Friday, April 16, 2021

BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER


Contact For Trading Firms and Media:  steenbab at aol dot com

My Twitter Feed:  @steenbab

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:


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.  Trading firms, teams, and portfolio managers interested in performance coaching and help with hiring processes can email me at steenbab at aol dot com.  Please note that my work is limited to trading and investment firms, so I cannot provide online advice or coaching services to individual, independent traders


FURTHER RESOURCES




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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When Doing Less Is More

 
A wise portfolio manager recently forwarded this article to me.  The gist of its message is that we often look to improve our lives--and our processes--by adding to them.  We operate on the implicit premise that more is better, so that when we seek change, we gravitate toward doing more things.

In my recent Forbes article, I take a look at the topic of fasting.  I view fasting broadly, not only as refraining from eating.  Anytime we seek to eliminate events and elements that are a regular part of our lives, we conduct a kind of fast.  Thus, getting away from emails and cell phones is a form of fasting.  Meditation and the quieting of our self-talk is also a fast.  

The William Penn quote suggests that fasting may provide some of the benefits of sleep, a kind of refreshment of the spirit.  Sleep itself is a kind of fast, a refrain from activity.  Without sleep, coherent and effective activity becomes impossible.  Similarly, if all we do is "process" and the repetition of routine, we may be efficient but will we ever achieve refreshment?  Many of life's most meaningful activities, from honeymoons to vacations to special celebrations, occur outside life's routines.

The surest way to kill the love, romance, and specialness of a relationship is to make it routine.  For the same reasons, that is how we destroy the passion of living our own lives.  To function effectively in the world, we need routines.  To function optimally, we need to operate outside of routine.  Doing less can provide us with more.

The developing trader needs more process, more routine, to overcome the emotions involved in trading and the resulting impulsivity.  The experienced trader needs quality time away from process and routine to overcome staleness and continually approach markets with fresh eyes and creative thought.

If you were to go on a process fast in your trading, what would you eliminate and what would that free you up to do?

Further Reading:

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Sunday, April 11, 2021

Thinking Through A Traders' Happy Hour

 
Prior to the pandemic, I hosted occasional craft beer happy hour sessions with traders from various backgrounds and firms.  I have always found that such gatherings are helpful in multiple ways, socially and professionally.  Smart, motivated people love to share ideas and learn from one another.  That creates a rich environment for personal and professional development.  And good food and drink doesn't hurt!  Indeed, the research in positive psychology suggests that we learn best when we are in positive mind states and when we process information in multiple ways.

What if the best way to learn trading is not through webinars, classes, conferences, videos, and podcasts, but live, while having fun?  What if the best way to develop as a trader is not by listening to self-anointed gurus, but by learning together from shared experience?  What if Zoom meetings are not meant for talks and PowerPoint presentations, but for creating happy hours and fun, interactive learning experiences in our own homes?

Not a bad legacy from the pandemic!

Stay tuned--

Brett

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Further Reading:

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Sunday, April 04, 2021

What Is Market Breadth Telling Us?

 
A few weeks back, I posted re: market sentiment and noted that sellers were notably unable to push the market lower.  That situation led to a nice rise to new highs in SPY/ES.  Now we see a very different situation.  On Thursday, we broke the 4000 level in SPX, but interestingly, we had 334 stocks registering fresh monthly highs and 75 making new monthly lows.  Compare that with over 1000 stocks making new monthly highs in mid-March.  In early February, we had over 1100 stocks hitting new 3-month highs.  That fell to 939 in mid-March and hit a level of 171 on Thursday.  (Data from Barchart.com).  In other words, the recent market uptrend has become much more selective.  If we look at small cap stocks recently and technology shares, for example, both have failed to take out prior highs.  Indeed, overall, it's been larger cap issues rather than growth names that have performed best of late.

There is a structure to market cycles, in which the market begins with strong upside momentum and a tide that lifts most boats.  As the cycle matures, the strength becomes more selective and we can even observe pockets of the market register new short-term lows.  With the inability to rise and many traders/investors trapped on the long side, we get a move for the exits and a momentum period of decline, with many stocks making new short-term lows.  A dramatic example of this occurred early in 2020, when the market registered 751 new 3-month highs on January 17th and then hit a new index high on February 19th with 503 fresh 3-month highs.  What followed was the big decline from the COVID outbreak.

