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Buddhism contains many a wisdom, but seldom is Buddhist wisdom translated into useful ideas we can use to our advantage in our trading and investing. Yet, Buddhist tenets hold many a truth for our trading psychology. When properly understood and applied, they have the power to alter the way you think about the markets and could provide you with a very powerful trading edge.
While it is true that Buddhism contains many wisdoms, we need to acknowledge that the enlightenment of the Buddha some 2000 years ago cannot be compared to the enlightenment of a person today.
What I am saying is this: We need to re-interpret the wisdom Buddhism passed on to us in the context of today’s world and translate this interpretation into useful paradigms and practical techniques to help us become better traders and investors.
I came to Buddhism many years ago when I first started out trading and encountered many unexpected problems with my trading psychology. Consequently my trading account was not a pretty site during the first five years or so of my trading. As luck would have it I met a professional trader and hedge fund manager with Buddhist leanings (now my partner) who became my mentor and taught me much about the Buddhist approach to trading and investing.
So, let us take a closer look how Buddhism can help us as traders and investors
First, the consistent pursuit of self knowledge is a main facet of Buddhism. Self knowledge is be the highest knowledge you can possess, but we erroneously direct our focus outwardly instead of inwardly. This is recognized not only by all the wisdom traditions but also by modern psychology and behavioral finance experts.
The premise that through the deep understanding of yourself you understand the universe is fundamental to our understanding of reality. Buddhists place great importance on the pursuit of self knowledge. Through self knowledge you increase awareness and gain control over your mind. Once you have learnt the art of observation of your thoughts you gain much control over yourself. In fact, mental control is the only control you ever possess, so learn to use it and learn to use it wisely.
Second, self knowledge leads to decoupling from the crowd consciousness.
We are all deeply imprinted with the thoughts, feelings and emotions of crowd consciousness and mistakenly believe that they are an integral part of us. Making decisions independent from Jim Cramer and other gurus is pretty much impossible for the average investor or trader. Yet, they believe that they are making informed trading decisions of their own.
Learning to distinguish between your thoughts, feelings and emotions and those of other people is an invaluable pursuit which will lead you into the realms of mastery way beyond what you could imagine right now. The best trades, the best investments are never the crowded trades. You can only spot and stay with the trade if you have authentic self confidence that comes from intimate self knowledge.
Third, the pain of losing is totally misunderstood. All suffering has its benefits, but we tend to ignore the benefits and instead go into resentment, anger and frustration whenever our trades don’t pan out how we had hoped.
Anger reactions are common among traders. They are far more common far more often than most traders and investors are willing to admit. Embracing the emotional pain you are experiencing whenever things don’t go your way, is a powerful technique, because it is the quickest way by far to neutralize the unpleasant emotion, and also dissolves resistance, thus opening you up to receiving. Receiving in this context means learning from the frustration, anger and emotional pain our egos heap on ourselves. If you understand the importance of this and set the intention to practice acceptance and are willing to learn from your emotions trading life and life in general must improve. It is a universal law.
Fourth: Competition is an idea born in our civilization based on a total lack of understanding of universal law.
The universe is a place of exchange, and co-operation. Each particle is in constant communication and interaction with each other, starting with the smallest common denominator, the sub atomic particles, particles don’t ever competes with another, they interact in harmonious flow. Instead of viewing the markets from a competitive stance remember that for every trade someone has to take the other side, or there would be no liquidity and no markets.
Competition leads to judgement and force. The markets do not move by force but in cycles. Irrespective of what you have been taught, no amount of manipulation will ever interfere with natural cycles in the long run.
You are not in competition with the markets, but part of its flow.
So, where do you go from here?
Take the time to work on getting to know yourself intimately. After all said and done you are your greatest trading asset from which everything flows, so take the time to learn about yourself, and do so without judging yourself. Learn how universal laws affect everything in existence. learn how reality is created through you. This knowledge will not only provide you with a great trading edge, but it will help you master your life in general to and become a happier person. When you improve one area of your life all other areas of your life improve as. well.
Mercedes Oestermann van Essen is an active trader, trading psychology coach and the author of “The Buddhist Trader” and other books on trading psychology.
She holds webinars and bespoke trading psychology seminars for traders, investors, and professional traders.
