What To Do When Your Trading Is Successful

 

11/5/2025 - The most important thing to look for in teaming up with another successful trader in a pod is complementary strengths.  You want to be similar in personality, but different in what you're good at.  Ideally, someone you team up with is strong in areas where you are not, and you are strong in areas that they are not.  That can take different forms.  You might be strong trading one market, and they might specialize and experience success in a different market.  You might be strong trading longer time frames, and they might find success in short-term trading.  You might succeed trading stocks directionally; they might succeed trading options structures.

In such an arrangement, clicking in terms of personality makes it easy for each of you to learn from the other.  They mentor you, and you mentor them.  You share ideas, and you share learning lessons.  Each of you expands your success.

Once you can create a two-person pod, then you might think about bringing on a third and fourth person who you both like and respect and who excels in areas of trading different from what the two of you do.  That way, you continue the structure of learning from/with each other and expanding your trading.  Reviewing market opportunity at the start of each day and reviewing performance at the end of each day creates many opportunities of "each one teach one".

Great things can happen when each person is a mentor and each person is a student and you challenge/inspire one another to grow.  Trading psychology is not just about managing negative emotions and behaviors.  When you create the right team, you cultivate the right mindset.  

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11/4/2025 - Moving from individual, isolated trading to trading with one or more dedicated traders in a "pod" is an important path toward our growth as traders.  At some point in a successful trader's development, adding size--doing more of the same thing--is not a formula for success.  That would be like being a business that has one profitable product and just keeps making more and more of it.

Eventually successful traders get to the point where getting bigger means getting broader.  By doing more and different things with an edge, the individual trader becomes a portfolio.  The diversification of strategies and styles ensures that there can be success across different market environments.  

When we trade with others in a pod, we learn from them and that sparks our ability to get bigger by getting broader.  As the pod grows, we connect with more mentors--and we also mentor more peers.  That expands our market mastery, and it also cements our learning.

A true measure of success is the ability to sustain profitability across different market conditions.  That can only happen if our trading is as diverse and flexible as markets are.  In teaching others and learning from them, collaboration makes everyone better.

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11/3/2025 - Once your trading is profitable, the single most important thing you can do is seek out other profitable traders, network with them, and share ideas and experiences.  This is the first stage of teamwork.  At every successful professional trading firm where I work, trading is conducted in teams.  The sharing of ideas and mutual mentoring accelerates everyone's development and supports their trading.  The trading events you attend and the traders you follow on social media are opportunities to reach out to other participants and network.  It may take a while, but finding just one or two others willing to share ideas and experiences is a great start toward accelerated growth.  

Ultimately, when you find those like-minded colleagues, you'll want to consider creating a formal trading pod, where you become a small group with its own processes and mutual learning.  There is no reason learning and development have to be undertaken in isolation.  Once you've been successful on your own, your growth has only just begun.  The key is to team up with others who are similar enough in values and personality but different enough in markets and strategies traded that you can learn from one another.

The step from individual, isolated trader to pod member is often the most promising step in building a sustainable trading business.  Learning with others accelerates everyone's development.

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11/2/2025 - Very often, there is an intermediate phase of development in which some of your trading is successful and some is not.  This is not at all necessarily because of changes in our trading psychology.  Rather, markets change in their direction, volatility, and correlation to other markets, ensuring that any given approach will work some of the time and not at other times.

If your trading has been profitable, but marked with losing periods, the best practice is to isolate those losing periods and see what might make them different than the winning periods.  It's possible that the losing periods were periods of greater distraction in your personal life; it's also possible that the losing periods were choppier or more volatile than the winning periods.  Reverse engineering periods of loss is the first step in figuring out how to adapt.  

The other helpful exercise is to reverse engineer the greatest winning periods and see what you might have been doing differently and what markets were doing at that time.  Often, this review will tell you when you're in your sweet spot, enabling you to grow your risk-taking.  For example, my recent trading reviews showed that when I began by identifying markets that were stretched on a short-term basis and then identifying how their movement lined up with their behavior on the longer time frame, I was often successful in figuring out how the shorter and longer perspectives lined up.  If I started with the big picture and (prematurely) developed a directional opinion, that was when I did my worst trading.

Learning from your successes fuels your positive psychology and provides the confidence to size up your trades.  As I emphasized in my book, the goal is to turn your best practices into sustainable processes.