The current breadth weakness in no way predicts a similar decline for the near future.  Rather, it is a yellow caution light for the bulls.  The market is behaving as it often behaves relatively late in bull market cycles.  I am watching breadth closely to see if the bullish sentiment of hitting 4000 might be masking increasing weakness, particularly among the "reopening" and growth stocks that one would expect to be leading the way higher.

Further Reading:



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Friday, April 02, 2021

How To Trade With Focus

 
Here is a link to the recent webinar I conducted with FuturesTrader71 and Futures.io.  One of the topics that came up was dealing with emotionality during trading.  Morad made the excellent point that we are most apt to respond to markets emotionally if we become too attached to the profits and losses of each trade.  If we define, refine, and follow a sound trading process, we can allow the probabilities to work themselves out in our favor without getting too wrapped up in any single trade.  

A point that I brought up is that, often, it's not emotion itself that is the problem for traders but an absence of focus.  In other words, if we're operating in the flow state--in the zone--we are absorbed in market action and understanding what markets are doing.  It's the presence of focus that provides us with emotional distance.  For example, when I am working with someone as a psychologist and intently listening to what they're saying, I'm not thinking about myself, how much money I'll make from the meeting, how I feel about what they're saying, etc.  Being in the zone naturally takes us out of our own heads and away from our own emotional reactions.

As the quote above indicates, what we focus on expands.  When we focus on something, we reinforce it.  If we focus on our shortcomings, we diminish our self esteem.  If we focus on losing money, we reinforce our insecurities.  When we focus on mastery and understanding, we expand our sense of competence.  

I mentioned in the webinar that many people try out meditation as a way of building focus, but they don't go about it the right way.  They meditate long enough to relax, not long enough to enter the zone.  This is why I like biofeedback devices that give immediate feedback as to whether or not you're in the zone.  Simply trying to dampen negative emotions doesn't work.  We need to get ourselves into a quiet, focused state and then sustain that state for increasing periods of time. 

What we focus on expands.  But if we focus on focusing--if we practice intensive focus each day--then our capacity for focus expands.  Without focus, we lose free will.  We lose our ability to determine our future.  There is little sense spending our time setting goals if we lack the focus to sustain their achievement.

Further Reading:



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Sunday, March 28, 2021

Ask The Trading And Trading Psychology Questions Top On Your Mind

 
It's been a busy few weeks, and I've largely taken a break from social media and educational programs in order to focus on my own trading.  Among the areas I've been working on are:

*  Using the trading psychology of market participants to read intraday and longer-term patterns in the stock market;

*  Refining the use of market cycles for the timing of trades;

*  Refining the use of quant studies to look for market edges;

*  Using relative performance to identify the next market themes in play.

This work was rewarded on Friday with one of my best trading days in a while.  Trading is always a work in progress and that is a big part of what keeps it fascinating and challenging!

If you click the graphic at the top of the post, you'll get the details on a webinar I'll be doing with Futures.io and Morad Askar this coming Wednesday at 4:30 PM EST.  The format of the session will be that participants can bring any trading or trading psychology question for Morad and me to answer.  Participants can ask their questions anonymously and it will be open kimono on my end.  Happy to share my latest work, as well as general ideas re: trading psychology.

The idea is provide free coaching and mentoring to developing traders and allow everyone to learn from each other's questions.  

In order to participate in the live session and ask questions, you'll need to use this link to register:  


Because it's a virtual session, attendance will be limited.  Hope to see you there!!

Brett
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Friday, March 12, 2021

Tracking Sentiment And Market Impact


If you click on the chart above, you can see one thing I was tracking in the afternoon of Friday, March 12th.  (Data and chart from Sierra Chart).  In the top panel, we see the futures market for the S&) 500 Index (ES), where each bar represents 50,000 contracts traded.  The second panel shows the proportion of volume during each 50,000 contract period that was transacted at the offer price (green color) vs. the bid price (red color).  What we see with the yellow arrows is that the trend of ES continues higher, but there has been recent hitting of bids during the recent period.  In other words, sellers have been more aggressive lately, but they have been unable to push price meaningfully lower.  That has kept me long the market, with a tilt toward large cap value, which has been outperforming the NASDAQ tech names.  

Knowing the sentiment of the market through tracking which side is more aggressive and then seeing how this is impacting price action provide a helpful perspective on the market.  In this case, it has kept me in my position despite some price pullback and opens the door to my adding to the position should I see fresh lifting of offers taking price higher.

