What Is Mindful Trading? (2024 Guide)
Updated February 22, 2024
All products and services featured are independently selected by WikiJob. When you register or purchase through links on this page, we may earn a commission.
- A list of the Top Brokers for Mindful Trading in April 2024:
- Description of the Best Brokers for Mindful Trading in April 2024
- What Is Mindful Trading?
- How Mindfulness Can Make You a Better Trader
- Five Reasons to Try Mindful Trading
empty
empty
empty
empty
- How to Be a Mindful Trader
- Frequently Asked Questions
- Final Thoughts
A list of the Top Brokers for Mindful Trading in April 2024:
Description of the Best Brokers for Mindful Trading in April 2024
1. eToro
Pros
- Regulated by FCA, ASIC
- No withdrawal fee for US clients
- 0% commission on stocks
- Social and copy trading
Cons
- Not available in every US State
- More expensive than most of its competitors
- No MetaTrader platforms
Below content does not apply to US users
Founded in 2007, eToro is considered a very low-risk broker as it is highly regulated by the Financial Conduct Authority (FCA) in the UK and many other regulatory bodies elsewhere.
Opening an account is free and you can access a $100,000 demo account to test the system.
It offers 47 currency pairs for trading. Spreads for forex trading have recently been significantly reduced and range from a very competitive 1 to 3 pips for major currency pairs.
Typical spreads for EURUSD and USDJPY trades, for example, are just 1 pip.
You can see the full list of spreads on the eToro website.
You’ll need to deposit a minimum of $200 for Copy Trading, eToro's standout feature which allows you to follow other traders and copy their trades.
This forex broker is great for beginners due to its user-friendly interface and app and 24-hour customer support. It allows you to trade currencies, stocks and cryptocurrencies in one portfolio and the Copy Trading system is a great way to learn.
The company also offers trading courses and features a Learning Lab which houses a variety of tools to support clients with their trading experience.
To find out more, read our eToro review.
76% of retail investor accounts lose money when trading CFDs with eToro. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take two mins to learn more.
2. Plus500
Pros
- No buy/sell commissions and tight spreads
- Leverage of up to 1:30
- FREE unlimited Demo
- 2,800+ trading instruments
- Real-time quotes and advanced analytical tools
- Fast and reliable order execution
Cons
- No API integrations
- No social copy trading
Another user-friendly entry on our list of the best forex and CFD brokers in the UK is Plus500, providing an easy-to-use and accessible service.
You’ll find over 60 CFD currency pairs with competitive spreads, no commission and available leverage of up to 1:30.
Although MetaTrader and cTrader are not available, Plus500’s own platform is very user-friendly. It comes with a range of intuitive risk management features and is available on web and mobile.
Plus500 requires a minimum deposit of £100 if using a credit or debit card, and £500 if using bank transfer.
Plus500 UK Ltd authorized & regulated by the FCA (#509909).
3. IG
Pros
- Highly regulated
- MetaTrader 4 (MT4)
- Over 10,000 instruments
- Available in the UK and US
- 24/7 customer support
Cons
- High fees
- No deposit compensation scheme for US accounts
- No copy trading
- Inactivity fees
IG is a great share trading platform for beginners thanks to its user-friendly interface and extensive educational resources.
Pros of IG include a wide range of trading instruments and markets, as well as the ability to access multiple account types and trading platforms. The platform also offers a demo account for beginners to practise trading strategies before investing real money.
However, IG isn’t the cheapest share trading platform, with relatively high trading fees and a minimum deposit requirement of £250 when paying by credit/debit card or PayPal.
In terms of additional fees, IG charges a commission fee for share trading, starting from £8 per trade. There’s also a custody fee of 0.25% per year for holdings of £250 or more.
Overall, IG is a solid choice for beginners looking for a user-friendly platform with extensive educational resources, but investors should be aware of its fees and minimum deposit requirements.
What Is Mindful Trading?
Mindful trading is trading without reacting to emotions.
Mindfulness is described as a ‘state of active, open attention on the present’ by Psychology Today and it is a way of thinking that allows the observation of thoughts and feelings from a distance without judgment.