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10/31/2025 - The previous set of posts outlined steps we can take when our trading inflicts significant losses, both financially and emotionally.  There is much more to trading psychology, however, than minimizing losses.  Indeed, most of my meetings at hedge funds deal with expanding success, not coping with discipline issues or losses.  The first question that arises in this context is, "How do we recognize success in trading?"  This is not as simple as adding up our P/L.  When I help teams and firms hire successful traders, here are a few things I look for right away:

*  Are returns positive over a sufficient period to cover various market conditions?  Does the trader earn significantly more than the risk-free returns of government bonds?  

*  Does the trader demonstrate good risk-adjusted returns (as measured by such indicators as Sharpe ratio)?  Is the average/median size of winning trades greater than the average/median size of losers?  Good risk-adjusted returns can be a great initial sign of a disciplined trading process.

*  Does the trader demonstrate the ability to make money in different kinds of markets and in different kinds of ways?  Such diversification tells us something about a trader's adaptability.  It's great to make money in one kind of market, but rarely is that a sustainable business.

*  Has the trader evolved in recent years?  How have they grown?  A trader who demonstrates ongoing improvement and growth is more likely to adapt to future market changes.

*  Does the trader demonstrate a positive trading psychology, finding both joy and meaning in trading and rising to challenges through innovation and teamwork?

The above are useful criteria in assessing your progress and success as a trader.  If you are firing on many of these cylinders, it is worth asking the solution-focused question:  What have I been doing right?  How have I been able to make progress as a trader?  So often, future success comes from leveraging what we do best.  More to come!

     

What To Do When Your Trading Blows Up

 

10/30/2025 - Maybe the most difficult question we have to tackle after our trading blows up is whether trading truly is meant to be our path.  We might not truly know that until we take the steps below, get proper training, undergo intensive practice that builds positive habits, and truly internalize sound trading processes.  What we find during this re-education is that the right kind of trading either interests us and gives us energy or is a drain on our mental and emotional resources.  Each of us possesses signature strengths:  abilities that capture who we are at our best and that inspire us.  Trading may not capture our greatest strengths and might even thwart them.  If we're wired to be emotionally connected with people and help them or if we're wired for physical challenge or creative, artistic expression, trading will likely frustrate who we are as people and prove to be unfulfilling even when we make money.

The goal is not to trade.

The goal is to follow your bliss, because that is the path that will open your doors in life.

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10/29/2025 - If you hope to return to trading after a traumatic blow up, the key will be to return in a new way and in a safe way.  This means beginning afresh, with training and mentoring and exploring markets and ways of trading markets that actively engage you and that fit with your interests and strengths.  Very many times, traders blow up because they put their capital at risk without the proper training and guidance.  They have not learned from mentors, so they don't possess edges in different kinds of markets.

Once you get the training and mentoring to trade in new and promising ways, it is important to begin trading in simulation mode and then with small size so that you turn good trading into habit patterns.  Only repetition and practice can accomplish that.  To repeat the point below, the idea is not to try to make yourself disciplined, but rather to make good trading so habitual, routine, and automatic that you won't need to impose discipline on yourself.

If you're trading because you need to make money right away or because you need the thrills of risk-taking, then you're likely to put yourself on yet another blow-up path.  Trading out of need is a formula for overtrading and impulsive trading.

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10/28/2025 - So what is the next step in recovering from blowing up our trading accounts?  Once we step back from trading and deal with the hurt we've created--connecting with others, taking care of ourselves--we have to come to terms with what we've done and why we blew up.  It's not coincidence that every major spiritual and religious tradition addresses the issue of repentance.  To repent is to look at what we've done, truly acknowledge the painful consequences of our actions, and vow to never repeat those mistakes.  Our emotional/impulsive/tilted trading may have hurt our relationships, our health, and of course our financial well-being.  Facing all of that and experiencing the pain and regret from our actions is a powerful motivator for change.  In essence, we hit bottom and get to the point where our priority becomes "Never again".

It is only after we come to terms with the consequences of our faulty trading and make amends to those who have been impacted by what we've done (and how we've done it) that we can even consider returning to markets.  More important than returning to trading is committing ourselves to never make the same mistakes that brought us to this point.

And how can we prevent that?  By making sure there are always things in our lives more important to us than P/L.  By making sure we have income and savings to cushion us if trading loses money.  By making sure that we have a trading process so well learned and internalized that it becomes second nature.  It is not discipline that can successfully bring us back to markets; it's the power of habit--and turning our best trading into our most automatic routines.

