Wednesday, August 31, 2022

BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER


Most recent blog post - THE NEW BOOK IS NOW AVAILABLE!!

Most recent Forbes post - The Real Reason Traders Fail

Recent podcast:  The Psychology of Performance with SUNY Upstate HealthLink

Recent podcast:  Trading Psychology and Spirituality with BearBullTraders

Recent podcast:  Ego, Trading, and Spirituality with Alpha Mind

Recent webinar:  How to improve your learning curve as a trader (with Bookmap)

Trading, like any great performance field, is an arena in which our self-development is an essential part of honing our craft.  Welcome to TraderFeed, a blog site that now also serves as a repository for over 5000 original articles on trading psychology, trader performance, and trading methods.  Within the extent of my knowledge, this is the largest single source of trading psychology material in the world.

The links on this page will help you navigate the database of posts to find the information most relevant to your development.

My coaching work is limited to trading and investment firms, so I cannot provide online advice or services to individual traders.  I do, however, welcome questions about the ideas in this blog.  You can email me at steenbab at aol dot com.  I'm also available via Twitter (@steenbab), where I link new posts and articles.

TRADERFEED TABLE OF CONTENTS











I wish you the best of luck in your development as a trader and in your personal evolution.  In the end, those are one and the same:  paths to becoming who we already are when we are at our best.

Brett
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Sunday, September 15, 2019

Key Perspectives in Trading Psychology - 3: The Power of Passion and Purpose

In the first post in this series, we took a look at two information processing systems and how those interact to create trading opportunities and problems.  The second post explored what we need to do to process market information more effectively.  This third and final post will also draw upon the Radical Renewal book to propose a fresh idea with powerful implications for trading psychology.

As the book notes, the single most powerful influence on our information processing is trauma.  When people are traumatized, the disruption to their safety and security is enough to overwhelm their ability to perceive self, others, and situations normally and objectively.  The victim of post-traumatic stress disorder, for example, will perceive threats in normal situations, simply because those might remind him of experiences during wartime.  

Normal emotional experience enables us to process information normally.

Traumatic (non-normal) emotional experience disrupts our normal information processing, sometimes permanently.

Traders who do not manage risk properly and lose all their money generally cannot come back and take normal risk.  Even modest drawdowns can feel threatening and unbearable.  The information that markets provide is lost, overwhelmed by the internal, threat-based processing.  Quite simply, to use the terms introduced in the first post from this series, trauma keeps us mired in self-focused processing, so that we cannot understand the "other", whether the other is a market, a person, or a life situation.

With that in mind, here's the big idea:

What if extreme positive emotional experience, such as profound joy and inner peace, creates a form of positive trauma in which we become rooted in other-focused processing?  In other words, what if very meaningful experiences that draw upon our sense of passion and purpose have just a profound impact on our information processing as traumatic stress?  In such a situation, what we would be capable of in terms of meaningfully processing the world would be as far from our normal daily experience as is our functioning under post-traumatic stress.  

When I conduct webinars and talk with traders, very often their questions focus on how they can reduce or eliminate their negative emotions, such as fear, greed, overconfidence, and frustration.  What they miss is that there are ways of cultivating extreme positive experience that can provide us with much more powerful market antennae.  

By consistently tapping into what we are passionate about--what gives us meaning, purpose, and fulfillment--we become consistently able to process the world in terms of what is meaningful.  We exit our self-focused internal chatter and become more sensitive to the nuances of the world around us.

Reducing negative emotions will help you process markets normally.  That's not a bad thing.  But what if your aspiration is to function beyond normal?  To perceive what is actually meaningful in markets, we need to be attuned to meaning--and all that lies on the far positive side of normality.  In Maslow's terms, the goal is to cultivate our capacity for the peak experience.  That keeps us grounded in the flow state, from which we draw both inspiration and creativity.

Further Reading (Free Blog Book):  

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Friday, September 13, 2019

Key Perspectives in Trading Psychology - 2: How We Can Process Market Information More Effectively

In the first post in this series, we took a look at our two distinct information processing systems and how those interact to either assist or interfere with our trading.  Drawing on the recent blog book that I released, Radical Renewal, now let's take a look at two specific strategies that can help us process market information more effectively:

1)  Strategies that build our joy and happiness - Fascinating research from Dr. Barbara Fredrickson suggests that psychological well-being (happiness, fulfillment, energy, closeness to others) not only makes us more productive and physically healthier; it actually broadens our field of vision.  When we are stressed, it is as if our perception becomes tunnel-visioned.  Under conditions of well-being, we broaden our vision and perceive more at the periphery.  A simple example of this is, when positions move against us, we can become fixed on screens, hanging on every tick.  When we experience well-being, we can sit back and more easily explore various pieces of information to detect patterns.  A different way of stating this is that, when we have greater well-being, we have greater access to intuition and our capacities for pattern recognition.  What we do to build our well-being (inside and outside of trading) helps us generate better trade ideas.  A great exercise is to review your trading journal entries and identify the ratio of positive, happy, fulfilled sentences to upset, frustrated, negative sentences.  None of us like to lose, but it's the trader who can extract joy from learning from losses that is most likely to rebound.

