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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New Techniques For Improving Trading Psychology

 

3/5/2026 - The 48 positive emotional experiences listed in yesterday's post (below) create a checklist both for your daily experience and for your trading experience.  The idea here is the reverse of what traders typically do with their journaling.  Instead of writing down all your mistakes and negative experiences, write down your best trading decisions and most productive experiences and then identify, from the list of 48, which emotions accompanied your productivity.  If you do this over a period of time, you'll notice a pattern in the positive emotions that contribute to your best ideas and best actions.  

For instance, your market experience that is accompanied by inspiration and curiosity and also by a sense of serenity and calm may mark the generation of your most profitable trade ideas.  Conversely, when you're trading out of stress and fear of missing opportunities, that could mark your worst trading.

Once you know your best patterns, you can set up routines/processes that draw upon these emotional experiences.  Instead of only combating the negative, we are looking to understand ourselves and build our positives.

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3/4/2026 - What are the positive emotions that lead to enhanced overall wellness and to peak performance?  If we can track our positive emotions--and what helps generate them--then we become able to trade at our best.  Craske and colleagues offer a "positive emotions dial" that actually is a system for "diagnosing" our optimal experience.  Here are the categories on their dial:

Optimism:  Hopefulness, Positivity, Encouragement

Exuberance:  Vivacity, Liveliness, Animation

Serenity:  Peacefulness, Calm, Relaxation

Gratitude:  Thankfulness, Appreciation, Contentment

Euphoria:  Joyfulness, Merriment, Cheerfulness

Love:  Affection, Compassion, Empathy

Zeal:  Passion, Determination, Motivation

Delight:  Enjoyment, Amusement, Pleasure

Fulfillment:  Honor, Pride, Confidence

Exhilaration:  Excitement, Enthusiasm, Eagerness

Inspiration:  Fascination, Interest, Curiosity

Elation:  Happiness, Pleasure, Satisfaction

Please pay close attention:  Here is the foundation for an entirely fresh approach to trading psychology.  Study your best trades and your best trading periods and identify where you stand on the above dimensions at those times.  That includes what you're experiencing in your personal life and during your trading.  What is the positive context that drives your greatest successes?  Those are the emotional experiences that you want to cultivate, day to day and week to week.

What if we've had it wrong all this time?  What is combatting our most negative thoughts, feelings, and actions is *not* the way to win at trading?  What if we've been ignorant of what drives our success all along and simply need to do more of what makes us our best selves?  

No amount of fighting losing will bring us what we need for winning.

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3/3/2026 - In the Positive Trading Psychology book (p. 132), I cite reviews of research that conclude "that happiness contributes to our work success and the quality of our relationships contributes to our happiness".  I point out that "The challenge for our trading processes is to create happiness habits that keep us energized, inspired, and fulfilled, so that the power of repetition can not only help us undo our negative patterns, but instill new, positive ones.  For the peak performer, every day should be practice in building happiness habits".

Negative thinking and self-blaming can be thought of as unhappiness habits.  Happiness habits are ones that energize us physically, that make us feel appreciation and gratitude, and that focus on opportunity.  It is not enough to avoid the negatives; we want to build the cognitive, emotional, and physical positives that keep us at our peak.  As I discuss a bit later in the book, we not only have triggers for our worst thoughts and actions, but also positive triggers that cue us to act upon opportunity.  One of my positive triggers is a brisk walk each morning to start my day after feeding the cats.  It is during that walk that I engage in prayer and meditation, voicing my thanks for the day, for my family, and for the challenges that help me grow.  The goal is to start the day invigorated and inspired--and then to carry those experiences forward throughout the day.  

When we make happiness a habit, we are much less likely to fall into the negative emotional traps experienced by traders.

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3/2/2026 - An important insight from recent research in psychology is that it takes emotion to change emotion.  Simply talking about problems or writing about them in a journal does not truly help us internalize solutions.  In emotion-focused therapy (EFT), couples work on their problems by giving voice to the positive feelings that typically underlie the negative reactions that bring them for help in the first place.  For example, members of a couple might distance from each other and grow further and further apart.  In EFT, they learn to express the feelings of hurt and disappointment that lie behind the distancing--and the desire for love, closeness, and acceptance beneath their pain.  In expressing these feelings constructively (with the therapist's help), the couple regains a sense of openness and connection.

For traders, reactions of anger, frustration, and revenge trading mask their disappointment over their results and their positive desire to find and act upon opportunity.  When the trading coach points out that occasions of frustration are occurring at points where markets are acting in unexpected ways and that many other traders are likely to be fooled by this unexpected market action, the trader is then able to view the period of frustration as a potential period of opportunity.  This enables them to replace the negative emotions that can lead to tilt trading with the positive curiosity of digging into market action and detecting new patterns.  

Traders do not talk themselves out of tilt.  The trader learns to replace the negative emotions of tilt with the positive emotions that accompany best trading practices.  Once the trader recognizes that frustration occurs when new and different things are happening in the market, it becomes possible to step back, identify the fresh opportunity, and return to successful trading and a successful mindset.

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3/1/2026 - With the bombing of Iran over the weekend, the death of the Iranian leader, and subsequent retaliation, we have the prospect of markets in turmoil this week.  A spike in oil prices, a flight away from risk (stocks), and a move toward the safety of fixed income instruments (bonds) are expected.  With VIX already hovering in the 20 region, we can expect a meaningful degree of volatility in the near term.

Here is a great opportunity to work on our trading psychology.  The game has changed for the time being.  New participants may enter the market (keep an eye on volume), reflecting the need of money managers to limit their downside.  Too, it is not clear that this will be very temporary.  China receives a large amount of their oil from Iran and surrounding countries and would be quite impacted by any disruption of the Straits of Hormuz.  Russia has already made it clear that it will be more willing to act unilaterally in the face of this action by the U.S. and Israel.  In short, we will have more (and different) market participation and more uncertainty and volatility.

