How To Build A Career In Trading

 

9/20/2026 - Many aspiring traders focus their efforts on timing:  when to buy and when to sell.  They look for patterns of price, volume, volatility to establish entry and exit signals.  What can be seen among the Market Wizards is an equal focus on *what* to be trading.  It's interesting that many successful traders have used a version of William O'Neil's framework (CANSLIM) to focus on companies that are strong fundamentally and that are demonstrating strength in relative performance.  If they are buying, they're buying the strongest companies with the best trends.  They are not looking to predict when weak stocks will become strong, and they're not just trading one thing.  Hedge fund manager Jim Roppel, who shares his trade ideas with other traders through his newsletter, is a good example of this approach.  

What these successful traders have found is that the best performing stocks have already begun their moves.  In Elliott Wave terms, they are buying the third wave of growing companies that have attracted institutional interest.  It's in that third wave that a trader can ride the potentially large moves when the crowd discovers the stock.  Traders in rates, currencies, and commodities focus on different fundamental qualities of best trades, but similarly wait for evidence that large institutional participants (which also behave in crowd-like ways) are finding the opportunity.

In short, the successful traders are not so much predicting market moves as identifying their early phases.  This can occur at very short time frames for active day traders, as in the search for "stocks in play" described by Mike Bellafiore and playbooked by the traders at SMB Capital.  First there is a screening for what is in play; only then is there a focus on how to play it.  

Success at fishing is not just about using the best rod.  You first need to know how to find the best ponds.

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9/18/2026 - Where traders go wrong in developing a trading career is that they first focus on trading.  They are eager to succeed and make money.  That short circuits the developmental process of expertise.

Consider a student who wishes to become a physician and has a passion for helping people.  Where does that student begin?  Not by immediately trying to treat patients (that would be damaging for everyone involved!), but by learning about the body, learning about health and illness, and learning about how to best help people with particular problems.  The saying in medical school is "see one, do one, teach one".  We learn by observing the work of experienced professionals, then by trying to help others with the supervision and feedback of those professionals, and then by teaching others ourselves and cementing what we've learned.  And all of that is *after* we've learned anatomy, physiology, pathology, etc.

First we learn the fundamentals (the "basic sciences" of markets); then we learn by observing markets and experienced pros; then we try trading on our own with minimal risk and get feedback on our performance; then we apply what we've learned, get larger, and eventually mentor others and solidify our expertise.

All of this is what new traders do when they begin careers at hedge funds, investment banks, and other professional settings.  The success rate of those programs is quite high, especially compared with the success rate of unstructured self help.

This is why team environments are generally the best way to learn trading.  You can watch and learn from successful traders, and you can add your own research that benefits those traders.  By studying the many books available that teach trading (see below) and teaming up with just one other learner, you can greatly improve your learning curve.  

To trade the right way, it's necessary to learn the right way.

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9/17/2026 - So where do we begin if we want to build a career in trading?  One of the most powerful observations that came from my review of the Market Wizards books--and books by the Wizards--is that success came from deep, prolonged immersion in markets.  The Wizards spent long hours each day following markets closely--and then spent more hours reviewing performance and reviewing and previewing markets.  This is training in pattern recognition, as the immersed trader sees more things more times and eventually internalizes those patterns.

Among books that illustrate patterns to look for in markets is The Trader's Handbook mentioned in yesterday's post; Mark Minervini's Trade Like a Stock Market Wizard; The Logical Trader by Mark Fisher; and The Lifecycle Trade by Eve Boboch, Kathy Donnelly, Eric Krull, and Kurt Daill.  It is quite unusual for a hedge fund manager to write a newsletter for traders outlining what to trade and how to trade it, but The Roppel Report by Jim Roppel is precisely that.  A great collection of videos from experienced market participants can be found on the SMB Capital YouTube channel, many of which detail trading patterns from different perspectives.

What will happen when you immerse yourself in the patterns described in these sources is that you'll discover ways of thinking about markets that make unique sense to you and--most important of all--you'll pull these patterns together in ways that make unique sense to you.  In other words, your trading style will be an integration of what you learn from your mentors.

A trader develops confidence, not just through positive thinking, but through cultivating his or her unique ways of viewing markets that ground their decision making.

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9/16/2026 - Right now, we have more resources to guide our trading success than ever before.  Books have been written about great traders and by great traders.  Yes, there is more distraction than ever before from tweets, videos, and courses from gurus.  But the landscape is rich with quality mentoring from traders with proven track records.  

I am currently writing an updated version of my Trading Psychology 2.0 book.  An important part of the update is a review of the major works of great traders over the past decade or so.  Over the past month I have immersed myself in all the Market Wizards books, as well as books written by such Wizards as Linda Raschke and Mark Minervini.  When I encounter an important insight, I bookmark the text.  When I finish the book, I review all the bookmarked passages.

