Sunday, November 23, 2014

Good Reads to Wrap Up the Weekend

Some interesting findings about gratitude:  it is significantly and positively correlated with life satisfaction, vitality (energy), happiness, optimism, and empathy.  It is significantly and negatively correlated with anxiety and depression.  People who write a journal about things they are grateful for vs. people who keep a journal of their daily hassles and problems end up experiencing more positive emotion, better health, and greater optimism.  We can train ourselves to be more grateful, and that brings significant positive benefit.

*  Views on all-weather portfolios, Tony Robbins, simplifying your life, high yield divergences with stocks, and much more from Abnormal Returns.

*  Excellent perspectives on trading as a peak performance activity from SMB.

*  Thanks also to Steve from SMB for calling attention to this article on how automation can make us less intelligent.

*  Valuable look at facts and fantasies regarding factor-based investing.

*  Why unsexy low-beta stock sectors can be better investments than high beta/high volatility ones.

Have a great start to the week!
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Is This Market Weak, Strong, Not Weak, or Not Strong?


The recent post on market strength and weakness made the case for looking at strength (buying pressure) and weakness (selling pressure) as independent variables.  We can have markets in which both buyers and sellers are active, and we can have ones in which both are relatively dormant.  By measuring upticks and downticks across all stocks separately, we can gain some insight as to the behavior of both buyers and sellers. 

The two charts above update views on strength and weakness.  The top chart looks at all stocks within the NYSE universe and tracks those closing above their upper Bollinger Bands versus those closing below their lower bands.  (Data from the StockCharts site.)  The idea here is that in a strong market, we'll have more shares closing above their upper bands and vice versa for a weak market.  In a market in which buyers and sellers are relatively dormant, we will see few stocks close above or below their bands.

Note how this is exactly what has happened in recent sessions:  we have had a waning of strength (fewer stocks closing above their bands), but not an excess of weakness (net stocks closing below their bands).  At the market peaks in July and September, we saw an excess of stocks closing below their bands *prior* to the reaching of an ultimate price high for those cycles.  In other words, it wasn't just diminished buying but net selling that preceded the market fall.  Markets don't get weak unless some market components are actively leading the way.

This is similarly reflected in the bottom chart, tracking the daily balance of upticks versus downticks among all NYSE shares.  That balance has come down in recent sessions, but is nowhere near the levels of net selling pressure that we saw prior to the October drop.  In recent sessions, buying and selling pressure have been relatively balanced; we have not seen selling pressure swamp buying activity.  Again, the takeaway is that markets don't get weak unless sellers become active and dominant.

To be sure, small cap stocks have been underperforming large caps of late and shares in the energy sector (XLE) have been understandable laggards, given the significant drop in the value of crude oil.  Thus far, however, weakness in those areas has not been sufficient to bleed over to the broad NYSE universe.  Buyers are not grabbing bargains as aggressively as in the latter portion of October, but neither are sellers taking advantage of high prices the way they were in September.  With prospects of monetary stimulus most recently from China, following Japan and Europe, prices that looked frothy a couple of months ago have not found broad selling lately.

Further Reading:  International Stock Performance
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Saturday, November 22, 2014

How to Build Discipline and Conscientiousness

The recent post highlighted why conscientiousness is the single personality trait most consistently associated with life success.  We commonly hear traders extol their passion for their work.  Desire alone, however, is only half the success equation.  It's conscientious follow-through that makes the difference between dreaming of success and waking up to make it a reality.

Can we cultivate conscientiousness?  Can we improve upon our ability to pursue goals in a disciplined, intentional way?

Michael Posner's work in cognitive neuroscience suggests that a key element in self-regulation is the development of executive attention.  This makes sense:  the opposite of conscientiousness is not laziness; it is distractibility.  The distracted person is one who cannot sustain directed action:  intention requires attention.  Posner's work finds that attention can be trained through the use of challenging video games and through such processes as meditation.

