Wednesday, August 31, 2022

BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER



RADICAL RENEWAL - Free blog book on trading, psychology, spirituality, and leading a fulfilling life

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Most recent blog post - A Very Important Trading Psychology Insight

Most recent Forbes post - How Meditation Helps Us Become Better Traders

Three Minute Trading Coach - Demonstration of a Technique for Returning Us to an Optimal Mindset

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Latest Podcasts:  

How Traders Are Succeeding in the Current Market Environment - With Mike Bellafiore and Money Show

Trading Psychology and Market Psychology with Daily FX

Ego Trading and Spirituality with Talking TradingPart One, Part Two

Recent YouTube Video:  Six Characteristics of Successful Traders (with SMB Option Group)

Recent Podcast:  New Perspectives in Trading Psychology with John Sinclair and Positive Trends

Recent Podcast:  Tools and Techniques for Minding the Markets with Optimus Futures

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 coaching services to individual traders.  I do, however, welcome specific 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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Thursday, May 28, 2020

Very Important Trading Psychology Insight

Let's take a look at recent posts:

This Forbes article examines research on meditation and how meditative practice can make us better traders;

This Three Minute Trading Coach video describes a technique for reprogramming our minds by pairing stressful trading scenarios with a calm, focused state;

This Three Minute Trading Coach video illustrates a quick technique for entering calm, focused states in trading.

From these three posts, we can identify a very important trading psychology insight:

It's not emotion that interferes with our trading; it's the inability to stay grounded in the present.

Think about it:  Many of the problematic emotions of trading take us out of the present moment.  When we feel fear, we're worried about the future.  When we're afraid of taking a trade, we're regretting a recent loss.  When we're pushing ourselves to size up, we're focused on the future.  When we focus on a missed trade or a poor exit, we're caught in the past.

It's the distraction of the past and present that prevents us from being truly immersed in markets and feeling the patterns that we've studied and observed.  Even if you *could* eliminate emotion from trading, you'd wind up losing your *feel* for markets.  We want that capacity to feel!  But we want to stay grounded in the present, as the observer of our feelings, so that we can distinguish a feeling taking us back to the past or one caught up in the future versus one that comes from a deep, intuitive feel of what is happening here and now.

If you're struggling with discipline in your trading, perhaps it's not emotion that you need to banish.  Perhaps it's mindfulness that you need to boost.  That is a game changer in trading psychology.

Further Reading:

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Sunday, May 24, 2020

Getting Better Before You Get Bigger

One of the very talented traders I work with at SMB recently talked about pushing his trading to get bigger and make more money.  It's a great issue for him to be tackling, as his trading has been remarkably consistent.  So why not focus on getting bigger--and bigger--and bigger to make more and more and more money?

In a recent Confessions of a Market Maker podcast, I joked that pushing ourselves to get bigger in our trading (a common topic among male traders) is akin to pushing ourselves to get bigger in the bedroom.  If there is one formula for diminished performance in both domains, it's focusing on size.

Research suggests that risk-taking is linked to personality traits (particularly extraversion), but is also domain specific.  One can take risks in one area of life and be quite averse in others.  Many traders moderate their risk-taking precisely because they need to maintain an even mindset during their trading.  As soon as they experience the drama of rising and falling P/L, their trading processes become disrupted.  For those traders, thinking big and acting big is a path toward getting small.

For many traders, we want to get better and better before we get bigger.  And we want to get bigger, not necessarily by taking more risk per unit of capital, but by increasing our capital base.  In other words, if I'm trading stock index futures and leveraging my best trades by three-to-one, the answer to getting bigger is not necessarily to go to five- or ten-to-one.  The answer is to increase my capital base and keep doing my consistent thing with 3:1 leverage.

The best path to a consistent trading psychology is consistent trading.  And the best path to growing your trading is to do so sustainably, maintaining consistency of trading and mindset.  Pushing yourself to get bigger, putting outcome ahead of process, too often means that our egos have hijacked our trading.  If we fill our minds with P/L concerns, what room is left to process markets?