2)  Strategies that build our quiet - As the first post emphasized, when we get into the fight or flight stress mode, our bodies speed up.  When we eliminate our inner chatter, we are most likely to achieve our flow state and absorb the patterns that markets present.  This is why meditation has been effective as a way of accessing those pattern recognition skills and achieving greater clarity of perception.  Research has found that the mindfulness created by meditation is helpful in treating such problems as anxiety and depression.  Similarly, meditation can help traders exit their self-relevant/fight and flight processing and become more aware of what is happening around them.  Research also finds that meditation can also help us reduce stress, improve focus, and increase the quality of our sleep.  Other strategies, including physical exercise, yoga, and prayer, can similarly contribute to a clearing of our minds and improved energy and focus.

In sum, we can see that the traditional advice that traders should control their emotions and be more disciplined is limited.  What we want is a set of tools--and indeed a lifestyle--that allow us to better access our capacities for insight and understanding.  By increasing our focus and broadening our perception, we can become better idea generators and better equipped to detect meaningful changes in market behavior.

Further Reading:

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Monday, September 09, 2019

Key Perspectives in Trading Psychology - 1: Our Two Modes of Processing

In this series of posts, I will present key ideas from the new book, Radical Renewal.  That book is written as a series of blog posts and so can be accessed without registration and free of charge.  

As I described in the recent webinar, we have two ways of processing our experience, including markets:

1)  The self-focused mode - This is a rapid mode in which we assess events for their relevance to ourselves:  whether they are good or bad for us, whether we like or dislike them, whether they excite or bore us.  Much of our moment-to-moment emotional experience reflects these self-relevant assessments:  what makes us happy, fearful, frustrated, eager, etc.

2)  The other-focused mode - This is a slower mode in which we experience the world around us based on our connections to what is outside ourselves:  our closeness to other people, our understanding of the world, our beliefs and values, etc.  The emotional experience from the other-focused mode is different in quality from that stemming from our self-focused processing.  For example, in place of happiness, we experience joy and fulfillment; in place of relaxation and calm, we experience peace.

What we call ego is the sum of our self-focused processing.  It shows up as our self-talk:  our continuous inner dialogue about our experience.

The sum of our other-focused processing is what we call soul.  It shows up as our inner experiences of meaningfulness and significance.

The ego--our self-relevant mode of processing--is necessary for survival.  It mediates our fight and flight responses and steers us toward what we deem good for us and away from what we see as harmful.  That self-relevant mode has real survival value.

To thrive, however, and not just survive, we need those connections to realities outside ourselves.  Close personal relationships, a sense of community, a mission or calling in life:  these provide life with something more than fun and enjoyment.  They are what provide us with purpose and meaning.

One challenge we face in life is that, while we are in our self-focused mode, it is difficult to be other-focused.  If I'm preoccupied with my problems at work, I won't be a very good listener to my spouse.  If I'm caught up in the minutiae of my daily calendar, I can lose sight of my broader goals in life.  

To succeed at discretionary trading, we need to be able to maintain a feel for markets and understand what they are doing.  When we are self-focused about P/L, catching or missing moves, making right or wrong market calls, we lose our ability to read markets accurately.  We respond to our fight/flight mandates, not to the broader meaning of the situation.

It is very important to understand this:  It is our self-focused internal dialogue--our self-chatter--that gets in the way of trading solely based upon our insight and understanding.  This is why I emphasize in the book that good trading comes from the soul, not the ego.

When we cultivate our other-focused processing modes, we increase our capacity to detect meaning from markets.  

In the next post, we'll take a look at techniques that help us stay soul-full in our trading.

FURTHER READING:


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Saturday, September 07, 2019

Sunday Evening Live Webinar: New Trading Psychology Techniques




This Sunday evening at 8 PM EST, I'll be joining BubbleHead for a live webinar that will discuss new ideas and practical techniques coming from my new blog book, Radical Renewal.

Registration for the free webinar is available here; please bring questions about how to get the most from your trading and how to best use your non-trading time to develop yourself as a trader!