Indeed, a study of short-term integrative mind-body meditation training found that it was effective in improving both attention and the regulation of emotional responses.  By learning to focus attention, build mindfulness, and control the body's state of arousal, subjects were able to lower their cortisol response to stress; lower their negative emotionality; and improve positive emotional experience.   

Similarly, training in the arts appears to lead to changes in the brain that are associated with improvements in attention and general cognitive functioning.  Cognitive discipline, a precondition of behavioral discipline, appears to be a capacity that can be trained.

An interesting study looked at conscientiousness as a set of behaviors, not simply a trait that people have or don't have.  Behaviors negatively correlated with conscientiousness included "avoid work"; "impulsivity"; "antisocial"; and "laziness".  Behaviors positively correlated with conscientiousness included "organization"; "cleanliness"; "industriousness"; "appearance"; "punctuality"; "formality"; and "responsibility".  Viewing conscientiousness as behaviors opens the door toward cultivating habit patterns that are conscientious. 

By building habits that make us more conscientious, we avoid the circularity of needing conscientiousness to follow a program of building conscientiousness.  Each of the conscientious behaviors listed above can be turned into a daily action that is repeated as part of an ongoing routine.  By making the behavior routine, we take it out of conscious control and automate it--enabling us to cultivate the next positive habit.  A particularly promising strategy is to use the mind-body meditation training described above to start the day with regulated attention and arousal and then use that mindful state to enact a conscientious behavior.  Over time, that would build habits of both cognitive and behavioral self-control.

The important takeaway is that disciplined lives start with disciplined days and those start with disciplined acts.  If we do not achieve a degree of mastery over mind and body, it is difficult to believe that we will sustain a path toward life mastery.

Further Reading:  Turning Success Into a Habit
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Friday, November 21, 2014

The Personality Trait Most Important to Cultivate for Success

If, indeed, success is traversed by staircase and not elevator, what would be the best predictor of success?  

It might be quite simple:  the propensity to take the next step.

That propensity is part of what is known in psychology research as conscientiousness.  People who are conscientious tend to be very organized, very responsible, and very planned in their actions.  Do you get your work done before you relax and play?  Do you get work done well ahead of deadlines?  Do you attend to details in your work?  Do you think and strategize before you act?  All of those are manifestations of conscientiousness.

There is much to be said for being laid back and going with the flow.  A conscientious person would leave time in their schedule for chilling--and would make relaxation a positive habit pattern.  That is very different from chilling whenever the mood strikes.  

It turns out that, out of all personality traits, conscientiousness is the best predictor of success.  Not all conscientious people have talent, but talent is most likely to be honed as skills via conscientiousness.  After all, what is deliberate practice if not conscientiousness applied to learning?

Research finds that people who are high in conscientiousness have higher incomes and get better grades.  Recall the research of Angela Duckworth:  two factors predict success:  grit (the ability to persevere even after setbacks) and self-control.  Perhaps conscientious people are successful because they set and pursue goals with steady determination.

Conscientiousness brings other benefits as well.  Conscientious people tend to be healthier, perhaps simply because they are more consistent in engaging in healthy behaviors.  The "discipline" so often emphasized as a component of trading success is conscientiousness applied to the creation and following of trading rules.

There is interesting evidence that conscientiousness consists of two subtraits:  industriousness and orderliness.  The conscientious person is hard working and achievement oriented and is also organized and perfectionistic.  That sounds a lot like Duckworth's formula.

There are differences in brain structure among people who are high versus low in conscientiousness.  There is also evidence that conscientiousness contributes to the integrity of the brain during the process of aging.  Can we learn to become more conscientious and cultivate this as a trait, in effect rewiring our brains?  Research on self-regulation training suggests that this, indeed, is possible. In my next post, I will outline the components of a self-directed program that can improve our abilities to take the next step on the staircase to success.