We can only start over if we retrain ourselves.  

More on this to come...

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10/27/2025 - Let's take a look, step by step, at how people recover from trauma.  Trauma occurs when people's lives are shaken up.  Their security is lost; their future is threatened.  Painful outcomes intrude in their day to day thoughts and feelings, disrupting mood and outlook.  Trauma is a word we associate with stress.  A traumatic stress is one that occurs when our normal lives are threatened.

It's important to understand this, because it helps us understand why the first step in trauma is to remove ourselves from the immediate situation causing us stress and placing ourselves in the most supportive, secure environment possible.  Connecting with those who care about us; re-establishing a normal routine in life; focusing on activities that are rewarding and fulfilling:  all these help us return to a state of greater security.  

When we have helped create our traumatic stress through addictive/impulsive trading, there is something else that can begin our recovery.  It is not a coincidence that the first of the twelve steps of recovery among alcoholics is "honesty".  We need to own up to our roles in creating our problems and our hitting bottom.  No excuses, no avoidance.  We take responsibility for our actions at the same time that we seek support and routine.  Ironically, that can be the hardest step in bouncing back, but also the most promising one.  Once we take responsibility for what we've done, we re-establish the sense of control that allows us to bounce back and turn things around.

More to come...

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10/26/2025 - I have received a number of emails from traders in crisis.  They have lost money, and they have lost their dreams of success.  Instead of providing fulfillment, their trading has led to pain and anguish.  A large part of this pain is due to the fact that they blame themselves for their failure.  They recognize that they have not followed their rules and they feel that they have betrayed themselves.  In reaching out, they ask the difficult question, "Should I stop trading?"

Here is where being a practicing psychologist is different from being a trading coach.  A trading coach typically tries to help you with your trading.  A trading coach is invested in you continuing your trading because that continues your work with them.  A psychologist is focused on your health and well-being and that may or may not include trading.

Suppose we replace the term "trading" with the term "drinking".  A person could say, "I've tried to have a good time drinking and I want to go out with my friends.  I've had too much to drink at times and so I set rules to limit and control my drinking, but lately I've broken all my rules.  I wrecked my car and lost my job.  Should I stop drinking entirely"?

Well, that puts our trading problem in a new light.  We can become dependent on anything that produces big highs--and that dependence can create deep lows.  Indeed, our dependence on trading can create traumatic consequences for us, as this post points out.  In the case of drinking, it's clear that we need to take two steps:  1) stop drinking; 2) get help for the traumas our drinking has created.  That first step of stopping drinking and getting help is always the hardest.  That's why people with drinking problems who have hit bottom often reach out to groups such as AA--for support as well as advice and encouragement.  Connecting with others in healthy ways replaces the drinking.

So, if we've been trading impulsively and addictively and breaking all our rules, should we continue to trade with ever more vows of "discipline"?  Of course not.  We need to give ourselves time to heal from the traumatic consequences, and we need to find others who can support us in that healing.  Only after that period of healing has occurred should we consider returning to markets in a different and healthier way.  The goal is not to trade.  The goal is to live a happy, healthy, fulfilling life.

The first step is the hardest, but it can also give you energy, because it can be the first step toward a new life.      

Finding a Trading Lesson in Each Market Day

 

10/24/2025 - The single greatest trend I have observed in my recent years of coaching work at hedge funds is the growth of teams and the expanding role of teamwork in trading performance.  Interestingly, this has also been a distinctive trend at the proprietary trading firm SMB Capital.  I recently spoke with a member of an expanded team at SMB and it was clear that his trading--and his engagement in markets--had benefited from the sharing of ideas and mutual review of performance.  Because of the learning that had occurred within the team, this trader was exploring unique and sophisticated trading opportunities.

At the hedge fund level, teams have become the mechanism for learning, training, and promotion.  As they've grown, teams have tackled new markets and new strategies.  They share ideas and information daily and thus are able to see a greater range of risks and rewards than individual traders.  I predict this will become a dominant trend among those individual traders as well.  They will network with one another and create their own trading pods.  This will keep individual traders actively engaged and also tap into their positive motivations to learn and help others.  Connecting traders and helping them form their own pods is an important mission for trading communities going forward, as communities become teams of teams.  

