Zen and The Art of Trading

Something just clicked for me... I felt propelled to recognize this post for I feel it is so essential.. to finally getting into my zone in trading and in life.

Paticularly the detachment of preconcieved notions.. of ones environment and thoughts.

Thanks, Martys

 

No, thank you. I am always impressed when people hit a chord with the traditional lineages. It is pretty much a brief summary of pith instructions on tranquility meditation from the Mahamudra lineage of Tibetan Buddhism. The instruction on relaxing the arms and legs is from the Chod lineage of Machig Labdron. I learn them from my teachers. The instruction on the old man watching children is taken from reading books on Dzogchen. It's only the tip of the iceberg.

Basically we are just being too eager and too hard on ourselves... As a result, the natural process of meditation just escapes us.

I felt sad sometimes because I know a lot of people who think they are some meditation experts practiced for years and years meanwhile they have branched off the wrong way by a thousand miles just because they never bother to investigate the pith instructions from the traditional oral lineages. You can't say anything to them either because it would hurt their ego.

Just the pith instructions would humble me. One of my personal favorites from the female wisdom dakini Niguma:

"If you don't understand that whatever appears is meditation,
What can you achieve by applying an antidote?
Perceptions are not abandoned by discarding them,
But are spontaneously freed when recognized as illusory."

- Niguma

 

"POKER RULE#26: Learn from your mistakes... The Zen Buddhist would say that when we factor past lessons in for future play, losses are not losses, but rather stepping-stones toward future correct play. Failure, by its nature, moves us in another direction, away from failure. We need to treat these lessons neutrally. Simply learn from them. Don't take them too much to heart or put too much emotion into them."

Focusing too closely at the prices on the screen can put one into light hypnotic trance. Avoid emotional self-sabotage and negative self-talk during trading. Correct any error in the mind's eye. Revise the game plan to handle the situation if needed. One must also understand that not all losing trades are mistakes - the market is simply a game of odds. Don't be too hard on oneself regardless.

 

An excellent idea! There are some good points in this book, that's for sure.

 

"POKER RULE#27: Know all the ways you can lose big... Some of the ways you can lose include: a total drought of good cards all night long and being nicked-and-dimed and anted to death; second-best hands all night; second-best hands alternating with bad hands in between; hands that start out good but that don't "finish"... This is critical because how you deal with such occurrences can be the difference between having a bad night and having a full-scale, off-the-chart disaster."

One should always have something in the trading plan to deal with potential disasters. In the ancient Book of Changes (I-Ching) warned that EXTREMES WILL REVERT. It is the nature of good things to turn bad and usually when it is least suspected. The worst case scenerios must be covered at all times. Stop loss is necessary (expensive) insurance policy yet at the same time, one has to be careful of getting chopped up too often. I don't have a good answer to this myself. Sometimes I put in a stop with the order and at other times I finesse with a mental stop depends on the market rhythm. Live and fight another day.

 

A recap of Patience:

RULE #1: Learn to use inaction as a weapon.

RULE #2: Don't get irritated or angered by long sessions of folding.

RULE #3: If you've been folding a lot, for a long time in the game, and you're starting to think that maybe it's time you got in and played a few hands again -- that's not a good enough reason. Keep folding.

RULE #4: Don't feel like a martyr when folding.

RULE#5: Sometimes others get to play and you don't.

RULE#6: To win at poker you must embrace the idea of breaking even.

RULE#7: Regard patience as a central pillar of your game and strategy.

RULE #8 Keep plugging away. Expect nothing.

RULE #9: Don't fall into the "Now Trap."

RULE #10: The long run is longer than you think.

RULE #11: Don't defend patience too strongly. . . . It is a letting go. It is not a fierce commitment to letting go.

RULE#12: Don't be impatient about being patient.

RULE#13: Occupy yourself while you are not playing.

RULE#14: Learn to play against other patient players. . . . there is a patience so slow that it is almost Zen-like.

 

Thanks for the recap! In Dao De Jing, Lao Tzu mentioned how the "MU" (non-entity) is what make "YOU" (entity) functional. He gave three examples:

1) The empty space where all the spokes of a wheel comes together. It is the space that allows the axle to rotate.
2) The empty space of a clay container vessel.
3) The empty space of the doors and windows of a house where the inner space connects with the outer space.

I would go further with the imagery: it is the "non-trade" (MU) that makes the "trade" (YOU) functional. Look at both as integral parts of the trading dynamics (the Yin-Yang Diagram) and not individual stand-alone entities to be fixated out of context.

 

"POKER RULE#28: Know the range of what is likely to happen to you in a game... For example, let's say the general monetary range of the game you play in is +$300 to -$300. These are the outside parameters of what you can expect to win or lose on any given night. If you know this going in, you won't be shocked and surprised by fluctuations that occur within the range... Be comfortable with these intermediate outcomes, too. Do not be frustrated by them or think that they are somehow unacceptable... You will note by observing the best players that they don't have a problem with any of these outcomes. They calmly accept them as they cash out and leave the table..."

Don't impose one's will onto the market. Don't expect anything. Have the worst case scenerio covered.

 

"POKER RULE#29: Expect the worst - why gamblers are pessimists. By expecting the worst, you have already mentally dealt with it... The ability to see the dark side - what can go drastically wrong - and to have this view of things always within easy reach become an advantage in poker."

It is essential to have the worst case scenerio covered. Individual trades as much as some experts preached are not really independent events. The markets are not unrelated. The human motives are not independent. The trades comprising a winning streak and losing streak are not really independent. I think one has to recognize and manage the risks on both the micro-level (individual trades and money management) and the macro-level (market bias and strategies).

 

"POKER RULE#30: Don't expect a certain card to appear. Bad players do this all the time - expect the best possible outcome to occur - and then are crushed when it doesn't."

Take what the market gives you. Play the probability for the long run.