What is your prefrontal cortex?
Keeping your brain healthy is key for trading success, and best part of all, it can be trained to reduce impulse control and increase problem-solving. These are critical skills for investing profitably and reducing stress in the stock market.
The functions above are also referred to as your “Executive Functions” and are responsible for any thinking before a decision. Follow the steps outlined below will help train your brain for trading success.
Your Prefrontal Cortex & Trading
There is strong evidence that exists stating that a healthy prefrontal cortex leads to a better outcome in work and trading success. Trading is a job that requires constant fast decision making in the face of uncertainty and being patient through choppy markets. You can trust you will make better decisions leading to trading success when you take care of your brain, which often spells the difference between new and experienced traders.
Below are 10 ways to workout and ensure you have a healthy functioning prefrontal cortex and working towards trading success:
1) Good sleep routine
It is super important to get a good sleep every night for many reasons but we will focus specifically on why it relates to the topic at hand. When you are deprived of sleep it is found to disrupt the connection between your prefrontal cortex & amygdala.
Studies show sleep deprivation causes your amygdala to overreact to negative situations or stimuli. This is due to the connection being disrupted with your prefrontal cortex which is responsible for moderating its response.
Did you know that casino owners know that gamblers are riskier when they are tired?
Next time you are at the casino take a look at the dark windows, bright lights and loud music that they use so you don’t notice the passing of time. There’s generally no clocks on the wall either.
Here are some tips to get a better night sleep:
- Put your phone away from your bed. This has an added benefit if you use it as your alarm clock. No more hitting snooze without getting up for it.
- When using your phone past 7 pm make sure the blue lights are off. These keep you awake unnaturally. Your phone has this built in you just need to activate it if you didn’t yet.
- Go to bed around the same time. Keep a solid routine. All investors who display trading success have very predictable routines.
- Keep a journal next to your bed. When you have those million dollar ideas write them down. This helps get them out of your mind so it stops racing and ensures you don’t lose that thought.
2) Keep moving
Similar to sleep, this goes beyond the scope of our topic but for the sake of the blog, we will stay on topic.
You want to stay active, keep your body moving and flowing. Sitting for extended periods of time is one of the worst things that you can do for yourself. Get up and walk around the office or the house, go to the gym, go outside, ride a bike, walk to the mailbox, really anything to just remain physically active. Break your sitting addiction.
3) Say thank you
When people express their gratitude it helps release positive emotions. In turn, these positive emotions improve your happiness and help activate your prefrontal cortex.
4) Avoid drama
This is something I avoid religiously. You won’t catch me arguing on Twitter. When you engage in arguments and drama all this does is feed your ego. It does NOTHING beneficial for you. Engaging in drama activates your amygdala and throws off the full functioning of your prefrontal cortex.
5) Step outside of your comfort zone
In order to get somewhere you haven’t been you need to do things you’ve never done. Have you heard that quote before?
When you do things outside of your routine, step outside of your comfort zone, your brain connects new neural networks. It is then easier to do next time around. Practice does make perfect.
Stepping outside of your comfort zone doesn’t have to be something crazy. It can be a slight change in something that you are already doing. Does hitting that snooze button until the last minute make you feel comfortable? Stop hitting it, get up earlier, force yourself to make new habits and exercise the brain. This is the process of exercising your Willpower which every profitable trader needs an abundance of.
6) Be optimistic
If you realized how powerful your mind is and how much power each individual thought has, you would be very careful about what you let your mind think about. Don’t be a pessimist. Optimism breeds optimism. Remember the last point? Practice being optimistic, fake it if you have to in order to build those habits.
Optimism leads to higher levels of dopamine which engages your brain more. This will make sure you are in the best state to make the best decisions. Trading success often depends on being self-aware, and shifting your mind back to the (future) positives rather than dwelling on the (past) negatives.
7) Use social media responsibly
This cannot be stressed enough. Social media is here to stay and it does bring many benefits but be very careful how you use it because it does affect your brain and it’s decision making.
One of the things social media has done is made instant gratification even easier to find. With the use of likes & followers, you are receiving a form of instant feedback that feeds your desire for instant gratification.
Trading and instant gratification are a very dangerous duo. When you reward it you are decreasing your brain’s ability to have patience and rewiring it to seek rewards NOW. Remember the neural pathways and habits? That applies here.
In trading you need patience.
“The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
Below is a great video on how social media affects the brain.
Gaining knowledge engages your brain activating neural connections. When you are reading a book your brain is trying to put together a storyline from the separate pieces you are reading.
9) Eat healthy
Have you ever had a good productive day after a very sugary & heavy breakfast? Yeah, me neither.
Your diet is going to play a huge roll in your thought process. Foods that tend to be high in salt, sugar or artificial additives are going to more likely give you brain fog and affect your clarity of thought.
As a trader you want to be on your feet, sharp and thinking in a very coherent manner. Eat plenty of fruits & vegetables. These will give your brain the correct & healthy nutrients that it needs to work optimally.
Just like your body needs nutrients for heavy lifting to repair, your brain needs nutrients for heavy thinking.
Did that word just give you the chills?
Don’t think of meditating as sitting in a location off the grid cross-legged alone for hours.
It, of course, can be that but anyone can meditate with only 5 minutes a day. Taking an Uber? Meditate in the back for 5 minutes. All you need is to be sitting and focus your attention inwards.
Going to sleep? Focus on being present as you fall asleep.
Focus all of your attention on your breath as it goes in and out. Listen to the thoughts going through your mind without entertaining them. The thoughts are not you, you are the observer. The goal is to stop identifying as that voice in your head and identify as the consciousness observing it.
As with anything, it will be hard to focus at first but I promise you 5 minutes later you will feel relaxed. Maybe confused but relaxed.
I like to meditate in the morning because it sets the tone for my day. It makes me more aware of my surroundings and in tune with my thought processes. It helps to balance out all of my emotions and really become present. It has helped immensely. Why do you think some of the most famous traders all openly meditate?
It works and you owe it to yourself.
It can be done in many ways but the ultimate goal is to quiet the mind and sharpen your awareness. It is one of the best ways that I know to strengthen the prefrontal cortex because it forces you to be present and concentrate.
Aside from trading, you would be surprised how long you have been on autopilot.
You only get one brain. Take care of it. If you follow these 10 tips you will think more rationally and be a better decision maker.