Zero to Hero in trading
This is my book summary after reading “Zero from Hero” by Yvan Byeayee.
Trading, like any high-performance endeavor, is a mental game where we are required to pay
attention to the present moment. But this is not enough! We have to stay present in a way that ensures that we execute our methodology flawlessly so that our results are in line with its capabilities. In other words, we have to learn to dissociate ourselves from our thoughts and feelings!
While a statistically tested strategy and an efficient money management technique are primordial, the right mindset is what glues everything together.
The fundamental idea behind trading is that it is a game where we are rewarded for our ability to mindfully abide by a certain set of tested rules. Said this way, it surely sounds easy– it’s not!
You have likely been trading with an apprehension to short-term pain while seeking short-term emotional gratification.
To trade successfully, you have to turn this around: Embrace the short-term pain and seek long-term emotional gratification!
When we are able to practice patience instead of giving into our instant pleasure seeking nature; when we are able to cultivate equanimity instead of impulse driven behaviors, we allow ourselves to experience better psychological satisfaction. But that is not all. We also largely change the character of our experiences and, therefore, the quality of our lives.
The burn of lifting weights, for instance, would be agonizing if it was a symptom of terminal illness. But because it is associated with health and fitness, most people find it enjoyable. Similarly, we can come to a point in our trading where the mental discomforts we experience as a result of doing what we should do instead of what we want to do, becomes synonymous to positive returns over a set number of trades.
In other words, you don’t associate yourself with them anymore; you become a passive observer of your own thoughts, feelings, and sensations, in such a way that they do not impinge on your behavior anymore. By means of observation, you become detached from them!
How do I create consistency?” “How do I change my experience of trading to something that is truly fulfilling?” Notice how those questions involve the self. This shows us that “We” are the key to the trading conundrum!
Wisdom is nothing more than the ability to follow one’s own pieces of advice.
This line of thinking, somehow, led me to think about the many commonalities between great traders. It became clear to me that these commonalities were not so much in the way they traded– in fact, not at all. Every single one of them used a different trading methodology from the other. But what they did share in common was their overall view of what a market is and what is possible within it. They began to treat it as a set of probabilities rather than possibilities.
They recognize the overall opportunities inherent to trading, but they also realize that the way to get positive results is through the consistent execution of their proven methodology. In other words, they forget the possibilities and they focus strictly on the probabilities. This approach ensures that they can trade their methodology with the least amount of emotional involvement because it prevents them from internalizing market action. By focusing on the probabilities, like the squirrel, they can completely immerse themselves in the present moment — body and mind
Good traders have learned at one point in their career to free their minds of the emotional implications associated with mistakes and failures. They are flexible and have learned to thrive in uncertain environments, just like reeds that bend with the winds without breaking. They are not overly attached to money and the absolute need to be right. In turns, this engineers the kind of market performance they enjoy year after year.
When you have a pen and a piece of paper, and you are putting your thoughts down,
it allows you to articulate clearly the thoughts in your mind and the feelings in your body that might just be hazy otherwise. When you have it on paper, it is not abstract anymore and you have something tangible to work with. At that point, writing becomes the catharsis of the mind.
The habit of meditation the most powerful thing I have ever learned. If I had to attribute my success in the markets to a habit that I do consistently in my day-to-day life, without a single ounce of hesitation I would say meditation. The source of our problems–as traders– is the very thing that is our greatest asset: Our minds! Taking a trade too soon; taking it too late; not taking a signal at all; not putting a stop in; moving our stop; not taking profits, or taking too little of it, all these trading errors result from our thoughts.
The word “Buddha” means one who is awake.
The practice of meditation does not ask us to become a Buddhist or a religious person. That is not the point here. Rather it invites us to fulfill the capacity we each have as humans to awaken– from this dream-like state we seem to all unconsciously be prisoners of. Being analogous to thoughts is similar to being asleep and dreaming.
Just imagine if other people could hear your thoughts broadcasted on a speaker all day long. You would seem completely insane! Upon close inspection, one could even call it a form of psychosis.
We spend 99% of our time lost in thoughts, and this engineers for the most part our suffering on this earth. Meditation allows us to escape that mental prison in such a way that it becomes clearer to us that the
way we think directly influences our experience of the world. It shows us that there is more to our experiences than what our thoughts suggest.
