9/15/2026 - I continue to find that the single greatest mistake that developing traders make is focusing on their mistakes and losses and not clearly identifying and studying what they do right. As I explain in the Positive Trading Psychology book, this takes a toll on mood and energy level. Perhaps more significantly, however, it prevents traders from understanding and building upon their strengths. It is vitally important that developing traders understand what they do well in life and how they can bring those strengths to their trading. Your trading success will be a leveraging of talents and skills that have already proven successful in some area of life.
When we include in our journals what we've done well and *how* we've done it well, over time we will notice patterns of strengths. Those become the foundations of our personal best practices. The best way to overcome negative trading emotions and behaviors, such as fear, greed, and overtrading, is to ground ourselves in what is successful and fulfilling in markets.
For example, as a psychologist, I found that I was quite good at reading subtle cues during therapy sessions that showed me that my client was going through a change of emotion. Those emotional shifts within the session almost always occurred when an important topic was touched upon. Reading my clients alerted me to the issues we needed to work upon. Later, I found that following moment-to-moment indicators in the stock market, such as shifts in volume and the number of stocks trading on upticks/downticks, similarly alerted me to trend changes in the market. Reading people, for me, was not so different from reading markets.
Peak performance in markets will occur when we study our peak performance in other areas of life that have made us successful. What has brought us success to this point will be the foundation for our trading success.
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9/14/2026 - At some point, we don't feel fired up. The fire in the belly isn't there. We lose our energy. And, for most people, that means losing their motivation and falling down on their performance routines. An athlete cuts corners on the workouts. A trader glosses over charts without digging deep to see what is going on. Then performance falls down and energy takes a more serious dive.
Peak performance means engaging in the right processes *whether we feel like it or not*. That means habit takes over. We perform at a high level because that's who we are and what we do, not because we're pushing ourselves each step of the way.
Think of a long-term romantic relationship. Do we always feel passionately connected to the other person? No, but we can always act out of love even during those times when we're not feeling madly in love because the connection has become a deep part of us. What I found after reviewing the Market Wizards series is that great traders are in love with markets and with what they do in markets. They don't have to be wildly fired up to be deeply connected to price and volume action. Indeed, many of the Wizards believe that a calm, focused approach is best for decision-making.
Developing traders don't succeed because they tie their motivation to P/L and can't sustain themselves emotionally during inevitable drawdowns. They never get to the point of letting their love for markets mature, so that they do the right things out of commitment. When we love the process of trading, we don't need to be emotionally attached to the outcomes.
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9/13/2026 - A reader recently emailed me with a worthwhile question. He wanted to know how he could determine if a losing trade was due to his poor trading or whether it was due to an anomaly in the market. In terms of peak performance, it is vital that we understand what goes into success. The only way we can do that is by reviewing many, many markets over different periods of time and different time periods and observing regularities that accompany trading success. Only after such an exhaustive review is conducted can we begin to capture those regularities in trading rules that become part of our "playbook".
It is no different for sports teams. After a basketball game, there is exhaustive review of game film to identify what worked and what didn't. Players take away lessons about handling situations on offense, on defense, on transitions between offense and defense, etc. Those lessons are then rehearsed again and again in practice until they sink in and become second nature.
For the professional trader, there has been so much internalization of the rules that a losing trade is often a sign of a changing market. That enables the trader to quickly pull back risk taking, go into observation mode, and understand the new regime. Only then can the trader open the playbook for that new market. For instance, a break from a range may signal a transition from a cyclical to a trending market and will be traded quite differently.
In the past, I've mentioned the skilled trader I worked with who would take a loss, look up at me, and say, "I just paid for information". Very frequently, the losing trade would alert him to new market conditions and a new set of ideas that could make up for the loss and more.
Peak performance is not eliminating loss. It is using loss as a tool for learning and winning.
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9/11/2026 - I recently joined Jeff Holden and the SMB Capital trading education crew to answer the questions of over 200 developing traders. The group was tackling topics related to trading psychology. One of the points that I made was that what traders often call "choppy" markets are often cyclical markets that offer shorter-term opportunities to trade the ups and downs. A major mistake that traders make is wanting to catch the really big (directional) moves/trends. Often, they end up trading 10 out of every 3 trends, getting whipsawed in the process.
Following the idea of cycles in the previous post (below), what if we developed tools for identifying when trending markets become more rangebound? As Jeff pointed out, we could develop new "playbooks" for these range markets with rules that allow us to seize the opportunities present. This would complement the approaches mentioned in my post on 9/9, which focus specifically on stocks still showing directional potential (stocks "in play").
The idea, to use Tom Basso's term, is to become an "all-weather trader": to have ways of making money in different markets and market conditions. A peak performance mindset is one in which we are flexible enough to recognize that we can succeed under any market conditions. We don't need to impose our styles on markets; we can adapt to what markets give us.
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9/10/2026 - In The Trader's Handbook, authors Richard Moglen, Nick Schmidt, Ross Haber, and Ameet Rai emphasize "five key principles of trading": 1) Keep it simple; 2) Stay focused; 3) Plan for failure; 4) Manage risk tightly; 5) Think in cycles. Notice how this advice mirrors that of many of the Market Wizards: in a very important sense, the successful trader plans for failure and manages risk tightly by knowing where to exit positions. Peak performance comes from the confidence of knowing your downside and how you can handle it. That focus is important because how you size and manage risk is just as important as the ideas you generate.
