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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