track his trading, but other priorities always seemed to get in the way. He started a journal several times, only to let it slip after a few days. When markets became more correlated, he found less benefit in trading multiple markets. Everything seemed to be ‘‘risk off’’ or ‘‘risk on.’’ The benefits of diversification, which had long aided his trading, now were diminished. He either made money on all his trades or lost money. The solid risk-adjusted returns that he had enjoyed for a number of years slowly eroded. Nolan realized that he needed to make changes in his trading, but he avoided the very steps needed to adapt. A careful investigation early in our meetings discovered that Nolan was most likely to procrastinate late in the day and least likely early in the morning. In the morning, he found fewer distractions and usually felt well rested. By the evening—and especially after an active day’s trading—he felt drained. The last thing he wanted to do was dive into new efforts. This, it seemed, was a classic willpower issue: He simply lacked the mental resources needed to direct and sustain effort. This was verified by a key observation: Whenever Nolan procrastinated, he felt tired and/or overwhelmed. A common thought was, ‘‘Not this, too!’’ He recognized that, at such time, he felt on overload. It didn’t matter whether he was asked to mow the lawn, help with the kids, or read research papers—all of it felt like a burden, particularly after he had worked all day. Nolan was a classic case of energy leaking through the windows. His problem was not that his work drained him. Rather, his problem was that he lacked any reliable method for renewing his energy. Borrowing from the solution-focused playbook, we examined evenings in which he didn’t feel drained. Not so surprisingly, on most of those occasions he had taken a short power nap—about 20 minutes—after coming home from work. That was sufficient to renew some of his focus and drive. We decided to build on that element of solution. I suggested to Nolan that, since he functioned best during early mornings, we had to create more mornings for him! The way to do that was to have him take a power nap after work, followed by a short but vigorous exercise session. During the session, he would engage in the self-hypnosis exercise mentioned above, suggesting to himself that each repetition was charging him with energy, renewing his willpower. He added a useful suggestion—as he felt more energized, he would perform his repetitions with greater speed www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 177 and effort and build his energy even further. As a result, his workouts were relatively brief but strenuous, with effort increasing throughout each session. Having rested and then pumped up, Nolan felt in the early evening very much how he usually felt first thing in the morning. He began to look forward to using this second morning to tackle his most pressing responsibilities. One of his priorities was to teach himself options trading, as he became convinced that this would provide him with some of the diversification benefits that he had been missing in his recent trading. Instead of achieving diversification by trading multiple markets, he began to look at trading volatility as a source of unique returns. What I found particularly fascinating was that, in the more energized mode, Nolan was no longer a procrastinator. He didn’t need to change his personality or enter into any kind of deep therapy. Rather, he simply needed a reliable method for recharging his batteries and renewing his cognitive, physical, and emotional well-being. ■ A Workout for Mind and Body Yoga is a particularly interesting practice in that it combines work on breathing and mindfulness with physical activity, such as stretching. We commonly think of meditation as a seated discipline. What yoga shows us is that we can be highly physically active and calm, controlled, and mindful at the same time. Indeed, most of the poses taught in yoga are designed to evoke particular physical, emotional, and spiritual states, such as self-awareness and gratitude. Through repetition, yoga practitioners learn to associate particular postures with particular states, creating habit patterns of well-being. For example, many foundational yoga poses involve opening up the body, stretching muscles, and maintaining balance. All require considerable self-control and precision and all are undertaken in a state of mindfulness, typically with controlled breathing. When we are stressed, we tend to breathe in rapid and shallow ways, react to events without mindfulness, narrow our focus of attention, and tense our muscles. Yoga positions create an unstressed state for the body, even as we are physically active. This is important because it trains us to stay controlled under conditions of physiological arousal. Pumping up the body while keeping the mind focused and mindful prepares us for staying in the zone even when we are pumped up during the heat of market action. BEST PROCESS #2: BUILDING ON STRENGTHS 178 I recently outlined in the TraderFeed blog a workout routine for mind and body that blends the benefits of meditation with those of traditional physical workouts. The speed workout that I described involves an initial period of deep breathing, concentrated focus, and seated calm, in which I am mindful of inhalations and exhalations while maintaining an erect posture. With each inhalation, I repeat to myself, ‘‘Energy in,’’ and feel my body energizing. With each exhalation, I repeat to myself, ‘‘Energy out,’’ and feel myself relax. After a few minutes, I typically feel quite centered and energized. Then begins