Further Reading:

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Friday, May 22, 2020

How To Stay Passionate About Your Trading

All too often, I see traders begin their careers with passion and energy and then gradually lose the spark.  I see it in people's romantic relationships as well.  What starts out with energy and excitement eventually becomes routine.  And no one ever felt passionate about routine.

I recently discussed with a savvy trader how he has changed up his review process to make it more challenging and meaningful.  Tackling the right new challenges *gives* us energy.  It's something we look forward to.  As I discussed on the Confessions of a Market Maker podcast recently, we stay passionate about our trading when we have fun with what we're doing; when what we're doing is meaningful to us; and when we're connected to people through what we're doing.

What a great report card for evaluating ourselves:

*  Am I having fun with my trading?
*  Am I learning new and meaningful things in my trading?
*  Am I energized by my trading processes?
*  Am I connecting with the right people in my trading and do we make each other better?

Research suggests that we perform best when we are in a positive mindset:  when we are energized and engaged.  Yes, it's great to write journal entries and scan charts and review performance.  But all that can eventually become routine.  How are you going to stay passionate about your trading?

The Three Minute Trading Coach:  How to Shift Your Trading Psychology
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Wednesday, May 20, 2020

Training Your Mindset For Success

The most recent Three Minute Trading Coach video demonstrates a simple technique we can employ to return to a focused, mindful state during the heat of trading.  Where we get the greatest value in mastering our trading psychology, however, is not through the occasional use of techniques or reading pieces of advice.  We master our mindset through regular, disciplined training.

What that means is that any technique has to be practiced again and again and again before it truly becomes a part of us.  It could be a golf stroke, a baseball pitch, or a way for a singer to hit a very high note:  only repeated practice makes the new skill part of us.  But once we master the skill, we have it for life.  The key, as Muhammad Ali points out, is having a burning vision of being a champion that is so inspiring and motivating that it drives us through the suffering of day-after-day practice.

In coming videos, I will outline research-backed strategies for practicing ways of improving our mindset.  But the videos won't matter if you don't have that burning desire to "live the rest of your life as a champion."  Goals and practice channel our efforts, but it's vision that drives our efforts to train ourselves for success.

Hell is not just an afterlife.  We can find hell on this earth if we look back at our lives and find ourselves filled with the regret of, "I could have been a champion."  At SMB, very successful traders earn a shirt, which is presented to them in a group happy hour.  At one level, you could say, "WTF, all that work for a shirt??"  But, of course, that misses the point.  The shirt is a step on the path toward living your life as a champion.  The shirt is a tangible goal that focuses our efforts to be our best selves and train, train, train ourselves for success.

What is your "shirt"?  What is your tangible, visionary goal that will drive tomorrow morning's practice?

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Sunday, May 17, 2020

The Key To Successful Trading Psychology

We generally think of the sleep and waking states as binary.  We are either asleep or we are awake.  A very important recognition, reflected in the recent Forbes article, is that sleep and waking are a continuum.  Much of the time, we are not fully awake and we are not fast asleep.  Our bodies are awake and we talk and act and trade, but we are not self-aware. We can drift from thought to thought, habit to habit, routine to routine quite mechanically, seemingly awake but not awakened.

A paradox in trading is that we need routines and processes to trade with consistency, but this same immersion in routine can leave us lacking self-awareness.  Most of us have had the experience of making poor trades and then, at the end of the day, wondering, "How could I have done that?!"  Quite literally, "I" did not do that.  It was "me" reacting.

Without self-awareness, we are reactive.  Action requires intention: the "I" must be in the driver's seat.  Trying to get rid of emotion in our trading, in and of itself, will not build our capacity for intentional action.  We can be just as reactive in quiet boredom as frustrated fury.

Experienced trading psychology coaches recognize this:

*  The AlphaMind Podcast, with Mark Randall and Steven Goldstein, emphasizes mindfulness as an important component of performance, facilitating self-management and even pain management.

