No results

Your New Secret Trading Weapon: Sleep

Fusion Markets

post content image

Sleepless nights are a common predicament for most traders. It is the only time you are not consciously screening the markets. As stressful as it can be to sleep with volatile open positions, it is extremely important that you beat the urge to make impulsive moves and that you give your brain some rest.

Since the forex markets run 24/5, most people barely get enough sleep while the markets are open. But this kind of lifestyle will ultimately lead you to make sub-optimal biased trading decisions.

Depending on which part of the world you’re in, the markets might move the most while you should be asleep. For those here in Australia, we are sleeping while the US is in their trading day, which, when you have large open positions active in the market, can make it even more difficult to get a good sleep.

But here’s the thing most traders are not thinking about. Getting a good night’s sleep every day is just as crucial as your fundamental and technical knowledge. Still, many of us tend to overlook a good rest, thinking we can survive on far less than we need. Let’s look at why sleep is essential for forex trading and how to cultivate a good sleep routine.


Why is sleep important for traders?

Sleep plays a big part in our mental wellness, which then affects our decision-making for the day.When you’re placing trades that involve vast amounts of money along with prices that change every second, you want the part of your brain that makes decisions (the pre-frontal cortex, if we’re being precise) to be in tiptop shape.

Ask any elite athlete what one of the most essential tools they have for recovery is, and it’s often sleep. Lebron James, for example, reportedly sleeps as much as 10 hours a night. Now I know what you’re thinking, “Well, I’m not an elite athlete and I’m certainly not Lebron”. But you are trying to obtain peak (trading) performance, right?

Trading involves competent risk management. Before you execute those trades, you want to have a clear picture of the risks and benefits so that you can make calculated and well-informed decisions. When you don’t allow your body and mind to rest well, your practical decision-making is overshadowed by restless behavior patterns.

Basically, good sleep keeps you sharp and productive. On the other hand, studies show that lack of sleep tends to impair decision-making involving complex factors and unexpected occurrences, which occurs quite a lot when the markets are open. By having good sleep regularly, you allow your brain to make unimpaired decisions compared to when you are sleep-deprived.

And speaking of the brain…  

What’s the science behind it?

First, let’s look at what goes on in your brain when you sleep.

Throughout the day, when you’re awake, the brain accumulates metabolic waste. You don’t even have to exercise or move around to accumulate it. Your body already expends energy by just keeping your basic functions running, like breathing and pumping blood.

In using energy, metabolic waste builds up in various parts of your body, your brain included. In time, the buildup can interfere with the peak functions of your brain. When you sleep, your brain sees the perfect opportunity to do some house cleaning. The brain has a built-in waste removal system which is called the glymphatic system.

Sure, the glymphatic system also works while you’re awake, but the cleanup process is at least twice as fast when you’re asleep. This is because your brain knows that there’s not much going on in your body, which allows it to focus on clearing up.

This is why you always feel refreshed and focused when you wake up after a good night’s sleep. And since mental wellness plays a huge part in your trading psychology and your trading mindset, you always want to be in this “clear” state whenever you’re trading. When you’re sleep-deprived, the part of your brain in charge of your fight or flight reactions — the amygdala — is far more stimulated than it would be when you’ve had a normal amount of sleep.

What does this mean for you as a trader?

Well, try to go back to the last time your fight or flight reaction (or amygdala hijack) got triggered. Maybe you were in a disagreement with a colleague or a friend, or you were in an emergency. Wasn’t it hard to stay focused because you felt like a thousand things were going on at once? Now think about how you feel when you’re sleep-deprived and a trade isn’t going your way and a new announcement means you need to think about the implications and what’s next for the market. Are you at your best cognitively at this point? Probably not.

A stimulated amygdala makes it hard to make logical decisions. It also cuts off access to your pre-frontal cortex, which is in charge of making logical decisions. And as forex traders, our trading mindset should always be governed by logical, not emotional, decisions.

Unfortunately, your brain is more likely to go into fight or flight mode with a lack of sleep. You aren’t thinking or seeing the market clearly. Maybe you’re paranoid about your trade, or you see things that aren’t there, or maybe you enter or exit the trade too early.