The worst thing traders can do is blindly go forward, trading the same themes and chart patterns that have guided them recently.  A valuable technique employed by psychologists is exposure work, in which we face stresses through imagery work and mentally rehearse our coping.  Doing that again and again helps prepare us for actual stressful events, because we've already prepared ourselves and activated our responses to challenge.  This same approach can be very helpful in a new and volatile market environment.  We can observe and observe and see how markets are trading and note the patterns that are appearing.  We can mentally rehearse trading those patterns and make the unfamiliar more familiar.  The key to the success of this method is giving ourselves the time and space to observe the new market conditions and figure out how we can best trade them.  

By itself, market movement is not opportunity.  It only becomes opportunity when we are prepared and understand the movement.  Exposing ourselves again and again to various scenarios prepares our psychology as well as our trading.

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2/27/2026 - An important body of research suggests that our lives are not disrupted by an excess of stress, but by our lack of balance between stress and well-being.  When we have many things in our lives providing happiness, fulfillment, and closeness with others, we can tolerate very high levels of stress and emotional demand.  It's when that balance is disrupted that our stress becomes distress.

In their recent summary of research, Craske et al outline a number of "positive affect treatments" that combat depression and anxiety.  Their research finds that techniques that enhance our positive experience are more effective in improving mood and functioning than techniques designed to reduce negative states.  Among the techniques they employ are methods for enhancing loving-kindness, gratitude, generosity, and appreciative joy.  Notice that we can think of these methods as ways of growing our spiritual strengths.  

The implications of this line of research are profound.  It may well be that the ups and downs of market performance and the stresses we feel as a result are only problems if we don't have sufficient positive emotional experience in our lives.  By literally exercising our capacities for joy, gratitude, love, and giving, we create buffers for all of life's stresses--and we become better people in the process!

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2/26/2025 - Well, the new book is finally available!  The subtitle says it all:  Turning personal strengths into trading strengths.  The big challenge for developing traders is figuring out what they do well and then leveraging that in their trading processes.  Yes, it's important to avoid trading on tilt, fear, greed, etc.  Doing less of the negative, however, will not achieve positives.  The important perspective that the book discusses is that your trading success will draw upon the same strengths that have created your life's successes to this point.  Think of your greatest accomplishments, your greatest areas of mastery.  Somehow, in some way, your trading has to leverage the talents and skills behind your life's greatest achievements.  

In this series of posts, we'll look at innovations in positive psychology that can improve our trading psychology and our trading practice.  The solution focus is one of the most basic innovations, where we turn our attention to situations in which our problems are not occurring.  We don't always trade with poor discipline.  We don't always trade emotionally.  What are we doing when we are disciplined and level-headed?  Is there something we're doing that we're not aware of that actually is the solution to our problems?  Many, many times, our best practices are hiding in the situations where our problem patterns are not occurring.  Let's journal those exceptions!  Let's learn from what we're doing right!

In the book, I describe the learning process at SMB Capital, where newer traders operate in teams with more experienced traders.  In some teams, the experienced mentor and the developing trader will share a joint account and make decisions together:  what to trade, how to size it, how to manage the risk, etc.  Yes, this is a great practice for learning trading, but notice how it is also a great way to study successes and identify best practices.  If everyone you team up with shares just one thing each day that they did well and breaks it down to show how they did it, imagine the acceleration of learning and development that would occur!  Even if you use a trading community to find just one trading buddy, that could greatly expand the development of your trading strengths.

Studying the one or two or three great trades you placed in the last week helps you internalize the ingredients of your success, but more importantly helps you internalize a sense for your own greatness.

How Can New Research In Psychology Help Our Trading? - Physical Exercise

 

2/25/2026 - A major challenge for physical exercise is that it, like many things in life, can become routine.  Ideally, exercise pushes us hard enough that it becomes truly effortful, not at all comfortable and routine.  Also, when we vary exercise, we practice making efforts in multiple ways.  For instance, I alternate days of working on flexibility and strength (upper and lower body) and working on aerobic fitness and core strength.  This creates a structure for regularly challenging ourselves and pushing our limits.  

What we're really exercising is our capacity to sustain effort.  We only possess free will to the degree that we can form and sustain our intentions.  Everything we exercise strengthens our free will muscles, because we're exercising goal-oriented behavior.  As we build our intentionality, that carries over to other areas of our lives.  Recent research (cited below) finds that an ongoing program of exercise enables us to get more out of each session.  In other words, not only are we "fertilizing" the brain (see below), but we're adding more fertilizer over time.  

In my routine, I wake up at 4:15 AM; greet and feed four hungry cats; immediately go on a power walk and begin my quest for 10,000 steps daily; then work out at home or the local gym; and then engage in prayer and study before actually beginning the work day.  Exercising love.  Exercising the body.  Exercising the soul.  Every day.  

To keep going, we have to keep growing.    

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2/24/2026 - The finding that exercise leads to enhanced BDNF (brain-derived neurotrophic factor; see below) has led to research documenting the ways in which combining exercise with important cognitive activities helps us process the information from those activities more deeply and effectively.  As one example, we can combine exercise with our market preparation for the day or with our trading reviews.  The heightened brain activity created by the exercise improves our processing and makes our preparation more likely to stick.

