BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER

Below are resources to help traders become their own trading coaches, improve their trading processes, and develop a positive work-life balance.  All the TraderFeed posts also contain links to valuable resources and perspectives.  

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

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The Three Minute Trading Coach Videos

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Forbes Articles:

https://www.forbes.com/sites/brettsteenbarger/
  

My coaching work applies evidence-based psychological techniques (see my background and my book on the topic) to the improvement of productivity, quality of life, teamwork, leadership, hiring best practices, and creativity/idea generation.  An important part of the "solution-focused" approach that I write about is that we can often best grow by focusing on what we do well and how we do it--and then doing more of what works for us.  The key is to know our cognitive, interpersonal, and personality strengths and leverage those in the pursuit of performance. 

FURTHER RESOURCES

*  A Creative Way to Use TraderFeed 

*  Brett Steenbarger Bio

*  Brett's Books on Trading Psychology

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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How to Achieve Quiet Confidence in Our Trading

 

1/15/25 - Understanding markets is not just about the big picture macroeconomic trends impacting price action.  It's also about identifying the kind of markets we're in:  trending/momentum; cycling/mean reverting; or a combination of the two, where cyclical moves occur within trends.  The kind of market we're in determines the kinds of trading strategies we employ.  Much frustration and loss in trading occur when we impose our strategies on the market, rather than trade the conditions we see.  I find that I'm best able to trade market cycles by constructing charts based on volume, not time, and by tracking crosses of adaptive moving averages (moving averages that automatically adjust their parameters based upon identified cyclicality).  Very promising trades occur when moving averages are behaving similarly on shorter, medium, and longer time scales.  When cycles line up, the result is a sense of understanding that fuels our confidence in trading.      

1/14/25 - The below post suggests that our optimal frame of mind when trading is not positive or negative, but focused and open-minded.  As a psychologist, when I meet a new person in counseling, my first step is to connect with them and listen, listen, listen.  If I stay open-minded and keep listening, the themes in what they are telling me will jump out at me.  I don't try to intervene in the person's life until I have a clear thematic understanding of what they are going through.  Similarly, I want to connect with the market I'm trading and listen, listen, listen to all going on within and around my market.  That requires a focused, quiet mind--and most of all a curious, interested mind.  We achieve quiet confidence when we achieve understanding and we achieve understanding by listening and listening for the themes connecting markets and time frames.  Our optimal mindset is curious, interested, and focused.  If we spend too much time looking for trades, we stop listening to markets and that leads to frustration.  How we approach markets shapes our trading psychology, not just the reverse.  

By transforming our trading, we can transform our trading psychology.

So much effort goes into trying to predict what markets will do next.  Confidence, however, comes from understanding.  When we understand what is going on in markets, the right trades come to us.

In a recent video for SMB Capital, I explained how the perspectives of active investors--such as those managing capital at hedge funds--can benefit short-term traders.  This is because portfolio managers don't just look for trades:  they identify themes that connect a variety of markets.  A good example of this can be found in my recent post, which tracks recent moves in the U.S. dollar, U.S. interest rates, the U.S. and overseas stock markets, and commodities.  There are themes underlying these moves (such as the potential impact of tariffs), which show up as relative strength in certain stock market sectors (such as the growth areas of technology) and relative weakness in other sectors (such as interest-rate sensitive shares).  When we can step back and see the themes connecting movements among markets, it becomes easier to participate in significant market developments, such as the weakness in stock and bond prices on Friday.

Much of what we call "overtrading" occurs when we don't step back and achieve understanding and instead react to every market move that catches our eye.  There can be no quiet confidence when we overtrade and when we are more interested in finding trades than in understanding market behavior.  An experienced psychologist knows that people don't have dozens of problems; they typically have just one or two issues that show up in dozens of areas of life.  Once we can step back and see the themes connecting our life challenges, we open the door to responding to old challenges in new, constructive ways.  So it is in trading.  When we stand back from the moment-to-moment ups and downs of markets and perceive the themes driving the trading from large institutional participants, we place ourselves in a fresh position to ride those waves.