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10/23/2025 - The common view of trading psychology misses an important reality.  Yes, our emotional and cognitive states impact our decision making.  Equally important, however, is that our decision making style impacts our cognitive and emotional states.  All of us have strengths and weaknesses in terms of information processing.  Some of us process information best if we focus on a limited number of things and go into depth in those, seeing what others miss.  Others benefit from a broad vision and finding patterns and themes that pull things together.  When we are processing information in line with our strengths, we find the experience meaningful and interesting.  When we attempt to make sense of things outside of our strengths, we typically struggle and experience frustration.  It's not just we lose money if we are in the wrong mindset; it's that we experience negative mindsets if we're doing the wrong things (i.e., if we're operating outside of our strengths).  

Yesterday's trade began choppy and range-bound and evolved into a downtrend.  Getting out of the weeds and seeing what was happening across sectors was key to perceiving and benefiting from the market shift.  It was the frustration of being in the weeds that prodded me to step back, look at the larger picture, and align myself with my best thinking.  We work on our psychology by refining our trading.  This is an important trading lesson.

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10/22/2025 - The idea of finding a trading lesson in each market day is to become better and better at recognizing and acting upon opportunity and better and better at sizing and managing risk.  That way, every day yields something we can improve and/or something we did well that we can build upon.  Suppose, at the same time, we find a trading psychology lesson in each day that we trade:  something we can take away with respect to how we approach our trading.  For instance, with yesterday's lower volume and volatility, I had to adjust expectations in setting take-profit levels.  On Monday, those expectations were lofty; on Tuesday, I had to focus on near-term levels that I thought could be hit on the move-to-move basis.  One of my Tuesday trades hit my target but didn't get filled.  I adjusted my expectations but not enough.  Flexibility in how we approach the day's opportunity set is an essential element of trading psychology for the active trader.

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10/21/2025 - Note how the early trading of the market today differed greatly from the early market action on Monday.  Sector performance was mixed; advance/decline numbers were not extended in either direction; TICK numbers were similarly constrained.  Unlike Monday, when holding positions to ride the trend paid out, today's trading rewarded nimble trading move-to-move.  Remember, the opposite of a trending market is not necessarily a randomly choppy market.  There are short-term cycles that show up when trends are not dominating.  The move-to-move trades exploit these cycles.  It's a great example of how our trading must change as market environments change; a valuable market lesson. 

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10/21/2025 - Growth as a trader is a continuous process of starting over, but always from a higher starting point.  As markets change and as our understandings of markets evolve, we become new traders who are experienced traders.  During this most recent vacation period, I've remade my research databases to highlight trading patterns based on market and sector breadth and now am integrating that information into my market views.  Yesterday was a rewarding day in which old understandings of trend days in markets joined together with backtested historical patterns of sector and market breadth to reveal opportunity early in the trading session.  

One new practice I'm following in my journaling is to identify a single, valuable trading lesson each day based upon what I experienced and learned.  The idea is to ensure that each session is a learning opportunity that can be carried forward to improve performance.  Yesterday's lesson was that, when we see unusually strong NYSE TICK, advance-decline stats, and sector performance from the earliest minutes of trading, we want to be prepared to trade a trend day by holding positions and taking advantage of short-term pullbacks.  Identifying the kind of market we're in provides us with a valuable game plan for the trading day.

   

Focusing on Opportunity

 

10/13/2025 - TraderFeed will be on vacation while I ramp up my research platform and apply it to these markets.  I look forward to sharing insights and experiences.  

Friday's market was a dramatic reminder that relying on visual inspection of chart patterns and technical indicators for trading has its limitations.  Once important news comes out, market participation changes (volume, volatility) and the patterns that had shown up in previous trading can no longer be counted upon.  For example, previous oversold levels that could be counted upon for bounces now might simply lead to further downside.  

The key takeaway is that *who* is in the market defines the nature of trading opportunity.  When volume and volatility expand due to increased institutional participation, only historical analysis of similar periods can provide insight into trading opportunity.

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10/10/2025 - One thing I've been able to appreciate from my breadth-based research is that opportunity is not distributed evenly in the market.  There are periods in which backtests show little to no edge going forward, and there are periods when the backtests show a very distinct historical bias toward directional moves.  These periods of opportunity are generally ones in which multiple backtests of market behavior conducted over different time frames line up--and those then line up with current price action.  An example would be a market that shows a bullish edge from 3-5 days out and also for 20+ days out.  Intraday, there is selling that cannot push prices to a fresh low, so that we get short-term oversold readings at higher price lows.  

