Quick Fix to Bad Trading Habits

In fast-paced trading, emotions can rapidly erode your capital. While everyone focuses on technical analysis and market strategies, the psychological aspect of trading is often what makes or breaks your success.

Research shows that up to 80% of trading success may be attributed to psychology rather than technical knowledge. In this post we explore a scientifically-grounded breathing technique specifically designed to interrupt destructive trading patterns.

Why Use Physical Exercises for Trading

The mind-body connection in trading is supported by extensive research in psychophysiology - the study of how mental and physical processes influence each other. When we experience trading stress, our body enters a "fight or flight" response:

• Cortisol levels spike

• Heart rate increases

• Breathing becomes shallow

• Decision-making abilities become impaired

These physiological changes can lead to poor trading decisions. However, research shows we can hijack this system through controlled breathing exercises, effectively "rebooting" our nervous system from a state of stress to one of calm focus.

The Emergency Reset: Breathing It Out

This technique combines elements from proven therapeutic approaches including:

• Mindfulness-Based Stress Reduction (MBSR)

• Somatic Experiencing

• Progressive Muscle Relaxation

Different methods work for different people. If you’re in serious trouble with bad trading patterns, it’s worth trying. If you feel this one is really not for you, there are methods you can find in this blog.

Step-by-Step Process

1. Interrupt the Cycle (30 seconds): Close your eyes and focus on your breathing. Take slow, deep breaths at a rate of about 6 breaths per minute (5 seconds in, 5 seconds out). This rhythm has been shown to optimize heart rate variability, a key indicator of emotional regulation.

2. Body Scan and Emotional Location (1 minute): Conduct a quick body scan to locate where you're holding trading-related tension. Common areas include:

• Chest (anxiety about losses)

• Stomach (fear of missing out)

• Shoulders (stress about position sizing)

• Jaw (anger from revenge trading urges)

3. Conscious Release (2-3 minutes): With each exhale, visualize releasing the negative trading energy. This visualization isn't just metaphorical - research in neuroscience shows that coupling physical sensations with mental imagery strengthens the effectiveness of stress-reduction techniques.

4. Verification Check (30 seconds): Before returning to your charts, do a quick emotional assessment. Can you view price movements without feeling triggered? Your heart rate should be normalized, and your breathing steady.

The Science Behind It

This technique works through several documented mechanisms:

1. Autonomic Nervous System Regulation: Controlled breathing directly influences your vagus nerve, which helps switch your body from sympathetic (stress) to parasympathetic (calm) mode. This physiological shift improves:

• Decision-making capacity

• Emotional regulation

• Risk assessment abilities

2. Cognitive Behavioral Modification: By practicing this technique, you're creating new neural pathways that associate trading stress with a healthy coping mechanism rather than impulsive actions.

3. Interoceptive Awareness: Regular practice enhances your ability to recognize early warning signs of emotional trading, allowing you to intervene before making costly mistakes.

Practical Implementation

• Practice this technique daily, not just during trading crises

• Keep a trading journal noting emotional states before and after using the technique

• Set specific triggers for when to use it (e.g., after any loss exceeding 1% of portfolio)

While this breathing technique has strong scientific support, trading psychology is highly individual. This tool works best as part of a broader strategy that might include physical exercise, proper sleep hygiene, etc.

Remember: The goal isn't to eliminate emotions from trading (which is impossible), but to manage them effectively so they don't interfere with your trading strategy.