Further Reading:  Are lapses of discipline the cause or effect of trading problems?
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Thursday, November 20, 2014

Who Has the Upper Hand in the Stock Market: Buyers or Sellers?



The recent post noted that we've been seeing diminished strength in the stock market rally.  As earlier this year, a big part of the weakened breadth has come from smaller cap shares.  Above are three charts that track market strength and weakness in a unique way.  This is based on work that I introduced in August and have since refined significantly.  It is a proprietary measure that assesses the number of stocks within the NYSE universe that are trading on upticks (buying pressure) versus the number of stocks trading on downticks (selling pressure).  The balance measure (bottom chart) represents the difference between buying and selling activity.  

Please note that each chart is normed so that zero represents an average level of buying, selling, and balance going back to 2012.  When we see buying pressure above zero, that represents above average buying activity.  When we see selling pressure below zero, that represents selling activity that is greater than average.  When the balance measure is above zero, we have an above average net level of buying relative to selling.

It turns out that buying and selling are not flip sides of the same coin.  During 2014, daily buying pressure has correlated with daily selling pressure by -.33.  That means that only a little over 10% of the variance in selling can be explained by buying activity and vice versa.  A market in which buying is getting weaker is not necessarily one in which selling is expanding--and that turns out to be important for understanding where we're at in market cycles.

As you can see from the top chart, buying pressure typically ramps up as markets are making intermediate-term lows, as we see longer timeframe participants scoop up bargains.  That increased buying continues early in the cycle's rise, as the market moves higher on strong upside momentum.  As the cycle matures, we see diminished buying pressure, with buying actually turning negative (below average) during the topping phase of the cycle.  This was very evident during the topping processes of July and September.  Note that buying pressure started very strong out of the October lows and most recently has turned negative (below average).  This is an indication that the current cycle is in a mature phase.  In itself, it is not predictive of the kinds of drops we had in August or October, however.

When we turn to the middle chart, we can see that selling pressure is most extreme at market lows as we'd expect and then dries up during the early part of intermediate-term cycle rallies.  As the cycle matures, we see selling pressure pick up, as an increasing number of participants take advantage of high prices.  Note how selling pressure picked up meaningfully during the July and September topping phases.  Most recently, we've seen selling pressure pick up (below zero; more selling than average), though not to the degree that we saw prior to the recent market corrections.

Finally, the bottom chart integrates the two and shows how the balance between buying and selling evolves over time.  The balance is very much skewed toward buying early in the rising phase of a market cycle and then turns negative as the market tops out.  Note that we have turned negative on balance in recent trading sessions, though again not to the level seen at recent market peaks.  If we are indeed in the topping phase of a market cycle, this waning of buying and expansion of selling should continue, eventually leading to an inability of buyers to push index prices to fresh highs.

Further Reading:  Market Cycles
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Wednesday, November 19, 2014

The Challenges of Global Disinflation




Above we can see the collapse of commodity prices over the past six months, as reflected in the Goldman Sachs Commodity Index (GSCI); oil futures; the gold ETF (GLD); and wheat futures.  In an inflationary environment, we expect to see rising commodity prices and a weak currency.  What we've see of late is a strong U.S. dollar and falling commodity prices:  a much more disinflationary environment.

Indeed, disinflationary forces have emerged as a key concern at the Bank of England and the Bank of Japan sounds less clear that it can reach its 2% inflation target.  We are also hearing recent reports of "entrenched" disinflation across Asia.  Falling commodity prices are also disinflationary for producers of raw materials such as Australia.  Across much of the world, disinflation has taken hold of economies, and that has included the U.S.

So what happens in a world of growing disinflation?  We see competitive devaluations of global currencies to stimulate inflation, with Europe seemingly following the recent lead of Japan.  Risk-free yields remain crushed in a disinflationary world of zero interest rate policies, encouraging yield-seeking through stocks and longer-duration bonds.  That has been very good for the long stocks/long bond trade.

