4/30/2026 - It was great meeting with a group of traders for the "ask me anything" webinar with Agnieszka Wood. A couple of mistakes were addressed in the session very effectively. Agnieszka discussed the mistake of trying to fix our trading before we've addressed the emotions we've been going through during difficult trading. It is all too easy to become reactive when we're frustrated. Stepping back from trading temporarily, recentering, and renewing our search for edge is an effective way to respond to loss.
Peter Robbins raised another great point. We had been discussing the importance of getting big in trades when our edge is playing out and he noted that there are some environments in which it is not prudent to get big. That is certainly true of highly volatile, uncertain markets. Volatility gets us big by itself! Good risk management takes market environment into account.
As I explain in the Positive Trading Psychology book, the quality most common to great traders is intellectual curiosity. Great traders love the hunt for ideas. They love to discover. That keeps them engaged even when they have small positions in the market. And that's what gives them the inspiration to put on larger positions. The best traders love the discovery process every bit as much as they love trading!
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4/29/2026 - Perhaps the greatest mistake traders make is not making enough mistakes. The trader who is innovating is always going to be getting things wrong, fixing them, and learning in the process. Avoiding mistakes too often means avoiding growth.
Years ago, I contrasted a Japanese car maker's operations with those of a U.S. car maker. The U.S. manufacturer ran the assembly line at a moderate speed, ensuring that line workers would keep up with the flow and make a minimum of mistakes. Indeed, if they had sped up the line, they would have heard from unions in a hurry!
The Japanese company, however, sped up the line every so often and then scanned to see where things broke down. They would then fix those areas, maintain the higher speed, and then speed things up some more. The U.S. company saw flaws in the assembly line as something to avoid; the Japanese company sought flaws for continual improvement. Which company do you think had a track record for most reliable vehicles?
There's an important lesson here. As long as we're managing risk the right way, we want to embrace our losses and use them as fuel for our improvement. Avoiding mistakes is perhaps the most subtle of all mistakes.
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4/28/2026 - The problem that beginning traders make is that they are too eager to take risk before they've developed robust processes to guide their generation of ideas, sizing, risk management, trade review, etc. The problem that experienced traders make is that they are fully grounded in routine and don't spend enough time and energy developing new sources of edge. In the first case, the trader is too eager and takes imprudent risk. In the second case, the trader lacks inspiration and lacks novelty and innovation.
It's not so unlike the problem that occurs in romantic relationships. They start with excitement and newness and run into challenges channeling that energy into daily coordination of individual needs. Over time, the constancy of daily routine makes it necessary for couples to find new energy from fresh interests and activities.
Every relationship should be comfortable and stimulating and challenging. Our relationship with markets needs to be comfortable enough that we can handle day to day challenges, but also stimulating in the exploration of new sources of edge.
Success is a balance between stability and innovation. Without excitement and curiosity--and a stable way of channeling those--trading (and our market edges) grow stale.
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4/27/2026 - I've consistently found that the majority of directional traders make their living from managing risk well (not having large losing trades) and from having (often only a handful) of large winning trades during a year. They make their money when they are *really* right and they take advantage of that.
The big mistake that traders make, leaving them as good traders but not great ones, is that they have a clearly defined criteria for finding opportunity and identifying entries and exits. They *don't* have a clear process, however, for taking full advantage of those situations when they are *really* right. In other words, they don't have a clear process for getting big in the right trades.
This is partly a trading psychology issue. Traders clearly visualize being wrong but not being amazingly right. They have a process for limiting losses, but not maximizing gains.
They think cautiously and prudently, but don't think greatly when the proper time comes.
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4/26/2026 - What makes our trading psychology is not whether we make mistakes, but what we do with those mistakes. In the coming series of posts, we'll take a look at common mistakes traders make and how they can use those mistakes to improve their trading.An unfortunate number of traders have missed the bulk of the large upside move in stocks since the lows late in March. Out of a sense of prudence, they didn't want to "chase" the rebound and so waited for a pullback. The anticipated pullback simply hasn't occurred.
As the late Ayn Rand taught, when things don't make sense, it's worthwhile to check our premises. What's the premise that traders are relying upon that is leading them to miss opportunity?
Quite simply, traders are assuming that pullbacks are measured in price action alone. If we don't see a correction in price, traders assume we haven't seen a correction.
But suppose we measure correction in other ways. For example, off the late March lows, we subsequently saw breadth--as measured by the percentage of stocks trading above their three-day moving averages--pull back to 47.47 on April 7th and then back to 32.39 on April 10th and then back to 49.39 on April 15th. All of these pullbacks occurred at higher price levels, because a few groups of stocks kept the averages higher even as the bulk of stocks retreated from their recent highs. From a breadth perspective, the powerful rally offered *many* opportunities to get into the rally.
Price alone does not define the market.
What we look at determines how we trade.
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