No thought is good or bad – mindfulness accepts that all thoughts and emotions are valid. It can also be described as ‘living in the moment’.
Mindfulness might seem like a buzzword, a synonym for yoga and Zen meditation, but it is not about clearing your mind of emotions – rather paying attention to, recognizing and acknowledging them.
These thought processes happen in trading and everyday life, so if you can become slightly detached – as the observer of the thoughts and feelings rather than their helpless victim – you can block out judgment and find the state of awareness that is living in the moment.
In trading, mindfulness can help you make better decisions without either ignoring thoughts and feelings or reacting only because of thoughts and feelings.
Open Trading Account with Plus500
81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. *CFD trading via Plus500’s demo account.
How Mindfulness Can Make You a Better Trader
A good trader can have several different strategies that make them successful.
Some traders prefer to trade in a mechanical fashion – completely taking emotion out of the equation to make trades.
In fact, this robotic trading is one of the major selling points of automated trading systems – algorithms that take emotion away from trading so there is no complicated interpretation and judgment to make decisions on when to push the button.
Aspiring to trade mechanically can work as part of a strategy but human nature can get in the way of decisions, with hesitations, fear of loss, worrying about the future and every other facet of emotion regarding trading.
Trying to hold these feelings back is not easy, and that is where mindful trading comes in.
Mindful trading involves knowing that these thoughts, feelings and emotions happen, that they are valid reactions to a situation, but that they are not objective measures of reality.
By identifying such feelings and understanding that they are there, you can come to terms with them before taking appropriate action. Sit with the thought or emotion and then take appropriate action.
There are some things that you cannot control, as a trader and during everyday life. Being able to recognize your responses, as something that is happening and not something that you are, helps you to be in the moment and stay detached.
Five Reasons to Try Mindful Trading
1. Maintain an Emotional Equilibrium
Understanding your response to events – and being mindful about how your thoughts and feelings coalesce, whether those events are something that you can control or not – helps you to accept and therefore control your behavior.
Detaching from emotions means detaching from overconfidence (when winning) and self-sabotage (when on a losing streak).
This emotional equilibrium might seem a Zen-like idea but can help prevent reactions from impacting on trading decisions.
2. Better Judgement
Becoming an observer of your thoughts and feelings and getting the detachment from emotions that is part of mindfulness allows better judgment when making decisions.
Understanding the reaction, living just in each moment and taking time to sit with feelings gives you the breathing space for better judgment, even when under pressure.
There are no knee-jerk reactions when problems are approached with mindfulness.
Avoiding confirmation bias, overconfidence or self-sabotage through a mindful appreciation of your emotional reaction allows for better decision-making.
3. Better Focusing Ability
Unlike meditation, mindfulness is not about completely clearing the mind. But it is about quieting the mental chatter that can get in the way of rational thought.
By identifying and accepting your thoughts, they hold less power over you.
You can then focus on what matters – what action you are going to take.
Better focus is beneficial for not only reacting to situations but also for creating strategies.
4. Better Information Processing
Understanding your emotional response to events and information helps you to process facts as they are presented rather than through your own conscious or subconscious biases.
Taking the time to sit with your emotions and thoughts when presented with new facts allows for better information processing – and then better decisions.
Being able to process information outside of your biases will also help improve your critical thinking skills.
5. Staying Calm Under Pressure
Trading is a cut-and-thrust situation and making the best decisions under pressure can be difficult.
With mindful trading, when money becomes secondary to the love of trading, you can let go of worries and thoughts about past or future trades.
Without reacting to the pressure, whether winning or losing, a cleaner and more decisive execution of judgment can be achieved.
How to Be a Mindful Trader
Step 1. Minimize Distractions
Remember that mindfulness is about being in the moment, and this is more easily achievable when you can minimize distractions.
Distractions can be in the form of errant thoughts, worries about the future, thinking about the past or even how you are feeling in terms of physical health.
If you acknowledge them and listen to what they are telling you, letting them go will be easier.
Letting go of those feelings will help you to remain undistracted.
Step 2. Value Calm Behavior
Better decisions can be made when you are calm – this can be useful not only in trading but also in everyday life. Calm behavior helps you deal with problems in the most beneficial way.
