Finding Your Best Mental State for Trading

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.

The Zero-State

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.

Another effective trader I know needs to see himself as a pure mechanical businessman, so he takes a different approach: that of disinterested observer. He remains so disinterested that he will not even watch the trades unfold lest he’s tempted to adapt his rules mid-trade.
His analysis showed that such behavior did not add value, so his optimal mental state was to be as far away from engagement as possible.
These are just two other examples of different mental states suitable for effective trading. There may be as many unique states as there are traders, which means that you must use introspection and self-knowledge to discover what works for you psychologically.
How will you know? Know thyself and consult with others you trust and respect. Above all else, however, make sure you trade with real money in very small position sizes. Doing so will help you assess the effects of market, system, money and self on your total trading performance. Without even a small amount of money on the line, you postpone the Day of Judgment. The sooner you get into the game, the sooner you will engage in real learning. In addition, you need to use trading strategies that suit your personality, time frame, risk profile and working hypothesis of market behavior. Trading in ways that fit you will help you maintain your optimal mental state for trading.
Now, let’s delve into my preferred state for effective trading—the zero-state.

The Zero-State Experience

For me, achieving the zero-state is a necessary precondition for trading at my peak. It is a place where adjective pairs of mental states cancel each other out, leaving only a moment of pure being. It is the space between the words that we know, a moment and a place of freedom, where all notes may be struck; the moment precisely before the next action occurs.

For a horn player, it is the moment where he has gathered his breath and is prepared to initiate the note—the pure balance point between inhale and exhale. A diver finds the moment of motionless serenity between ascent and descent.

Imagine a Cartesian coordinate semantic grid system with adjective pairs arrayed about the origin. Each word has its precisely paired antonym and the midpoint of the ray that connects them is bisected at the origin.

The pure form of the act of trading for me is to achieve a timeless correctness—to take actions or to refrain from actions in perfect balance with the needs of the market at that moment; to be nothing more or less than that which is required ideally.

When I trade from this moment, this place, my results generate neither joy nor sadness; they simply are what they are. This allows me to enter the next trade with no emotional charge. I find this state keenly important to my style of trading. I try to find the hesitation point in a channel trade or in a breakout, where price remains poised between fear and greed. At this point, bulls and bears are in timeless balance and the next leg of the move will begin just as the last leg ends.

When I am able, I stalk the price to that moment of harmony, that zero-state where momentum transitions so I can refine the entry point and the initial stop to be absurdly close. This enables me to minimize open risk and move to “no lose” trade conditions very quickly.

When I know (barring an interruption of connectivity or market discontinuity) that I will never do worse than break even, I enter an immensely freeing psychological state as a professional trader. Experiencing the zero-state provides spiritual nourishment and meaningful satisfaction of that moment provides a meaningful experience having had a brush with Truth and Perfection in a small way for a fleeting moment in my life.

In judo we speak of a moment in a throw where you and your partner are equally sure that the other judo player is throwing you with exactly the same force and skill as you are throwing them. In that moment the throws stop, time slows, and you are suspended in a moment of pure being.

My exercise of attaining the zero-state smoothes my equity curve and rewards my trading practice.

Source: Ken Long, founder of Tortoise Capital Management,

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