Brett

Friday, September 06, 2019

The New Book Is Now Available

I'm pleased to announce that the new book that I recently described is now available for download, free of charge.


The book is written as a blog, with each chapter being a separate post.  At the bottom of each page are links for navigation to the next chapter and to the table of contents.

In coming days, I'll be writing blog posts summarizing each chapter and its relevance for trading.

To my knowledge, this is the first book covering the topic of trading and spirituality.  My goal is to expand the field of trading psychology to show how we can use tools from various spiritual traditions to overcome the needs and demands of ego and truly open our minds to what markets are trying to tell us.

Because of the blog format, you'll find many links, as well as opportunities to comment on the text.  The format will also allow me to add material to the book over time, so that it is continually evolving.

Thanks for your interest in this project.  I especially thank the many excellent sources of insight that I link in the Appendix.  My hope is that the ideas in the book will help not only with your trading, but in leading a fuller, enriched life!

Brett  
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Thursday, September 05, 2019

Communicating With The Market We Are Trading

One of the topics I take up in the new book is how we interact with the markets we trade.

As the above quote suggests, too often people engage in conversations in order to make their points and say what *they* want to say.  In that mode, it is difficult to listen in a truly open-minded way.  Most of us have had the frustrating experience of trying to carry on a conversation with people who talk at us, rather than with us.

Traders are among the worst culprits in this regard.  They don't truly look at what the market is doing; they look for their next trades.  In their relationship to their markets, they aren't good listeners.  They are too busy getting ready to "reply".

A great way to listen to the stock market is to track the various sectors within the market and see what they are doing.  Are they moving predominantly in one direction (a trending market), or are they doing very different things (a rotational market).  A nice tool in this respect are the technical rankings of individual stocks and sectors on the Stock Charts site.  When we see sectors with very different rankings and charts, it's tougher to make the case that we're in a bull or bear market.

Recently we've seen great strength and new highs from utilities stocks; consumer staples issues; and real estate shares.  Lagging have been international equities; regional banks; small and mid cap shares; and many energy-related funds.  Dividend and large cap names--traditionally defensive havens--have been strong; perhaps not surprisingly in a world of rapidly falling yields.  This rotational environment has frustrated many traders attempting to trade the overall market directionally.

An excellent exercise is to look at the market from the ground up, sector by sector, and *then* formulate an overall market impression.  When we operate top-down, it's all too easy to impose our predictions and expectations on the market.

Further Reading:

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Monday, September 02, 2019

What Makes a Trader Successful

In the recent Forbes article, I took a look at what I called the "real reason" why traders don't succeed.  No, it's not having the wrong "setups" and it's not having the wrong mindset.  What sinks traders is what sinks most startup businesses.  Indeed, if you view trading as a startup business and evaluate it on the four criteria in the article, you might wonder how, possibly, the average trader could succeed.

The building blocks of success start with talent, but of course all of us know talented people who don't go on to become successful.  As Goethe suggests above, it is when talent is expressed and exercised that we experience our greatest fulfillment.  The opposite of fulfillment is frustration.  If frustration is our dominant emotion, in trading or in any other endeavor, we know that we aren't making optimal use of our talents.  As a psychologist, I feel fulfilled.  As a mechanic, I would be frustrated.  It's all about being what I'm good at.  

When our talents find expression, work energizes and inspires us, and that helps us build unusual skill.  What makes traders successful is finding an approach to markets that so engages their strengths that it supercharges their learning curves.  When work is frustrating, it drains us of energy.  When work is fulfilling, it invigorates us.  

A career is something we choose to do.  A calling is what no one can keep us from doing.  What the average trader calls a "passion for trading" is merely a set of ego needs to make money and find success.  That passion dies down quickly when the challenge of the learning curve is faced head-on.  When trading taps into our talents, that is when we find a calling in markets.  It is the sense of calling that accelerates our learning, creating unusual skill.  

Unusual skill married to great talent creates world-class performance.

This is why we can often identify great traders by observing what they do outside of market hours.  If trading truly expresses talent and embraces a calling, it doesn't really matter that markets aren't open.  They love working on their game.  They love the challenge of finding opportunity and learning from experience.  What makes a trader successful is not a passion for trading; it's a passion for all that goes into profitable trading.

Further Reading:

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Friday, August 30, 2019

Running Your Trading As A Business

I had an interesting situation recently in which a trader wrote to me about a start-up situation.  I interpreted the email as a request for advice regarding starting up a hedge fund or other similar money management vehicle.  I responded that the initial steps were:  1) set up a viable business plan that explains how the fund will make money in different kinds of market environments and with different kinds of strategies; and 2) identify the people to be hired that would be best for implementing the business plan and maximizing the effectiveness of the trading.  Only after figuring out the right plan and the right people, I suggested, should be focus go toward raising capital and finding the right capital partners.