the formal workout: I start with 5 to 10 minutes of stretching, starting with hands and arms, moving to back and waist, then legs, and finishing with situps. That is followed by 10 minutes of lifting on a weight machine, with sets chosen to work neck and shoulders, arms and chest, and legs. The final 15 minutes is spent in an aerobic workout on the treadmill, keeping the pace at a target heart rate. The workout follows two sets of rules across all three activities (stretching, lifting, running): 1. There is minimum rest time between activities. I move rapidly from one activity to the next. The idea is to create a concentrated workout that results in getting increasingly pumped up over a half-hour’s time. By condensing as much exercise benefit into as short a period as possible, I push my limits without overly taxing any single part of the body. 2. Throughout each activity, I maintain the same centered awareness as I had achieved during the first several minutes . What this means in practice is that I remain mindful of my breathing and posture and keep my mind focused on the ‘‘Energy in, energy out’’ mantra throughout each activity. The goal is to stay in the zone, even as I am moving quickly from activity to activity and testing my body’s limits. What I have found is that this exercise routine, repeated day after day, creates much of the benefit that I’ve derived from self-hypnosis. The initial period of breathing, posture, and awareness becomes associated with getting ready for the speed workout routine. The workout routine in turn is associated with staying mindful during periods of physiological arousal. Because the workout is associated with the breathing work, it’s not necessary to motivate myself to exercise; because the workout is associated with mindfulness, it’s not necessary to motivate myself to set time aside for meditation. The entire activity becomes a sequence of positive habit patterns. www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 179 When I first began this routine, I didn’t envision all of its benefits. Indeed, I thought of combining work on mind and body simply as a time-saving measure. It was only later that I discovered the greatest benefit of the combined workout routine. ■■■ The trade was moving away from me as the market headed lower. I found myself tensing up. My mind began to race. I had anticipated a break to the upside, but it wasn’t materializing. I looked across different indexes and sectors and tracked the recent upticks and downticks to determine whether this was a broad shift of market participation. Something felt wrong, but I could not put my finger on exactly what it was. Suddenly, without advance planning, I shifted my position in the chair and sat up straighter. I adopted the seated position that I take just before the speed workout. I began to regulate my breathing and maintained my focus on the market. I was aware that my heart rate had increased and that I felt tense, but I felt more like an observer to my stress than a participant. The market bounced a bit, held, dipped, bounced, held … the sequence continued for a few minutes. I said out loud, ‘‘The buying has dried up.’’ The NYSE TICK could not move above +500 on the bounce; price could not take out its prior high; a key sector barely budged during the bounce in the overall market. Quickly, I exited the long position and flipped to a short. That is unusual for me. Normally, I would exit and then reassess the market. This time, however, the market’s behavior seemed quite clear. Within a short time, sellers reentered the market and we moved back to the day’s lows, where I covered, taking advantage of what had been a range trade all along. Key Takeaway We learn to function in the heat o f battle by training under heated conditions. What made this little sequence special was not the modest profits of the trade but what the process of the trade taught me. It was the first time I could recollect in which the flight-or-fight response to adverse price movement kick-started me into a state of calm focus and sound BEST PROCESS #2: BUILDING ON STRENGTHS 180 information processing. It was all set up by the shift in posture . I associated the mindfulness with the open posture of chest expanded and sitting very straight. Once I sat in the proper posture, the breathing came naturally and was quickly followed by the calm clarity of being in a more mindful state. Day after day of training myself to stay focused and controlled while my body was pumping up led to an unexpected focus during a pumped-up trading episode. Quite literally and somewhat unexpectedly, I had trained myself to move deeper in the zone as I became more worked up. The mindful speed workout has become a major psychological tool in my trading arsenal. It is a way of staying energized, and it is a way of building and sustaining well-being. Most of all, however, it achieves a reprogramming: Instead of losing control when we are stressed, it teaches us to become even more controlled when the stuff is hitting the fan. ■ Special Topics in Well-Being: Love Do you remember when you first fell in love? It’s quite the amazing experience. Ordinary experiences become extraordinary when you’re immersed in love. My memory for events is not particularly good, yet I can remember vivid details of the New Year’s Eve party in which I met my wife-to-be. Some 30 years later, we took a cruise together and I found it extremely gratifying to experience those same feelings. Love encapsulates all of the experiences of well-being: happiness, satisfaction, energy, and affection. It is one of the most concentrated experiences of well-being that we can achieve. Too