How adopting a STOIC attitude can make you a better trader.
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"The happiness of your life depends upon the quality of your thoughts: therefore, guard accordingly, and take care that you entertain no notions unsuitable to virtue and reasonable nature." - Marcus Aurelius
How adopting a STOIC attitude can make you a better trader.
The above quote by Marcus Aurelius, a third-century Roman Emperor, encapsulates the central philosophy of Stoicism, an ancient Greek philosophy that emphasizes the importance of developing an attitude of acceptance, self-discipline, and emotional regulation. These principles are relevant not only to everyday life but also to trading in financial markets, where they can give traders an edge in the highly competitive and constantly changing environment.
To succeed as a trader, one needs to develop a strong mental state that can withstand the ups and downs of the market. Mastering the mental aspect of trading can give traders a significant advantage over their competitors. This is where the wisdom of Stoicism can be particularly helpful. The following quotes from famous Stoics illustrate the concepts that can help traders achieve their full potential.
Self-Discipline
"Without self-discipline, no success is possible. Period." - Seneca
Seneca, an ancient Roman philosopher, believed that self-discipline was the key to success in life. In the context of trading, self-discipline is crucial to executing a trading strategy consistently and effectively. This involves using tools such as stop-loss and take-profit orders to automate one's trading system while also applying principles of sound money management. However, trading success also depends on the trader's ability to exercise self-control, especially when faced with temptations to deviate from their plan. By cultivating a high level of self-discipline, traders can improve their performance and strive for consistent improvement.
Focus
"Make it your habit not to be distracted by what you're doing when you're doing it, or by what's going on around you. And as you do what you're doing, do it with all your might." - Cleanthes
Cleanthes, a Stoic philosopher and successor of Zeno, emphasizes the importance of concentration on the present task in his work "Hymn to Zeus." As traders, it is crucial to devote our full attention to trading when the time comes, which includes analyzing charts, scanning for setups, backtesting, researching, and executing orders. All these activities require precision, seriousness, and justice. To maintain focus, traders should minimize distractions by working in a dedicated area that is free from external interruptions. They should also approach trading with the intensity required to succeed in this competitive field.
Emotional Regulation
"Just keep in mind, the more we value things outside our control, the less control we have." Epictetus
Epictetus, another Stoic philosopher, taught that valuing things outside of our control can reduce our ability to control our emotions. In trading, market volatility can create a range of emotions, including fear, greed, and frustration. Traders must learn to manage these emotions effectively to avoid making irrational or impulsive decisions that can lead to losses. Instead of focusing on external factors beyond their control, traders should focus on what they can control, such as their preparation, discipline, and focus. This approach can help traders remain calm and focused during periods of high stress, and make better decisions based on logic and rationality, rather than emotional reactions.
Mindfulness
"Mindfulness is the first requisite of virtue. Without it, one cannot take a single step along the road of virtue." Musonius Rufus
Incorporating mindfulness into your trading routine can help you stay focused and make better decisions. Mindfulness involves being fully present and aware of your thoughts and emotions in the moment. By practicing mindfulness, you can improve your ability to manage your emotions and avoid making impulsive trading decisions.
One way to practice mindfulness is to start each trading day with a few minutes of meditation or deep breathing exercises. This can help you center yourself and become more aware of your thoughts and feelings. Another way to incorporate mindfulness into your trading routine is to take breaks throughout the day to check in with yourself and your emotions. By being more aware of your emotional state, you can make better decisions and avoid getting caught up in market fluctuations.
Resilience
"Even if one's happiness is destroyed, a strong and resilient mind will restore it from within." - Chrysippus
Resilience is an important concept in Stoicism, and it is particularly relevant to trading. Setbacks and losses are an inevitable part of trading, and developing resilience can help you bounce back from these setbacks and stay focused on your long-term goals.
To build resilience as a trader, it is important to learn from your mistakes and avoid getting caught up in negative emotions. When you experience a setback, take the time to reflect on what went wrong and how you can do better in the future. Try to stay positive and focus on the long-term, rather than getting bogged down by short-term losses.
Patience
"Patience is the noblest of all virtues and when rightly perfected, it is the strongest of all powers." - Attalus
Patience is another key principle of Stoicism that can be helpful for traders. By exercising patience and waiting for the right trading opportunities, you can avoid making impulsive decisions and reduce your risk of losses.
To develop patience as a trader, it is important to have a clear trading plan and to stick to it. Avoid getting distracted by short-term fluctuations in the market, and focus on your long-term goals. Take the time to research potential trades and wait for the right opportunities to present themselves. By being patient and disciplined, you can increase your chances of long-term success.
Real Life Examples of Stoicsm in Trading
Stoicism has been used by successful traders throughout history, and there are many examples of traders who have incorporated Stoic principles into their trading routines. For example, legendary trader Jesse Livermore valued self-discipline, equanimity, and focus in the face of market volatility, seeking to understand and accept the natural cycles of the markets. He was known for his ability to keep his composure and maintain perspective, even when his trades were not working out as planned.
Similarly, Bruce Kovner, another successful trader, adopted a Stoic mindset to stay disciplined and avoid emotional decision-making. He emphasized the importance of weighing risks and making decisions with a clear, rational mindset. Additionally, Kovner adopted a long-term approach to trading, advocating for patience and avoiding impulsive decisions. You can read about his story in "Market Wizards".
In addition to Livermore and Kovner, there are many other successful traders who have employed Stoic principles in their trading strategies. For example, Nicholas Darvas, who made millions through stock trading in the 1950s, used the Stoic concept of "definite major purpose" to focus his trading efforts and direct his attention to the most profitable investments. He believed that the ability to stay focused and keep a cool head during times of uncertainty was essential to success in trading.
By learning from these real-life examples, traders can gain practical insights into how Stoic principles can be applied in the world of trading. These examples can also provide inspiration and motivation for traders who are looking to improve their own trading performance.The Low-Down
These are only a few of the key concepts from Stoicism that can make you a better trader. If this resonates with you, I encourage you to read the popular works. Meditations by Marcus Aurelius is a smooth read with much valuable content that you can implement into your daily life. Start there.
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