*  Yvan Byeagee, in his Trading Composure blog, describes a process for mindfulness and its ability to "detach" us "from unfruitful patterns of behavior".  

*  Adam Grimes, on his site, explains that meditation, a key path toward mindfulness, helps us "work toward a state of clarity and...the stopping of random thoughts and influences."

Gary Dayton, speaking with Andrew Swanscott and the Better System Trading podcast about mindfulness in trading, notes that even traders with many years of experience feel emotions related to profits and losses and that suppressing and controlling emotions doesn't work.

What the Forbes article adds to these valuable insights is that the development of our intentionality is enhanced when we operate within an intentional community.  It is not coincidence that serious students of meditation learn within communities headed by a master teacher.  Nor is it coincidence that peak performance, whether from an Olympic athlete or a performing artist, is never developed in a vacuum.  There are always schools, always coaches and mentors, always supervised practice and structured feedback.  Operating within a high performance community keeps us continually mindful of what we need to do to perform at our best.  It is no coincidence that, at trading firms such as SMB Capital, preparing for the day, searching for trade ideas, and reviewing performance is all undertaken in a team context, where being around awake people helps keep each trader from falling asleep at the trading wheel.  

Viewed from this perspective, every single day offers a potential workout of our intentional muscles.  Each day lived purposefully cultivates our capacity for self-direction and true wakeful living.  The key to successful trading psychology is living life purposefully, expanding our capacity to sustain direction and intention.  At root, all bad trading is mindless trading.

Further Reading:

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Friday, May 15, 2020

Why We Need A Checkup From The Neck Up

The most recent Three Minute Trading Coach video explains how we can take our emotional temperature and keep ourselves in the calm, focused zone in which we best see market patterns and act upon them. 

Why is this particularly necessary for traders?

Trading appeals to competitive individuals and the competition for trading profits is an ongoing and fast-paced one.  The stronger our competitive drive, the more susceptible we become to frustration.  Frustration occurs when an important goal is blocked:  when we want and need an outcome and something gets in the way of achieving it.  

It is not possible to eliminate frustration altogether, nor is it even desirable.  Frustration can be channeled in such as way as to spur new searches for ways of reaching our goals.  For the experienced trader, frustration often contains information.  The market we're trading right now might not be acting the same as the one last week or last month.  For the self-aware trader, frustration pushes us to re-examine what we're doing and how we're doing it.

But we can't channel frustration if we're unaware of it in real time.  That is why the simple three-item checkup from the neck up described in the video is helpful during trading.  As Ziglar points out, without such a checkup, we are all prone to "stinkin' thinkin'" and "hardening of the attitudes".  We fail in trading when we fail in sustaining an optimal mindset.

When we're in the calm, focused mindset, we want to be completely absorbed in markets.  When we're frustrated, we want to be completely aware of our state so that we can take the necessary breaks and return ourselves to our zone.  In the next video and blog post, I will describe a powerful technique that can quickly restore our optimal trading mindset and provide us with the perspective to learn from our frustration.  With the right, proven techniques, we can truly become our own trading coaches.  And it all starts with sitting back and conducting our checkup from the neck up.

Further Resources:


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Tuesday, May 12, 2020

How To Stop Forcing Trades

We often hear the term "overtrading", but what *is* overtrading?  Quite simply, it's trading that no longer has any probabilistic edge.  An example would be a poker player in Vegas who feels a need to bet a chunk of his or her stack despite holding a mediocre hand.  When we overtrade, we trade for psycho-logical reasons, not logical ones.  

A common form of overtrading is "forcing" trades.  That's where we become so convinced about an upcoming opportunity that we don't wait for a sound risk/reward place to enter the market.  Rather, we push too much size and try to predict the next move rather than wait and *identify* when it's occurring.  Forcing trades is a great example of how our egos can get in the way of our making moneywe are so eager to be right that we overplay our hands.

So how do we stop forcing trades?