often, however, we accept the premise that the magic of love is something that we outgrow. We see couples that are comfortable but not passionately in love and we assume that this is the natural state of things. Similarly, young people often approach their professional lives with dreams and aspirations—they are in love with their work. As time moves on, however, the magic fades, replaced by a daily sequence of business meetings, project deadlines, and office politics. It’s a sad reality that, as people age, they become less enthusiastic, less audacious in their goals, less in love with their lives. They aren’t necessarily depressed or unhappy. They simply lack the glow of being in love. We think of love in terms of romantic relationships and, as we’ll see, that expression of love is particularly important to well-being. In truth, however, we have a relationship with every major facet of www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 181 our lives. We have a relationship with our jobs; we have a relationship with our bodies; and we have relationships with our friends. We have relationships with our recreational activities, and with our families. Even more broadly, we have a relationship with our physical environment, from our offices at work to our homes. Life can be conceptualized as an interlocking network of relationships. The quality of our lives is greatly impacted by the quality of those relationships. Imagine, for a minute, your relationship with financial markets. How would you characterize that relationship? Is it an adversarial relationship? A hot-and-cold, confusing relationship? A fulfilling relationship? Many traders talk about markets as if they are battlegrounds and they prepare for combat each day. Other traders, frustrated, talk about markets being dysfunctional and manipulated. How we relate to markets very much impacts our trading experience. If we think of the market as a casino, we will frame one kind of experience. If we treat markets as battlegrounds, our experience will be quite different. Now imagine what it would be like to be in love with markets : to find in them something unique, special, and valued. A person who is in love with markets will be market-focused even outside of normal trading hours. They are not simply preparing for a day’s trading; they are passionately interested in deepening their market experience, learning everything they can about markets. A good romantic relationship makes us feel visible: We are understood and appreciated for who we are. A good relationship with markets makes us visible as well. As we have seen, it brings out our greatest interests and strengths. As we’ve observed so often in this chapter, tapping into well-being means that we don’t have to continuously rely on motivation to do the right things. When we are in love with markets, we don’t have to make ourselves research, observe, and study: Indeed, nothing can keep us away from our passion. When I worked a full-time job at a medical school, I wanted to study markets intensively, but knew I couldn’t follow them in real time. Instead, I printed out charts of major markets and indicators on a five-minute basis and collected them every day. Each day required quite a few minutes to download and print out the data, but over time I developed quite an encyclopedia. I could track how markets and indicators behaved at major turning points, how they behaved in trends, and how they acted during range conditions. I could track breakouts and how they occurred, and I began to observe differences between fakeout markets and true breakout ones. BEST PROCESS #2: BUILDING ON STRENGTHS 182 The investigation was fascinating. I conducted my daily downloads and reviews for two full years. During that time, I placed very few trades. It wasn’t about the trading. I was in love with markets. I recall being asked many times how I could stay so motivated to download and study market information each day. The question amused and confused me. It wasn’t motivation; it wasn’t even a choice. I no more motivated myself to follow markets than I motivate myself to spend time with my wife and children. When you are in love, interaction becomes a source of joy. To this day, I maintain the downloading. Each day I track a variety of breadth measures, many of which I update on the TraderFeed blog. One data set has been manually updated daily since 2006. Each day I look forward to seeing the new data, much as you might look forward to the next episode in a television series that you enjoy. It was during my printout days that I discovered the NYSE TICK and the value of tracking market sectors. It was during later data explorations that I learned to break the market down into transactions across a wide universe of stocks and separately assess buying and selling pressure. Over time, all that study has given me an unparalleled database. Most important, it has provided an intimacy with the data that can only come from love. ■■■ Too often, trading comes at the expense of relationships. The ups and downs of performance and the uncertainties of markets take a toll on traders and partners alike. I recall being asked at one trading conference for the secret to success in markets. My answer was simple, ‘‘You should always have something in your life that is more important to you than trading.’’ That is the power of love. When we love markets, but have something more important to us than trading, wins and losses suddenly fall into perspective. Imagine being a passionate trader who was deeply connected to his or her religious faith. The love of markets would be a powerful motivator, but it would pale beside the power of a deeper, religious love. Could you really become too caught up in the ego implications of winning and losing if your main focus is spiritual connectedness? Similarly, the love of a spouse and family is what keeps me going. If I experienced a debilitating drawdown in my trading, it would hurt and I would be disappointed— and I would still have a good and rich life. Traders who neglect their relationships implicitly put their trading at the top of their emotional priority list. When that happens, self-esteem, www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 183 mood, and energy level become correlated with P&L. Love provides an important set of emotional buffers: When we derive energy, affection, happiness, and satisfaction from activities outside of markets, we don’t have to overtrade markets to manufacture good feelings . Many times, the answer to our market problems is cultivating the positives from our nontrading lives. ■■■ Research studies tell us a great deal about how love contributes to our overall well-being and effective functioning. In her book, Love 2.0, Barbara Fredrickson (2013) summarizes fascinating research conducted by neuroscientist Uri Hasson at Princeton University. He had a young woman tell a story while being connected to a brain scanner. He then had various people listen to the story while connected to scanners. What he found was that certain people related to the story more than others. When people related closely to their story, their brain wave patterns mimicked those of the speaker—even though the two of them had not met. Indeed, when there was a closely felt connection between listener and speaker, the brain wave patterns of the listener actually anticipated those of the speaker! This suggests that, when people connect with one another, there is actually a ‘‘neuronal coupling’’: Minds are in sync. Another person’s reality becomes ours. Research summarized by Lopez, Pedrotti, and Snyder, in their overview book, Positive Psychology (2015), finds that when partners in long-term romantic relationships are shown pictures of one another, areas of the brain that are associated with bonding and attachment, as well as with rewards associated with goal attainment, become active. When there has been long-term coupling, the mere sight of the loved person becomes a source of well-being that protects against stress and promotes health. Fredrickson notes that the neuropeptide oxytocin, which is asso- ciated with bonding, is stimulated by close, loving interactions. Oxytocin helps to moderate stress and facilitates social interactions. When parents and children are in sync with one another, the production of oxytocin occurs on both ends, helping cement loving, trusting bonds. In short, love places us in greater harmony with others, and that harmony helps make us more loving over time. Key Takeaway Our connections to others are a powerful buffer to trading stress. BEST PROCESS #2: BUILDING ON STRENGTHS 184 Indeed, research suggests that social attachment overall is related to well-being. Argyle, in his 2001 book, The Psychology of Happiness , cites evidence that satisfaction with friends correlates positively and significantly with both happiness and life satisfaction. He similarly notes that a strong social support system is associated with superior physical health, especially when that system brings actual support, not just a venting of problems. As noted earlier, a variety of studies find that being married is associated with higher levels of well-being. Argyle cites evidence that this is true across cultures, resulting in superior mental and physical health among married individuals. In one particularly interesting study, Berkman and Syme (1978) tracked 7000 people over a nine-year period. Among those over the age of 50, 30.8 percent of those with weak social networks had died by the end of the study, compared with 9.6 percent of those with strong networks. So what does this mean for trading? Three implications stand out: 1. Building professional networks—Among the most successful traders I’ve worked with, the majority have very active and strong networks of peer traders. This network helps them s tay on top of market develop- ments and research, but there is an additional benefit: It provides an effective professional social support system. Fellow traders are most likely to understand the day-to-day challenges of markets and assist with problem solving. Many of these networks include not only infor- mation sharing, but also mentorship. A strong and active network is a great way to broaden trading horizons while sustaining well-being. 2. Sustaining strong romantic relationship and family ties—Itisextremely important that traders cultivate consistent sources of happiness, life satisfaction, energy, and affection as a buffer to the ups and downs of market performance. Too often, traders who experience performance challenges double down on their market focus, further immersing themselves in the source of their difficulties. This creates a downward spiral of energy, a loss of optimism, and a greater likelihood that trading setbacks will become outright slumps. When relationship and family ties are strong, risk taking takes on a different complexion. Trading well becomes part of a commitment to loved ones, not just good intentions on one’s own part. 3. Love workouts —What we’re finding out in this chapter is that any source of well-being can be exercised and cultivated as part of creating positive habit patterns. Successful romantic relationships, like any living, growing thing, need tending and care. Focusing on www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 185 day-to-day responsibilities