Day after day, reading the greats and about the greats, we begin to internalize their lessons.  The first step in building a career in trading is surrounding yourself with trading greatness.  That could be in a legit trading community, and it could be by immersing ourselves in the works of successful traders.  Once we learn about their psychology and approaches to trading, we can begin to emulate their best practices.  A great place to start that phase of our development is The Trader's Handbook: Winning Habits and Routines of Successful Traders by Richard Moglen, Nick Schmidt, Ross Haber, and Ameet Rai.  It includes a discussion of "the trader's journey" and details steps in successful trading, from "entry tactics and trade execution" to "sell rules and position management" to "post analysis and trading rules".  

Great trading begins with great mentoring.  There is an amazing set of resources out there.  The first challenge is to establish your curriculum and draw upon the passion and drive of the best traders to find the best within you.

Peak Performance Priorities

 

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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9/7/2026 - In his book One Good Trade, Mike Bellafiore identifies seven "fundamentals" that go into making "one good trade":

*  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.

 

What Is The Best Way To Learn Trading?

 

8/27/2026 - One of the best ways to learn about learning trading is to read the writings of successful traders.  In yesterday's post, I presented a couple of key insights from Market Wizard Mark Minervini.  In this post, we'll look at another Market Wizard, Linda Raschke.  Linda, in the Market Wizards interview, compares learning markets to learning to play the piano.  It takes practice and the desire to keep improving.  One of the joys of both fields, she observes, is that we can never be perfect, but we can be inspired by the opportunity to become better and better.

In her book Trading Sardines, Raschke points out that "You can't predict in advance where the big wins are going to come from--just keep taking every system signal" (p. 94).  And when we win again and again?  She explains that "Any time you find the key, they eventually change the lock" (p. 96).  Because markets are ever-changing, losses are inevitable and risk management becomes essential for staying in the game.  "Models are just that," Raschke notes, "they give a trader an initial game plan but have to be flexible enough to adapt as the price action progresses" (p. 98).

The key word here is "flexible".  The successful trader has to be highly disciplined in following the "initial game plan", but has to be aware of when markets have changed and new plans are needed.  The best way to learn trading is to practice and practice formulating game plans that have been tested and then practice and practice reassessing markets when those game plans are no longer bringing success.  Flexibility and resilience are skills that can be built over time, but only through intensive market experience.

We need to lose in order to adapt and win.  This is the key insight of Tom Hougaard:  the best winners are ultimately the best losers.  Learning to trade is learning how to lose the right way.

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8/26/2026 - The last post focused on the intensity of market study and performance review as a key element of trading success.  Reading through the interviews of the Market Wizards, it's clear that their training and their preparation are conducted over long hours of deep concentration.  There is nothing casual about their market routines.  Each practice, each review, each preparation for the new market day is a workout.  For that reason, the most successful traders are the most focused and take away more from their time in and out of markets than average traders.

In his book Mindset Secrets for Winning, Market Wizard Mark Minervini advises, "To accelerate your improvement and take your performance to the highest level, you need to practice in a way that builds both your physical and mental capacity, and in a way that strengthens your self-image" (p. 159).  In other words, the best way to learn trading is to treat the learning as *training* and use learning processes to build a winning psychology.  How we learn trading and how we prepare for each trading day has to be a psychological workout if it is going to build our endurance, our competitive determination, and our resilience.

There is one word that should always give you pause if you're looking for help with your development as a trader.  That is the word "easy".  If someone is promising you an easy path to success, they are confessing that their work will not build your ideal mindset.  No one ever cultivated and sustained the drive to win by opting for "easy".  "Easy" is for those who wish to avoid effort.  Learning trading cannot be comfortable if it is going to be successful.

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8/25/2026 - As part of writing my next book, I am reviewing all the Market Wizards books, as well as other texts from accomplished traders.  The goal is to get to the heart of trading greatness.  Here are four elements of trading success that I have noticed repeatedly:

1)  Intensity of market study - Viewing, playing, and replaying market action every day and carefully noticing patterns that characterize the best trading opportunities in different market conditions and different volume/volatility regimes.  This latter point is crucial:  opportunity varies as a function of *who* is in the market;

2)  Intensity of execution study - Once you clearly observe the promising trading patterns in different market environments, drill down to very short-term time frames to observe how those opportunities set up.  The goal is to identify the ideal points of execution for each of the market patterns you observe.  Ideal execution enables you to trade each opportunity with superior reward relative to risk.  There will be different execution patterns for each market pattern you observe across market conditions.

3)  Intensity of trading review - Once you've started trading the market and execution patterns that you've intensively studied, you then want to replay and review each trade to see what you did well and what you could have done better.  Each trade has to become a learning lesson, reinforcing your strengths and correcting your weaknesses. 