What if it's not fear, greed, and lack of discipline that interfere with our trading, but suboptimal brain functioning?  By not working out the body, we keep our minds in more sluggish and distractible states.  I'm currently working out with a fitness organization, and the coach there routinely prescribes new exercises for me to improve my core functioning, my strength, my flexibility, etc.  I find that mastering new exercises--and exercising new body areas and functions--creates overall well-being that carries over to other areas of life.  

The ultimate workout is a workout of our willpower.  By continually challenging our limits, we become comfortable with challenge and more able to respond to the market's challenges.  By increasing our BDNF, we fertilize our ability to process market information and identify emerging opportunity and threat.  The important conclusion of recent research is that exercising the body sharpens the mind and trains us to tolerate uncertainty and challenge.

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2/23/2026 - Recent research in psychology suggests that physical exercise not only helps our mood and the clarity of our thinking, but also significantly contributes to our resilience (Smits & Otto, 2024, p. 76-78).  Resilience refers to our ability to tolerate stress and discomfort and persist in our planned activities.  It is difficult to think of anything more relevant and valuable for traders.  Indeed, we can think of the lack of "discipline" often discussed in trading psychology texts as actually a limited degree of resilience.  We need to get better at tolerating discomfort and persisting with our efforts if we are going to succeed in difficult market conditions.

There are two ways in which we can use exercise to improve our resilience during trading.  First, we can turn each exercise into an opportunity to build resilience.  That means that we make conscious efforts to push past our comfort zones and lift enough weights, run with enough speed and incline, to expand our capacities.  Every workout thus becomes a workout of our willpower.  Indeed, a training coach can help us make sure that we perform exercises the right way and also persist long enough to build our endurance and strength.

Second, we can use each routine in our workouts as an opportunity to exercise mindfulness.  Note how many people working out at a gym will listen to music on their phones while they're on the treadmill or doing calisthenics.  They are distracting themselves from the difficult experience of physical effort.  Suppose, however, they were to sustain attention throughout their routine, thus exercising their capacity for awareness at the same time that they exercise their bodies.  Our routines become training in cognitive focus under conditions of stress--quite relevant to trading.

By training ourselves to strive for goals under conditions of challenge, we become more capable of maintaining our functioning in challenging market conditions.  If we don't challenge ourselves and develop our intentionality outside of markets, can we expect to trade with free will?

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2/22/2026 - The discovery that exercise impacts the mind in ways strikingly similar to antidepressant medications (see below) is a complete game changer.  Yes, we've long known that exercise is a component of well-being and that when we have more energy, we can perceive more and accomplish more.  That is important.  We cannot get very far in life with a sluggish body.

The finding that exercise enhances the neurotransmitters serotonin, norepinephrine, and GABA (Otto & Smits, 2024) raises the possibility that we can engage in specific exercises to achieve specific improvements in our cognitive and emotional functioning.  Research finds that "Exercise also has important effects on a crucial brain-maintenance molecule known as BDNF (brain-derived neurotrophic factor).  BDNF has been called a memory molecule because it is involved in the way the brain forms memories, helping those memories to be available for guiding ongoing functioning" (p. 12).  The authors refer to BDNF as a kind of "Miracle-Gro" for the brain, fertilizing our brain's functions as we might fertilize a plant's growth.

When we exercise before an activity that involves important learning (a therapy session, a trading session, a review of trading), three benefits become evident:  "better mood, less anxiety reactivity, and enhanced memory" (p. 91).  In short, exercise helps us process information better and more deeply.  If our goal is to learn, it is best accomplished in an optimal physical state.

Work on our strength conditioning?  Work on our aerobic conditioning?  Work on our flexibility?  Our core?  What if each has a unique, distinctive impact when pursued regularly and properly?  It doesn't matter how many trades, research reports, and charts we process if we're not in our best state of mind and body.

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2/20/2026 - In this series of posts, we'll take a look at recent research in psychology and how that research might be relevant to our trading performance.  The idea is that all work on performance should be based upon objective evidence, not just practical "coaching" advice.  It turns out that recent research finds an amazing correlation between our physical fitness/conditioning and our psychology/performance.

A significant portion of the population is quite lacking in fitness.  According to research from the Centers for Disease Control, 25% of the population reports no deliberate physical exercise in the past month and fewer than 25% of adults meet recommended guidelines for strength and aerobic conditioning.  Interestingly, exercise boosts our levels of neurotransmitters, much as psychiatric medication does.  Indeed, Smits and Otto, in their review, suggest that "exercise may be conceptualized as a non-pharmacological analogue of antidepressant medication" (p. 8).

From a positive psychology perspective, exercise boosts our sense of wellness, which in turn energizes our work efforts.  The right kind of session in the gym not only exercises our strength and aerobic capacity, but also is a direct experience of goal setting and achievement.  Smits and Otto also point out that exercise benefits sleep quality, providing us with a clearer mindset and boosting our sense of resilience.

In the next post, we'll take a closer look at how we can use exercise as a psychological treatment.     

  

Best Practices For Coaching Our Own Trading

 

2/19/2026 - Note how in every performance activity--acting, music, sports, dancing--there are active practice sessions that accomplish two purposes:  they keep the performer in shape, and they rehearse the challenges that are likely to be faced during live performance.  Active coaching guides the structure of those practice sessions and provides real time feedback, so that the performer can make corrections and improve performance before everything goes live.  As the saying goes, it's not practice that makes perfect, but perfect practice that makes perfect.  The coach's job is to create perfect practice.

If we understand the importance of the above, we can appreciate why so few developing traders succeed.  They don't engage in active practice, and they don't receive real-time coaching during their practice that enables them to make changes that will carry over to market hours.  Going over P/L and making some notes in a journal is great, but it is not active practice.  No sports team would improve on the field simply by writing in journals.  