Success in markets comes from turning themes into solid risk/reward trades.  Confidence comes from seeing a bigger picture and knowing how to turn that into short-term opportunity.

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What in the World is Going On

 

1/7/25 - Just a quick addition to the below post:  If you take a look at the popular equity ETFs in U.S. industries on the Barchart site, you can quickly see strength and weakness among sectors of the market.  Notice that yesterday was generally seen as a strong day in the market, but strength was focused on technology and communications stocks--two important areas of growth.  The value areas, such as consumer staples, were actually down on the day, as were the interest rate sensitive areas, such as utilities and real estate (see below).  Trading success hinges on quickly identifying whether we are in trending or rotational markets.  Is money flowing in or out of stocks, or is money flowing from certain areas of the market and into others?  In the rotational markets especially, what we trade is just as important as when and how we trade.  We can work on timing all we want, but if we're trading the wrong things, our returns will be suboptimal at best--

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This post will summarize what is happening across financial markets and economies--what is sometimes called the "macro" picture--and explain how that understanding can help our short-term trading. 

I've begun work with new portfolio management (PM) teams at hedge funds, and I have been impressed by the unique research undertaken by each team.  One thing that makes these teams distinctive is that they first seek to understand what in the world is going on and only then do they explore trades that might provide them with good reward relative to risk to exploit this understanding.  Because they are driven by intellectual curiosity and the desire to understand, they are not following every tick in the market and they are not going on tilt, trading on FOMO, and experiencing all the common problems we hear about.  When PM teams meet with someone like me, it's to expand their understanding, improve their teamwork, and translate conviction about what's happening in the world into portfolios of trades that best leverage their distinctive strengths.

In my upcoming book, Positive Trading Psychology, I explain how a knowledge of short-term trading can help active investors achieve better reward relative to risk for their trades.  I also explain how an understanding of macroeconomic fundamentals can help short-term traders identify unique areas of opportunity and align their trades with bigger picture trends.  It is when we blend the tactical identification of opportunity (our fast-thinking, pattern recognition skills) with the deeper, strategic thinking that provides us with an understanding of market trends and patterns that we achieve the positive mindset that accompanies a sense of mastery.  Optimal trading psychology comes from understanding, and understanding comes from preparation.  Notice how the relationship among preparation, mastery, and mindset occurs in every performance field, from sports to chess to professional dance.

OK, so what is going on in the world?  Here are a few observations from macro markets, with a shoutout to Barchart.com, which provides a wealth of data (found in the following links) regarding performance across asset classes and regions of the world:

1)  The US Dollar is outperforming other currencies:  Note the uptrend in DXY since early October.  During that same period, note the relative weakness of the Japanese Yen, the Canadian Dollar, and the Australian Dollar, and the relative strength of the US Dollar to the Chinese Yuan.

2)  The yield curve has been steepening:  Remember how, not so long ago, we were talking about inverted yield curves and forecasts of recession?  No longer.  Since September, long-term fixed income prices have fallen more than medium-term fixed income prices and both have fallen more than short-term fixed income prices.  That means that interest rates are rising as we go out on the curve.  Note that high-yield bonds have performed relatively well.  We don't seem to be anticipating defaults in the fixed income world.

3)  Many commodities have weakened:  The commodity index is down since early October, with notable weakness in metals and mining, agribusiness, and the shares of raw materials companies.   

4)  US stocks have outperformed overseas averages: Note the relative underperformance of European shares since late September and, indeed, in the relative underperformance of non-US stocks in general.  Shares in China have held up better than shares in Australia, South Korea, and Brazil. 