How does a good night’s sleep benefit your trading?

A good night’s sleep gives you good preparation for the trades you’ll be making the next day. Your brain is clearer, and your mind is sharper. When you look at the charts, you’ll be less likely to be influenced by sudden price fluctuations, which we know are all too common in financial markets, particularly in forex trading.

By consistently making good forex trading decisions, you’re more likely to see bigger gains in your trades.

In fact, one study  suggested that sleep-deprived forex traders had relatively lower returns because their decision-making skills were affected.

A good night’s sleep also promotes a healthy work-life balance. You may be a forex trader, but it’s also important to look into your personal health outside the financial markets. You feel more energized and alert when you are awake, allowing you to see new opportunities in the market that an otherwise tired trader might not. This could be your edge.  

Tips for sleeping better

Now that we’ve talked about why sleep is important, let’s talk about developing good sleeping habits.

First, reduce your screen exposure before bedtime. Blue light keeps our brains alert, and this is the kind of light that you usually see from your phones and your living room lights.

Put the phone down and shut off your computer. As hard as it is, that will mean trying to keep your eyes off the charts. Try having herbal tea (Peppermint, chamomile is best for relaxing), reading a physical book (to avoid more screentime), or doing something that relaxes you to get your brain ready for bed. If you really must check your phone or computer late at night, try using apps that make the screen appear “warmer,” giving it an orange tint or via “dark mode” starting from a couple of hours before your bedtime.

Orange lighting is less harsh compared to blue light, which makes it easier to eventually fall asleep.

Second, if you can afford it, separate your workspace from your bedroom. You want your brain to associate your bedroom with rest and relaxation so that as soon as you walk into the bedroom, your brain “gets” it and starts powering down. Playing on your phone or laptop in bed is likely confusing your brain.

Third, keep your room to a cool temperature. Ideally, between 18-20 degrees Celsius.

Finally, one of the worst things you can do is get up and check your phone or computer for what’s happening in the market. The screentime on your eyes, the adrenaline rush, and more will only cause you to make an emotional decision.

If it makes you feel better, a stop-loss or a take profit takes a lot of the unknowns out of the equation. Your trade will either have one of three things happen: It’s still open, it’s been closed with profit, or closed with a loss. By leaving the outcome to the market, you are more likely to think too heavily about it all through the night.

Forex trading is not all about the technical and analytical aspects. A sound body complements a sound mind. You should take care of both aspects to make sure you are at your best. In our view, a well-rested trader will likely exceed a sleep-deprived trader that’s not at peak cognitive performance.

We’ll never share your email with third-parties. Opt-out anytime.

Relevant articles

Stuff that makes you think
post image main
Why You've Got a Bigger Advantage than Professionals
Fusion Markets

You’ll often hear in the media or from professional market participants that retail clients “shouldn’t try to compete with the professionals”.

Ignoring the condescension here for a moment (“the adults will take it from here”) it is my firm belief after ten years of trading that this isn’t always true.

Sure, any beginner will find it challenging at the beginning to trade successfully, but you can’t expect to play like Roger Federer after one match of tennis, can you?

Charlie Ellis, the man who oversaw the $24 billion Yale endowment fund in the US once, said “watch a pro football game and it's obvious the guys on the field are faster, stronger and more willing to bear and inflict more pain than you are. Surely you would say ‘I don’t want to play against those guys.”

But Charlie is wrong in a few ways.

Yes, professional traders and institutions have many advantages at their fingertips. They get news faster than you do. Their trades go more quickly than yours. They pay far less than you do. You get the picture.

But it’s not all doom and gloom. Here are a few reasons why:


No, not in the sense that you have more actual time to trade than them.

You probably don’t.

You’ve probably got a full-time job.

You might have kids or ailing parents to look after.

Trading is like a side hustle for you.

BUT your time horizon is different from theirs.

You can hold a trade for days or weeks without a Manager yelling at you “Why the hell are you selling euros, you dummy… the market is going up”. You might enter a trade on gold and plan to hold it for months.

A professional fund manager or trader might not have that luxury due to quarterly reviews, investor pressure or whatever else.

