January 3

The Stoic Trader Series | Seneca’s Stoic Wisdom for Traders

By Yvan


As a trader, if you are consistent, rational, and you generally do things well, you’ll inevitably get lucky and make a lot of money.

But every once in a while, the market will throw a wild card at you, and which could result in you losing more than you had previously anticipated.

It’s all part of the game. It’s a risk we must accept and work with.

Those abrupt periods of vicissitudes… they’re circumstances stoic philosopher Seneca had to deal with.

In this article, I’ll share Seneca’s life and you’ll quickly see how trading is such a great opportunity for us to implement his stoic teachings.

This is the final part of a series called The Stoic Trader.

If you don’t know what stoicism is, make sure to check out the previous articles:

Part 1: The Stoic Trader Series | How Stoicism Can Make You a Better Trader

Part 2: The Stoic Trader Series | Marcus Aurelius’ Stoic Wisdom for Traders

Part 3: The Stoic Trader Series | Epictetus’ Stoic Wisdom for Traders

The insightful Seneca

Seneca is an interesting character. According to many, when compared to Marcus Aurelius and Epictetus, he didn’t necessarily practice what he preached.

He claimed, as stoics do, that we should all strive to live virtuously, and yet he was often at the center of quite a few scandals in Rome.

First of all, he was born in southern Spain over 2,000 years ago and was educated in Rome. Eventually, after having pursued a career in politics, he became a high-ranking financial clerk and turned very wealthy as a result.

When a guy named Claudius became the emperor of Rome, Seneca’s life took a sharp turn as he was exiled to the island of Corsica on the premises of adultery with the emperor’s niece.

Eight years later, in another twist, Agrippina, the mother of Nero, the future Emperor, secured permission for Seneca to return and for him to become her son’s tutor and adviser.

Nero later went on to become one of the most tyrannical emperors in the history of the Roman Empire. At the same time, Seneca was slowly rebuilding his fortune and at some point, he went on to become one of the richest men in Rome.

That wealth came largely while in service to Emperor Nero, a fact that caused many people to charge Seneca with hypocrisy—how can someone with so much wisdom associate himself with Nero!?

But while Seneca got wealthy, he also got dead. Thinking Seneca was plotting to overthrow him, Nero ordered him killed.

Actually, he ended up having to kill himself.

Yup!

Seneca was sickly overall, so it took him a couple of tries before he successfully managed to take his own life. As the story goes, he tried to cut his veins but the blood wouldn’t even flow out of them. But eventually, it did.

Seneca reminds me a lot of Grand Maester Pycelle in Game of Thrones, and I wonder if he was George RR Martin’s inspiration for that character.

Anyhow…

Like most of us, Seneca lived through ups and downs. To dismiss his lessons on the false premise that he wasn’t a real practicing stoic would be missing the point.

As said earlier, although Seneca succumbed to many temptations – notably, sex, money, and power— (because, like all of us, he was all-too-human) his stoic philosophy did, in fact, help him weather the turbulent circumstances of his life. (His thoughtful letters to his mother prove this when he was exiled to the island of Corsica)

And Seneca does offer some persuasive arguments in favor of stoicism –his writings clearly demonstrate a certain depth of understanding of the stoic way, and that’s why they have stood the test of time.

Seneca’s Stoic Wisdom for Traders

Seneca’s teachings cover a lot of different things, but I like his particular emphasis on the acceptance and mental rehearsal of misfortune.

He would visualize bad scenarios and use that to train himself to stay calm and free from emotional suffering in the midst of such adversity.

Now, I know what you’re thinking – Isn’t such negative visualization anxiety-provoking and more harmful in the end?

It can be. But, done the right way, it is a very powerful act — one that will help you develop a tougher skin by preparing you mentally.

Also, it’s important to remember that for the Stoics, misfortunes are not actually negative but neutral. It’s in our perception of the events that the labeling ‘misfortune’ is made. And we can train ourselves mentally to change that; we can train ourselves to be able to respond more productively when adversity hits.

And so, thinking about negative scenarios will appear like a pessimistic thing to do for those that don’t understand what you’re attempting to do. But, for you, it’s all but pessimistic. You’re training your mind to respond rationally, calmly to inevitable turns of events.

Seneca once said,

We should remind our spirits all the time that they love things that will leave – no, better, things that are already leaving. You possess whatever is given by Fortune without a guarantor.

By this, he meant that things will happen whether we want it or not – both good times and bad times are temporary, everything is in constant flux.

While we naturally want good things to keep happening, clinging creates expectations for the future. But the future quite often doesn’t pan out the way we want. And when it doesn’t, we become disappointed. Because we expect it to.

Seneca goes further by saying this,

It is in times of security that the spirit should be preparing itself for difficult times; while fortune is bestowing favors on it is then is the time for it to be strengthened against her rebuffs.

By this, he emphasized the importance of practicing misfortune, to prepare ourselves for when vicissitude strikes again.

So, as a stoic trader, ideally, you want to take some time on the weekend to contemplate the worst possible outcomes that can happen – for instance, a loss of discipline leading to a disastrous loss, the market reversing and stopping you out 4-5 times in a row. And so on.

That’s what I do personally, I usually sit on the patio if the weather is good, and I’ll spend a few minutes imagining little ways in which things could go wrong during the coming trading week. And I go through concrete ways in which I will deal with this.  

When Monday comes, this puts me into a distinct mode of operating when I’m actually trading:

  1. I’m uncompromising with risk. Since I honestly don’t know what the market will throw my way.
  2. I’m focused on playing the numbers game.
  3. I strive to remain neutral. I’m not entertaining any rose-colored fantasies for any of my trades.
  4. When losing trades occur, I’m not really bothered… I was mentally prepared for that.
  5. When winning trades occur, I’m pleasantly surprised.

As you see, negative visualization is really just a strategy to get you prepared for anything the market throws your way, thereby helping you act proactively and minimize disappointments.

But this is very important: you don’t want to practice anxiety and thoughts of being defeated and feeling despaired amidst those difficult circumstances. No, this would be counter-productive. Instead, you want to practice clarity, composure, and wisdom.

Conclusion

I hope you enjoyed this series on stoicism. There’s so much more to say about stoicism, but I’ve tried my best to boil it down to an essence.

I firmly believe that there’s no need to overcomplicate things.

What’s most important is practice, because knowing is not enough… unfortunately.

For Stoicism to be effective, it has to become a way of life.

I kid you not, this is serious work.

Stoicism was never meant to be some mere theory, it was meant to be highly practical.

So, read about it, understand it, and practice it. I guarantee you, it’ll better your life and improve your trading.

That said, I’ll certainly write more about stoicism in the future, but in the meantime, here’s a meditation to get you started with that stoic mindset work.

It offers an opportunity to reflect on Seneca’s popular thoughts.

And if you’re ready to take it further, consider taking the Trading Psychology Mastery Course.

 

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As a trader, if you are consistent, rational, and you generally do things well, you’ll inevitably get lucky and make a lot of money.

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"It is in times of security that the spirit should be preparing itself for difficult times." - Seneca

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When losing trades occur, I’m not really bothered… I was mentally prepared for that.

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Negative visualization is really just a strategy to get you prepared for anything the market throws your way, thereby helping you act proactively and minimize disappointments.

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