5)  Performance among US stock sectors has been very mixed:  We've seen relative strength in NASDAQ shares and Consumer Discretionary stocks.  Growth shares have outperformed value stocks lately and small cap shares have recently underperformed the overall market.  Note the particular weakness in interest-rate sensitive sectors, such as real estate and utilities, as well as raw materials and healthcare.  We hit a peak in stocks making fresh new annual highs on November 6th and, since December 10th, the number of stocks making fresh one month lows have exceeded the number of monthly highs every single day and the number of shares registering three month lows have exceeded the number of three month highs almost every day.  Only 6.45% of real estate stocks are trading above their 20-day moving averages as of this past Friday and only 7.14% of raw materials shares.  By comparison, despite the recent correction, over 30% of technology stocks are above their 20-day averages.  

Conclusion:  The bottom line is that performance in financial markets has become narrower and narrower.  Rising long-term rates in the US, falling commodities, and weak overseas equity markets speak to the potential impacts of economic policies that seek to place America first.  The prospect of broader trade wars and diminished trade due to possible retaliatory tariffs weigh on many segments of equity markets.  Trading success has hinged on identifying the relative winners and losers in the emerging financial landscape.  Short-term traders should be alert to the patterns of relative strength and weakness.  

So far, in the big picture, strength is relatively concentrated in the US (US dollar; US stocks) and, within the US, strength is relatively concentrated in growth segments of the market.  A Goldman Sachs report observes that concentration of value among US stocks is at historic highs.  They observe that we have only seen similar levels of concentration prior to the Great Depression, at the peak of the dot-com bubble, and during the early 1970s.  Right now, themes of relative strength and weakness dominate the macro investing landscape.  It will be important to watch the segments of greatest strength to see if this period also turns out to be a bubble that bursts, perhaps as the  stagflationary result of tariff wars fueling inflation and restraining growth.

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Wrapping Up 2024 and Preparing for the New Year

 

1/3/2025 - A wise friend once said to me, "Love never dies; it has to be killed".  We don't lose our love for markets and trading; we have to kill that love by attempting to trade in ways that don't genuinely draw upon our greatest strengths, talents, and skills.  One strength that brought me to psychology is the ability to listen to people over time, relate to them, identify what they're going through, and help them craft strategies for change.  If I had to conduct an entire therapy in 30 minutes, I would quickly lose my love for psychology.  It would be a frantic process, devoid of the fulfillment of truly getting to know someone and make a positive difference in their life.  Similarly, I've found that my talent in trading is listening to markets over time, discerning themes, and participating in those once I have a solid understanding of what is going on.  If I attempt to conduct trading on a scalping basis, coming up with trades every few minutes, trading no longer becomes an expression of who I am.  My love for trading doesn't die; by attempting to be someone I'm not, I've managed to kill that love.  Lots of gurus out there; it's great to learn from them.  Ultimately, however, we have to synthesize what we learn from mentors with who we truly are.  The challenge is to figure out how to be the best version of you.  Whatever is going to make you very successful in trading will draw upon what has made you successful in other areas of life.  That's an important lesson for development in the new year--

12/31/2024 - To stay fresh and opportunity-focused in markets, it's important to always learn and do new things that sharpen your craft.  When we continually grow in our trading, there's an ever-present learning P/L, fueled by the excitement of discovery.

In coming posts, I'll elaborate on an approach to trading that I'll be refining in 2025.  The approach makes use of charts, where each bar represents a given amount of volume.  I typically look at four "time frames" simultaneously:  high frequency, short-term, medium-term, and longer-term.  The high frequency chart might draw bars every few hundred shares or contracts traded; the longer-term chart might capture bars of tens of thousands of shares.

Once you have displays of volume bars, interesting questions emerge:  What does it mean when the range of the bars expands or contracts?  What does it mean when bars open at their high or low and close at their opposite extreme?  What does it mean when the volume bars form a tight/narrow range?  My observation is that, when we view markets with volume-based bars on multiple scales, we can capture the real-time unfolding of supply and demand.  Instead of simply trading chart patterns, we can look within and across patterns to identify when bulls and bears are in control and when they are in balance.

