365 Trade: Finding the Flow

The goal of this thread will be to post lessons learned from my perspective as a both a trader and Tai Chi/Qigong teacher. Assuming there is any interest I will try to make somewhat frequent posts.

The title "365 Trade" is a concept taken from a book called "365 Tao", which gives the reader a valuable lesson each day taken from a Taoist point of view. Although I don't trade every day of the year, I look at my charts almost every day of the year, and lessons can certainly be learned even when a trade is not taken.

A brief background about me: I have been trading Forex since 2005. It wasn't until 2008 that I ended a calendar year with profits. This learning curve is quite normal. Somewhere towards the end of '07 I began to actually "see" the market. It doesn't mean I am now always right. It just means I enter trades with purpose and understanding.

I credit my meditative practices hugely with giving me the patience and calm to trade profitably, and I hope I can encourage others to give some sort of mind-body movement a chance. It may just improve your trading, and relieve some of the stress and anxiety that will cause you to make bad decisions and negatively affect your health and well-being.

In my next post, i will tackle the first lesson.

Sifu,

Welcome to ForexFactory.
Heck yes... If you want to explain "Tao" meditative principles, I'd like to hear it.
Having said that.... I'm gonna send you an e-mail for a little private chat.

you'd better 1st remove the link to your website, where you sell stuff, before posting further.

Exactly my point. Let's give this guy a minute to straighten it out, then we can tackle the first lesson.

Balance is the first lesson I learned myself that led to being a better trader. I was anything but balanced in the very beginning, spending countless hours watching charts, taking way too many trades, and watching with great anxiety as my over-leveraged trades went against me. I'm sure this is a very common and perhaps familiar scenario to some of you, whether currently or at some point in your trading endeavors.

In Tai Chi or Qigong we are always seeking balance, and trying to align ourselves with the Tao or "the way". When you are aligned with the Tao things seem to unfold effortlessly. You stop fighting yourself and live much more in the moment. Everyone has certainly experienced times where everything just seems to be going perfectly with little effort, and also times when you can't seem to get anything right no matter how hard you try.

Trading often reveals how balanced you are in a brutally honest fashion. If you are centered you will be making logical choices and if you are unbalanced you will be making emotional decisions, possibly caught up in such a whirlwind you are unable to stop yourself.

To find balance in trading the first step is to become aware. You can create awareness by simply slowing down. If you are not breathing in a relaxed manner you should not be entering a trade.

I encourage you to spend a few minutes practicing the following simple exercise before you begin trading for the day

1. Rest your hands on your lower abdomon (also known as the lower dan tian).
2. Close your eyes
3. Breath slowly and deeply in a very relaxed fashion. Do not over-exaggerate your breath. Try to feel your abdomen slowly expand as you inhale and contract as you exhale
4. Just focus lightly on your lower abdomen while taking several breaths

5. After several breaths you should remind youself to be aware, remain patient, and trade calmly today

To some of you this exercise may seem silly. Perhaps so, but give it a try for a few days and see if it makes a difference. This simple exercise accomplishes some wonderful things in regards to trading. It calms you, provides focus, and most importantly brings you into the present moment.

From a Tai Chi perspective we start to shift from Monkey Mind to Alligator Mind. In which state do you think you'll make better more balanced decisions? When your mind is all over the place or when you can sit calmly for hours waiting for just the right moment to act.

I hope whomever stumbles upon this thread finds some enjoyment from it.

Happy trading!

Intention is essential to being a good trader. Let me first talk briefly about intention from a Taoist Tai Chi perspective and then how it applies within the world of Forex trading.

When I teach a Tai Chi or Qigong form to my students, I can teach the exact same form, but accomplish different goals simply by changing the intention. We may practice one week focusing on the intention of creating an internal fire. This is done to burn away tension, pain, illness, and also to stimulate energy. The next week we could practice the same form, but with the intention of refining our movements and making them as smooth and flowing as possible. Now our intention is focused more externally than internally. Same form, different intentions, different benefits. If we praticed the forms with no intention our forms would be "empty". We would just be moving without any true benefit gained.

What is your intention when you enter a trade? Do you have a clear intention when you enter a trade or are you simply trading. Just like with a Tai Chi form you do not want your trading to be "empty". Otherwise you will be trading, but without any benefit gained, in this case growing your account or at least learning from your experiences.

If you don't know what you are trying to achieve how can you possibly succeed? Every time before entering a trade I make sure my intention is crystal clear. I know why I am entering, what my hard stop will be, when I will exit early, and what I will do if price moves in my favor.

Traders can have very different intentions and be profitable, so the key is having a concrete intention in your mind BEFORE entering a trade. Two traders could enter at the same price, one Short and one Long, and both could end up being profitable if they have different intentions. One may be a scalper or intraday trader, while the other trader is looking long-term and willing to hold their position.

The problems set in when you are not quite sure of your intention. "I'll take a scalp if things go against me, but I'll try to turn this into a long-term trade if things go right." Being flexible is good, being wishy washy is bad.

How many people have moved stoplosses once they were in a trade to avoid being stopped out? This is a recipe for disaster in the long run. Your intention should have been strong enough before placing the trade to know where your stop loss level would be set.

Playing or watching sports is a great way to realize how intention works. If you play sports think about a time where you hesitated. Perhaps on whether to take a shot or to make a pass. When an athlete's intention gets confused it usually leads to a bad play. When a trader's intention gets confused it usually leads to a smaller trading account.