Without practice trading, our live trading becomes practice--and few can survive the toll that learning curve takes on our accounts.  The "setups" we trade don't matter if we fail to practice recognizing and acting upon them.  Successful self-coaching means guiding ourselves in practice, so that we're programmed to do the right things in real time.

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2/18/2026 - One way to coach your own trading is during review processes.  At the end of the day, week, and month, you can track what you did well and what needs improvement.  Both provide opportunities for goal setting, as you have goals to repeat and expand what you did well and goals to correct what you didn't do well.  Those goals provide a motivational focus each day as you track how well you're reaching your goals and encouraging yourself to tackle the next set of goals.  Notice that there is a motivational component to this self-coaching that is often missing in traders' reviews.  As your own coach, you are like a coach in the gym assisting a workout.  Your role is to instruct and guide, but also to encourage, push, and motivate.  A coach doesn't allow a performer to stay in their comfort zone.

I was in the gym this morning and heard someone on the mats yelling out instructions:  "Do three more!" and "Let's pick it up!"  He sounded a little like a drill sergeant, but also like a motivational coach.  "You can do it!"  When I walked over to his area, I saw that he was talking to himself!  He was exercising, but he was coaching himself while performing the exercises.  His self-coaching was in real time.

We are always talking to ourselves, including during our trading.  By making our self-talk coaching talk, we can bring our motivation and change efforts to real time.  We don't need to wait for performance review to coach our performance.

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2/17/2026 - What is the ideal team structure?  If we're going to team up with other traders, who should be part of our team and how should we structure team interactions?

As the posts below suggest, how we coach ourselves helps shape our performance.  When we reach out for teamwork--even a collaboration with one other trader--we want to select someone who meets the following criteria:  1) They have some area of experience/skill that could benefit our trading; 2) They have areas for improvement in their own trading that could benefit from our experience/skills; 3) They show the performance and leadership mindsets necessary to coach themselves and benefit from the coaching of others.

Teamwork accelerates development.  It does so because it takes your self-coaching and raises it exponentially by turning coaching into a team process.

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2/16/2026 - Quick reflection:  What emotional tone do you use with yourself when you're reviewing your trading?  Is it pretty much emotionless:  a summary of what happened, etc?  Is it a negative tone, blaming yourself for mistakes?  If a sports coach used your tone in reviewing game performance with a team, how effective would that coach be?  How often do you motivate and inspire yourself?  How often do you get fired up by what you did well?  

Most of us coach ourselves in ways that we would never coach someone in a performance field.  How we talk to ourselves shapes how we perform.

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2/15/2026 - I'm going to ask a very important question, one that is rarely addressed by traders or coaches.  

Ready?

How do you get the discipline to follow your discipline?

You have a discipline:  a process for finding trading opportunities, a process for managing the risk of positions, etc.  You also have a personal discipline around things like diet, exercise, sleep, relationships, etc.

As we all know, however, willpower is typically not sufficient for sticking to our discipline.  We can overtrade, we can fail to manage the risk of a position, we can eat too much, etc.  We have a discipline, but not the discipline to follow our discipline!

The discipline to follow our discipline comes from inspiration.  If we are energized and inspired by what we do, no one can stand in the way of our doing the right things.  If I'm an Olympic athlete, I'm inspired by the competition and the possibility of representing my country and winning a medal.  That vision keeps me performing difficult training, day after day.

So now you see:  we lack the discipline to follow our discipline because we lack a visionary goal that inspires and energizes us.  Making money is not a visionary goal.  For many of us, it simply expresses a need.  The portfolio manager I work with who uses a portion of his profits to benefit at-risk youth--and who devotes meaningful time to mentoring those youth--now has an overarching *reason* to trade well and succeed.  He is not pushed by his needs; he is pulled by a greater ideal.

So often, we don't fail because of shortcomings, but because of the absence of greatness.  If we don't think and feel greatly about our lives, how in the world are we to trade greatly?

Again, if we don't think and feel greatly about our lives, how will be sustain great trading?

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2/13/2026 - In this set of posts, we'll take a look at how traders can successfully coach themselves and accelerate their development.  A point that I made in the recent trading psychology conference was that my goal is not to become a trader's coach for life, but to teach traders tools for coaching themselves for life.  Coaching ourselves means that we need to dedicate time each day to standing apart from our trading, reviewing markets, reviewing our trading, looking for patterns in both, and learning from those.

Note the key word here:  patterns.  There are patterns to markets, and there are patterns to our trading of markets.  One exercise that I engaged in when I first learned trading--and that I have resumed recently--is identifying the one or two best trading opportunities each day in the SPX and how those could have been identified with my toolkit:  NYSE/NQ/SPX TICK; cycles based upon volume bars; moving average crossovers and divergences from moving averages/VWAP based upon volume bars; areas of volume expansion; and confirmations/divergences among different market indexes.  In the past, I did not have such an extensive toolkit, so returning to the exercise now provides fresh learning.  The goal is not just to understand the market better, but to become better as a pattern recognizer.

So what is the best practice here?  It's performance review, but directed toward the market, not toward ourselves.  We want to become better and better at finding opportunity, and we can only do that by looking at opportunity after opportunity, day after day.  Over time, we internalize the patterns that we trade.

And, by the way, patterns trend.  Patterns that show up at one point in time tend to recur:  at later times, on larger and shorter time frames, etc.  And if you do want to hire a trading coach?  Find out, with specifics, how they coach their own trading.    

The Power of Diversification

 

2/12/2026 - Take a look at a six-month chart of XLE, the SPX energy sector.  Now take a look at a six-month chart of XLB, the SPX raw materials sector.  Compare those with a six-month chart of the financial (XLF) or consumer discretionary (XLY) sector.  What we're seeing is a concentration of risk-taking among large institutions into those industries that will provide the basic materials for the AI boom.  (Note similar strength among a number of the commodities and in the commodity index DBC overall).  Other sectors of the market are not in decline, but have not been going much of anywhere for the last few months.  