The goal of such an approach is understanding: flowing with evolving market activity, not locking ourselves into fixed views.  Over time, it becomes clear that volume bars behave a certain way when the market is topping or bottoming, when it is trending, etc.  The patterns derive their significance across the multiple time horizons.  

In the new year, may you always innovate, always expand your understanding!

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How will you make 2025 a new beginning?

How will you track your performance in 2025 to ensure that the new beginning is truly powerful?

What will challenge and excite you in the new year to bring out your best efforts?

Too many New Years begin with lofty resolutions that quickly fade away as the days pass.  How will you keep your vision alive so that each day, each week, each month is a new beginning?

There is much more to change than setting goals.  

We become what we consistently do.

What we focus upon grows.

What will you do consistently in 2025?  What will be your focus?

Happy New Year--

Brett

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The Most Important Lesson in Trading Psychology

 

12/26/24 - To change a behavior, anchor that behavior to a distinctive state of mind and body.  For example, let's say I want to work on sizing up my positions by a fixed percentage.  During my workout before trading, while I'm lifting weights and jogging, I mentally rehearse the mindset of getting bigger.  I focus on the feeling of fitness and how I'm making my trading more fit.  When the market opens, I immerse myself in the thoughts and feelings of fitness and mentally lift the weights of my trading size.  Over time, the link between my physically fit mindset and my trading mindset grows stronger, creating new pathways in my mind and in my behavior.  This is but one example of how we can catalyze change by shifting our state of mind.  

12/24/24 - Albert Einstein famously observed that "We cannot solve our problems with the same thinking we used when we created them".  In other words, to solve a problem, we have to remove ourselves from the box that created the problem in the first place.  "Thinking outside the box" is the hallmark of creativity.  A parallel psychological principle is that we cannot solve our personal problems in the same state of consciousness that gave rise to the problems in the first place.  Our states of mind and body constrain what we perceive and how we process what we perceive.  All lasting psychological change occurs in unique, enhanced states of mind and body.  This is creativity of consciousness.  A major limitation of our trading psychology is that we try to change what we do but never escape the mindset that gave rise to our problems.  My next post will describe how we can reprogram mind and body to create new ways of thinking, feeling, and acting.       

We all know about the old joke where we tell someone to try as hard as they can to not think about a pink elephant.  Of course, the harder they try, the more the image of the pink elephant intrudes in their consciousness.  What we focus on grows.  What we think about expands.  What we dwell upon shapes our destiny.  That's the lesson from Robin Sharma.

So why, then, do we focus our attention on our trading problems, our trading mistakes, and our most negative trading patterns?  Much of trading psychology is telling traders to not think about pink elephants.

Each of us has unique strengths.  Each of us finds our greatest potential as traders by leveraging our talents and building skills around those.  What if we simply focused on what we understand, what we do well, what makes sense to us?  What if we're meant to break down, in exquisite detail, what we do during our best trades?  

What we focus on grows.  When we focus on our successes, our successes can expand and shape our destiny.  Without that positive focus, can we truly hope to grow as risk-takers?

Further Reading:

Mastering the Positive Psychology of Trading

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The Psychology of Handling Large Drawdowns

 

12/19/24 - Yesterday's massive drop in the stock market in the wake of the Fed news taught an important trading psychology lesson.  Earlier in this post, I discussed replacing frustration with focus.  By mentally rehearsing drawdowns in a calm, focused state, we can normalize inevitable losses.  But the lesson from yesterday was different.  We want to replace uncertainty with understanding.  What happened following the Fed news?  Relative volume in stocks exploded:  the volume each time period was *much* greater than the average volume for the same period.  At the same time, the NYSE TICK completely changed its distribution of readings, consistently hitting very negative levels.  When we put these two observations together, we can appreciate that large market participants were bailing out of stocks.  Only aggressive selling of baskets of shares could account for such negative TICK and such high volume.  

