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• Article Biofeedback for Better Living and Trading by Wessel de Roode
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• Trading Tip How Low DID We Go? by D. R. Barton, Jr.
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Article

Editor’s Note:  Earlier this year, Van learned how to use the emWave2 device from the HeartMath Institute.  Since then, he has been working on improving his own coherence and has been researching trading performance improvements with some Super Traders using the device.  In September at the Berlin workshops, Van found an attendee who had been using the emWave2 already every day in his trading. He graciously offered to share his experiences with our readers. 

Biofeedback for Better Living and Trading

by Wessel de Roode

View On-line

About a year ago, I became involved in a very stressful situation. An investor in my wife’s company threatened to slander our reputations and promised to destroy us if we didn’t pay him 4x the fair price for his shares. I became consumed with fury about this attempted blackmail.  I was also angry because this big fight wasn’t even mine — I had been dragged into it. When I started thinking about driving the guy over with my car, I realized I needed to address my anger and return my adrenaline and cortisol to healthy levels again. I also knew, however, that I did not want to just take a symptom killing pharmaceutical so I started to research effective ways I could lower my stress.  

In my search, I found an article by a Dr. McCraty about lessening stress by reducing the heart rate variance (HRV) (Endnote 1). The article explained how to use biofeedback to measure HRV and create a relaxed state of mind. As McCraty explained, when you lower your HRV, you can reach a state of coherence.

Coherence is the state when the heart, mind and emotions are in energetic alignment and cooperation. Coherence builds resiliency while personal energy accumulates rather than dissipates — all of which provide more energy for manifesting intentions and harmonious outcomes. 

This state of coherence was very appealing to me.  In its most basic form, all anyone needs to do to improve their coherence is to breathe rhythmically and pay attention to an HRV monitor. I bought an HRV biofeedback device which gave me crucial guidance on my coherence level and I started to learn how to get rid of my stress.

Pushing the Limits

Over time, I practiced improving my coherence and worked hard to explore what techniques gave me the highest scores. This is a short list of what I found best worked for me:

Breathing
Breathing in and out from my heart or breathing in from the heart and out through the solar plexus helps increase my coherence. Also, breathing deeply helps improve coherence; shallow breathing doesn’t. I know that almost stopping your breathing is part of some meditation methods but in my experience and from what I have read, almost stopping your breath really hurts your coherence.

Thoughts of Love, Gratitude
Think of joy and gratitude! For me gratitude works best. Perhaps for you a loving thought works better. Just sticking to one or both of these powerful energies boosted my coherence dramatically.

A Buddha Smile
I put a smile on my face like the Buddha has in many sculptures. Even when I don't feel like practicing coherence, smiling is often more simple at the start than focusing on positive thoughts.

Use A High Coherence Setting
Putting the device on a higher level forces me to focus on staying at a higher coherence level. In my training I do this when I am consciously practicing and stretching myself to higher levels.

Focus on a small dot.
I notice that opening my eyes just a bit and focusing on a single dot on my screen improves my HRV.

Performance Improvement

At one point, I found an interesting TEDx video from Alan Watkins called "Being Brilliant Every Single Day"(Endnote 2) in which he explains the correlation between heart coherence and brilliance. When you experience stress, your coherence drops and the frontal lobes shut down. Humans are largely unaware that under these conditions, we basically stop thinking rationally. Dr. Watkins calls this lack of thought and unawareness about it a "DIY Lobotomy!” Have you ever said something under stress and later thought, “What was I thinking?” Well, you weren’t.

To demonstrate the point, Dr. Watkins put a volunteer in a mildly stressful situation while the audience viewed a biofeedback monitor. The audience saw the man’s coherence drop while he stumbled over some simple math problems. Watching that, I suddenly realized that HRV biofeedback could be very useful for trading. Being able to tell if I was operating from a clear mind or from an irrational mind could improve my trader efficiency dramatically.

A Device for Trading

After thinking about how I would use an HRV monitor for trading, I could tell that it would be different than using one to reduce my stress level. For general stress reduction, I could use any device that is either stand alone or works on my iPhone. Using an HRV monitor for trading, however, brought up a particular set of issues: an iPhone will run out of power during the day and I don’t allow any other software to run on my trading workstation than trading software. Also, I wanted a device that would archive results so that I could review them later.

How I Use the emWave2 for Trading

After I found the right device, I decided to add a trading rule that I could only enter/exit/adjust trades when my heart coherence was in the green zone - which meant I had an acceptable level of coherence. The results were good - I was able to keep calm during all trades by maintaining coherence with some attention during my trading activities. When my mind became scattered and all kind of thoughts flowed through my head, the device would tell me I was out of coherence. Just doing a few seconds of exercises (actually just becoming aware) is usually enough to get me back into coherence and allow me to continue to trade.

