One of the most important skills a professional trader needs to develop is being able to manage his or her psychological state. Effective psychological maintenance can make all the difference between trading success and failure.
In my own trading, I have found the essential state of mind I must be in to trade at an optimal level. I call it the “zero-state.”
For me, the zero-state represents an emotionally neutral condition that is neither happy nor sad, neither overconfident nor fearful. The adjective “calm” starts to come close to what I mean but the term lacks an important distinction. “Calm” is part of an adjective pair, whose partner has precisely the opposite meaning. “Stormy” is usually given as the antonym to “calm.”
The term “serenity” describes a state that comes even closer to describing the zero-state than calm. Serenity suggests a timeless eternity of “no-emotion,” where I am not connected to the outcome in a personal, meaningful way.
No conventional adjective, however, can fully describe the zero-state. An adjective describes a particular condition. I associate one adjective or condition as one half of a pair of opposites. Both words of the pair form poles on a continuum where I think of the exact center as “zero,” just as on a number line. Conceptually, the Japanese term “mu” comes fairly close to this concept of center. “Mu” has been variously described as neither yes or no, a state in-between that does not acknowledge the question being asked as one that may be answered by either yes or no, with the answer existing in a different plane of reality.
Other Useful Mental States
Other traders I know have found different mental states useful. After all, trading from an emotion-free state (like the zero-state) may not be the best mental state for you. Consider the following options for your optimal mental state in your journey of self discovery and trading mastery.
I know traders who find it necessary and useful to achieve a state of emotional alpha male competitiveness in order to enter the “ring of combat.” These traders perceive the trading environment as combative and they interpret their role accordingly. They anticipate combat, they mentally prepare for it, and they experience trading in combative terms. (more…)
For those of us without a Bloomberg terminal New Frontiers in Technical Analysis: Effective Tools and Strategies for Trading and Investing by Paul Ciana (Bloomberg/Wiley, 2011) is an idea book, not a plug and play manual. But even though some of the software tools described in Ciana’s book are not available on run-of-the-mill trading platforms (and where they are, they are available by subscription only) clever programmers may get inspired. Moreover, even without access to proprietary software the imaginative reader can add some new arrows to his quiver.