4)  Intensity of teamwork/mentoring - Share the results of the work above with one or more developing and experienced traders engaged in the same processes.  Drill down on what they have been doing so that you ensure that you learn something new and promising from each sharing and that they are learning similarly from you.  This sharing and learning will reinforce what you're learning, expand your mastery, and keep you focused and motivated.

The intensity of your learning process and your growing sense of mastery will be the best supports for your trading psychology.  Great traders, like great athletes, are always in training--and they use their training to stay focused and motivated and to keep growing and learning new things.

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8/24/2026 - Suppose the experience and wisdom of a mentor could be captured by an artificial intelligence platform and used to aid in training developing traders.  Indeed, suppose that multiple mentors could be available through AI so that different perspectives could be accessed by the developing trader at any time.  This possibility was unthinkable years ago, but it is rapidly becoming a reality.

I'm not convinced that AI mentoring could entirely substitute for the value of direct human interaction, just as AI-delivered psychotherapy is not as effective as therapy delivered by a live, experienced psychologist.  One important reason for this is the value of human relationships and our ability to internalize emotional experiences through our connections with others.  Just as an AI parent could not properly socialize an infant, the AI mentoring platform--even accompanied by realistic avatars--is unlikely to replicate the experience of a caring, involved mentor.  When a learner is inspired by a mentor and greatly desires to live up to the mentor's example, great things can happen, whether it's in the military, in learning the arts, or in developing trading prowess.

But just as a trading journal can help us review performance, identify strengths and weaknesses, and set goals, the AI mentor can help guide our day to day development.  It's useful to think of AI as a greatly enhanced journaling, learning, and feedback tool rather than as a mentoring replacement.

So back to the topic of the recent posts:  How can we best learn trading?  We learn when we are deeply engaged in identifying market patterns, structuring our trades to exploit those patterns, managing and sizing those trades effectively, and using market reviews to set goals and adapt to market changes.  Teaming up with other dedicated traders can greatly enhance and accelerate our development and, soon, artificial intelligence will become an indispensable component of the learning/mentoring process.

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8/23/2026 - The previous post emphasized that, in professional settings, people who are interested in learning to trade are first hired as junior analysts.  They use their analytical skills to identify assets that are mispriced, and--with experience--they recommend trades based upon their analyses.  Once the analysts have experience and success behind them, their recommendations are tracked for P/L.  Indeed, at many firms, there is P/L attribution for every trade that is in the book.  If the analyst's ideas are proving to be profitable, the analyst will be given a "sleeve" of capital to actually trade those ideas.  This is done with the supervision and mentorship of the senior portfolio manager, so that there is ongoing learning/training.  If the P/L of this beginning account is favorable and if risk is managed well, the account will grow and the analyst will become a co-portfolio manager.

So we can see that the way a new team member learns trading is to first learn "idea generation", get feedback/mentoring on their research and the quality of the ideas they generate, and then learn trading their ideas--again with teaching and mentoring.  As a result of this very structured process of talent development, the success rate of new team members is astronomically higher than the success rate of traders who attempt to learn trading on their own.  

What can an individual interested in learning to trade do to increase their odds of success?  The key is to find trading communities with likeminded members who are willing to team up, share ideas, review performance, and hold each other accountable.  Yes, there are many communities where members watch videos and take courses.  What is important, however, is to actively engage in teams where that learning--and the application of the learning--can be shared.

Look at how physicians are trained.  Look at how soldiers are trained.  Look at how performing artists are trained.  Always there is performance, there is mentoring and deep review of performance, and there is application of the learning.  You don't perform surgeries, go into combat, or perform on the Broadway stage until you've had significant training.  It's great when trading is your dream.  If you're trying to do it all on your own with a few videos and online courses, it's no longer a dream.  It's a fantasy.  

The next post will address the role of AI in accelerating the learning of trading.

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8/21/2026 - Yesterday's post focused on some of the shortcomings that we see in the education and training of traders.  Much of that training is conducted online, because that is what creates scale--and income--for the instructors.  But is that ideal for generating trading success?  Let's take a look at professional trading firms and see how they train their talent.

The first big difference at hedge funds and similar trading organizations is that new talent is hired.  Typically they are hired by a team and typically they report to a more experienced, senior team member who supervises their efforts.  At a hedge fund, they are hired as junior analysts, tasked with the responsibility for gathering the information needed for the team to make informed trading decisions.  Thus, for example, at a fund trading individual stocks, the junior analysts will follow a group of companies within an industry and stay on top of earning reports, news developments, and communications with the managements of their companies to identify when the stocks of those companies are compelling buys, holds, or sells.