This is an example of thematic diversification.  Large institutional investors base their investment decisions on themes that are supported by economic data, fundamental data within industries and companies, and by geopolitical developments.  When they detect new themes, they often will shift funds out of certain assets and sectors of the market and into others.  This thematic diversification requires active traders to track where funds are flowing, so that they can ride those waves.  By trading different themes that are gaining interest, we are most likely to exploit opportunity even in overall markets that have been relatively flat.

Diversification enables us to go where the action is.

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2/11/2026 - Here's a simple example of how developing traders can diversify their trading and adapt to shifting market conditions.  Since the summer of 2010, when I first began collecting the data, the correlation between the day's range in SPY and the VIX for that day has been .76.  Think about what that means.  To a statistically significant level, if we know how options are pricing volatility (VIX), we can anticipate the amount of directional movement within the trading day.  Moreover, the SPY volume for that day correlates quite significantly with the size of the day's trading range.  

What does that mean in practice?  As we move forward in the trading day, we can track the relative volume of the market (how the volume for each minute of trading compares with the average volume for that minute) and we can track the level and direction of VIX.  That tells us in real time whether we're likely to experience a day of big moves or a relatively narrow, choppy day.  We can then adjust our trading accordingly--but only if we have diverse trading strategies:  some that make money in momentum/breakout conditions, some that make money in reversal conditions, etc.  

Like the football or basketball team, we see how the opponent's defense is aligned and we use that information to call the trading plays most likely to work.  That can only happen if we have a diverse playbook to draw from:  different edges for different situations.  Once we develop such a playbook, the result is a sense of mastery:  a positive trading psychology.

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2/10/2026 - Diversification, as explained below, means that we treat each day, week, month, and year as a portfolio of activities that are meaningful to us and that draw upon our best characteristics.  There may be ups and downs in our relationships, in our P/L, in our health, etc., but over the entire life portfolio we are generating positivity.  Putting all of our eggs in one basket leaves us vulnerable to blowups--in markets and in life.

But we achieve diversification over the course of our lifetimes as well.  A career that is rewarding and fulfilling at one phase of life may give way to a different one as we mature.  The joy of a romantic relationship will evolve into the joy of raising a family.  I began my career as a full-time faculty member at a medical school and greatly enjoyed coordinating counseling services for the students.  Over time, as my interest in markets grew, I saw that many of the approaches to psychology that I had been teaching and applying could be very relevant to helping traders with their performance.  Still later, I began applying these methods not only to trading firms, but investment banks and large hedge funds.  What might look like a happy and successful career is actually a succession of careers.

What that means is that if we are to live diversified lives, we have to be able to let go of one set of activities to move on to others.  In a very important sense, every life activity--including trading--needs a stop level.  If we never stop out of what we're doing, we never transition to what can lie ahead.  Becoming too attached to any life activity--including trading--prevents us from finding what we're meant to be doing.  As I mentioned during our visit to Devon in Colorado, the point at which we grow old is the point at which we determine our best years are behind us.  Only when we can stop out of activities that we outgrow can we rejuvenate with fresh challenges.

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2/9/2026 - One of the greatest mistakes traders make is working on their development by focusing on their negative emotions and performance.  If you keep emphasizing everything you do wrong, you eventually internalize the sense of being a f*ck up.  Correcting errors is certainly necessary for performance improvement, but it is not sufficient.  

A major theme of the Positive Trading Psychology book that will be coming out later this month is that we grow by leveraging our strengths and finding ways to trade that draw upon the best of who we are.  Every truly successful trader I've worked with has succeeded by bringing talents and skills from previous accomplishments and adapting these to markets.  When we draw upon what we do best and what means the most to us, our efforts give energy--and that energizes our creative search for opportunity.

So how is this related to diversification?  All of us possess a portfolio of experiences, skills, and abilities.  Life success comes from drawing upon these in everything we do:  relationships, leisure activity, career efforts, trading, family life, etc.  A way of viewing this diversification is to ask:  What will make today a great success even if my P/L is down for the day?  A diversified life gives us so many ways to win that each day brings us energy and well-being.  

How we live eventually shapes how we trade.  

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2/8/2026 - Investors and active day traders achieve diversification differently.  An investor creates a portfolio of positions with positive expected return, where these positions are not highly correlated with one another.  One bet might be on economic strength in emerging markets vs. developed markets and could be expressed with a position that is long EEM and short SPX.  Another bet might be a long position in crude oil, expressing a view of economic growth/demand and weather-related demand.  Capital is divided among these different positions, so that the combination can make money even if individual views prove incorrect.  This diversification requires knowledge of multiple markets/stocks and strategies.  Its goal is not only solid absolute returns, but a smooth curve of returns buffering losses (i.e., high Sharpe ratio).

The active day trader achieves diversification by trading many instruments in a given day and trading different patterns among those instruments.  Thus, I could be long the ES futures on an anticipated morning breakout and then I could trade an individual stock short based on flows moving out of its sector and toward others.  Still another trade might be a volatility bet expressed through options by purchasing a straddle.  Diversification is achieved sequentially rather than simultaneously in a portfolio.

Understanding how diversification balances our returns helps us appreciate how diversification balances our mindset.  When we have multiple ways to adapt to ever-changing markets, we achieve a higher level of control over our returns.  One of the most common--and least appreciated--sources of emotional disruption of trading is our rigidity: our failure to adapt to shifting opportunity sets in markets.