One interesting difference for trading compared with my normal coherence practice - I use a medium coherence setting while trading which allows me to stay focused on what I’m doing. If I used a high setting while trading, I noticed that I could be so “in the now” that I would forget what I just did – which is not so helpful. As I gain more experience, however, I can see how a state of such high coherence could help me be one with the market.

Conclusion

For me, my Heart Rate Variance has become very useful feedback that answers the question "how am I physically operating right now".  HRV is like the oil pressure of an engine - if it drops, then we're in trouble even though the engine might sound like its doing fine for the moment. The feedback helps me maintain a clear state of mind while making trading decisions and let’s me know immediately if my thinking becomes distracting.

Using the emWave2 device has generated a lot of ideas about how it might be used to help everyone’s psychology and improve trading performance. I hope this short explanation helps you explore your awareness and find what works best for you as a person and as a trader.

References

1. McCraty, R., Barrios-Choplin, B., Rozman, D., Atkinson, M. and Watkins, A. The Impact of a New Emotional Self-Management Program on Stress, Emotions, Heart Rate Variability, DHEA and Cortisol. Integrative Physiological and Behavioral Science. 1998; 33(2):151-170.

2. Dr. Alan Watkins, Being Brilliant Every Single Day TEDx presentation

About the Author: Wessel de Roode MSc used to work as a freelance executive-coach and program manager for banks and European broadcasters. After his children’s birth, he decided to change directions and actively support his wife's company’s rapid growth. Currently, the children AND the company have reached enough maturity for him to devote more time and energy to his next challenge: developing himself into a fulltime day trader. He’s looking for the right mix of technologies and psychology that suits him best.

Disclaimer

If you are interested in purchasing the HeartMath Institute emWave2 Device, VTI has a few available for $199. Click here to purchase from VTI.

Amazon.com also offers the emWave2. Click here to go to Amazon.

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Trading Tip

How Low DID We Go? A Market Pullback Update

By D. R. Barton, Jr.

Last week’s “Trading Tip” article came out amid the biggest market fear moment in almost three years.  On Wednesday, October 15, the CBOE Volatility Index (Symbol:VIX) hit its highest level since December of 2011.

My goal in writing last week’s article was to help readers get outside the hyperbole of market commentary and give us an objective look at how this pullback compared to others in recent history.  At that point, the numbers showed that this was just a normal pullback in a bull market.  The tone of the article was “don’t get caught up in the hype and panic”.   

More importantly, I wanted to give some sign posts that would serve as lines in the sand.  Those sign posts would alert us if and when the pullback had become more than normal market movement – those areas are where lots of money managers and other market participants would have to take more aggressive action to lighten their long exposure.  Let’s look at the Tuesday, October 14 chart for a reminder of how things looked on that day:

Last week, I gave these comments:

“The first key area will be the closing price from 2013 which was 1848.36.  A close below this level would mean that we’ve given up all our gains from the year.  The second level to watch is the distance of a 10% correction.  For intraday levels, this would mean a drop to 1817.33.  On a closing basis, we would need a close below 1810.22.”

More important was the conclusion:

“Until these levels have been breached, this is all just normal market activity.  Keep your stops in place and stick to your plan!”

Let’s see how this played out as of the close on Tuesday, October 21:

As we see at the arrows above, on the “Ebola plus” fear day (plus = other less important economic factors), price temporarily crossed below the line that sent the S&P 500 negative on the year.  It almost got to the 10% “correction level” line, and then reversed leaving a long buying tail.

Were these levels magic?  Not at all – but - there were a whole lot of eyeballs on them.  So while not mystical, they certainly are important.  And on this trip down, the market certainly respected them.

What Next?

This Tuesday, the S&P 500 closed at a very important Fibonacci level.  So what it does over the next few days with regards to this level will be key to how much more upside we have in this leg. 

Let’s look at the Fibonacci retracement levels related to the September 19 to October 15 down move:

This S&P 500 retracement closed with spitting distance of the 61.8% retracement level.  From a technical analysis perspective, a close significantly above this level will signal the end of the downtrend and put us back into uptrend mode in the intermediate time frame.

With that said, this rebound has come off of the near term lows VERY fast so expect some pullback or sideways consolidation as a reaction to the short-term overbought situation that the market developed in its asymptotic rise over the last four trading days.

I’d love to hear if you’ve found the past two weeks of analysis useful.  Please send an email to drbarton “at” vantharp.com and let me know your thoughts.

God bless you and great trading,
D. R.

About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured guest on both Report on Business TV, and WTOP News Radio in Washington, D.C., and has been a guest on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at "vantharp.com".

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