Here is what's key:  The junior analyst is hired because they have some skill set/talent that is valued by the team.  For instance, they might have programming skills, statistical analysis experience, or relevant experience from an internship during their education.  They apply their skills and experience to their work, but they are always supervised by a senior analyst.  That senior analyst reads and reviews all of their work and provides feedback about good ideas, not so good ideas, and further research that needs to be done.  Thus there is constant feedback about idea generation and the improvement of the quality of ideas.  Such supervision and mentoring lies at the heart of learning and professional development.

Teams are mentoring factories.  This lies at the heart of their success in producing trading talent.

The treatment teams in medical schools consist of a senior (attending) physician, senior resident physicians training in their specialties, junior residents supervised by the seniors, and medical students supervised by the junior residents.  "Each one teach one" is the motto.  We learn by teaching and we learn by being taught...at higher and higher levels of responsibility.  Elite training is never accomplished in isolation.

The intensive training within trading teams typically includes both fundamental analysis (factors impacting the demand for the company's goods and services) and technical analysis (factors reflecting demand and supply for the company's stock).  The idea is to be more rapid than the competition in identifying when a fundamentally solid investment is now in demand, as well as when an investment that has been in demand is now no longer compelling in its fundamentals.  These ideas are conveyed to the portfolio managers, who are responsible for taking the research and ideas from the analysts and turning those into actual trades in the team's portfolio.

Thus, both the junior and senior analysts have the opportunity to see how their work translates into actual trades and P/L.

So, what we see is that the first principle in learning how to trade is understanding what goes into good trades and then practicing idea generation with intensive supervision, feedback, and mentoring.  When the junior analysts become sufficiently experienced and successful, they are promoted to the role of senior analysts.  They share their ideas more directly with the portfolio managers, and they take on juniors for supervision.  Learners progress by becoming mentors.  In the next post, we'll see how these learners/mentors get to the point of actually trading their ideas--and we'll look at how individual traders can gain the benefits of team-based training.

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8/20/2026 - Over the years, there has been no lack of books, websites, videos, and courses promising to bring trading success to developing traders.  Indeed, we're flooded with offerings from aspiring gurus, promoting videos that outline market patterns, illustrated with handpicked examples.  Soon we'll see more of these patterns offered by AI tools, alerting traders to trends, breakouts, etc.

So why aren't these offerings more successful?  If a successful trader is teaching methodologies to developing traders, why don't those traders come close to replicating that trader's claimed success?  A common answer is that the aspiring traders need to develop their psychology as well as their trading methods.  They are not succeeding because of their lack of discipline.

But what if we were to take the patterns taught by the gurus and automate them so that there is perfect discipline?  Or what if we were to program the patterns and actually assess profits, losses, drawdowns, etc.?  I've performed this exercise a few times and the results are discouraging.  The patterns that are taught work in certain market environments and not in others, ultimately resulting in unacceptable drawdowns.

This makes sense.  If drawing lines on charts and finding simple "setups" consistently made meaningful money, those would be rapidly exploited with those who have the funds and programming expertise to take advantage of the opportunities.  When I first began working at professional trading firms, particularly large hedge funds, I was struck by the fact that none of the best traders used methods similar to those taught online.

None.

The professional traders understood *why* markets move and thus don't rely on charts and indicators that reflect movement but don't *explain* it.  In this series of posts, I will make an effort to explain how professional traders learn trading and how we can learn from their example.

How Well Do You Coach Your Own Trading Performance?

 

8/19/2026 - An important test of how well we coach ourselves is how we respond to losing periods in markets.  The book Best Loser Wins is very important in this regard.  The subtitle of that text reads:  "Why Normal Thinking Never Wins the Trading Game".  Normal thinking avoids pain and avoids loss.  It's normal to hang onto trades that go against us, not wanting to lock in a loss.  When we examine the trading of the best traders, however, we find that they are very good at losing.  When they see that their ideas aren't working, they're quick to exit and limit their losses.  When those ideas do work, they're quick to take profits on a portion of their position but also willing to let the rest of the trade run--and perhaps even add to the position.  The result is that the average size of their winning trades far exceeds the average size of the losers.  Ironically, the best losers end up becoming the greatest winners.

Where self-coaching comes in is that the best traders not only endure losses, but actively *learn* from them.  If a well-researched idea isn't playing out in price action, something else is going on.  That something else is a market driver and will trap unaware participants.  For instance, perhaps the stock market is not reacting as usual to growth news because commodities, especially oil, and yields are on the rise, suggesting an inflationary environment.  The losing trade quickly stimulates a fresh look at markets and often a new, promising trade.  The loss was a price paid for learning and can result in a much larger profit.

In short, the mindset of the successful trader is not so much positive or negative as it is resilient.  When we coach ourselves to find opportunity following losses, we exercise that resilience.