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2/6/2026 - We get married to benefit from a concentrated investment.  We have friends, family, and colleagues to benefit from multiple investments, each of which pays off uniquely.  Together, our concentrated efforts and our diverse efforts make for a deep life and a broad and stimulating life.  

So it is within our careers.  To succeed, we typically need to concentrate on an area of expertise where we bring unique depth and value.  We also have to apply our knowledge broadly enough to ensure that we're learning from new challenges and applying our expertise as widely as possible.  

Success is a function of breadth and depth.  We need enough variety to keep life interesting and stimulating; we need enough depth to make our efforts not just successful, but meaning-full.

I've been hearing from a number of portfolio managers and traders who have benefited recently from concentrated bets in growth areas of the stock market, but who have been losing money lately.  This has shaken their confidence and will make it difficult to reengage when opportunity arises.  So much of what happens in the stock market--and across global equity, currency, and rates markets--is a rotation of assets out of one area and into others.  Notice in the US stock market how raw materials and energy shares have been strong, but tech stocks have been weak.  Just a matter of months ago, that was hardly the case!

Diversification means that we have the tools to find opportunity in multiple markets and the flexibility to deploy resources in those different areas.  When we don't just have an edge, but a set of edges that are unique (not highly correlated with one another), we create a much smoother equity curve.  Balancing the ups and downs of our returns is crucial to preserving a positive psychology.  

The more we can achieve consistency of returns, the more likely it will be that we can maintain a consistent mindset. 

How To Make Changes In Your Life

 

2/4/2026 - Because of the accumulation of painful consequences over time, most people are pretty clear about what they need to change.  They are typically less clear about how to change and often very unclear about what they need to change to.  For example, we might fully understand that we need to eliminate overtrading, but we don't necessarily have a clear, step-by-step plan for addressing the causes of overtrading and implementing those steps.  Even if they have the plan, they often don't have a clear idea about what will replace the overtrading.  The problem pattern is there because it is meeting a need.  If we don't identify that need and find a constructive way to meet it, it will eventually seep into our trading in unhelpful ways.

In the post below, we looked at the importance of following a plan--a playbook--for implementing what we're meant to be doing.  That is necessary, but for many traders it won't be sufficient.  The overtrading occurs because there is a need for stimulation--and not just any stimulation.  The trader may be craving a need to be productive and creative and is channeling those needs through (over)trading.  Giving the trader a more disciplined framework does not, in itself, meet the need for creative productivity.  In a sense, we need two kinds of playbooks:  one to combat our weaknesses; the other to implement our strengths.  

Just as much as a need to combat poor trading is the need to channel what we're good at--and what matters to us--through our trading.  The ideal trading process is one that thoroughly immerses us in the best of who we are.  It is much easier to change from what we don't want to be when we have a clear vision of what we want to become.

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2/3/2026 - The 90 in 90 framework for making changes truly stick in our lives is directly applicable to trading.  As I've emphasized in the past, whatever we do repeatedly becomes part of us.  In that sense, we're always doing 90 in 90 when we follow habit patterns.  The key to changing our trading is making habit formation intentional.

For example, suppose we study our best trades and best trading opportunities and create a set of rules for identifying these patterns, knowing where to enter positions, knowing how to size those positions, and knowing where to stop out and where to take profits.  In short, we're creating what Mike Bellafiore has called a "playbook".  Is that playbook a guide for our trading?  Of course.  But it's something more:  it's a guide for rehearsing our best trading again and again as part of deliberate practice.

Imagine using your playbook to anchor your 90 in 90 change process.  You are going to conduct 90 reviews in 90 days, tracking the opportunities that fit within your playbook and walking yourself through each step of the play.  This is a detailed review in which you literally move forward bar by bar and track what you are meant to do according to your rules.  You talk aloud each step of the trade and train yourself to operate in a way that is planned, not reactive.

90 reviews in 90 days:  that is three months of intensively training yourself to operate at your best.  Now imagine doing those reviews within a team, where each replay of each trade reinforces what the team members are doing.  One day at a time, as they say in AA.  Because after many days, what started as our goals now are part of us.

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2/2/2026 - So far, the posts have talked about what creates change:  emotional experiences in the context of relationships that reorganize how we view ourselves and what we're doing.  This is how we initiate meaningful changes in life, but typically it takes more than this to sustain the changes that we make.

This is known as the problem of relapse.  It is very easy to go back to old ways, well-worn by habit.  To make change lasting, we need to create new habits--and that typically requires repetition.  So let's say I have a powerful insight and recognize that I need to be more loving and caring in my personal relationships.  That leads me to reach out to those I care about and rebuild connections.

That initiates change, but the change will only take root if my way of conducting relationships becomes a regular part of how I interact with others.  So each visit with friends, each conversation, each family interaction becomes an opportunity to practice being the kind of person I wish to be.  Quite literally, I am training myself to implement the change that had inspired me.

In Alcoholics Anonymous, when a person is quite serious about discontinuing drinking, they are encouraged to attend 90 meetings in 90 days.  Quite simply, if we repeat something every day for three months, it becomes a new routine--a new part of us.  "Bring the body and the mind will follow" is the slogan that recognizes that we internalize what we do regularly.  Indeed, this principle occurs across areas of life.  See, for instance, how 90 days of physical training can train us for a fit mindset.

Whatever change you want to become an ongoing part of you can benefit from a 90 in 90 process.  After ninety days of living a new life, we experience ourselves as new people.  In the next post, we'll look specifically at applying these ideas to our trading.