There is real freedom to be found in this simple practice of paying attention to yourself because if you catch yourself being angry, frustrated, hesitant, fearful… at any moment when you realize that you are merely observing those states, the choice not to act on them becomes clear. You can choose to let them fade away instead of pressing on them. They don’t have to prevent you from doing what you really know you have to do for the sake of your long term results.
If you can learn to separate yourself from your thoughts, nothing can prevent you from achieving the type of success you desire in the markets. Nothing! If you can escape the usual association to your thoughts of fear, anger, shame, despair; if you can learn to relieve yourself of the feeling that you call “I”, even for a few moment at a time but reliably, one day you could, in theory, become the best trader that ever lived. No kidding! But then again you would certainly realize that this success doesn’t mean much in the grand scheme of your life.
At one point, when you become consistently profitable in the markets, the success you might be craving so much right now will not matter to you as much anymore — trust me, it becomes less and less impressive. Winning trades become boring, losing trades equally boring– not void of emotions, just boring!
For the longest time, I have been pondering on that question. And I challenge you to do so as well. Start observing your thoughts, your desires, your feelings, your behaviors… and become the observer of your own life. Believe me… by doing so you will discover many things about the nature of living.
No matter where you are and no matter what you do; no matter how you look and no matter how much or less you have, you will find fulfillment in your life the moment you drop your self-concerns and focus on what is here and now.
We live in a world of cause and effect and what constitutes the reality of our lives is determined by a long chain of prior causes which, for the most part, we couldn’t possibly have any control over. However, once we realize that the present is all we have, we can work on making the most of it.
It is possible to simply drop your problems! If only for a few moments at a time, you can release the clinging to your past, what you think of yourself, your beliefs, and really enjoy what is truly present here, now, in this very moment. It is possible to get yourself to tune out the noise in your mind. When you learn to do so; when you lose your self-concern, the markets will cease to assault you. And instead of taking from you, they will start giving to you! Getting there requires a change in attitude; it requires a change in the attentiveness you pay to your experience of the present moment.
The past is a memory–it is a thought arising in the present. The future is merely anticipated–it is another thought arising in the present. What we truly have is this very moment. But we spend most of our lives forgetting that truth, fleeing it… overlooking it. Even in the markets, we are always thinking about past trades, or fantasizing about future ones, and this disrupts our capacity to truly appreciate the beauty and the uniqueness of this current trade. We are always transposing on it our fears and hopes, and when it doesn’t conform to our expectations, we become disappointed. We are always solving a problem in our minds, and we manage to never really connect with the present and find fulfillment there because we are continually hoping to become happy in the future. And that future never arrives!
If you don’t trade your edge flawlessly, then try to figure out what is preventing you from doing so. Fear, greed– these states only exist within the confines of our own minds. When you realize this, you also realize that you don’t have to act on these thoughts, bodily sensations, and emotions. That is why I think that meditation is THE exercise that all traders should incorporate in their daily routine because it allows them to cultivate a sense of detachment from whatever they are feeling. One is not the fear or the greed that he/she feels anymore, one is merely an observer of it.
The only reason why this is so difficult for most is because we aren’t taught to investigate our thoughts, emotions and feelings from a young age, as a way to understand ourselves and better deal with our pain and sufferings. In fact, we are usually taught the exact opposite– that our mind is a mysterious place that can only be understood by experts (psychologists).
However, I use the word equanimity in my first book, to describe something greater than that — it’s the ability to sink beneath our incessant thoughts, even for a few seconds at a time, and act from this place of inner calmness, stillness, and peace.
easy. We, traders, are not guaranteed financial rewards for every trade we place. It’s actually very often the opposite, however, in response, we have one of two choices: We can respond with anger, frustration, despair, anxiety, and in some cases even animosity. This, however, has the unfortunate side effect of making us feel really bad, in addition to making the situation much worse than it is because nobody can perform to the best of their abilities in such conditions.
We can accept the nature of the game, remain positive, and cultivate equanimity–which is definitely the best option. This is the choice I try to take in all cases. This philosophy of remaining positive applies to all parts of life, not just to trading.
There’s an old Zen saying that goes like this: “You should sit in meditation 20 minutes a day; unless you’re too busy or you don’t have time, then you should sit for an hour.”
