How Panic Attacks Led Me to Profits in the Stock Market

Investing

How Panic Attacks Led Me to Profits in the Stock Market

How one man turned a vulnerability into a superpower.

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How Panic Attacks Led Me to Profits in the Stock Market

Editor's note: When it comes to the financial independence movement, mental health is often overlooked. Those of us seeking early retirement might have a tendency to overwork ourselves, or get so emotionally wrapped up in our pursuit that it can be detrimental to our health. When Eric Ferguson from Mindful Trader reached out to us about sharing his battle with panic attacks, we were thrilled to be able to help him contribute to the discussion regarding mental health in the personal finance space. We applaud Eric for sharing, and we hope his story will help others. Take it away, Eric!

Would you expect that a guy with a history of panic attacks would do well in the stock market?  To me and maybe to most people, that doesn’t seem likely.

After all, when it comes to trading stocks, panic can derail otherwise logical decisions.  Panic is a fear that has so much intensity that it overwhelms the rational brain.  That’s typically not good for making money in the stock market!

Yet here I am, a guy with panic disorder, currently experiencing success in the stock market.

The Origin of My Panic Attacks

I didn’t have panic attacks as a kid.  They only started happening as an adult.  But I think my childhood played a role in the eventual onset of my panic disorder.

As a kid, I oriented myself toward performance.  If I wasn’t performing well (in the form of doing well with grades, household chores, social etiquette, etc), then it was a major blow to my sense of self-worth.

We were pretty hard core in my house as a kid.  To give you an idea of the environment I was in, I had two brothers and all three of us were the valedictorians of our respective classes.  None of the kids in my household got anything less than straight As.

Now I’m not claiming that I was forced by my parents or anyone else to get perfect grades or to perform in any other way.  I adore my parents and I had a wonderful childhood.  But due to my environment or my genetics or whatever else, I oriented myself toward performance.

Therefore as a kid I felt very uncomfortable if I didn’t perform well at everything I did.  It felt downright scary to me.  I now realize, as an adult, that it’s because I thought I might not be lovable if I didn’t perform.

Fast forward to early adulthood, and I was a guy who was very tightly-wound.  I worked relentlessly and I tried hard to please everyone.  I had such a rigid shell of fear about the potential of letting anyone down that it was like I was walking on pins and needles most of the time.

My anxiety became so acute that I suffered a panic attack at one point in my 30s.  It was like nothing I had ever experienced.  It’s like I had completely lost my grip on reality.  It felt like I was in imminent danger and like I was about to die.  Even after the effects of the panic attack wore off, I was really scared about what had happened.

In my case, that’s when things got really funky.  I started fearing the prospect of having another panic attack.  The sensations were so alarming to me that I wanted to avoid them at all costs.  That turned out to be a recipe for an onslaught of more panic attacks.

Panic Attacks Led Me to Mindfulness

As I began to have more panic attacks, it led to more fears:

What would happen if I had a panic attack at work?  What would people think?

What if I had a panic attack in front of friends?  Or family?

Would people be disgusted by me?  Repulsed by me?  Scared of me?

These were terrifying prospects to me.  I chose initially to bottle it up and not tell anyone other than my wife about it.

This only led to more acute fear and panic.  I remember some meetings at work where I was holding on to the arms of my chair with all my might because it felt like I was holding on for dear life.   I was going through tremendous suffering.

It all got to be too much.  I was panicking about having panic attacks.  It was an extremely dark period of my life and was absolutely the toughest thing I’ve ever dealt with.

I opened up to my mom about what I was going through, and lucky for me, she offered me unconditional love.  She also put a book in my hand called “The Power of Now” by Eckhart Tolle.

That book was a steppingstone into a new chapter of my life.  It was the beginning of my adventure into mindfulness.

How Mindfulness Helped

Mindfulness is when one focuses his or her awareness on the present moment, while acknowledging and accepting any feelings, thoughts, and bodily sensations that come up.

Meditation proved to be a great way to strengthen my “mindfulness muscle”.  With meditation, I would sit and pick one thing to focus on.  For example, sometimes it would be my breathing.  And as I hold that focus, I notice any time a thought comes up.  When it does, I let the thought go and resume focusing on my breathing.

Doing that over and over helped me in several ways:

  1. I got better at focusing, and specifically better at picking what I want to focus on.
  2. I learned that my mind “has a mind of its own”.  Coupled with studying how the brain works, I came to understand that the mind is firing all sorts of thoughts through my head, and that I have a choice how to respond to those thoughts.  So when a panic thought comes up for example, I can choose to some degree whether to give it energy or whether to let it go.
  3. I got very seasoned at tolerating emotional discomfort.  Rather than chasing away tough emotions, I practiced giving them space.  Every sensation is welcome when I’m practicing mindfulness.
  4. I began to see that life is about much more than just money.  To me, money had been kind of like a measure of my “performance” as an adult and therefore had seemed extremely important to me.  But with mindfulness, and focusing my attention on the present moment, I came to see that life has such an abundant bounty for us to enjoy regardless of money.  I can feel the warmth of the sun on my skin or enjoy the juiciness of an orange and get a tremendous amount of pleasure.