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8/18/2026 - In the last post, we looked at how relative volume provides important information for understanding market movement and planning our trades.  Because volume is so highly correlated with volatility (+.66 during 2026), tracking volume in real time can help us anticipate likely movement and thoughtfully establish targets for our trades.

Yet another facet of the market microsystem that helps us coach our own trading is how market components are moving concurrently with the overall market.  If we're trading stock index futures, for example, and we see the market break out of a range higher, we want to quickly look at the NYSE TICK and see how many stocks are ticking higher (i.e., lifting offers) on the move.  That tells us a great deal about the breadth of buying interest.  We also want to glance how various market sectors are behaving on the breakout.  Is this a broad move higher, likely reflecting a trend, or is this rotational action impacting some sectors and not others?  

Finally, we want to see how other markets are trading at the time our market is breaking from its range.  Is the move occurring in asset classes other than stocks, such as interest rates and currencies, or is this an idiosyncratic move specific to equities?  If it's a broad move across asset classes, this can be a great signal that large institutions are deploying capital across macro themes--a development which should help price movement persist.

Who is in the market helps determine how the market moves.  A good coach, like a good football quarterback, sees the entire field and calls plays based on what they see.  A great deal of trading failure occurs when we get run over by the big picture that we never see.

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8/17/2026 - The previous post suggested that every market exists within an ecosystem and that successful trading of a market requires an understanding of that ecosystem.  We can think of price action and volume as the market's "text".  The ecosystem is what surrounds and determines price and volume behavior:  the "context".  Understanding--and genuine conviction--occurs when we can place the market's text in proper context.

Let's say that we are trading the SPX Index via SPY or stock index futures.  The first piece of context is how the market is trading compared with how it has typically traded *at that time of day*.  So, for instance, is volume at today's opening bars significantly higher, lower, or similar to typical volume during those bars over the past month or so?  *Who* is in the market determines how much the market can move and how it is likely to move.  Who is in the market also tells you who you are trading against, and that tells you how the market is likely to move.

A simple exercise is to identify the best couple of trading opportunities each day over an extended period of time and then check out those opportunities as a function of the market volume traded on each occasion.  You'll see that the ideal "setups" occur differently when you're trading in markets dominated by institutions and those dominated by smaller participants.  Developing traders who don't understand context won't realize why the patterns that had been working for them now aren't working.  They'll become frustrated, and that will hurt their trading.  But the problem is not predominantly psychological.  It's a failure to understand market context.

More to come.

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8/16/2026 - So what does trading have in common with photography and how is that relevant to coaching our own trading performance?  The above photo of a bee eating and pollinating a flower was sent to me by Dr. Corinne Masur, a psychology colleague and an accomplished photographer.  It's a beautiful picture of a beautiful act:  the bee feeds from the nectar, while pollen sticks to its body.  When the bee moves to another plant for eating, the pollen falls off onto the new flower, enabling the new plant to grow and flourish.  The bees and flowers thus live in a mutually beneficial ecosystem.  Understanding the bee requires an appreciation of that ecosystem.

When Dr. Masur described what it takes to capture such a beautiful photo, she said that it requires the ability to stand in one spot for a long period of time.  That immediately made sense to me.  The perfect shot doesn't just suddenly appear.  The photographer sees a promising opportunity and waits for the right shot, framing it to capture the subject and its surroundings.

Great traders have a detailed understanding of an ideal market situation to exploit, from the big picture to the moment-to-moment activity.  They then have "the ability to stand in one spot for a long period of time", patiently waiting for phenomenal reward relative to risk.  Those are the opportunities to size up, and they don't come along all the time.  Trading without the ability to stand in one spot--and the knowledge of what to look for across time frames--*is* overtrading.

What many traders don't understand is that each market exists within an ecosystem.  It's understanding that ecosystem that that helps us trade the opportunity properly.  Simply looking at price bars and chart data misses the ecosystem.  It would be like looking at the bee and missing the flower.  The next post will explain how to coach ourselves to identify market ecosystems.

This post is written in honor of Victor Niederhoffer, who understood nature and ecosystems and their relationship to markets.

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8/14/2026 - It's often assumed that the role of trading psychology is to help us follow our plans and execute our setups.  That is not how experienced traders and portfolio managers coach themselves.

Consider a basketball team preparing for an important game against a talented rival.  A significant amount of time is spent watching game films, stopping the films at key points, and learning lessons from those occasions.  It is those lessons that are then practiced on the court, building awareness and skills that can take advantage of the rival's weaknesses.

For instance, the films might show that the opposing team is slow to rotate their zone defense when the ball is passed cross court.  This sets up open jump shots from the perimeter.  In practice, then, the team will rehearse rapid cross court passing to take advantage of the opponent's slow adaptation.  

