Stoicism is a philosophy that originated in ancient Greece. It emphasizes the development of self-control and resilience in the face of adversity, by training one’s mind to accept what cannot be changed and to focus on one’s own actions and attitudes. The goal of Stoicism is to live in harmony with the universe and to cultivate wisdom, justice, courage, and temperance.
If you have been trading for some while, there are several words in the definition above that you can probably relate to. This is how Stoicism can help traders:
Stoicism teaches that our emotions and reactions to events are under our control, and that we should strive to maintain composure and calmness in the face of adversity. This can be useful for traders who need to make rational decisions, even in the face of market volatility or loss.
Stoicism does not advocate getting rid of emotions, but rather encourages controlling and regulating them in a healthy manner. Emotions can play a positive role in our lives, but that they can also lead to suffering and unhappiness if not properly managed. In an environment so emotion-heavy as trading, we can easily get caught up in reactions of things do not go our way. Excessive or irrational emotions, such as fear, anger, or attachment, can interfere with our ability to act in a wise manner when making trading decisions. Stoic traders seek to cultivate self-awareness and self-discipline, training themselves to recognize and control their emotions, rather than being controlled by them.
Remember: the market is not doing anything to you, you are actually part of it, and should act accordingly. If you get a series of wins, don´t get euphoric. If you face consecutive losses, don´t get depressed. Both are equally damaging to your future as a trader.
Acceptance of Impermanence:
For Stoics, everything is impermanent and constantly changing, and that we should not become attached to things that are beyond our control. The markets are absolutely impermanent, and traders should embrace this, since price movements are in fact what can give us profits. Accepting impermanence can help traders avoid becoming overly attached to positions and biases, and make objective decisions based on market conditions, even if opposed to their thoughts from a few minutes before.
Focus on what’s within your control
The Stoic philosophy emphasizes focusing on what is within our control, and accepting what is beyond it. This can help traders avoid getting caught up in market noise or external events that they have no control over, and instead concentrate on their own strategies and decisions.
Stoics strive to strive to develop resilience, the ability to bounce back from adverse events, and to learn from them. This can be useful for traders who face losses, and need to maintain their confidence and perseverance in the face of setbacks. Every trader, even the best ones, make errors and face series of losses. A resilient trader is the only one who has a chance of success.
Do Your Best, Whatever The Results
Doing one’s best in all circumstances and accepting the results, rather than becoming attached to specific outcomes is an important Stoic concept. The Stoics believed that we have control over our own thoughts, words, and actions, but not over external events or the results of our efforts. In trading you should continuously study, backtest, develop strategies, journal, etc., as part of your personal effort. But you have absolutely no control over what happens to price after you place a trade. Therefore, the success or failure of a trade is ultimately outside of their control, and traders should instead focus on the quality of their own efforts.
Stoic traders focus on the present moment and take control of their thoughts and actions. According to Stoic philosophy, much of our suffering comes from dwelling on the past (lost money, trade opportunities missed, lack of discipline) or worrying about the future (possible gains or losses), rather than paying attention to the present moment. This emphasis on being fully present in the now is seen as a key success factor for trading psychology.
Don´t Expect Anything
Avoiding excessive expectations or attachment to external events is seen as a way to achieve peace of mind and freedom from suffering. Traders face a lot of distress in their careers from desiring things to be other than they are. By practicing acceptance of the present moment and detachment from external events, we can stay focused on the only thing that matters: getting into the next trade with our best strategy and discipline. This doesn’t mean Stoics don’t have desires or ambitions, but they strive to maintain a healthy perspective and not allow their happiness to be dependent on the outcome.
Traders that want to improve their trading psychology skills can rely on Stoicism to cultivate a more rational and resilient mindset, and make more effective decisions in the face of market challenges.