Why was this happening?  Yes, investors were disappointed in the limited outlook for rate cuts, but just as important, they were locking in their gains for the year.  With only a couple of weeks left to go, money managers who are compensated on their annual returns can't afford to sit through a drawdown.  Once we see what was happening, we could entertain the idea that we would see a trend move lower:  the selling was pronounced.  Uncertainty is replaced with understanding.  We don't just trade better because we reach a better mindset; we achieve a positive psychology by understanding what is happening in markets and turning fear into opportunity.  

12/18/24 - A TraderFeed reader asks a question about fear of losing money and how it's affecting his trading.  A great book on this topic is Best Loser Wins by Tom Hougaard.  He explains how planning for (inevitable) losses normalizes them in our experience and gives us control over the downside.  Another good book in this regard is Mastering the Mental Game of Trading by Steven Goldstein.  He highlights the importance of "letting go" of the outcomes of trades and instead focusing on the processes of sound trading.  When we set stop losses, we can mentally rehearse them while we're in a calm, focused state and literally train ourselves to take the emotion out of drawdowns.  This exposure method can be practiced as part of our daily routines, making losses expected and thus less threatening.  

Every successful trader is passionate about making money and even more passionate about protecting their money.  When you read the interviews of the great traders in Market Wizards, you find that many of them started their careers with a passion to make money, then lost significant capital, and only then recognized the importance of managing their losses and taking the right bets.  

Recently, I've received a number of emails asking me about how to handle large drawdowns.  Of course, the answer is to limit drawdowns in the first place:  with prudent stop losses, by keeping bet sizes reasonable to weather inevitable losing streaks.  But if you have already gone through a large loss, how do you move forward as a trader?

Here are three steps you need to take:

1)  Treat financial losses as emotional losses - If you've drawn down significantly, a piece of your dream has flown out the window.  Lose 20% of your capital, and you need to make 25% on the remainder simply to break even.  Lose 50% and now you need to double the remaining capital just to get back to even.  A big loss of money is like a big loss of a relationship.  Research in psychology tells us that the best way to get through those painful losses is to give ourselves time to express our emotions and seek social/emotional support.  We heal more quickly when we go through a grieving process and especially when we are in the company of people who understand us and care about us.  Put trading aside temporarily and make time for healing.

2)  Let yourself feel the suck - It's tempting to want to put losses out of our minds and get back to normal.  But that doesn't help us learn from the losses.  It is the pain of drawdown that gets you to hit bottom and find the determination to never let that happen again.  The only way the drawdown will be worthwhile is if it transforms you.  The only way it will transform you is if the pain of the loss is so great that you will return to markets a new person, dedicated to managing P/L and making risk-taking sustainable.  Hitting bottom can be the first step in rising up.  The losses will only be worthwhile if they're an investment in making you better.

3)  Return slowly - Small capital, small bets:  crawl, walk, run.  You're learning a whole new game of money management and risk control.  Your first priority when you return to trading is to trade with consistency and to follow prudent rules for sizing positions and limiting losses per trade.  In my own trading, I want to make sure that I can easily handle five consecutive losing trades.  I know that, if I trade regularly and actively, such a losing streak will eventually occur due to pure chance.  Start small, get consistent, slowly grow the risk taking, get consistent at the new level of risk, then bump up again, etc.  When you hit a pothole in your trading due to changing markets, hold risk levels down until you figure out the new market patterns.  

The first step in winning the game is staying in the game.  

Losses are only a total loss if they don't make us better.

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Further Reading:

Three Best Practices for Dealing With Drawdowns

The One Question to Ask When You're in Drawdown

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Three Challenging Questions For Traders

 

12/12/24 - All good work on improving ourselves increases our capacity to sustain work on ourselves.  Just as in a gym, our workouts build our ability to sustain work:  when we grow our trading, we grow ourselves, and that is growth of our free will:  our capacity to grow.