How does this relate to markets?  The market is the opponent, and the "films" we review are how the market has recently traded.  We track volume/volatility; we track which markets have been correlated with our market; and we track which sectors of the market have been strongest and weakest.  We then identify opportunities that have appeared in these recent markets and how we can best take advantage of them.  Our practice is rehearsing how we'll trade patterns that are likely to recur in today's trade.

But what if today's market trades differently from recent markets due to news and/or impacts of other markets?  That's when we call a timeout and quickly adapt by *not* following our previous plans and by seeing--in real time--how opportunities are setting up.  We may even be able to identify markets from the past that have traded similarly and reviewed how we successfully traded them.

In other words, self-coaching sometimes means intentionally not following our plans in order to adapt to new/different market conditions.  Self-coaching is preparation and training, and sometimes that means making real time changes in what we do and how we do it.

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8/13/2026 - We are always coaching ourselves.  Some of us do it in a conscious, planned fashion and others do it randomly.  Our self-talk *is* our self-coaching.  We are always talking to ourselves about what we're doing, what we have done, and what we should do.  That internal voice is the coach within us.

That is why it's a great test to ask ourselves:  Would I want someone else to talk to me the way I speak to myself?  Would I speak to a good friend or colleague the way I speak to myself?  If the answers to these questions are no, then it's likely that our self-talk (our self-coaching) is sabotaging us.

The reality is that informed, constructive self-talk, like informed, constructive trading, is something that has to be learned, practiced, and cultivated.  We need to work on our self-coaching every bit as much as we work on our trading, because we're looking for mastery in both domains.  

Yes, we can hire trading coaches and we can sit on trading floors and listen to team leaders and managers guide us.  But if we simply rely on others as our coaches, we won't necessarily learn the skills and develop the tools for effectively coaching ourselves.  It starts with the quality of our self-talk and whether we're challenging and inspiring ourselves or draining ourselves of vital motivation.

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8/12/2026 - Why aren't we more successful in coaching ourselves to success?  As noted below, structure is vital.  If our coaching is irregular or if it's a mere add-on to our day's activity--something to get over and done--then it can't truly be internalized to change who we are and what we do.  A great question is whether we review our trading/performance with the same intensity that we follow and trade markets.  When we read about the Market Wizards, it becomes clear that they study markets and performance for long, intensive hours.  That helps them internalize what they learn.

But another reason self-coaching is not successful is that it leaves out a key dimension of learning:  emotion.  If we look at successful coaches in sports and performance fields, they don't simply go over performance in rote, routine ways with performers.  They motivate.  They push for more and more, better and better.  Think of locker room talks by basketball and football coaches.  Think of the coaching of Olympic stars.  The role of the coach is to inspire greater and greater performance.

How well do you inspire yourself in your self-coaching?  How well do you motivate yourself?  If your reviewing and planning are emotionless, routine processes, can they really push you to greater and greater achievement?

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8/11/2026 - Every trader is their own coach:  how we talk to ourselves and how we spend time previewing and reviewing markets *is* our self-coaching.  A worthwhile question to ask is:  If we coached a new trader in the way we coach ourselves, how well would they develop?  Alternatively, if we coached someone in the gym the way we coach our own trading, how well would they develop?  Many traders are far too informal in their self-coaching, so that they never truly challenge themselves and grow.

The first dimension of successful self-coaching is structure.  We don't hesitate to structure our trade ideas, spelling out entries, exits, sizing criteria, etc.  But how well do we structure our own coaching?  What kind of notes do we take before trading starts, during trading, and after?  How do we draw upon these notes to identify what we saw well and what we missed?  How do we review the trades that we took to see how well we could improve what we did?  How do we turn that review into action plans for the next day?

Look at workouts and practice sessions among sports teams or after action reviews by military squads.  There is nothing informal about it.  There is structure and there is purpose.  Everything is geared to improve performance going forward.  The coaching is motivational:  sometimes encouraging, sometimes a kick in the behind.  But there is always structure, going over performance in detail to highlight what we do well and what we could do better.    

Key Ideas From Trading Psychology 3.0

 

7/22/2026 - In his book Become Who You Are, Ryan Bush points out that each of us has a "portfolio"--a collection--of virtues and personal strengths.  He explains that "Pride is essentially the feeling of your virtue portfolio going up in value" (p. 208).  And how do we increase the value of our portfolio of strengths?  Bush recommends that we "simply create a daily activity schedule, designed to slightly increase the amount of virtue you bring out through your daily behaviors" (p. 209).  By integrating work on our strengths into our daily calendars, each day becomes a workout that expands the best of who we are--and each day becomes intrinsically rewarding.  