With the much stronger dollar and G20 promises of more economic stimulus to come, will global economies pick up some of the strength of the U.S. economy (which has benefited from lower commodity prices and restrained rates), or will that strong dollar become an anchor to the U.S. economy, restraining overseas demand for U.S. goods and forcing the U.S. to join the competitive downward race?  I will be watching the relative performance of overseas equities markets to the U.S. stock market; the behavior of U.S. and overseas rates; and the forward trajectories of commodities as ways of handicapping this key issue.
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Tuesday, November 18, 2014

Challenging Yourself and Changing Yourself

The recent post described how we can fire on all cylinders in trading--and in our lives.  A savvy trader I spoke with yesterday framed the issue quite well when he pointed out that it was easy to get so caught in the daily minutiae of markets that we never step back and address the big issues of performance and long-term success.

This brings us back to the issue of the dangers of having impotent goals.  A potent goal is a visionary one; it raises us to a new level, challenges us, and excites us.  Visionary goals are inherently idealistic:  not in the sense of pie-in-the-sky, but in the sense of speaking to our ideals.  Impotent goals, on the other hand, are utterly realistic.  They most often are coping goals--goals designed to get us over life's next hurdles.

There is nothing wrong with coping, and I resonate quite well with the bumper sticker that reads, "Forget world peace; visualize using your turn signal."  Dreams don't become realities without a healthy dose of realism and blocking-and-tackling execution.

But what happens when life becomes a daily sequence of blocking and tackling?  The part of us that needs to quarterback our lives needs a vision of the entire playing field.  That's why football quarterbacks drop back before they launch the ball forward.  It's the vision of the open player down field that sets up the big play.

If we don't have goals that challenge us, what will change us?  It's through challenge that we test our limits and exercise our strengths.  If we went to the gym and spent an hour lifting 20 pound weights, we would never build ourselves up.  Yet that is how we spend our time when we're immersed in the minutiae of markets, blocking and tackling, living life with head down.

One of the greatest poisons we can swallow is the wisdom that being idealistic is not realistic.  Those potent goals don't just change us; they energize us.  They are an important source of the well-being referenced in the previous post.  What is the vision for your marriage or your social life?  What is the vision for your physical development?  For the next phase of your trading evolution?  What ideal is so compelling that you won't want to spend more than one minute necessary in bed, because you're so eager to turn those dreams into realities?

In the past, I've shared my definition of old age:  It's that point at which you determine that your best years are behind you.  Nothing keeps us young and alive like the vision of what can be and the sense that we are moving toward that worthy vision.  It starts with how we live today:  we cannot achieve greatness unless we do at least some thing greatly right here in the present.  That's not a bad exercise for building positivity and keeping ourselves young:  each day identify one valuable thing you will perform greatly that day and then set time in your calendar to challenge--and change-- yourself.  

Many individual days lived greatly can add up to a great life.

Further Reading:  Why Living in the Future is the Best Way of Achieving It Now
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Monday, November 17, 2014

How We Can Fire on All Cylinders in Our Trading Performance and in Life

The old trading psychology emphasized controlling emotions, imposing discipline, and coping with the stresses of the ups and downs of markets and profits.

What my new book refers to as Trading Psychology 2.0 is that performance--in trading and across life--is a function of cultivating positive emotional experience, building on cognitive and personality strengths, and enhancing our creativity and adaptability.

In short, the old psychology is all about minimizing problems and disruptions.  The new psychology focuses on building our most positive attributes.

Most of us function in 1.5 land:  we are neither mired in problems, nor are we actively identifying and strengthening the best of who we are and what we do.  We don't hate our lives, but we are not in love with our lives.  We wake up, attend to morning routines, go about our work, and live life more or less on auto pilot--until random positive or negative events happen to befall us.