12/11/24 - Here is a formula for making positive changes going into the new year:  Think big, implement small.  What that means is that it's important to have a vision and mission that inspires and energizes you, but it's equally important to implement that vision with concrete activities, goals, and plans every single day.  Add one positive action to your routine each day that implements your big picture vision.  Incorporate that new action every single day in the same way for a month and then add another positive action in the same way.  Step by step, you move toward your ideal.  Change requires inspiration; change requires consistency.  What you do shapes your mindset.  Each day, be a little more of the person you're ultimately meant to be.

As we get to the end of the year and you review your performance, here are three tough questions to ask yourself (and answer!):

1)  If a basketball or football team prepared for its next opponent with the intensity and thoroughness that I bring to my daily preparation for trading, how well would they do?

2)  If I entered an elevator and saw a famous venture capitalist riding with me, what pitch would I make for my trading business and how likely would it be that he/she would invest in my trading?

3)  What have I been truly successful at prior to my trading career and how, specifically, do I leverage that talent in my current trading to achieve positive and unique returns?

Mindset will never, by itself, make you a successful trader.  What you do to pursue your distinctive trading success  empowers your mindset.

Further Reading:

Three Questions to Ask About Your Positive Trading Psychology

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Our Losses Are Our Lessons

 

12/6/24 - This video from SMB is one of the best I've watched in quite a while.  It highlights the psychology of winning:  how traders responded to a big trading day.  How we respond to losing makes us good; how we respond to winning can make us great.  It's important to be happy with success; it's equally important to not be satisfied with success.

12/4/24 - Yes, our losses can be lessons that guide our improvement, but our wins are also our windows on what we do well.  Yesterday I had a good trade, selling morning inability to move higher in ES and covering when the selling pressure, as measured in NYSE TICK, could not push stocks lower.  It wasn't a big trade in the size of the move, but it was a window onto what I do well in reading the market.  What was particularly encouraging was that I didn't let my bigger picture view (see below) interfere with the proper management of the trade.  Our wins are windows onto our distinctive talents and skills...when I trade well, I clear my mind and listen to the market the way I listen to a person I'm helping as a psychologist.  Very important lesson:  we're successful in markets when we're doing what makes us successful in other areas of life.    

12/2/24 - Here's a great real time example of how a process orientation to trading can also provide a positive trading psychology:  My breadth research, tracking the percentage of all NYSE stocks over various moving averages since 2006, shows that over 75% of stocks are trading above their short, medium, and longer-term moving averages.  When this has happened in the past, returns 10-20 days out have been subnormal.  I then examined the historical periods most similar to the current one in terms of breadth and volatility and two periods stood out:  early 2018 and early 2007.  Both led to intermediate-term corrections, but not outright bear markets.  Such research provides hypotheses grounded in history--not absolute conclusions.  Now, however, the hunt is on.  I will be looking for evidence to see if the historical pattern is playing out in real time or if this time is truly different.  Either way, there could be a good trade out there and, either way, the hunt for opportunity will keep me in an opportunity-focused mindset.  Good quantitative analysis feeds the brain, but also nurtures a positive trading psychology. 

I'm pleased to announce that the manuscript for my next trading psychology book, tentatively titled Positive Trading Psychology, has been completed and sent to the publisher.  It represents an important paradigm shift, taking trading psychology beyond the usual focus on the challenges facing market noobs and instead identifying the best practices of successful traders.  In the new year, TraderFeed will track my own trading and ways in which I'm applying the lessons of positive psychology.  

To maintain our optimal mindset, every trading day must be a win--either in terms of P/L, in terms of ideas generated and opportunities created, or in terms of lessons learned and applied going forward.  Nothing is more important in your daily and weekly reviews than identifying what you've done that will make you better going forward.  We achieve our best performance when we are enthusiastic about what we are doing.  The best traders are the ones that are always learning, always growing, always trying new things, always adapting to changing markets, always discovering new opportunities.