This is great material. I often get my attention to the trade at hand messed up because I'm thinking in terms of a troubling event with others that happened an hour or two ago, not in terms of my having the decision to make the trade to myself. Meditation, mindfulness and the like seemed too vague an approach to break down a trade-affecting negative/traumatic event into changeable portions. Alligator mind sounds great, in theory; it's just getting there.

So,you are making money from trading forex???

Yes, I am making money, although it has not been an easy or short road. I don't believe it is for most. I think one of the biggest keys is simply slowing down and being patient. Easier said than done of course, as most people are attracted to trading for the possibility of creating wealth and a better life.

For me I am at the point where trading has allowed me to change careers and work less hours than I did in the past. I was in the computer field for a number of years, and it was never very satisfying. Sitting in a cubicle all day became a miserable experience for me. At one point I was laid off from a dot com and actually tried to trade full-time. That was several years ago and I was not a good enough trader at that point to make it happen. I was also under-capitalized.

I now work in the wellness field as a manager and teaching classes. I work 30 hours per week instead of 40, so that has given me 10 more hours of personal freedom. 30 is the minimum number of hours to work and still receive benefits. Eventually I may look at trading full-time, but I am in no rush, because I enjoy my career and the balance works well for me at this point.

I more than make up for the 10 less hours per week through my trading. I also created an EA that I leased to a Forex company, which has helped generate income for me. I do not trade with an EA myself.

So I guess the two keys for me have been learning and applying patience and finding a balance between work and trading. I will also say that there are a very small handful of traders on this forum that give excellent advice. When I lost my ego, thinking I would be the world's greatest trader, and started to apply lessons from traders with more knowledge than me my trading improved vastly.

Keeping with the theme of this thread, I think this quote from Bruce Lee applies quite well to trading - "Absorb what is useful, Discard what is not, Add what is uniquely your own."

tao with forex? i think i will hang around here for awhile. thanks

Thank you to the members who posted the feedback. I'm glad you are enjoying my contribution.

The third lesson on patience is in my opinion one of the most important to master. In fact, I would say that without it you will never become a truly successful trader. Unfortunately, most people suffer from a serious lack of it.

The good news is that patience is a skill, thus it can be learned and improved. Some people are naturally more patient than others, and I believe those people also make naturally better traders. However, anyone can improve their patience, if they are willing to work at it. Skills only improve through practice, practice, and more practice. The Taoists have an expression. "Some practice is better than no practice. But more practice is better than less practice".

So how do you develop patience? How do you learn a skill that many people believe you are either born with or without. The best way in my humble opinion
is to take time away from trading and practice things that are naturally calming. Tai Chi, Yoga, or meditation will bring calm and patience into many other aspects of your life. The main idea is to take time out of your hectic schedule to slow down. Fishing is another great example of the type of activity that causes you to slow down and develop patience.

Patience is only part of the puzzle, but I believe that once you put that piece in place, you can at least begin to see where the other pieces fit. Consider patience as being the center piece that you build everything else around.

There is a popular English phrase that states, "good things come to those who wait". While I can agree with that statement to a certain degree, a person, particularly a trader, needs to know when it is time to act. That is why I think the Tao Te Jing, perhaps the most famous of all Taoist texts, does a better job of outlining patience in regards to trading and even life in general.

The Tao Te Jing talks about patience in Chapter 15.
Do you have the patience to wait
till your mud settles and the water is clear?
Can you remain unmoving
till the right action arises by itself?

A trader can learn a lot from that verse. Most traders enter without their minds being clear and focused. They enter on a whim, because they are impatient and cannot wait for the trade direction to become clear. If you cannot easily tell in which direction price is trending, don't enter! Wait for the mud to settle and the water to become clear. Wait until Price moves to a logical entry point.

So the Tao Te Jing teaches us that if we wait the right action will arise by itself. In trading, I think this means waiting on the sidelines when trend direction is not clear. Let the big dogs fight it out. Once either the Bears or Bulls have won, just take the wave for a nice easy ride. It becomes very easy when you learn how to find the flow and stop fighting yourself.

"The Master stays behind;
that is why she is ahead.
She is detached from all things;
that is why she is one with them.
Because she has let go of herself,
she is perfectly fulfilled."

Detachment is an important concept from Taoism that can easily be applied to trading the Forex market. A good trader should be detached from greed, emotion, as well as any preconceived notion on trend direction. Let's examine this last issue on trend direction a bit closer.

Having a preconceived idea about which way a currency pair is headed is quite dangerous in my opinion. I have seen many traders become 100% convinced that a pair was going to continue heading South, simply because that is the direction the pair had been heading for the last 5 days. This is showing attachment. The trader has become attached to trading Short, perhaps because they have made some easy pips by following the current downtrend.

It is important for traders of every market to be focused in the present moment; detached from what Price has done in previous trading sessions and focused on what it is doing at the moment. Obviously we want to use the past as clues to the future through technical analysis, but the key word here is "clues". We should not be so focused on the past that we forget about the present. Far too many times I see traders in the forums become attached to a trend, even to the point where they will use enormous stop loss levels, no stop loss, or continue moving their stop loss level further and further away in hopes that the trend will reverse and continue in the direction they desire.

Be detached in your trading and your profits will increase. Find the flow and truly see the market instead of injecting your preconceived notions upon it. Most people live a little bit in the present or the past. They worry about what they should have done and they worry about what they are going to do next. When you learn to find the flow you stop fighting yourself and things come much more naturally. You are finally living in the present. This takes practice and hard work...but it does pay off!

As always, happy trading!