Vedanta and Trading

Hi Traders, Thiru Nagappan here, founder of Master the Markets, Elite Traders Conference and The Traders Open Day.

One thing that really concerns traders is basically consistent execution. One of the most important things for consistent execution is ‘psychology’. As we all know, and it is commonly said, 80% of trading is psychology.

For me on my journey as a trader as I was progressing I did find it challenging as well in terms of keeping my mind always in the present moment and making my emotions stable as I am consistently executing my trades. As you know, the one thing that really makes your emotions fluctuate so much is the money fluctuations, the cash fluctuations, the drawdowns; it really gets you, and sometimes the fear cripples you to place the next trade which might be the biggest winner that overrides all your losses.

One of the things that really helped me was this knowledge and very ancient wisdom called “Vedanta”. Some of you already know of this limited company’s name Vedanta Trading. Some of you might be wondering what is the link between Vedanta and trading?

Before we delve into that, let us take a look at what Vedanta actually is. Vedanta in essence actually means study of the highest truth. For you to reach the highest truth, it is said you must first study the mind. I have found that Vedanta is one of the best deepest subjective sciences on the mastery of the mind. That was what was researched by all the spiritual aspirants back thousands of years ago and they wrote it down into how to master this mind of ours and keep it always alert and in the present moment. I found that really fascinating when I stumbled upon this from a lecture I attended by accident. Of course there are no accidents in life, there is always a reason why everything happens, and that’s how I got introduced into this beautiful knowledge on Vedanta which actually helps you and teaches you ancient wisdom for practical modern day living – this teaches how to master this mind of ours and then finally to even go beyond the mind to realize our true selves.

You may be asking ‘Okay Thiru, that all sounds really good, but why is this so important in our everyday life?’ Let me explain. For anything that we do, in trading or even in everyday life, the essence all comes from the mind. We need awareness of the mind; we need control of the mind to achieve productivity and efficiency in anything that we do in our entire life. Be it health, relationships, career, and in this instance our trading careers. The mind is important for anything that we do in our entire life.

What is the mind? The definition of the mind, loosely put, is the flow of thoughts. All of us have thoughts. How do we manage those thoughts? Thoughts can be further separated down into emotional thoughts – of course all of us have experienced that when we’ve been trading, all the emotions both negative and positive: fear, anxiety, happiness – all those emotional thoughts. Then the intellectual thoughts: maybe we’re sitting down formulating our rules, thinking about what has gone wrong, what has gone right, how can we improve it. Those are intellectual thoughts where there are logic, ideas and reasoning. So ‘mind’ is the flow of thoughts and those thoughts can be separated into two categories of emotional thoughts and intellectual thoughts.

Since we understand now that we can gain good mastery of these thoughts and can even align them towards a higher ideal, you and I can really understand, even on a simple level, it will give us so much more clarity in our lives and so much more optimization and productivity and efficiency in everything that we do, even in terms of health. For example, when you want to exercise, you’re thinking ‘Should I really do it today? I don’t really feel like I have the energy, maybe I should just take a rest.’ But in that moment, if you can master your mind and numb that other voice of yours, you can tell that voice ‘No, I’ve got a responsibility today and I’ve got goals to hit and I want to lose that weight.’ When you have that, that voice can never come back again, the voice that pulls you down and keeps you lethargic and lazy. The other voice will overpower that one and will say ‘No, you’re not controlling me today. I’ve got a responsibility. I’ve got to go down to the gym and continue with my regular exercise regime.’

When that continuously happens, when you have control and full mastery of your mind, you can easily see and can achieve your results much faster. The essence of success is all in the mind. I believe that this can actually give you a very good understanding of why it’s important to actually understand the relation of the mind and why the study of this Vedanta knowledge is so important to achieving everything that we want in life.

You may be thinking ‘Thiru, you’ve told me what Vedanta is, you’ve told me why it’s important as the link between our mind and our everyday life activities, but how does this apply to trading?’ On Vedanta there is very exhaustive literature but I’m just going to share with you some very simple principles which I want you all to contemplate as well.