We can't make money every day, but every day we can be entrepreneurs building our trading businesses.  A growth mindset fuels our trading growth.  When we surround ourselves with other trading entrepreneurs, enthusiasm becomes contagious and we find ourselves with the energy to focus harder and longer, dig deeper, and work harder to exploit opportunities.  

Further Reading:

Mastering the Positive Psychology of Trading

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Mentoring: The Key to Developing as a Trader

 

11/24/24:  When I first learned trading, the single most effective learning strategy I found was printing out charts of the market I was trading (S&P futures) on different time frames, charts of other stock indexes on those time frames, and a core set of indicators (RSI, NYSE TICK, VWAP lines, etc) on those time frames.  Every day, I identified the "trade of the day" and studied how it set up on the different time frames and how it set up on the various indicators.  I also studied how to best enter the trade, where to set a stop, when/where to take profits/add to the position, etc.  I literally did this for the better part of a year before going live with meaningful size.  By that time, the patterns were ingrained in my mind and a natural part of how I viewed the market.  I didn't fully appreciate it at the time, but I was also training myself to maintain an opportunity mindset and a positive psychology.  We can train ourselves to think big.    

11/21/24:  Here are two keys to successfully mentoring ourselves:

1) Process market activity and trading ideas in multiple ways in great detail:  talk them aloud, write them down, chart them, discuss them with others and listen to their reactions.  What we process many times in many ways, we are much more likely to internalize.  We mentor ourselves by guiding our own processes of preview, performance, and review.

2) Put energy and enthusiasm into the learning process: highlight the details that point to opportunity, focus on identifying and learning from what we've done well, treat mistakes as fuel for growth and learning.  The most positive development occurs in a positive mindset.

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I'm in the process of finishing my next book, tentatively titled Positive Trading Psychology.  The last chapter has been the most fun to write, because I've learned the most in writing it.  Nine mentors who work at SMB Capital submitted their best mentoring practices to be included in the text.  Even though I've worked with all of these mentors/traders personally, I found their ideas to be eye-opening.  Here are a few important lessons for developing traders that will be covered in detail in the book:

1) Seek Training, Not Just Education - Education is necessary for professional development and elite performance, but it is not sufficient.  Medical students begin their studies in the classroom, learning anatomy, physiology, etc, but they learn the practice of medicine by observing and helping senior students, interns, residents, and attending physicians.  Coursework and webinars cannot substitute for real-time experience under the guidance of a mentor.  The mantra in medical education is "see one, do one, teach one".  We develop expertise by observing masters at work, by tackling performance under supervision and guidance, and finally by cementing our skills by teaching others.

2)  Learn From Multiple Mentors - We begin by copying a master; we develop our own styles by absorbing the skills of multiple masters.  Copying the master brings us to a level of competence.  Synthesizing the learning from multiple mentors develops our own styles and brings us to a level of mastery.  Teaching others cements our learning and transforms mastery into expertise.  Too often, traders seek answers in a single video, podcast, or course.  Expertise comes from finding and cementing our answers, not by mimicking others.  There are no short cuts in the development of elite performance.

3)  The Best Learning Instills Optimal Trading Psychology - A mentor is not just someone who teaches you where to buy and sell.  An effective mentor models how to think about and pursue opportunity: how to blend risk prudence and reward maximization.  In teaching trading process, mentors inevitably model trading mindset.  We most effectively learn trading psychology in our pursuit of sound trading.  Great mentoring builds a positive trading psychology, as it establishes a sense of understanding and mastery.  We internalize optimal trading psychology when we ground ourselves in optimal trading process.