As I was going through this process of practicing mindfulness, I also joined a mindfulness group where everyone in the group offers each other unconditional support.  It was an eye-opening experience to find out that even after I explained that I had panic attacks, and even when they sometimes witnessed me in a state of panic, they still accepted me.

All of this put together has drastically changed my life.  I realized that it’s ok to be me, panic and all!  I also realized that I’m safe and I’m lovable even if I don’t make a lot of money.

How the Stock Market Fits In

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This new mindful approach to life has proven to be very valuable when it comes to making money in the stock market.

A little more history about me:  I’ve always been a numbers guy and have always been fascinated by the stock market.

I tried doing stock market trading early in my adulthood (pre-mindfulness) without much success.  I certainly wanted the money, but I ended up chasing all sorts of trading ideas around unsuccessfully.

I would try a strategy that someone said was sure to work, end up taking a loss at some point, and feel upset.  I would rush to find a new strategy, which I realize in hindsight may have been a way for me to escape the pain of having taken a loss.

I went through this cycle a number of times, jumping from strategy to strategy, and lost a bundle of money and felt a huge spectrum of emotions along the way (from rage to extreme fear).

After enough of this experience, I realized that I needed to figure out what sort of trading strategies actually worked.  I didn’t want to rely on what someone else told me without knowing for myself that it was an effective strategy.  So I began doing my own stock market research.  I looked back at historical stock price data and looked for trading strategies that may have worked relatively consistently over the long haul throughout history.

Within a year or two, I had found a couple strategies that data suggested may have been rock solid historically.  I was still in the depths of my panic at the time.

I began trading with those strategies and took some immediate losses.  Even though at this point I knew the back-tested history of these trading strategies, I had a lot of trouble dealing with the losses.  My mind immediately raced to do new research and find new strategies.

And in effect, I was doing the same cycle all over again that I had done before.  I’d take some losses, feel pain, and would want to find a way to get rid of the pain so I’d go hunting again for something different that presumably wouldn’t generate the pain.  I couldn’t withstand the pain even though I knew these trading strategies had a history of success in the stock market.

The kicker was that after switching to a new strategy within the next year or so, I later looked back and saw that the original strategy had performed well in the time since I had abandoned it.  I had jumped ship after some losses and ended up missing the bigger picture profit potential.

It was right around this time that I was starting to get deeply into mindfulness.

Why Mindfulness and Stock Trading Go Well Together

Fast forward to today, where I now have years of mindfulness practice and I have a portfolio of back-tested trading strategies from the research I’ve done.

Mindfulness allows me to accept the emotions that come up during stock trading.  And almost counter-intuitively, by fully accepting them, they often feel less intense for me.  Also, since mindfulness helped me realize that money is not the key to my happiness in life, I no longer feel like everything is on the line when my account balance fluctuates.

This has made a tremendous difference in my performance as a trader.  I no longer get shaken out of my trading approach based on the short-term ebb and flow of profits.  I am in it for the long haul, to take advantage of trading strategies that have a long-term history of success according to my research.

With my trading approach in the stock market, there are definitely going to be trades that result in a loss.  From all the research I’ve done, I couldn’t find any trading strategy that had major long-term success that didn’t involve a lot of losing trades along the way.  Losses are a mandatory part of the trading experience for my trading strategies, and mindfulness is a resource that makes it tremendously easier to stick to the plan even when losing trades occasionally stack up in the short term.

The end result is that after this crazy journey, I’m now trading profitably in the stock market.  It started with panic and led me down this long path to stock market success.

Things have gone so well with my trading that I even started my own business.  I operate Mindful Trader, which offers stock picks and teaches people the trading strategies behind the stock picks.  I focus on swing trades that only take about 30 minutes a day of my time to administer, which goes well with my mindful way of being.  I am effectively making all my years of research available to the public.  

And I have panic to thank for this stock market success!  Without panic, I may never have discovered mindfulness.  And I might still be running away from my emotions and unable to accept a loss.

I still have panic episodes.  They are much less frequent and less intense than what I used to go through years ago, but they’re still a part of me and my world.  And now I’m ok with that.

Investing

E

Eric Ferguson
Eric runs Mindful Trader, a service that publishes stock picks and teaches the strategies behind them. He spent years doing stock market research to identify historical quantitative trading edges.

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