Zen Buddhism is not something that can be written down. Zen is not an idea you can grasp by reading a few books, or many books for that matter. The true nature of consistent trading is the same.
Writing and talking about trading cannot fully express what a consistent trader experiences.
Reading and listening to seasoned traders does not guarantee you success in the markets.
This is why trading consistently is so tough. Most people fail despite enjoying success in other fields.
I can’t express the true nature of consistent trading as well. But I’ve read Zen sayings that are strikingly similar to some of my half-formed thoughts on trading. While these sayings are imperfect, they prompt traders to think deeper.
Regardless of your religion or spiritual leanings, as a trader, you will find that Zen-inspired ideas have much to offer. As you will see, the quotes below have little religious references. In fact, many are found in secular writings.
#1: Learn to let go and lose.
Learning to let go should be learned before learning to get. Life should be touched, not strangled. You’ve got to relax, let it happen at times, and at others move forward with it.
– Ray Bradbury
You need to learn to lose before you win. The market is a flow. It’s a process. It happens, regardless of how you feel and what you want. Let it happen, even when it stops you out.
To trade consistently, you must feel relaxed. With every trade you take and with every tick the market moves, you should be relaxed. If you feel tensed, you cannot get into the zone and appreciate the market price action for what it is. You will tend to force your desire on it.
This is exactly why over-leveraged traders always blow up. When you are risking too much, you are nervous. And nervous traders tend to gamble, not analyze.
This also explains why well-capitalised traders who control their risk are more successful. When losing trades don’t bother you, you are relaxed. Then, your mind is free to focus on trading.
#2: You are the only constant in trading.
Anywhere we go, we will have our self with us; we cannot escape ourselves.
– Hanh Nhat Thich
Among new traders, there is a notorious search for the Holy Grail. This search involves rapid and senseless changes in all possible trading parameters.
- Time frame
- Time period
You can change your market, trading time frame and strategies a hundred times. What you always bring with you is yourself.
So before you switch yet again from day trading forex to swing trading equities, look inwards.
Do you need to change?
When you trade:
- Are you following your rules?
- Are you scared?
- Are you greedy?
- Are you trying to prove yourself with some ridiculous profit target?
- Are you overtrading?
- Do you really have a plan?
There are many more questions you can ask yourself.
The point is to find out if the problem lies with you. Do that before looking for external reasons to explain your trading losses.
#3: Learn to be aware of your emotions as you trade.
Awareness is the greatest agent for change.
– Eckhart Tolle
A key step to becoming a consistent trader is to be aware of what’s wrong. And the hardest thing to stay aware of is your emotions while trading. Only when you are aware, you can stop doing what’s wrong, and start to change.
As you trade, keep asking yourself these questions.
- Am I taking this trade out of fear?
- Am I taking this trade out of greed?
- Am I taking this trade because I am bored?
- Am I taking this trade because I want to feel like I am a trader?
Once you recognize any of these undesirable states of mind, stop trading immediately. If you want to be consistent, never trade out of fear, greed, or boredom.
My worst losing streaks always happen when I lapse into a short-lived mania. My emotions become a blur to myself. And there’s zero self-awareness.
Also, many discretionary traders have a problem. They cannot distinguish between:
- A valid discretionary trade (made with accumulated market intuition); and
- A rogue trade (that breaks trading rules and seeks excuses).
But if you are aware of your emotions while trading, you will be able to tell a valid trade apart from a rogue trade. This is because if you are not scared or greedy or bored, and still feel a push to enter the market, that might be your trading instinct speaking.
#4: Look inside for help.
Work out your own salvation. Do not depend on others.
Every consistent trader I know depends chiefly on himself or herself.
They do not worship any trading guru. They do their own research. They do not expect handouts. They do not blame external factors for their failures. At times, they scrape through. But they survive, on their own.
Of course, exchanging trading ideas is great. New ideas can help us improve.
But a consistent trader knows not to depend on the trading book author or the lead trader in the prop firm.
To trade successfully, you can only depend on yourself.
#5: The best traders are humble.
When an ordinary man attains knowledge, he is a sage; when a sage attains understanding, he is an ordinary man.
With some technical trading knowledge and experience, you become a trader.
But when you become consistent and profitable, you feel ordinary again. This is because you’ve grown aware of the great uncertainty you face in the markets.
You’ve gained a strong appreciation of risk. In fact, your respect for risk is so deep that you would feel humble. And in that sense, you will feel ordinary.
#6: Don’t aim for wonder trades. Aim for a strict trading routine.
Zen is not some kind of excitement, but concentration on our usual everyday routine.
– Shunryu Suzuki
You might have heard a saying that profitable trading is not exciting; it is boring. That’s true.
You can feel excited about trading, but you should not feel excited about each trade. If you feel excited about each trade you take, you are probably more of a gambler and less of a trader than you think.
The most profitable trading is most unlike gambling.
Gambling depends on luck, a toss, and a roll. It’s exciting because it’s pure chance.
Profitable trading relies on strategy, process, and discipline. It’s boring because you know exactly what you need to do.
In a nutshell, ignore the trades. Focus on the process.
#7: Focus on trading simply
The more you know, the less you need.
― Yvon Chouinard
The more you learn about trading, the less you need to trade.
All traders go on a same curve. They keeping adding tools and tricks to their trading framework. Most of them never stop adding, and they are the ones that stagnate in their trading career.
A minority will start to downsize their trading toolbox. They will replace their indicators with understanding, and substitute price patterns with experience.
Seasoned technical traders focus on trends and market bias. Exact price patterns become less important to them. They know that once they get the big picture right, they don’t need a candlestick pattern to enter.
This applies regardless of how you trade. The best fundamental traders focus on themes and not news. A few macro themes beat a barrage of CNBC news.
Work Towards Trading with Zen
Trade, think, and experience the market. But don’t fixate on these quotes. As a Zen saying goes:
Don’t confuse the moon with the finger that’s pointing to it.
This list of quotes is just the finger pointing you to things that matter to a trader in the long run.
Want to learn more about using Zen ideas to improve your trading? Here are some books on applying Zen ideas to improving skill proficiency. (Not on trading, but similar ideas apply.)