Professional Risk

Professional or Career risk is one I picked up from famed value investor, Howard Marks. In his book “The Most Important Thing” (one of my favourite investing/trading books of all time – buy it!) he talks about how in the GFC there was so much pressure on investors to not look silly by calling the bottom of the market or “catching a falling knife”. No one wanted to be the guy in the office who was buying Citibank at $1 per share!

Similar to my time point above, you don’t have that problem.

You don’t have your colleagues questioning you why you’ve bought or sold some instrument. Or a boss that is screaming at you and putting you into an emotionally defensive position trying to justify your actions.

Will you lose your job for selling USDJPY? No.

Does a professional trader get fired for always missing targets or taking on too much risk? Yes.

You need to work out what you’re happy with in your trading goals and go for them.

It’s entirely up to you what you define as success. The Pros don’t have that luxury.


Which brings me to my next point.

Most professional traders and investors have a benchmark. If you’re a fund manager you’ll send out your monthly report to your investors saying “here is how much we made/lost.. and here is what the benchmark did”.

If you miss that benchmark, get ready for investor withdrawals. As a professional, you’re judged on your performance. Simple as that. The more investors leave. The more you have to sell. The more you sell, the worse your performance!

What’s your benchmark? You get to set your own. Happy with 1% a month? Awesome.

What about $100 a month so you can buy your wife dinner? Happy days.

Or $5,000 a month so you can pay off your mortgage? Even better.

It comes back to autonomy and your desires. No one else decides that but you.

Fees and Expenses

Believe it or not, you do have a HUGE advantage here, especially if you’re trading with a low-cost broker (hello, Fusion!)

If you’re a professional investor/manager, you’ll often have a significant research team, a very fancy office with lovely views, staff bonuses, visits to various investment conferences etc.

Not to mention all that travel to see your clients and investors!

Putting that aside for a moment, if you choose a good broker, you’ll pay zero spread and a small commission that is not far off what the pros trade. They’ve got $100,000,000 though, you’ve got one thousand!

So, ignore the haters telling you to stay out of the market because its only for the big boys.

However, let me be clear.

I’m not saying trading is easy and (unlike some) and that you can soon retire on the beach. It’s not. Trading FX, in particular, is a highly challenging exercise.

But don’t just assume because there are so many professionals in this that you can’t succeed or you’ll never be good enough. You have to play your own game, and for me, that’s the best part. I set my own rules as to what I consider success. That’s something the pros will never get.  

If you’d like to start trading and use your advantages to outperform the pros, Sign Up to Fusion Markets and get your feet wet with our demo account. When you're ready start a live account to start making real-time trades.

Trading Strategies
Financial Markets
Retail vs Professional
Market Trends
Stuff that makes you think
post image main
Ethereum Trading: All You Need to Know
Fusion Markets

What is Ethereum?  

You may have heard of Ethereum being compared to Bitcoin, but Ethereum isn’t actually the digital currency itself. Instead, Ethereum is the technology that can run various financial services like payment systems, identity software, security programs, and of course, cryptocurrency trading.  

But how does this technology work?  

Like Bitcoin, Ethereum also uses blockchain technology, but there are quite a few differences on the deeper, more technical side. Blockchain technology is the foundation that supports all of Ethereum’s services.  

The biggest feature of Ethereum is that it is a programmable blockchain. This means that you’re free to use the technology according to your own needs. Whether you need it for payments, software, or even Bitcoin, you’re free to do that!  

Some of the world’s biggest companies are using blockchain in various ways, which shows how flexible the technology is. BMW, the renowned automaker, is using the Ethereum blockchain to track materials across its supply chain.  

De Beers, the biggest diamond mining company globally, is using the Ethereum blockchain to track diamonds from mining to selling. HSBC is also using the blockchain to conduct foreign exchange trades on its FX Everywhere platform.  

The blockchain can be used on just about any technology that requires information to be logged and verified.   

But if you’re here reading this article, you’re probably more interested in investing in cryptocurrency or buying cryptocurrencies. That would be ETH or Ether.  


What is the difference between Ether and Ethereum?  

If Ethereum is the technology, then Ether is the cryptocurrency that runs on that technology. However, for most people, “Ethereum” and “Ether” are used interchangeably to refer to the digital currency instead of the technology.  