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2/1/2026 - In the two posts below, we took a look at how painful consequences open us to new modes of thought, feeling, and action--particularly when those consequences are processed in relationships that provide the new perspectives.  There is, however, another mode in which emotion catalyzes lasting life change:  powerful positive emotional experience, often captured in inspiration, can take us in entirely new directions.  This experience enables us to see ourselves and our lives in a fresh way reorganizing our priorities.  

When Margie and I took our first trip to Israel, literally walking the paths of religious history, the impact was so profound that I immediately returned to a more spiritual, religious life.  I've worked with traders who have been so inspired by the mentors they've worked with that they radically reshaped their approaches to markets.

A narrow focus on P/L and catching moves in markets not only exposes us to negative emotion (as we know well from greed, fear/FOMO, overtrading, etc.), but more crucially it keeps us from any experience of inspiration.  Eye-opening novelty and perspective is what can amaze us and lead us to reorganize our trading.  If we lack amazement, we cannot tap into inspiration.  The narrowness of our perspective prevents us from broadening our horizons.  

This leads to questions rarely asked:  What am I doing today and this week (month, year) that is wholly new, interesting, exciting, and potentially inspiring?  Is it a mentor we tap into or a new perspective on our markets and trading?  Is it an insight into a particularly successful trade?  What in my trading is giving me energy and renewal?  

We make great changes by greatly changing our experiences.

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1/31/2026 - Emotional arousal and awareness of the consequences of our actions often is the spark for personal change (see below).  By itself, however, it is not enough.  It is during that emotional awareness that we can become exposed to new thoughts, new ideas, new ways of doing things.  Take the example of the alcoholic who goes to AA.  Pain over the consequences of drinking brings the person to AA, but it is at AA that new experiences of community and new understandings of the need to replace alcohol with support--including the support of a "higher power"--take root.  The group experiences provide a new way of handling life's challenges.

So it is with trading.  We make the same mistakes over and over again until the pain (and the financial losses) become too great to bear.  One of the most interesting aspects of the Market Wizards interviews was how common it was for very successful traders to go through harrowing losses early in their careers.  (Paul Tudor Jones is a great example).  The pain of that experience completely opened the Wizards up to a new set of priorities regarding risk management and the need to trade in planned and not reactive ways.

We change by completely reorganizing what we do and how we do it, because the pain of what we went through is something we never want to repeat.  That happens in relationships; it happens with drugs and alcohol; it happens in markets.  We don't change because we want to.  We change because we have to.

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1/29/2026 - The integrative perspective in psychology is that the various approaches to change, such as cognitive therapy and psychoanalysis, are different ways of tapping into a common change process.  Research tells us that, by directly tapping into this process, we can accelerate change and make our change efforts more effective.  In these posts, I will highlight what we need to do to make meaningful changes, whether it's in our personal lives or in our trading.

The first element in the change process is emotional arousal.  We cannot sustain change if we stay in our usual states of mind and body.  It is when we are experiencing our lives most deeply and powerfully that we're open to the deepest and most powerful changes.  Very often, the emotional catalyst for change is emotional pain.  We have repeated a problem pattern so often and to such an extent that we feel despair.  We feel that we can't go on this way.  In AA, this is known as "hitting bottom".  Our pain becomes our greatest motivator to do things differently.

Sometimes there is a positive source of the emotional arousal.  We have such a powerful experience that it completely changes our perspective and our priorities.  Examples of this would be falling in love and committing to a life together; deep religious experiences; and unusual success in one of our pursuits.  Change occurs through inspiration:  by shaking up our priorities.

In both cases, emotion is a gateway to change.  The enemy of change is routine--and routine states of mind.  A simple example would be trading reviews at the end of a day, week, or month that are conducted quickly and in a rote fashion.  We write down some goals and observations and move on to other life activities.  There is nothing in the process that moves us.  It's not the lack of work or effort that prevents traders from succeeding; it's the absence of emotional arousal.  We either have to be so disgusted with our bad trading or so inspired by our successes that change becomes a must, not something to check on a list.

If we're not passionate about change, nothing ultimately changes.

The Special Talents and Skills of Short-Term Trading

 

1/28/2026 - How do short-term traders work on their long-term development?  This is one of the greatest weaknesses I have found among very active traders.  They are often quite good at reviewing the past day's activity and performance (see below), but there is little formal carryover of goals from week to week and month to month.  In other words, they are good at setting goals and priorities for tomorrow's trade, but they rarely step back and examine how they can broaden the strategies and markets they trade, how they can better make use of teamwork, and how they can adapt from one market environment to another.  When opportunity sets change, they are poorly equipped to make the larger changes needed in their trading.

It is worth noting that, among the professional traders I work with, monthly meetings and reviews are most popular.  The teams are focused on annual performance and monthly meetings give them twelve opportunities to learn from the past month, develop ideas for the next month, and renew teamwork and team focus.  That's twelve opportunities to do the bigger picture thinking that goes missing in the heat of daily market activity.  It's a process worth adopting for short-term traders as well.  It's great to adapt from day to day, but the ultimate goal is building a career.

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1/27/2026 - Short-term trading requires short-term coaching.  When I began working with traders whose average holding periods for trades was a matter of minutes, I was struck by one of their performance processes.  They prepared for trading at the start of the day, tracking order flow and short-term price action across a variety of markets.  They then took a midday break when markets slowed down and reviewed their morning trading and their morning P/L.  They adjusted their trading (direction, what was moving best) during that break and then took a longer review period after the market closed.  Often they would use the replay feature on their platform to see what they missed during the day and how they could have picked it up or traded it better.

Each day thus had three separate coaching periods.  This provided more opportunities for pattern recognition and more opportunities for learning.  Indeed, the morning sessions had their own stop loss levels, which preserved capital for the afternoon session.  Every day was really two days.  Their short-term trading was amazingly successful because they had turned performance improvement into a short-term process.