a nd putting romance and quality time together on the back burner is one of those guaranteed energy drains. What do you do each day that evokes and expresses your love for your children? Your romantic partner? Your closest friends? What are you doing to deepen your closest relationships? Broaden your base of support? Recall that use it or lose it principle: Love not actively cultivated is well-being forgone. The idea is to focus not just on the work productivity of your time, but also the emotional quality. Well-being is the fuel that powers you through the marathon race of a career. Cultivating love, friendship, and social support is essential to health and success. The right relationships give energy and make us better—as traders and as people. ■■■ Now let’s focus on a less comfortable topic: the reverse side of building affection and social support. Shutting people out. A very skilled trader I worked with several years ago went into a trading drawdown. He felt that his idea generation had waned and his trading of his ideas was less than sharp. He was especially frustrated by two missed trades. Both were ideas that he had researched and put on the back burner because price action was not yet confirming what he was noticing fundamentally. By the time he returned to the ideas, they had already moved without him. It was an uncharacteristic loss of sharpness, and he was highly critical of his performance. It didn’t take long to isolate a major cause of his problems. His firm had hired several new traders, all of whom were young, eager, and talkative. They brought good energy to the trading floor—and they brought nothing but distraction to the trader. He moved to an enclosed office space for the start of each trading day and conducted his research and reviews in quiet, without distraction. When he wanted to interact with other traders, socially and to share ideas, he came upstairs and sought out the contacts he most valued. That simple change of environment led to a major improvement in performance, contributing to the quality of his market preparation time. He was a trader who truly loved markets, and he loved his time observing and studying markets. When that experience was diluted with noisy conversation, his information processing suffered, his performance declined, and he became unhappy with himself. BEST PROCESS #2: BUILDING ON STRENGTHS 186 I tend to be an optimist. I generally can see the good in people and perceive their strengths, even when they most doubt themselves. Still, the saying that a pessimist is an optimist with experience rings true on this topic. There are some people who are noxious. There are some experiences worth filtering out. It makes little sense to build our well-being, only to see it squandered in a suboptimal environment. Shutting out negative influences is an important if uncomfortable step in maximizing our personal and professional experience. Consider the following examples of filters that are built into my daily life: ■ Every community I have lived in for the past 30 years has had common characteristics: strong support for public schools, parks, libraries, and infrastructure; low rates of crime; a sizable professional population; few traffic and congestion problems; and a prosperous downtown/community center. Experiencing high quality of life in my immediate environment greatly contributes to my outlook. The area where I grew up was very middle class—hardly the lap of luxury—but it was a very family-oriented, school-oriented, safe, and well-maintained neighborhood. If I don’t experience those qualities in an area, I spend as little time there as possible. ■ Over the years, I’ve found that some people in work settings are more focused on advancement through office politics and others are more focused on the quantity and quality of their work output. The former group is eager to use you when you have something they need, and they are the first to disown you if you become involved in controversy. I spend very little time interacting with the former group and cultivate good relationships with those in the latter group. One of the greatest inspirations for my own work is being around others who are inspired by what they do. ■ Ever since starting the TraderFeed blog, I’ve been active in social media. Most interactions are quite enjoyable. I love meeting people online who are from different parts of the world and who bring fresh perspectives to markets. At times, however, the online interactions are disagreeable. I have been subjected to sarcastic remarks, slurs, and even accusations if my views do not accord with the (usually anonymous) person commenting on the blog or tweeting me. That is www.MyChart.ir BEST PROCESS #2: BUILDING ON STRENGTHS 187 when the ‘‘block’’ button becomes useful. I will generally try a civil, constructive response the first time; after that, everything is blocked. Life is too short for becoming the receptacle of others’ drama. ■ I find most traditional media to be noisy. Television, websites, and online videos often attract eyeballs by engaging in manufactured controversy and hype. A common example is breathless predictions of market crashes from commentators seeking public attention. I avoid most media when I’m trading: Most of the time it feels like an environmental pollutant. ■ When you experience a degree of success in markets, you become like a person who has won a lottery: Suddenly you find yourself with people wanting to be your ‘‘friends.’’ Some are looking for hot tips; some are looking for jobs; some want you to share secrets of success. These are not stimulating, collegial interactions. They are painfully one-sided—all taking, not gi