Kneejerk reactions do not only happen during trading decisions. In day-to-day life, you will be presented with information and data out of your control that could cause you stress and worry.
If you value calm behavior, you will naturally put more effort towards cultivating it. Altering your priorities can alter your behavior for the better.
Practicing mindfulness, to calm the mind and see through the chatter, is a process. Mastering it will make it much simpler for you to react calmly no matter what might happen.
Step 3. Breathe
Breathing gives time for focus.
The breath is an important facet of mindfulness. Focusing on it creates a moment of calm – essential to good mindfulness practice.
Through breathing, focus can be placed on each thought, feeling and emotion as it arrives, so that it can be acknowledged, understood, observed, then let go.
Each breath can provide the mental space to be in the moment.
While focusing on your breathing, you are giving yourself time to process the information that you are presented with and your reaction to it before acting.
Step 4. Acknowledge Emotional Reactions
It is perfectly normal and necessary to have emotional reactions to situations.
Whether it is a reaction to an event that is your own doing, or something completely out of your control, the human responses of thoughts, feelings and emotions happen.
The key to practicing mindfulness is to truly acknowledge these emotions and sit with them so that you can then go on to make unbiased, calm judgments.
Emotions arrive and can feel strong and overwhelming like a tidal wave, but by acknowledging and accepting them, they will peak and pass on.
Trying to block emotions out only makes them get stronger as they try to metaphorically bash down the door into your mental fortress.
As you notice a thought or a feeling, isolate it and question it. Observe it without judgment – it is neither right nor wrong; there are no bad or good emotions.
Mindfulness is the judgment-free acceptance of your reaction and the clear-eyed choice of action to take.
Step 5. Practice
Unbiased acceptance and observation are not skills that can be developed overnight. But they are worth the effort to develop – utilizing them will have a positive impact on your daily life and your trades.
As well as practicing through focused mindful meditations, there are other ways to be present and mindful.
For some, a short walk and fresh air are enough to allow for clarity of thought. Exercise is also an excellent way to practice mindfulness, whether cardio or more strength-based training.
Mindful reading of a book – completing a full chapter without distraction – or completion of a crossword, sudoku or another puzzle can bring space to be present in the moment.
Sometimes even making and drinking a cup of coffee, quietly and with full concentration, can be a mindfulness practice. The stimulation of your physical senses can be used to center you in the present.
Bringing mindfulness into your everyday life is excellent practice to make it second nature. This ensures that when you are trading, you are making the best decisions alongside your feelings and thoughts rather than despite them.
As a bonus, you will likely find positive effects of this practice in your day-to-day life.
Step 6. Develop a Mindset or Framework
As part of your mindfulness practice, align yourself with a framework to help you when you are reacting to information relating specifically to trading.
This can also be called a schema. It is a habitual way of processing and integrating information about a specific subject.
If mindfulness is part of your trading schema, it will form the foundation of all your thoughts about trading. Then, no matter how you trade, this routine and prepared mindset will make mindful trading a normal reaction.
Whatever way you do it (taking a moment to breathe, having a coffee before pressing 'buy', considering your options on a bike ride), your mental framework will provide you with the stability to allow detachment from your emotional response to trading situations, so that you are not responding in a knee-jerk manner.
If you can decide based on the present, rather than the loss you made yesterday or the big win the day before, then you can trade in a way that is free from stress and pressure.
Trading becomes about the love of the game, rather than the worry of loss.
Having a framework to prepare you for situations that are out of your control helps you to respond to situations, such as potentially damaging financial movements, news stories or banking actions, in a way that is not emotional, but not inhumanly robotic either.
Observing reactions, understanding that they are valid and normal, then living in the moment and making cleaner judgments is what mindful trading is about.
Mindful trading involves practicing mindfulness and awareness during trading activities.
It involves being present in the moment, focusing on the task at hand and maintaining emotional balance.
Mindful traders are able to detach themselves from their emotions and remain objective, allowing them to make more rational decisions.
To be mindful while trading, it is important to cultivate a daily mindfulness practice, such as meditation or breathing exercises.
Traders can also take breaks during the trading day to refocus their attention and ground themselves in the present moment.