The most recent Three Minute Trading Coach video describes two ways of improving our trading that also improves our trading psychology.  The overarching point is that trading well--and grounding ourselves in market data that we have studied and reviewed so often that we have confidence in their value--is one of the best ways of improving our mindset.  If we are patient enough to wait for those occasions when we truly understand what is going on, that understanding provides us with the security to take proper risk in the idea.  Working on your trading ultimately *is* working on your head.  Understanding the psychology of other market participants is excellent grounding for your own psychology.

Further Resources:



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Monday, March 08, 2021

Should High Achieving Traders Try To Live A Balanced Life?

 
A developing trader with a real passion for markets recently asked me about the psychological benefits of a "balanced life".  I'm sure he noticed, as I have, that many of the most successful traders put an unusual amount of time and effort into their work.  Is that setting them up for burnout, however, or undue stress during periods of drawdown?

It's an issue that I am intimately familiar with, as I typically wake up quite early in the morning and often work into the evening, including on weekends.  I have multiple work responsibilities--teaching in a medical school, working with traders from different firms, and helping college students who are doing overseas internships--and I have a wonderful family to keep up with.  On top of that, I'm taking several courses and writing a book.  Time is tight.  Sometimes too tight!

Do I have a balanced life?  In one sense, no, if we measure balance in terms of hours per week.  In another sense, my time spent with family, in my marriage, in learning, and at work provide real variety.  Per the quote above, I seek a balance among my passions; I don't balance time.

A large body of research in the field of positive psychology finds that we perform best, feel best, and are physically healthiest when we maximize our well-being.  Psychological well-being comes from doing things that make us happy; doing things that are meaningful to us; doing things that give us energy; and doing things that bring us closer to those that we care about.

We want to be firing on all four of those cylinders frequently every week, preferably every single day.  If we balance our passions in that way, we're most likely to broaden our sources of well-being and make ourselves as fulfilled and productive as possible.  If you're looking to balance your work life, the best place to start is maximizing non-work passions.

I've often pointed out that trading has to fit into our lives; our time can't be hostage to markets.  If all we have in life is trading, we will feel empty, stressed, and depressed when trading isn't paying off.  When we cultivate multiple passions, we always have things in our lives that keep us energized and engaged.  

What in your life sustains you outside of markets?

Further Resources:




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Saturday, February 27, 2021

Three Ways To Improve Your Trading--And Your Trading Psychology

 
Here are three things you can evaluate right here, right now to help your trading and improve your trading psychology:

1)  Look at how much heat you take on your trades relative to how much they move your way - In other words, examine each trade you place and see how far the position went against you during the life of the trade and how far it went in your favor.  This tells you if you are truly achieving good reward relative to risk in the execution of your ideas.  If you tend to undergo meaningful downside before positions work for you, how might you refine your entries?  Studying what would have been more optimal entry points will help you reduce downside during your trades and that promotes a sense of mastery.  On the other hand, if you tend to take little heat on your trades, are you sizing up positions adequately when you do enter?  Might it make sense to size the entries larger and scale out of positions as they go your way, creating more consistent and larger profitability?  That can help our psychology as well.

2)  Look at the productivity of the time you spend when you are *not* trading - There are many junctures during the trading day and week when opportunity is slim.  Do you use this time to research new ideas, update existing ones, and review performance in detail?  Or do you find yourself staring at screens, worrying about P/L or searching for trades to put on, even if those aren't necessarily in your wheelhouse?  When we are productive in our time outside of trading, we create wins every single day, and that bolsters our mindset.  Using the time unproductively reinforces a sense of self that fails to achieve.

3)  Look at what happens to your positions after you exit them - After you've exited a trade, what tends to happen to your positions?  If you took a profit, did the positions move meaningfully further in your favor?  If you took a loss, did the positions reverse and eventually prove profitable?  Many times we exit positions and leave considerable money on the table.  Might it make sense to exit positions in stages, rather than all at once?  Might it make sense to hold portions of profitable positions longer for further potential gain?  Would it make a difference to hold those portions of positions in the form of options, reducing capital at risk?  Many times we enter for sound reasons and exit for emotional reasons.  Studying and optimizing our exits gives us greater control over our risk, enhancing our sense of efficacy.

The bottom line is that some of the best ways to improve your trading psychology is to improve the mechanics of your trading.  All the positive self-talk and work on mindset cannot substitute for skill and its consistent execution.