Before I tell you that, one thing that comes to mind is it’s important to remember that in Vedanta it is always said that contemplation is critical. So just you reading everything thus far, you can’t just nod your head and say ‘Yes, I totally agree with that.’ No, Vedanta says you should actually self-enquire. ‘Hang on a minute, is what Thiru’s saying actually right? Is it possible it is wrong, or how can he prove it?’ It is the same thing with your trading Traders. This contemplation factor is so critical. In fact, you should ask these three simple questions every day which are necessary for contemplation: What went well? What did not go well? What could I have done to improve? You can apply those questions to trading as well: What went well with my trading? What did not go well? And what could I have done to improve my trading today? If you ask those three questions each day, you will become so much better than all the other traders and in fact you will push yourself into the top 1% to 2% of the traders who are making consistent cash every day. So that is important for contemplation. You can use those three questions every day that I’ve just shared with you. That is what Vedanta really proposes that you do: contemplation every single day.

The second thing that I want to share with you all in terms of Vedanta, self-enquiry and contemplation, is the point of basically understanding why and how do we actually apply this knowledge in terms of a subject and an object relationship. Now let me explain this. Tom Bissu actually talks about this in the New Market Visits, but before I come to that let me explain this principle first. Subject and object. Imagine you are watching a movie, let’s say ‘Mission Impossible’. You’re watching Tom Cruise playing Ethan Hunt, the movie is about three hours long. The object is the movie and the subject is you. You are watching the things that are happening in the movie and  you get emotional fluctuations, for example, when he’s climbing on top of the train and an obstacle is coming up, you’re thinking ‘Oh no, is he going to go through that? Is he going to be caught by the enemy? Is he going to come out of it? What’s going to happen?’ All these emotions start to happen. It’s the same thing in trading. But you must understand, once your awareness increases and you start to understand that that is an object and you are the subject, this difference between the subject and object starts to happen and there is an emotional detachment from these two things when you understand that you are the subject. Now when that happens, there’s a level of control that you have and you can manage the situation rather than the situation controlling you. That is the most critical thing. When you start to realize the difference, that you are the subject and the object is something different, that’s when you can manage the situation much better.

Let me give you another example, a bit simpler. Imagine you’re traveling on a train and you look out the window and see trees, scenery and those kinds of things. You can only see that when there is a difference, when you are the subject and you can see the object.

Remember that it is the interaction of the subject and object that creates the emotional fluctuations. Once your awareness starts to increase that there is a separation between the subject and object, you will have more control over the emotions. Your intellectual conviction in your trading plan can actually override your emotions.

On a final note, let me relate that to a practical trading experience. For example, you are in a trade, you have your trading plan in front of you and it tells you exactly when you need to enter, how to trade your stop loss, all your trade management, where to get out and where to exit. The trade is going very well in your favor for the next two hours. Then suddenly there is a sharp market reversal and it is approaching your stop loss – let’s say it is just ten points away from your stop loss. Now your trading plan says that you can’t get out of the trade until it hits your stop loss or until it hits your target. All you have to do is keep trade managing it according to the rules that you have. You can understand at that point the emotions start to flood in; you start to think ‘I don’t want to have another loss again, I’ve already had three losses, I don’t want to have a fourth loss.’ That’s the emotional thoughts coming in but the intellectual thoughts start to counteract that at that moment and you think ‘I’ve got to follow the plan because the fourth one that I’m currently in right now can actually win and override all the losses.’

Now this simple concept, subject and object, can actually help you at that point because your awareness levels start to increase on understanding that the object is now the trade which is in action right now. The trade is creating all these emotional fluctuations, and you are the subject which is something different from that, similar to watching a movie. When you start to observe those thoughts like you’re watching a movie, those effects that those thoughts have on you start to reduce. There’s a level of detachment there. Very powerful knowledge when you start to put it into practice and contemplate this knowledge that I’m sharing with you. So once that level of detachment is there, the emotional strength that it can have on you to do stuff that you’re not supposed to do according to the plan, reduces. Your intellect starts to rise and they both start to align to each other. When also you have a higher ideal your vision in front of you as well strengthens and you get this stability mode, It is incredible! That state is just incredible, when your mind is just in that state and in the present moment and you have this amazing presence within you as you’re trading the trade. You absolutely know what to do, when to do it and how to execute it perfectly.

Well Traders, I will leave you with that amazing point for you to contemplate, and amazing knowledge that I have shared with you that has really impacted my life as well. Do definitely contemplate on it as Vedanta always prescribes as well.

As we always say, till the next time stay disciplined, follow your trading plan and keep Trading like a Master.

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