A good question to ask in this regard is "How will my trading today make use of the best of who I am?"  In other words, in addition to a monetary P/L, we create a psychological P/L in which pride in our work becomes the gauge of success.  Bush points out that such pride is the opposite of depression.  Rather than feel worthless, we experience the gratification of realizing our best selves.  It is very difficult to trade emotionally and on tilt if our focus is on being the person we most admire in ourselves.  

Bush quotes Michelangelo:  "Every block of stone has a statue inside it and it is the task of the sculptor to discover it.  I saw the angel in the marble and carved until I set him free" (p. 230).  Each of us is a block of stone.  Each of us is also the sculptor.  Trading, at its best, is art:  What we visualize ourselves to be and carve within ourselves is what we set free.

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7/21/2026 - A fascinating book from Mason Currey is Daily Rituals: How Great Minds Make Time, Find Inspiration, and Get to Work.  The book is a collection of work routines from a variety of talented and unusually productive artists, writers, scientists, and more.  What Currey shows is that a daily routine is "a finely calibrated mechanism for taking advantage of a range of limited resources: time (the most limited resource of all), as well as willpower, self-discipline, optimism" (p. xvi).  The key idea here is that routine can be the incubator of creativity and productivity.  Recall yesterday's post about "deep practice".  When we turn deliberate practice into an intensive routine, we supercharge our learning and that fuels creative accomplishment.  That is precisely what we see among the Market Wizards:  long hours of viewing and reviewing markets and trades and uncovering hidden patterns that can be converted into opportunity.  Creative insight does not come from out of the blue.  It is the result of regular, intensive effort.

In pursuing intensive routine, the great achievers tracked by Currey develop their capacity for intentional focus.  Their routines are their gymnasiums.  How they work is how they expand their capacity for sustaining creative effort.  Writing of the philosophy of G.I. Gurdjieff, Colin Wilson points out that "Compared with what we ought to be, we are only half awake.  Our fires are damped, our drafts are checked.  We are making use of only a small part of our possible mental and physical resources".  Creative geniuses have harnessed the power of routine and intensive deliberate practice to keep themselves awake.  Their routines are not just routine efforts.  Like the work in a gym, they are efforts that strengthen us.

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7/20/2026 - The previous post asked the question of why educational programs for traders rarely act as talent incubators.  The instructors can detail patterns to trade and sound trading routines, but rarely if at all do we see the students reaching their desired levels of success.

The problem is that best practices require best processes for their implementation.  Daniel Coyle, in his classic text The Talent Code, explains that success requires "deep practice".  Not just repeated practice, but *depth* of practice.  He gives the example of Clarissa, a clarinetist, who on first assessment does not appear to be especially gifted.  She gets to a point in the music where she makes a mistake, she goes back to the beginning, she repeats the sequence again and again in different ways until it sounds right, and then she moves on in the music until she makes another mistake.  Rinse and repeat.  Gradually, she becomes a talented musician.  

Deep practice is anything but review and repetition.  It's an active process of trial and error that doesn't stop until there is mastery.  An example I'm familiar with as a writer is that I will write a section of a chapter in relatively stream of consciousness fashion and then I will take a break and slowly read what I've written, changing sentences and sentence structures along the way.  Then I reread the section.  And make more changes.  Eventually it reads the way I want it to read.  By repeating this process for every paragraph of every page, I've learned to be a good writer.

Dr. Ellen Winner has called this process a "rage to master".  It is the bridge that links talent and innate interest in a field with elite skill development.  Traders who watch videos and take courses and then hope to trade successfully short circuit the process of deep practice.  From Coyle's perspective, there is no depth whatsoever in what they're doing.  Trading success is less about chart patterns and indicator readings and much more dependent upon what we observe among the Market Wizards:  an intense rage to master grounded in deep practice.

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7/19/2026 - At one level, the coming Trading Psychology 3.0 book will be a review of all that we know about trading greatness.  At a broader level, it will be a review of what we know about greatness in life.  Trading, like all disciplines, is a path for self-development.  In defining and refining our selves, we gain both self mastery and market mastery.

There is no lack of educational and training programming for traders, some of which attempts to detail the precise trading opportunities taken by the mentor.  What is striking about all of these is that the great, great majority of the students participating in these programs never achieve distinctive success.  They learn, but they do not master.

Why is this?  If a highly successful trader lays out in detail what they are doing to make money, why can't developing traders replicate that trader's success?  When we step back and think about it, this challenge is not unique to trading.  Any great athlete can explain in intricate detail how they train and how they perform, but very few of their trainees will be able to win Olympic medals.  