The important concept to keep in mind is that when we quiet the mind, we also quiet the ego.  As Radical Renewal discusses, our stream of self-talk *is* our ego.  To focus on markets and trade them well, we don't want to be chattering to ourselves positively *or* negatively.  Rather, we want to quiet the chatter and simply "listen" to markets the way we would listen to someone we care about during a conversation.  A good listener doesn't "force" the conversation by constantly jumping in with what he/she wants to say.  The good listener is attuned to the other person and knows what to say and when because of *understanding* that other person.

To stop forcing trades, we need to be quiet enough in our minds that we can sit and sit and sit and let the market make sense to us.  Then we will know what to do.  Meditation, where we learn to sit still, breathe regularly, and focus our minds on a single thing, is actually a training in quiet mind.  Meditation is practice in not forcing; it is training in *not doing*.  Meditation quiets the chatter of self-talk and that keeps our egos our of our trading.

In a coming Three Minute Trading Coach video, I'll demonstrate a simple meditative exercise that can quickly return us to the "zone" where ideas come to us and we no longer need--or want--to force.  It's amazing how much we can see in markets when we simply open our minds.

Further Reading:

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Sunday, May 10, 2020

The Three Minute Trading Coach: When Should We Take Trading Breaks?

The Three Minute Trading Coach is a new video series that features specific trading psychology challenges and techniques for mastering those.  Every video will have a practical takeaway idea that can help your trading.  Over time, the videos will form the backbone for an online course in trading psychology, accompanied by a how-to handbook.

Many new traders are flocking to financial markets, no doubt as a response to the work-from-home trend and growing unemployment.  My hope is that these videos and the soon-to-come handbook will help these new traders with their learning curves.

Here's the first installment of The Three Minute Trading Coach:


Thanks for your interest and support--

Brett
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Thursday, May 07, 2020

How To Adapt To Changing Markets

Show me a successful trader during 2020 and I will show you someone who has adapted well to massive changes in the trading environment.

Above is information you normally don't see on your trading screens.  This is the amount of movement that we are averaging for each unit of volume that we're trading.  The blue bars on the chart represent 50,000 contracts traded in the Standard and Poor's 500 futures (ES) from the start of 2020 to the present.  The red bars are a 20-period average range per bar.  Note that, as the market fell and volume increased, the amount of movement for each unit of volume rose exponentially.  Similarly, as volume has come down recently, we have also seen less movement for each amount of volume.  In short, we've seen a great volatility expansion in 2020 followed by a great volatility collapse.

One of the great misconceptions of trading is that all we need to do is find our edge in markets and then all the rest is psychology and staying in the right mindset.  The reality is that markets are ever-changing and so are the edges in trading them.  The market we saw at the start of the year was very different from the declining market of mid-February through mid-March and that market was very different from the present market.  The breakout trades that worked wonderfully and made people so much money when the VIX was north of 50 are now working far less reliably.  The successful trader understands the market environment and finds edges appropriate to what the market provides here and now.

Much of the frustration traders experience is the result of an inability to adapt.  It is a great example of how poor trading can negatively impact our trading psychology.  The answer to this situation is not merely to calm ourselves; we have to adjust to the trading environment we're in.

In a talk with SMB traders, I shared an interesting statistic:  the correlation between yesterday's market volume in SPY and today's volume is a whopping +.82 since the start of 2018.  Think about that:  volume tells us *who* is in the market.  The odds are good that the players who dominated yesterday's trade will also be dominant today.  If we want to find out what the upcoming market will look like--and the opportunities likely to present themselves--we need to actively study the last few trading sessions.  More specifically, if we want to figure out how to make money in today's market, we need to closely examine what worked for us yesterday and the day before.  Playbooking the most recent days' trades will provide us with the practice in pattern recognition that can prepare us for today.

Of course, if we get a genuine catalyst and volume today expands meaningfully above the most recent volume, we know that new players have entered the market and consider the catalyst to be trade-worthy.  That is important information and often precedes momentum moves higher or lower.  Being able to see the new traders in a market or stock and which way they're leaning can itself provide a meaningful edge.

Further Reading:

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