These opportunities are not common, but they are unusually promising and profitable.  Sizing all positions equally (i.e., taking the same risk in great opportunity markets and modest opportunity ones) is inefficient.  Invariably, when I come across a very successful trader, I find someone able to:  a) significantly size up researched high opportunity trades and b) effectively manage the downside risk of these trades.  A meaningful percentage of their weekly and monthly profits comes from a relatively small percentage of their trades.

The key to this success is the ability to *objectively* define the very high opportunity opportunities and patiently wait for these to appear.  Despite the large opportunity, the successful trader maintains the ability to manage risk effectively even when trading very large size.  This is the essence of trading like a sniper, with controlled aggression.

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10/8/2025 - Starting Monday, I will be taking a break from regular posting on TraderFeed to set up my breadth-based trading platform and begin trading the patterns I've been observing in my research.  What I can share is that what many traders don't look at--how money is flowing from certain sectors of the stock market to others--is associated with non-random returns over time periods most traders don't look at (20+ days out).  An edge is not something that is present or not present in the market, but something that evolves as flows shift from day to day.  Our job is to understand and follow that evolution.  A major problem in trading psychology is myopia:  we so focus on the present that we lose sight of the edges from days and weeks ago that are impacting how markets trade now.  Every trading day occurs within a context.  We lose vital information when we only look at the day and miss the larger context.

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10/7/2025 - I've been speaking with trading coach Agnieszka Wood and an active member of the Australian Technical Analysts Association about the idea of an enriched format for coaching traders that could provide greater opportunities for performance improvement.  In the medical world, it's common, when a patient enters a hospital, for multiple physicians to collaborate on their care.  Each physician has a distinct specialty and they combine their areas of expertise to create a well-rounded treatment plan.  Every patient benefits from this collaboration, and the physicians gain the opportunity to learn from one another.

Why not bring this model to the coaching of traders and create greater opportunities for change?  Traders would meet with multiple coaches in a group setting and would bring their questions and challenges to the team of coaches.  One coach, for example, might focus on how changes in the trader's psychology could help their trading.  Another coach might emphasize trading improvements that could help the trader's psychology.  Because the team coaching is conducted in a group session, it is affordable for traders and also allows traders to learn from the questions of others and the multiple responses of coaches.  It's a dynamic learning environment: active and interactive.

We create greater opportunity when we innovate--in trading and in all areas of life!

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10/6/2025 - I am getting a number of emails asking for help with trading discipline.  The traders feel that they can identify opportunity, but then violate their rules/stops/trading plans in the heat of action.  They recognize that opportunity is only opportunity if we can act upon it in a planned, disciplined manner.  They are asking for advice that will help them instill such self-control.

The key psychological principle here is that trading rules must be internalized as trading habits before we can pursue meaningful risk-taking.  In other words, we have to:  a) define the rules for our trading that reflect our best practices; b) turn those rules into checklists and step-by-step templates for action; and then c) repeat the application of these best practices again and again in practice/simulated trading and then in small-size trading until they are internalized as automatic habit patterns.

We do not gain discipline by exercising self-control; we achieve discipline by turning desired behaviors into habit patterns.  Then we can act upon opportunity consistently.

The mistake many developing traders are making is that they're trying to make money--and take meaningful risk--before they've truly internalized their best trading practices.  Until they build robust habit patterns around their best trading, they will be vulnerable when market events distract them.

Of course, the other reason for practice/simulated trading is to try things out, learn from our successes, figure out what we do best, and capture that information as best practices.  If we attempt to trade before we fully understand what goes into our successful trading, we will fall victim to impulsive decision-making.

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10/5/2025 - No amount of changing your bait, casting your fishing rod differently, and improving your mental outlook will help you catch fish if you're fishing in the wrong body of water.  Many traders experience frustration in their work, not because of any intrinsic emotional problems and not because they need to tweak their entries/exits, but because they are not focusing their trading on the areas of greatest opportunity.  If what you're trading isn't moving much, no switching of technical indicators, trading styles, or psychological exercises will help you make significant returns.

Consider the U.S. stock market this past month.  Look at returns in semiconductor stocks (SMH) over that period; then look at returns in consumer staples shares (XLP) over the same period; and then look at regional banking shares (KRE).  Participants in those markets were fishing in very different ponds.

A major source of movement in the stock market comes from rotation from one group of sectors to others, as institutions pursue investment themes.  Catching these rotations is a great way to find the best fishing ponds.  It's important to make sure we're playing the right games before we work on improving the game we're playing.