It turned out I was wrong in my interpretation and the trader was simply interested in going live in his own trading account.  That's when both of us realized that the advice I had given with respect to starting a fund is just as applicable with respect to one's own, personal trading.  In other words, your trading truly is a business and approaching it as such maximizes your odds of success.

So let's pick apart the advice and see how it applies to our own trading:

1)  A Business Plan - Imagine that you are pitching your trading business to a venture capitalist.  How will you convince the VC that this is a business worth investing in?  I'm pretty sure that the average trading journal and the average declaration of "edge" by trading XYZ "setups" would get you laughed out of the room by any experienced VC group.  So how would you convince others of your edge and the uniqueness and robustness of your returns?  If you can't convince others with a compelling business plan, can you truly expect to trade with your own conviction?  You wouldn't invest in someone else's trading if there wasn't a compelling track record and plan.  Why should you invest time and money in your own trading in the absence of such documentation.

2)  The Right Team - Every successful business I've encountered has started by making the right hires.  The founder(s) of the company have identified the right talent and experience to fill their own gaps and to successfully implement the business plan.  That means hiring people who share your vision, who work well with you, and who bring something special and unique to the business that makes everyone better.  If you are doing your own trading, this is no less important.  Your "team" consists of the colleagues and community that you interact with.  Do you have "partners" who you learn from and with?  Do you have teammates who help make you accountable?  The trading community at My Investing Club encourages the formation of TABs:  Trading Accountability Buddies.  The idea is to team up with a like-minded partner to share ideas and to learn from experience:  what you and they have done well and what both of you are working to improve.  

Operating in isolation without a detailed plan would not--and cannot--work for any business.  Many traders fail, not because they lack proper psychology, but because they never took their trading seriously as a business.  If you would not invest in another person's trading if they approached planning and teamwork the way you do, you know that you're not on the right path.  Be the kind of business you would want to invest in because, ultimately, you are investing yourself in your trading.

Further Reading:


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Wednesday, August 28, 2019

Radical Renewal: A New Book on the Spirituality of Trading

I am finishing the editing of my new book, Radical Renewal, and will be publishing it in the next few days.  Below is a bit of a preview.

First off, the book is being written in blog format, which means that each chapter will be a blog post and readers can click from one chapter to another to read the book.  Because it's written in this format, there will be many links included in the text, allowing readers to pursue topics of interest.  The online/blog format of the book will also enable readers to ask questions and make comments, and it will make it easy for me to respond and update the text periodically.  Perhaps best of all, the format allows anyone with an online connection anywhere in the world to download the book free of charge.

It's a way of giving back to a trading community that has given me so much.

The main ideas behind the book are:

1)  The major problems we encounter in trading are not just psychological.  Rather, they are problems that occur when our egos interfere with our information processing and decision-making.  It is precisely because trading is such a profit/loss, materialistic pursuit that it grabs our fear, greed, and needs for validation and status and makes it difficult to simply listen to and follow markets with an open mind.

2)  There are many spiritual traditions around the world, including the great religions and belief systems of the East and West, that provide tools and understandings for getting past our egos and grounding ourselves in larger realities.  The chatter that makes up our self-talk *is* our ego.  Spirituality is all about cleaning out the clutter in our heads and accessing our souls.  If there is one key idea to the book it's that great trading comes from the soul, not the ego.

3)  When we develop ourselves spiritually, we connect with what we find meaningful in life.  We ground ourselves in our strengths:  our activities give us energy rather than deplete us.  This renewal can be part of an ongoing lifestyle that impacts all areas of life, including our trading, our work, and our relationships.  When we spend more time "in the zone" of our flow states, we are best able to detect and act upon patterns in markets.  When we are ego-consumed, there is no flow.  We end up trading what we want to see or what we're afraid of seeing, not what is actually happening.

4)  There are three major paths of spiritual development across the world's traditions that can renew our lives and our trading:  the path of radical joy; the path of radical peace; and the path of radical repentance.  When we connect with others in communities that affirm spiritual values, we internalize those paths.  Much of our access to the soul comes from how we treat our bodies and how we interact with others.

The big message is that how we trade ultimately reflects how we live.  We cannot trade in disciplined ways if we live undisciplined lives.  We cannot have minds open to markets if we're filled with our internal chatter.  It's not enough to write journal entries and perform exercises for a few minutes when we go on tilt.

Trading well flows from living well.

Brett