It's the last of the five principles, however, that is underappreciated by most traders. They think of trends and attempt to capture large directional moves. The idea of thinking in cycles means that all directional moves have a limited lifespan and that any market will have periods of trending, topping, and bottoming. Peak performance comes not only from knowing which stocks/asset classes to buy or sell but when in their cycles to do the buying and selling. "Correctly identifying the current market cycle is one of the most important aspects of trading" (p. 148).
In the framework developed by William O'Neil, for example (see the post below), the idea is to identify companies with superior growth and focus on when they are in the sweet spots of their cycles and are under accumulation. Sizing up positions when moving averages are aligned and taking profits when the cycles begin to turn allows for a powerful combination of aggressiveness and defensiveness. This is a key idea in The Lifecycle Trade book by Eve Boboch and coauthors (see post below). Every great trade has a lifecycle.
The powerful idea of The Trader's Handbook is that we can make the most of our positions when we study their short and longer-term cycles. When we trade is just as important as what we trade.
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9/9/2026 - An important foundation for peak performance is confidence in your trading approach. The psychology of very successful traders is grounded in a belief that they are capturing enduring opportunity in the market. In the book Momentum Masters edited by Mark Minervini, David Ryan is asked "How do you know when your strategy may be broken versus just being out of favor with the current market?". He replies, "My strategy has never been broken. It is what works in the stock market...Eventually, the market always comes back to where the earnings are growing" (p. 174-5).
*That* is confidence.
Ryan is a disciple of William O'Neil and his focus on growth stocks that are undergoing accumulation. Using this approach, he won the U.S. Investing Championship multiple times. He said that he studied his trades as a beginning trader and got to the point "when I said I am only going to buy this one setup and not care about anything else. That is when it all started to work" (p. 186). When strong companies act as strong stocks and the fundamentals line up with the technicals, outstanding moves can be harvested.
I have seen this same approach work for Jim Roppel, whose hedge fund specializes in high performance growth names. He has strict guidelines for sizing positions up and down based upon performance, and he has strict guidelines for the stocks he considers investing in. A look through the Roppel Report, his newsletter (which I highly recommend), shows the depth and breadth of his coverage, as well as his ability to detect themes connecting the various stocks covered. The best stocks in the best themes generate the confidence needed to size positions aggressively when everything lines up.
In their book The Lifecycle Trade, Eve Boboch, Kathy Donnelly, Eric Krull, and Kurt Daill point out that growth stocks follow a lifecycle pattern. Traders can achieve excellent performance by knowing where growth stocks are in their lifecycles. There are different rules for trading different "phases of a stock's lifecycle" (p. 51), allowing for flexibility in the application of trading principles.
A priority for peak performance is knowing *why* your method works, because that provides confidence that it *will* work. It is not an accident that the success of William O'Neil has been replicated by the outstanding success of his mentees. Understanding creates confidence and confidence leads to success.
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9/8/2026 - Market Wizard Tom Basso writes in his book The All-Weather Trader (2023) that "Position sizing is more important than your Buy/Sell engine" (p. 125). He points out that most traders focus on what and when to buy and sell and put relatively little effort into how much to buy and sell. He explains that positions evolve as time progresses and a good bet can become a better bet, a worse bet, or even a completely different bet. Imagine breaking news that leads to a sharp increase in volume traded for a position you're holding. Volume is highly correlated to volatility and now you're suddenly holding much more risk than you intended. Similarly, you might see your long position behaving particularly well and breaking above a narrow range after correcting only modestly. What was a good bet has gotten better and a great trader will size up that position.
Market Wizard Kenny Sharkness, in Market Wizards: The Next Generation (2026) observes something that is true of many of the Wizards: A large share of their total profits come from a handful of trades. If we're attentive to position sizing, we can find very good risk/reward points for adding to existing modest positions and turn winning trades into meaningful winners.
Tom Basso adds an addition peak performance idea: "A successful trader has strategies that help fill the drawdown 'potholes' in the equity curves to make it all less stressful" (p. 142). In other words, a successful trader identifies periods of drawdown and specifically looks for new trading strategies that can exploit those periods. By smoothing the P/L curve, we achieve an important goal of trading psychology: reducing the stress of drawdowns.
A peak performance mindset is one that can be aggressive in pursuing unusual opportunity while at the same time taking actions that reduce the stress of ups and downs. Indeed, it is by keeping trading stress manageable that we become able to tap into our reserves and make the most of the few phenomenal opportunities that present themselves in a given time period. Reducing stress and maximizing opportunity are two sides of peak performance in trading.
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* Proper preparation
* Hard work
* Patience
* A detailed plan before every trade
* Discipline
* Communication
* Replaying important trades
The overarching idea is that a good trade is defined by the process that produced it, not by its P/L. In this series of posts, I'll take a look at peak performance fundamentals and explain how they are essential to successful trading.
Mike's text The Playbook brings together these seven fundamentals. The idea is that the successful trader studies stocks and their movement and eventually identifies promising patterns for buying or selling. By collecting multiple examples of these patterns, documenting them, and coming up with rules for buying/selling/holding/stopping out, the trader internalizes opportunities and becomes able to recognize them in real time. Eventually, like a great football or basketball team, the trader has deeply learned so many patterns that they can adapt to almost any market condition.
Peak performance doesn't occur on the basketball court or on the football field unless it has been laid out in advance and rehearsed, rehearsed, rehearsed. Staying fully focused on markets requires the ability to sustain effort hour after hour after hour. Our preparation is our workout routine. We will never sustain more focus and effort in our trading than we achieve in our preparation.
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