Most of all, the SMB mentors have taught me that the best teachers are always learning from their students.  The effective mentor-student relationship creates teamwork.  Mentors learn from the research and practice of their students just as the students learn from the instruction and guidance of mentors.  Great mentoring forms great teamwork, making everyone better--

Further Reading:

Three Questions to Ask About Any Market

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Becoming Solution-Focused in Our Trading

 

Added Note:  11/18/24:  Quite a few of the senior traders/mentors at SMB Capital are contributing best practices to my upcoming book.  What has become clear is that they don't just teach setups and risk management; they actually do those things with the developing traders on the trading floor.  One mentor described forming joint accounts with the developing traders, so that learning occurs in real time, with real money on the line for both teacher and student.  Notice how this is powerfully different from simply teaching trading techniques in live or online classes.  We learn trading solutions by seeing them applied--again and again--in real time with immediate feedback.  How we learn trading shapes our trading psychology.  

Additional Note:  11/13/24:  We can't be solution-focused in our trading if we're living our lives in problem-focused mode.  A solution-focused life means that we identify--every single day--what specific things we're doing to bring us energy, fulfillment, and success.  Working on our trading is fruitless if we're not working on ourselves.  Here's an article with links to assess our overall well-being and improve our positive psychology.  The goal is to maximize our happiness, life satisfaction, energy, and relationships.  If we are living full and fulfilling lives, we can readily handle the ups and downs of markets and trading performance.

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We give energy to what we focus on.

If we focus on negative outcomes, we energize our worries and fears.

If we focus on problems, we fuel our sense of being broken.

What is in your trading journal?  What is in your thoughts after a losing trade?

That is what you are energizing.

This is why it is so very important to focus on your best trading and learn from your successes.

When your trading problems are *not* occurring, that is often when you are doing something right.

Once you focus on what you're doing right, you become solution-focused.

Success follows when we identify our solutions and turn them into habits.

Suppose you identified one thing each day that you did well in your trading and made it a goal to repeat and extend the next day?

What we focus on each day compounds and becomes our reality.

No solution-focused trader has ever gone on tilt.

When we are solution-focused, we grow the best within us.

Further Reading:

Solution-Focused Trading

Keys to Solution-Focused Trading

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Trading Without Drama

 

Added comment (11/7/24):  In a video just posted, Jeff Holden and I teach a class for the SMB Training Program and address how to avoid trading on tilt.  Tilt always has a trigger.  If we rehearse trigger situations while placing ourselves in states of optimal focus, we defuse our negative triggers.  If we rehearse our A+ setups while placing ourselves in states of optimal focus, we create positive triggers.    

Additional note below:

What if we're looking for the wrong thing in our trading?

What if we're looking for "catalysts" and "breakouts" and bursts of volume and volatility, because that's where the action can be found?

What if, instead, we filtered our search for instruments that were trading in the most stable manner, following relatively unchanging trends and cycles?  

In that case, we would trade, not what moves the most, but what moves the most coherently and consistently.  We wouldn't be predicting in the face of uncertainty; we would be identifying in the face of stability.

If we trade the opportunities that are most predictable with the least drama, how might that impact our trading psychology?

Might our trade selection shape our trading psychology?

Perhaps logic starts where drama ends--

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Additional note - 11/5/24:  Notice something subtle.  Many traders attempt to use technical analysis tool for predictive purposes.  If we're trying to identify markets that are trading in regular, stable patterns, then the tools of technical analysis can be used to describe those patterns and help us align with those.  To the degree that the patterns indeed remain stable, that would bring some predictive benefit.  The main purpose of the technical tools, however, would be for trade idea generation, capturing the degree to which recent price action has followed stable cycles and trends (and, of course, cycles within trends).  

When I create charts where the bars are defined by volume traded, not time, this helps normalize the market's time series and makes it easier to use technical tools to identify stable patterns.  (Here's an interesting example from a few years ago; here's a relevant earlier post).  It's particularly enlightening when we can identify stable patterns over multiple time frames, aligning our ideas, an idea that Brian Shannon has emphasized in his work.

Further Reading:

A Framework for Trading and Trading Psychology

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