Additionally, maintaining a trading journal can help traders reflect on their emotions and thought processes during trades.
Mindful trading can help traders reduce emotional reactions, improve decision-making and increase self-awareness.
It can also help traders maintain focus, reduce stress and anxiety, and avoid impulsive trades.
Common techniques used in mindful trading:
- Mindful breathing
- Body scan
- Visualization
- Focusing on the present moment
These techniques help traders stay present and aware of their thoughts, emotions and actions, and avoid getting caught up in distractions or negative patterns.
Mindful trading can help with managing emotions by promoting emotional awareness, self-regulation and decision-making based on objective analysis instead of impulsive reactions.
This leads to a more disciplined and consistent approach to trading, and reduces the impact of fear, greed or other emotions that can cloud judgment.
Traders can practice mindfulness during trading by setting intentions, establishing routines, taking breaks and reflecting on their performance.
This helps create a sense of clarity, purpose and balance, and enables traders to stay focused and alert throughout the trading day.
Anyone can practice mindful trading, regardless of their experience or background. It requires a willingness to learn and practice, and a commitment to self-awareness, self-care and continuous improvement.
Tips for incorporating mindful trading include:
- Creating a trading plan
- Setting clear goals
- Avoiding distractions
- Taking care of physical and mental health
- Seeking support and feedback from other traders or mentors
By integrating these practices into their trading routine, traders can cultivate a more mindful and sustainable approach to the markets.
Mindful trading can help with risk management by increasing awareness of the trader's thoughts, emotions and actions during the trading process.
With increased awareness, traders are better able to recognize and avoid impulsive or emotionally-driven trades that may lead to higher risk.
Mindful traders may also be more disciplined in their approach to risk management, setting clear stop-loss and take-profit levels and sticking to them even in the face of market volatility.
Additionally, practicing mindfulness can help traders remain calm and focused during high-stress situations, allowing them to make more rational decisions when managing risk.
Yes, practicing mindfulness can help reduce trading-related stress and anxiety.
Mindfulness techniques such as deep breathing, visualization and positive self-talk can help traders stay calm and focused in the face of market volatility and uncertainty.
Mindful traders may also be more accepting of losses and less likely to engage in negative self-talk or self-blame, which can contribute to increased stress and anxiety.
Additionally, mindfulness practices such as meditation and yoga have been shown to reduce stress and anxiety levels in a variety of contexts, and may be helpful for traders looking to manage the emotional challenges of trading.
While there are many potential benefits to mindful trading, there are also some risks and downsides to consider.
One potential risk is that traders may become too focused on the process of mindfulness and lose sight of their trading goals or strategies.
Additionally, some traders may find that mindfulness practices do not work well for them or may even increase their stress levels if they find it difficult to stay focused or calm during meditation or other techniques.
As with any new trading strategy, it's important to approach mindfulness with an open mind and evaluate its effectiveness for your individual needs and goals.
Yes, mindful trading can be combined with other trading strategies and approaches.
In fact, many successful traders incorporate mindfulness techniques into their existing trading strategies in order to manage emotions, stay focused and make more rational decisions.
For example, a trader using a technical analysis approach might use mindfulness techniques to manage their emotions and stay focused on their trading plan, while a trader using a fundamental analysis approach might use mindfulness to stay calm and objective when processing new information about a company or market.
Ultimately, the best approach will depend on the trader's individual needs and goals.
Final Thoughts
In trading, mindfulness allows you to accept the feelings you have – whether positive or negative, good or bad – and understand that they are all valid. Mindfulness enables sitting with them, allowing them to happen and then moving forward when you are ready.
Mindful traders can maintain an emotional equilibrium whether losing or winning, dealing with events completely out of their control or square on in the saddle.
If you are mindful, you can control your response to these events and avoid making poor judgments, self-sabotaging or acting out of overconfidence.
Focus helps mindful traders to process information logically and reasonably and helps maintain calm when under pressure.
Mindfulness is a practice that needs to become part of everyday life to become an instinctual, normal response when trading. Applying mindfulness in day-to-day activities helps with this.
Mindful traders can then enjoy the trade for the game, rather than the worry of money or the risk of losing.
WikiJob does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