As part of researching the new book, I have consumed a steady diet of positive psychology books and research.  The general conclusion emerging from this work is that there is more--much more--we could be doing to renew our romance with our lives.  Positive emotional experience is something that can be taught and learned.  A few basic exercises, conducted with consistency, can make a meaningful difference in our levels of happiness, life satisfaction, energy level, and attachment to others.

Consider the Penn Resiliency Program described by Martin Seligman in his book FlourishThis began as an evidence-based intervention for schoolchildren to teach them skills that prevent depression.  Through the program, students were given twelve sessions of 90-120 minutes each, focusing on information, skills-building, and between session homework.  Skills included cognitive techniques for dealing with negative thoughts and a variety of problem-solving and coping methods.  

As Seligman outlines in his book, the Penn Resiliency Program did indeed lower the incidence and prevalence of depression, anxiety, and behavioral problems within the student population for two full years following the 12-session intervention.  Lo and behold, however, the program also resulted in a number of positive outcomes, including better grades, greater curiosity and love of learning, improved emotional and social intelligence, and increased happiness, hope, and optimism.   

This supports the research of Michael Fordyce, who found that teaching skills related to 14 fundamentals of well-being resulted in significant improvements in happiness and life satisfaction.  Like the Penn program, Fordyce's training was relatively brief, but focused on concrete skills and their day-to-day implementation.

Imagine if you set out--each day--to implement a single action designed to improve your life in four different areas:  your happiness and joyful experience; your satisfaction with aspects of your life; your level of energy and enthusiasm; and your connections to friends, family, and romantic partner.  Over time, what would be the compounding effect of such skill-building?  How would it impact your daily experience if each day was a day in the emotional gym, where you gave happiness and well-being a good workout?

To borrow an analogy from Colin Wilson, we are like automobiles running on a single cylinder.  Frustrated with our slow speed, we persistently hit our gas pedal, taxing our engines even further and reducing our efficiency.  What we need is to stop the car, get under the hood, and overhaul our engines.  The elements of subjective well-being are the cylinders of our engine.  Life is a lot more productive, a lot more enjoyable, and a lot healthier if we are firing on all cylinders.

Further Reading:  Happiness and the Power of Expectations
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Sunday, November 16, 2014

New Views for a New Market Week

Well, hope your weekend was a gift at the very least.  Here are links to useful views that just might provide a bit of stimulation for the start of the week:

*  How the U.S. is outperforming the world and other excellent perspectives from Abnormal Returns.  Also check out views on robo-advisors and smart beta from Abnormal Returns.  Increasingly, the AR site covers a far broader range of topics than markets.  Great way to keep up with the world.

Excellent perspectives on strategy from Daily Speculations;

*  Now this is absolutely fascinating:  From Eric Scott Hunsader, a video visualization of how the average trade size has declined in recent years.  If you doubted the impact of algos on the stock market, this should open your eyes.

A wealth of useful market data from Kora Reddy and Pastat.

*  Emotional resilience:  Crosshairs Trader outlines the many frustrating situations traders need to learn to deal with.

*   A slowdown, not a breakdown, so far in the stock market, from Brian Shannon and AlphaTrends.

Excellent ideas re: trading volatility from the Trading the Odds site.

Have a great start to the week!

Brett

The U.S. Stock Market Story for 2014: Bigger Has Been Better

Quick question:  Has 2014 been an up year or a down year for U.S. stocks?  

Chances are good that, if you anchor your view of the market to the Standard and Poors 500 Index or the Dow Industrials, you'd answer correctly that it's been an up year.  Less well appreciated is that the smallest capitalization stocks (IWC) are actually a bit down on the year, even given the recent rally from the October lows.

Indeed, as you can see from the chart above (January, 2 2014 = 100), 2014 returns to date have been a linear function of capitalization, with the largest companies (SPY) showing the highest return, followed by the midcaps (MDY); the small caps (IJR); and the microcaps (IWC).  