Then I say to myself in the privacy of my own mind: “At this moment, I am not interested in anything else in this universe. I’m not interested in any thought, memory or feeling. I’m only interested in this practice. During this time, there is nothing more for me to think or do — only this!“
So what I will suggest is to keep your practice of meditation and self-awareness. When something bad is happening to us in the markets, we almost always feel identical to the experience. We don’t think that this is only happening in our heads. Meditation is merely a means to continually draw back into this state of merely witnessing everything that is arising. How could these mental occurrences be what you are? You are merely noticing them. How is it that you feel identical to this voice you hear in your head? This is merely an illusion. When you acknowledge this, you become able to be more present in your life and with your experiences.
You can only learn by trading; by being active, by making mistakes. No matter how much you repeat those mistakes over and over again, you will eventually learn, until comes a time when you won’t make those mistakes again. You see what I mean? Look at the glass as half full.
Take the long view, both behind you and ahead of you. You are exactly where you need to be. Q. What are the effects meditation has had on your ability to trade? A. The first thing I started noticing is how impatient I was when I traded, so meditation gave me the actual extra push to inquire more about what I felt and instead observe. Who is feeling impatient? Why? How does it feel? Same thing when I felt fear. Who is feeling fear? When you ask those questions it becomes clear to you that you have the choice of acting (or not) on those thoughts and feelings because you are not them anymore, you are merely an observer.
Setting up a business is one thing, and it can be considered as the easy part. But being mentally prepared to make the business consistently profitable is another thing. While this might be a shocker for a lot of you, it is without a doubt the most challenging aspect of this whole endeavor. For instance, a novice trader may have devised a trading plan and figured out her trading methodology, however, there might still be a negative correlation between what she ends up with and what she could have had. In other words, for some reason, she might not be using her methodology to its full potential.
We want to be able to produce an income or a return from our trading that we can rely on, but this is not so much of an easy task as one might be inclined to think. Consistent returns in trading are a result of the consistency in our behavior.
It makes them believe that they have some kind of special talent to predict market directions, or that trading is a lot easier than what it seems. However, the reality is that winning in the markets requires absolutely no skills at all.
The truth is that winning and being a consistent winner are two completely different things, and this can be a really hard mental barrier to break for most. What novice traders don’t understand is that good trading requires skills that need to be developed. Since those skills are counter-intuitive by their very nature, since they tend to go against normal human tendencies, they will have to be developed and built through engagement and practice. What may be expected from such alterations of our normal human tendencies if practiced, developed, often repeated, and well-perfected is mastery over the “self” and its various impulses and afflictive conditions — i.e. anxiety, fear, greed, craving, and so on. You are not overcome by these states but you subdue them as they arise.
As you start out in this journey, your attention should be on the adoption of a business-like approach to trading so that you can bring a little more formality and structure to your entire trading operation. You should also acknowledge your current lack of skills to trade the markets effectively. By acknowledging this — by saying, “I am not a consistently profitable trader, yet!” you open yourself to accept new pertinent information to help you grow into the person you need to become in order to return consistent results from your trading operations.
The true key to durable market success is a profound understanding of how his state of mind
will, in essence, undermine him more often than not. When this shift in perception (or paradigm) happens, it creates an avalanche of conflicting feelings for the trader. He knows the potential is there to enrich himself beyond his wildest dreams — the markets provide us with that opportunity at every moment. The trader can clearly see his success right before his eyes, however, something within him seems to disrupt his ability to reach for it. The market represents a challenge, and for many traders, the challenge is also occurring within. Fixed beliefs and values combine with unacknowledged thoughts and unmanaged emotions, driving behavior, which results in mediocre market performance.
When you boil it down to an essence, change is the only logical result of desire. If you truly desire something, you’ll find ways to make and facilitate the change, whatever that might be.
Awareness allows us to identify what is truly important to us. Desire leads us forward, craving doesn’t! It is the attachment to desire and it is a poison that will consume you. It will cause you to pin your happiness to the very thing you desire in such a way that you will melt into grief if you don’t get what you want. Furthermore, craving will impede on your ability to take rational decisions, which will undoubtedly make durable market success an impossibility. It doesn’t matter if you own a clothing store, a fast-food outlet or even an online marketing business… if you want consistent results you have to be consistent in what you do! This is even more essential in a trading business because of the obvious mental afflicts felt in the midst of real-time moving markets. With no structure to the way you approach the markets, you will have a tendency to act impulsively; to feed into fear, frustration, greed, aversion, and thus, reinforce negative patterns of behavior. If you can make it a priority to stay methodical and systematic, you won’t be subject to such wild emotional swings that will detract your trading results.