5/15/2026 - I encourage you to check out this video of Neil Young singing Like A Hurricane. The song is great, but it's his performance that is extraordinary. Total energy and passion. Yes, I know that "process" is important in trading and "risk management" is essential. But we can become so immersed in P/L and the rules of trading that we don't trade with passion.
Whatever you do in life, do it with genuine passion. Life is meant to be celebrated. Relationships, trading, careers, personal interests: make them count. Make them passionate. Too much of trading psychology is about prudence and emotional self-control. There's a place to celebrate passion. Yes, we may grieve loss, but we're also meant to celebrate success.
Passionately.
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5/14/2026 - In her book on how children handle loss and grief, Dr. Corinne Masur makes an important point. During a time of upheaval and loss of an anchor in life, it's important to "keep rules and routines as consistent as possible" (p. 173). Loss brings a psychological sense of instability. Grounding life in consistency helps bring stability to the difficult life period.
This is rarely acknowledged in trading psychology, but the same principles hold. If traders go for significant gains in markets, they will occasionally experience significant losses. Sharpe Ratios for the usual directional trading ensure that the magnitude of losses will be correlated with the magnitude of the gains.
As emphasized below, what motivates traders is not just money, but a dream of success. When those large losses occur, the dream is threatened. Stability is lost. How can traders deal with such upheaval? We rarely read of this challenge.
For the trader, as for the child, the best coping comes from doubling down on routine and the familiar processes that have brought past success. This not only brings a sense of stability, but also helps prepare the trader for the eventual comeback. It is tempting to want to make the money back all at once, but such overtrading can only lead to further losses and emotional injury.
We often hear of the importance of remaining process driven in trading. Yes, this grounds us in our best practices, but it also grounds us emotionally when our large bets result in large losses.
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5/13/2026 - As AI becomes an increasing part of traders' processes of finding, expressing, sizing, and managing trades, how will this impact trading psychology? I am already working with professional traders who have expanded their analytical capabilities through AI platforms. They are finding more opportunities and different ones. This is exciting in one way, but poses a challenge in another.
As noted below, traders approach their work as entrepreneurs. They have a dream of beating the market. How will they feel if it's not them beating the market, but the computer? A major reason traders operate in a discretionary rather than systematic manner is that they want the trades to be *their* trades. Otherwise, they could turn on their systems, walk away from screens, and not be involved in market ups and downs at all.
AI has the potential to study the patterns of a trader's best trading and find opportunities that are in the trader's wheelhouse. Based on the trader's past performance, an AI platform can recommend ways of managing those trades--or could even place the trades independently! That would lead to amazing consistency in trading process, but it's achieved at the expense of the trader's discretionary participation. For many traders, this would be an emotional loss. It might similar to the response of store owners who find their businesses overwhelmed by the growth of large department stores and shopping malls. The store owner/entrepreneur doesn't want to manage a department store. Progress, at an emotional level, becomes a threat.
To be sure, even in a world of online shopping and shopping malls, there is room for small boutique stores with unique offerings. Innovation and uniqueness become central parts of the psychology for the entrepreneur. Today's trading psychology, so grounded in the fear/greed mindset of beginning traders, will evolve in the coming world of AI. Increasingly, the new trading psychology will be about innovation within niches and the ability to deliver unique returns. AI is great at finding answers. The new market entrepreneur will be great at asking questions and finding fresh niches.
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5/12/2026 - Let's take the example of overtrading. The common explanation for overtrading is that the trader has a fear of missing market moves (FOMO) and acts impulsively out of that fear. That's certainly true for some developing traders, but it misses the larger picture of *why* the trader fears missing moves.
As described below, many traders pursue trading as their dream. They pour their hearts into it; they pour their time into it. Often, outside of trading, they don't have much of a career or personal life. So how do they feel when the market is slow and they don't perceive opportunity? How would they feel if they spent the whole day watching screens and not placing a single trade?
They would feel empty.
They would feel purposeless.
They wouldn't just feel like a failure as a trader; they would feel like a failure. They would rather do something--place any trade--than feel that emptiness.
That is why a rich and fulfilling life outside of trading is necessary to success as a trader. If your life is a rich one, you'll never feel poor when you don't trade.
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5/11/2026 - The majority of people I have worked with in the trading world don't view trading as a job or even as a career. They are pursuing it as part of a dream, like true entrepreneurs. Their goal is not simply to make a living or make a good living. They seek to build something significant by achieving a high level of success.
This is why, as noted below, the essence of trading psychology is not fear and greed. Learning techniques to handle loss and pursue gain are necessary, but they don't address those situations in which the dream is threatened--or when it begins to flourish and needs to expand.
The idea of each trader developing a detailed business plan makes sense because such a plan is what translates the dream into concrete, day-to-day realities. The plan also addresses situations in which the dream needs to be modified and ways of keeping the dream alive in the face of performance challenges.
At a psychological level, the business plan allows traders to respond to challenges without overreacting to them. It's not fear and greed that throws traders off course. It's the grief and excitement that occur when our dreams are threatened--or when they play out unexpectedly quickly.
The great challenge for the trader--as for the entrepreneur--is to face situations in which the dream is fading away and to learn from them and emerge with a fresh vision. It is not unusual for an entrepreneur to start a few businesses and fold them before finding the right opportunity. They face loss and grief--and they use those to cultivate fresh visions and dreams.
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5/10/2026 - What if the essence of trading psychology is not fear and greed? What if handling those emotions is not what makes the best traders successful? Asking new questions is what brings us to new perspectives and new answers.Trading and investing are all about gain and loss and balancing those via the sizing of positions and prudent risk management. Inevitably it occurs in a trader's career that, in pursuing gain and success, they experience significant loss. One portfolio manager I worked with developed a new approach to investing and fell in love with the promise of the method. When market conditions changed dramatically, the new approach could not keep up and adapt. The manager went through a potentially career-ending loss. But it wasn't the financial loss that was so difficult; it was the loss of something cherished: a dream.
Many of the most challenging problems traders face is not simply fear or greed, but the emotional impact of loss and gain. What brings many traders to their craft is also what brings many people to a significant romantic relationship: a dream. How do we respond when that dream changes? When it is lost? How do our responses to loss impact our subsequent trading? Our lives? Our future ability to dream?
I'm currently reading How Children Grieve by Dr. Corinne Masur. A core idea in that text is that how we are impacted by loss is a function of the stage of life that we're in. Loss and grief are different for a child than for an older adult who loses their spouse, for example. Similarly, the beginning trader is impacted by loss differently from the experienced one. New attachments impact us as well...and those impacts differ for people at various phases of life.
What we lose and what we gain impact us emotionally. A healthy psychology knows how to grieve--and how to celebrate. When we fail to deal with the emotions of loss and gain, our subsequent actions become distorted by what we don't process. A beautiful way to deal with loss is to more deeply attach to everything and everyone important to us that we haven't lost. In life as in finance, a rich and deep portfolio helps buffer us from traumatic losses. The deeper our love, the greater the grief we will experience in times of loss. It is the passion we feel, not the need and greed, that leaves us vulnerable to loss and open to the fulfillment of gain.