This effect is striking, because it shows that only the largest capitalization companies have been making new highs during the current rally.  Why might this be the case?  Large caps with yield, such as utilities shares, have been outperformers, given the crushing of interest rates across the globe thanks to zero interest rate policies from central banks.  Stock buybacks also have been dominant among the large caps, contributing to returns.  Finally, in the wake of global economic weakness and recent U.S. dollar strength, large caps could be benefiting from a flight to perceived stability and quality.

Let's now bring in a different perspective and look at U.S. large caps versus other international stock markets.  Sure enough, we see a similar pattern:  U.S. large caps have made strong new highs, while equities outside the U.S. (EFA) and specifically within Europe (FEZ) and emerging markets (EEM) are actually down on the year.

So, in short, the money has been moving toward U.S. large caps and away from overseas shares and away from the smaller capitalization companies.  From this perspective, the broad asset class of stocks has a major breadth problem.  The rising tide has lifted one boat.  

Nor do I see this dynamic changing since the October lows.  During that period, SPY has gained 9.65%, while MDY is up 9.08%, IJR is up 8.48%, and IWC is up 6.71%.  Healthy increases to be sure, but the pattern of relative returns remains intact.

I've emphasized the strength of the recent rally and the fact that I don't see outright weakness manifesting itself among U.S. stocks.  That being said, should we begin to see diminished interest in U.S. shares--and particularly the large caps--in the wake of an anticipated end to quantitative easing; in response to global economic weakness; and/or in the face of geopolitical turmoil (Russia is a mess and may have every incentive to use the Ukraine conflict to deflect attention from a falling oil market, a weakening economy, and a crashing ruble), then suddenly 2014 begins to look like a broad topping period late in a long-term market cycle.  

That's enough to bring out the bear even in this generally optimistic soul.

Further Reading:  Upside Momentum is Topping
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Saturday, November 15, 2014

A Quick Update on Stock Market Strength



My recent post suggested that we were seeing diminished strength in the U.S. stock market, but not distinct signs of weakness.  Above we see three charts that update the view on market strength.

The top chart tracks the number of common stocks across all exchanges that have made three month new highs vs. lows.  Typically this measure peaks ahead of price during bullish intermediate-term cycles.  We can see that new highs have indeed peaked and, though we have been trading at or near price highs lately, the number of shares hitting fresh peaks has diminished.  Still, we're not seeing net new lows as we did prior to peaks in April, July, and September.  (Raw data from the Barchart site).

The middle chart follows the number of stocks listed on the NYSE that close above vs. below their upper and lower Bollinger Bands.  This has tended to peak and trough ahead of price during the up and down phases of market cycles.  Again, we've seen a peak in this measure, but as yet not the negative readings that preceded the July and September peaks.  (Raw data from the Stock Charts site).

The bottom chart tracks the number of stocks listed on the NYSE that give buy vs. sell signals on the Commodity Channel Index (CCI) per the Stock Charts site.  Once again we see a peak in buy signals, but not as yet an expansion of sell signals as we saw prior to the September peak.

In sum, we're seeing signs of waning upside momentum, but not yet a pickup in downside momentum.  For that reason, I believe it's premature to assume that this market is on the verge of a correction on the order of August or October.

Further Reading:  Will this Market Roll Over?
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Fresh Perspectives From Trading Coaches

In this post, I thought I would step back and pass along worthwhile ideas from a variety of trading coaches who post to social media.  Ultimately, my hope is that the ideas on this blog--and the ones that I link--can become fuel for your own self-coaching.  The more I stay in this business, the more I realize that the really successful money managers and traders are those who spend as much time studying themselves (and their trading) as they do studying markets.  For them, self-mastery is as much the motivation to compete in markets as making money.  As we launch into a weekend, these posts might spark some self-coaching insights:

Self-coaching and lessons from basketball - From TraderFeed

When perceived risk outweighs actual risk - From Richard Peterson and MarketPsych