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1/26/2026 - What creates success among short-term traders is not only pattern recognition, but the ability to process many patterns quickly.  One of the reasons I chose to track the mentoring process at SMB Capital for my latest book is that I wanted a better sense for how active traders gain their performance edge.  What stood out is something I had observed in interacting with their best traders:  the ability to look at many different trading instruments and quickly find patterns worth trading.  The use of scanners greatly assisted this process, but there was also scanning being done by the trader to see how things were moving across different time frames.  Their expertise came not only from knowing how to trade, but by focusing on the best things to trade.  The ability to process large amounts of information quickly and identify patterns of patterns allowed them to participate in the greatest areas of opportunity.

The broaden and build model in psychology suggests that positive emotional experience helps us process more information and process that information better.  A positive mindset expands our awareness and makes us better at finding opportunity.  When we are in the right mindset, there is joy in preparing for trading:  the process of finding opportunity is intrinsically rewarding.  It is that joy that energizes our pattern recognition and helps us trade better ideas in better ways.

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1/25/2026 - As noted below, there are tremendous trading advantages to blending rapid pattern recognition skill with traditional analytical skill.  The current market is a great example of this, as we've seen very bullish moves in small cap stocks and in metals (copper, silver, gold), raw materials shares (XLB) and energy stocks (XLE).  That has led to considerable bullish speculation regarding the impact of the AI trade, as noted below.  But sector analysis provides caution.  Since 2020, when more than 85% of XLE and XLB stocks are trading above their 20-day moving averages, next 20-day returns in SPY have been subnormal.  Indeed, the next 20 days in SPY have averaged a loss of -.56% (N=134), an eye-opening return during a bull market period.  If I were only looking at charts and patterns, I might look for the uptrend to continue.  Based on the analysis, however, I can approach this week's market with a balanced perspective and let the market show its hand.

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1/25/2026 - I'll share what I've been discussing with a number of traders in recent days, addressing their frustration over not making more money in the AI stocks and missing the moves in silver, gold, and mining shares.  Note that, while this issue has psychological implications, no amount of work on psychology is going to provide answers as to asset allocation and trade selection.  Rather, a proper understanding of the situation might just help the psychology!  

The AI theme is alive and well, but the focus among the people I read and speak with has been toward the geopolitical competition for the raw materials that are in short supply if there is to be broad AI development.  So what we're seeing (Greenland is an example) are efforts to lock in these resources and generate the power and mining needed to exploit them.  That is why we're seeing recent relative strength, for example, in the XLE (energy) and XLB (materials) ETFs.

These might represent promising investment themes, but for the short-term trader the question becomes, "What price/volume action do I need to see to participate in these trends with favorable reward relative to risk?"  The short-term trader can thus participate in big picture market developments by breaking trends down into component moves.  A different way of saying this is that cycles occur even within strong trends, and those can offer excellent timing opportunities for the short-term trader.  

A promising combination is having the perspective of an investor and the nimbleness of a trader.

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1/23/2026 - Quickly review the previous sets of posts on hidden edges in the market.  All of these were over longer time frames, and all of them involved data collection and analysis.  By seeing how markets have behaved historically, we can develop hypotheses about how they might behave going forward.  Then we can use real time price action to gauge whether these scenarios are actually playing out.  Notice that this is a highly analytical process.  The hedge fund team managers who collect data and develop ideas based on the data are called analysts for a reason!

Short-term trading--particularly trading intraday--is a completely different activity.  Data collection and analysis are less important and pattern recognition becomes key.  For instance, if I see small cap stocks breaking out to new highs, resulting in strong market breadth, I can observe where selling in other areas of the market might pose opportunities to buy.  Alternatively, if I see that the market has traded in a relatively narrow range and now breaks higher on increased volume following a similar move in small caps, I can infer that large market players are perceiving opportunity on the long side and join their move.

Where investing requires slower, deeper thinking, short-term trading involves faster, nimbler processing.  This has important implications for training.  The only way to build faster pattern recognition is to be exposed to many patterns many times so that you can internalize those.  A major reason traders fail at daytrading is that they don't spend enough time experiencing patterns to be able to recognize those in real time.  When I wrote the book The Positive Psychology of Trading, I spent time with Jeff Holden and his group of trainees at SMB Capital to see how they were learning to trade the market actively.  What I saw is that he walked students through trades bar by bar, showing what was happening and what that meant.  This was something the group did day after day, until they could perceive opportunity on their own.

Training in short-term trading is training in perception.  Only by seeing things again and again can we recognize them in real time and take the right steps.  That is true for medical students learning to make diagnoses and treatment plans, and it's true of active traders.  Sound training builds a sound psychology.  No amount of psychological work can substitute for understanding what is happening in markets.

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1/22/2026 - Talents represent our inborn strengths.  As Goethe points out, we find our greatest happiness and fulfillment when what we're doing in life is aligned with our talents.  To make the most of our talent, we typically have to develop skills in any field.  Those are not inborn; they are conveyed through mentoring and practice.  Skills put talents into action; together they create success.  The football player who has natural athletic talents spends hours and hours in practice and in sessions with coaches to hone the skills that will turn raw talent into successful performance.  A key performance principle is that elite performers typically spend more time in practice and rehearsal than in formal performance.  That process of deliberate practice not only hones skills, but develops the winning mindset of the performer.  It is the role of the coach to structure practice sessions and provide the feedback that will allow performers to make the most of their talents.

Without mentoring/coaching and structured deliberate practice, talents never find their way to skills and elite performance.  In the upcoming posts, we'll take a look at the special talents and skills required by short-term trading and the ways in which these can be honed through the right kinds of learning processes.