The shorthand for Ether is ETH, and just like Bitcoin, ETH is a form of decentralised finance or “defi.”  

This means that the digital currency is not centrally regulated by one authority. Instead, all the computers on the blockchain do the work of validating each and every transaction on the network.  

Ether is up there with Bitcoin as one of the most highly traded cryptocurrencies globally, along with Ripple XRP and Litecoin and others available on Fusion Markets’ platforms.   


The benefits of trading Ethereum  

As with any digital currency, the biggest benefit of trading Ethereum is the lack of centralised regulation because of blockchain technology. This means that making fraudulent transactions on the network is extremely difficult and almost impossible.  

However, one thing that makes Ether different from Bitcoin is that the supply of Eth is limitless.  

Let’s break it down a little bit.  

The way Bitcoin works is people are constantly “mining” for Bitcoin. However, there is a predefined limit for the amount of Bitcoin that can ever be in circulation. Once all the available Bitcoin has been mined, that’s all the Bitcoin that will ever circulate.  

The Bitcoin mining rate slows down over time, so the prediction is that the last Bitcoin will be mined at around 2140. That’s over a hundred years from now, but it’s still a definite time that will arrive.  

For most people, the problem with the limited supply of Bitcoin is that it can create issues like high inflation levels in the future.  

The supply of Ether does not have the same limitations that Bitcoin has. Thus, it can be more stable in its fluctuations, and this effectively works as a hedge against extreme inflation.  

Ether is also less volatile, at least when compared to Bitcoin. So if you’re looking to invest or trade in cryptocurrencies, but you want to minimise the volatility, Ether may be right up your alley.  


Risk Management when it comes to Ethereum  

Despite the lower volatility levels of Ethereum, it is still a cryptocurrency. This means that unlike more traditional investments like stocks and forex, its price is still quite volatile in comparison.  

So, when trading or investing in Ethereum, it’s essential to employ risk management practices.  

First, only use as much money as you’re willing to lose. This is a basic precept for investing or trading in general, and it applies to Ethereum as well. The price of ETH in 2021 may be high, and it may look like it will continue to rise, but no one can really predict the next price movement.  

Second, diversify. Don’t put all your eggs in one basket. If you want to trade cryptocurrency, make sure to allocate your funds across multiple digital currencies. That way, if the price of one plummets, you still have your holdings in other cryptocurrencies to rely on.  

Third, do your own research. Don’t rely on social media gurus or finance forum posts that tell you when to buy or sell. Cryptocurrency is a fairly new concept, and it’s pretty much still in its infancy stages.   

If you’re investing in ETH, make sure that you understand it, how it works, and what the technology behind it is.  

A good investment is one where you believe in the product you’re investing in.   

While it’s true that no one can really predict how the price of the cryptocurrency will move, it’s much safer to put your money in investments that you’ve done research in instead of just blindly following what you see on social media.  

Finally, make sure to monitor your own physical and mental health while trading cryptocurrency. The markets run 24/7, and you don’t want to be looking at charts all day while ignoring your own well-being.   

Taking care of your mind and body allows you to make better, more rational trading decisions, dramatically reducing the risk.  

Risk management is a fundamental skill that any reasonable investor or trader should have. There are plenty of risks when it comes to ETH and cryptocurrency in general. Risk is unavoidable, so the best thing we can do is to manage and minimize it.  


The Future of Ethereum  

Despite cryptocurrency being a new concept and Ethereum being fairly more recent than Bitcoin, its rise in the charts shows that it’s here to stay.  

The main selling point of Ethereum is how its blockchain technology compares to Bitcoin, and with the number of people investing in or trading ETH, it’s clear that there is widespread acceptance and trust for ETH.  

Will ETH keep its place as one of the top cryptocurrencies in the future? The truth is, nobody knows. Governments are still only beginning to recognise and regulate cryptocurrencies, so the future of ETH is, as a whole, uncertain.  

But for some people, that uncertainty is what makes ETH such a good investment. Hopefully, this article has helped get you started on the basics of trading ETH. 


Ethereum Trading
Crypto currency
Ready to Start Trading?
Get started live or get a free demo