What portfolio managers can learn from the World Cup - From Doug Hirschhorn 

A guide to visualization - From Bruce Bower and SMB

Using feelings in trading - From Denise Shull and ReThink

Developing emotional self-awareness - From Andrew Menaker

What is the best style for coaching yourself? - From TraderFeed

How our brains respond to bubbles - From Richard Peterson and MarketPsych

Why women make great portfolio managers - From Doug Hirschhorn

Performing under pressure vs. choking - From Bruce Bower

Empathy and intuition as trading styles - From Denise Shull and ReThink

The psychology of openness and adaptability - From Richard Peterson and MarketPsych

Self-talk and self-coaching - From TraderFeed

Have a great start to the weekend!

Brett
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Friday, November 14, 2014

The One Trading Drill That Can Most Improve Your Trading Performance

In response to the post on training as the missing ingredient in the development of traders, an inquiring reader asks:  "Can you please offer us from your own experiences as a trader and as a traders coach some ways to practice, some drills or what ever you think is suitable, to help us evolve as traders?"

It's a very good question, because it highlights that, before we can intensively drill skills, we have to clearly identify the specific skills that comprise our best trading.  Those skills will be different for a relative value trader of rates, a directional global macro trader, and a daytrader of stocks.  Just as soccer players will have different drills from basketball players and gymnasts, longer-term investors will benefit from different rehearsal than shorter-term traders.

Understanding how you make money precedes any formal structuring of deliberate practice.  In an upcoming post, I will address a general process for achieving self-understanding.  I do, however, want to respond  concretely to the reader's query, because it speaks to the need to translate ideas about performance into daily practices that make a positive performance difference.

So what is the one thing you can do to improve your trading right now?

Imagine that you could eliminate the one worst trading practice that you have observed in yourself over the past month or two.  How much difference would that make to your overall profitability?  In many cases, the return on investment for working on eliminating that one worst practice would be very high.  Indeed, it can make the difference between profitability and drawdown.

Once you identify that one worst practice, you want to clearly map out the situations in which it occurs.  What is happening in markets at those times, and what is going through your mind at those times?  What are you thinking?  Feeling?  In other words, you want to become as aware of the "setup" for your trading mistakes as you are about trading setups:  you are focusing on your patterns now, not just market patterns.

The result of your reflection should result in an actual map:  a flow chart that captures the sequence of events leading to the bad trade.  For example, the sequence might start with getting out of a trade because it has hit your stop; then seeing the trade return to the original intended direction; then thinking and fearing that you have missed another opportunity (again!!); then chasing the move at a bad entry point; and then stopping out again on a normal retracement.

In that sequence, you now want to insert an additional set of steps that will derail the pattern and prevent the poor trading practice.  Your negative pattern is trading reactively based on the frustration of potentially missing a market move.  Your additional steps will be, following a stop out, to take a quick break from screens, regulate your breathing, and review your planned criteria for any re-entry.  In other words, you are mentally rehearsing your rules for good entry execution and planning any possible return to the position, rather than staring at the screen and fretting that you're missing a move.

Taking a loss ====> Fresh planning 

That is the new pattern you will be "drilling".  You are creating psychological conditions in which the poor trading cannot survive.  Mentally rehearsing the new pattern and actually enacting it in trading creates a highly focused deliberate practice.

So here's the process:  1) identify your one worst trading practice; 2) map the sequence of events (internal and external) leading to that worst practice; 3) insert into the map a set of steps that will make that worst practice impossible; and 4) mentally rehearse and then actually enact the new, inserted steps in your trading.

It is not necessary to change many things all at once.  Intensive work on changing the single pattern most responsible for your poor trading creates positive changes that will energize future focused efforts.  Most of us, once in a while, trade like idiots.  Targeting those occasions and slimming down the left tail of returns can make a huge difference to overall profitability.

Further Reading:  Drills for Intraday Trading
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