Further Resources:



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Sunday, February 21, 2021

How We Tranceform The Mindscape

 
In The Psychology of Trading, I wrote about "Tranceforming the Mindscape", which was my way of describing how we can cultivate alternate states of consciousness as a way of expanding our ways of thinking, feeling, and behaving.  Although many turn to drugs and alcohol for this purpose, the reality is that there are many disciplines we can learn to live life more intensely.  The right kinds of dance and music can shift our awareness.  Mastering meditation can be another path.  In the recent Trading Coach Video, I describe the use of self-hypnosis as a way of expanding our repertoire.  Especially relevant is the recent Forbes article, which describes the technique of anchoring and how we can employ it to improve performance. 

Suppose you want to be a winning race car driver.  You work on different techniques of driving, different ways of passing cars, different ways of pacing yourself.  All are fine, but you're still driving the same car.  That's the challenge of most traders.  They are looking to improve their psychology, but they're operating with the same brain, the same states of awareness.  Does anyone truly rewire themselves simply by writing notes and goals in journals or casually reviewing charts?

To win, we need to be driving a better car.

In the Radical Renewal blog book, I describe ways of programming our minds for stillness and extreme quiet.  There are ways of radically quieting the mind that enable us to reprogram ourselves and create new connections of thought, feeling, and action.  This "trance-forming" of our mindscapes involves entering very different states of mind and body and then rehearsing desired patterns--and directly experiencing our best selves--in these fresh states.  For instance, I recently wrote about brain wave biofeedback and techniques I'm learning to keep myself in hyper-focused states.  While highly focused, I simply walk myself through the things I want to accomplish in my day or in my trading.  Incredibly, everything I rehearse comes back to me vividly once I return to the focused state.  So, for instance, one of my trading goals is to hold winning positions longer under defined conditions.  Rather than keep myself "disciplined" to achieve this goal, I keep myself focused.  The right trading actions are anchored to the state of high focus.

The fundamental idea behind Radical Renewal is that the world's great spiritual and religious traditions are collections of time-tested methods for transforming ourselves, overcoming our egos, and tapping into our souls.  It is difficult to find such a tradition that does not induce trance states through ceremony, prayer, meditation, and/or dance.  "Tranceforming the mindscape" means that we develop the ability to process the world in enhanced states of focus and awareness and then use this experience to expand our repertoires.  It is through the body that we program the mind; if we operate in a narrow range of mindsets, we will never expand ourselves.  To paraphrase Gurdjieff via Colin Wilson, the fundamental human situation is that we're watching the wrong movie, not realizing that we have been the projectionist all along, that we should be in the control booth.  

Life is too precious to be lived mechanically.


Further Resources:



Friday, February 12, 2021

Learning How To Lose

 

On the surface, it seems like a strange idea:  We become winners when we learn how to lose.  It's when we can't accept losing that we hold onto trades long after they've gone against us.  It's when we can't accept losing that we play small ball and never pursue meaningful rewards.  It's when we can't accept losing that we become frustrated during drawdowns and lose our focus and discipline.  It's when we can accept losing that the good entry in a trade is never good enough and we miss opportunity.

So many of the challenges of trading psychology are rooted in our inability to lose.

When we can accept--truly accept--that trading is a probabilistic game, that losing is part of those probabilities, and that we can trade well and lose, our egos no longer become attached to our P/L.  If we go to a Vegas casino and bet large when we hold two pair, we can lose when someone around the table comes up with three Kings.  We were right to bet large and, over time, that bet is likely to pay off.  If we can't accept losing, however, we will not just lose but be defeated.  That will prevent us from placing the next solid bet, or it could frustrate us and place us in revenge mode, betting even larger on a poor hand.

Learning how to lose means losing in a planned manner.  It means knowing when our trade has been proven wrong and exiting at a point that we have rehearsed and accepted.  It means sizing our bets so that the probabilities going against us won't take us out of the game.  If we run a 60% win rate with our trades over time--which would be quite good--the reality is that we will lose several times in a row many times during the year if we trade often, simply by random chance.  If we can't accept that kind of losing, can we truly hang in there to win?

Traders work on improving their trading and that is necessary for success.  Working on losing is equally important.  A great topic for a trading review is:  Did I do a good job of losing?  The odds can never work in our favor if we don't fully embrace those odds.

Further Reading:

Radical Renewal - Free blog book on trading and spirituality



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