Trading Psychology 3.0 will propose a unique explanation for this phenomenon.  A book title from Ryan Bush is Become Who You Are.  It suggests that greatness comes, not from mimicking others, but from the intensive application of one's own talents, skills, and passions.  Most education shows you how to be like the teacher.  Rarely is that a path to elite success.  "If you meet the Buddha on the road, kill him" is a Zen Buddhist saying that tells us that enlightenment can only come from within:  from becoming better and better versions of who we already are.  The path to your trading greatness can be found in what you are already doing greatly.

Our challenge is to become better and better versions of ourselves.

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7/17/2026 - How can we overcome the emotions that make it difficult for developing traders to master their craft?  This will be an important topic in the Trading Psychology 3.0 book.  Somehow, because of the structure of the training process at hedge funds, we don't see portfolio managers or team members going on tilt or overtrading due to FOMO.  How can we develop the right mindset as well as the right trading?

The answer lies in the learning process.  What leads to overemotional trading are the *needs* that we bring to trading.  Specifically, if we *need* P/L (because of our financial situation or because of our self-esteem), then we're going to overtrade and overreact to make profitability happen. Great trading means knowing when to *not* trade.  The best traders, as seen in the Market Wizard books, trade quite selectively:  when *they* have the edge.  They are driven to trade well and that makes them better and better over time.

At a hedge fund, becoming a money manager is a developmental process.  First you might begin as a junior analyst, then you will expand your responsibility for researching good ideas, then you will trade a simulated "paper" book of your ideas with the mentoring of the portfolio manager to learn trading skills; then you will be allocated a small "sleeve" of capital to trade based on what you've learned.  Gradually that sleeve can expand to the point where you become a co-manager and eventually can begin your own team.  All of this occurs over years.

The developing analyst/trader judges performance based upon their learning and professional progression.  Each day's P/L is irrelevant to the bigger picture of growth.  The reason the developing money manager does not experience tilt and frustration is because they know they are meant to learn from losses.  They are focused on their learning P/L, not their dollars and cents each day.

This is why it can be very helpful to participate in a quality training program for traders.  The right mentoring keeps us focused on the big picture of our growth and away from trading ups and downs.

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7/16/2026 - What is the greatest impact on professional trading that I've seen from AI?  Initially, AI was super helpful in terms of coding ideas from traders.  Now we're seeing AI as a fast and deep research tool, capable not only of identifying promising trade ideas but also trading them.  For the first time in years, I'm seeing teams actually shrink in size as the efficiencies of AI make the hiring of analysts and junior traders unnecessary.

There is, however, a more profound transformation coming from AI that will be explored in the Trading Psychology 3.0 book.  With the ability to quickly research and identify trading opportunities and automate those, there is no reason why tomorrow's daytrader can't be a portfolio manager.  In other words, the benefits of diversification and holding different positions that will thrive in different market environments will increasingly become an essential part of daytrading.  Imagine a daytrader who simultaneously holds short-term positions in different stocks and different markets:  some might be scalps, others might be intraday position trades, others might be swing opportunities.  Now the trader's job becomes one of balancing the various positions, creating multiple ways of winning based upon rigorous research.

Many traders are looking to training and education sites for ways of playing the game better.  Soon, however, it will become a different game entirely.  Tomorrow's trader will look increasingly like today's hedge fund manager.

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7/15/2026 - The book Trading Psychology 2.0, published in 2015, was an effort to take trading psychology beyond the usual themes of controlling emotions and avoiding impulsive behavior to a look at the best practices of the successful traders I was working with at professional trading firms.  A little more than a decade later it's time for an update.  A number of excellent books have come out during that time detailing trading success.  I've also learned a great deal about the specific trading practices that contribute to success and especially the overarching processes that help traders adapt those practices to ever-shifting market environments.

At the heart of the new 3.0 book will be a good old fashioned literature review.  In the academic world, where I've worked since the 1980s, one begins a research project with a review of all the important works that have been published, the answers they provide, and the questions they leave open.  The idea is that, in true science, knowledge is cumulative:  we build our understanding step by step, contribution by contribution.  Trading Psychology 3.0 will review a large number of books written by successful traders and successful trading coaches to highlight what we know about great trading--and what still remains to be discovered.

One key idea from the 3.0 book will be the degree to which profitable trading is process driven.  It is far more than searching for patterns to trade and setting stop loss points and profit targets.  Process oriented trading incorporates a set of routines that examine markets and track the evolution of opportunity and an entirely separate set of routines to review performance and track improvements that have been made and that need to be made.  It is the consistency and intensity of these processes--many of which are performed by teams in professional settings--that shapes profitability.

A forthcoming book by Brian Mazza, called Nothing Changes if Nothing Changes, draws upon the structure of physical development to identify what we need to do to train success in all areas of life.  The idea of developing our trading as a training process is a powerful one, where the goal is not just improvement but transformation.  If how we prepare for trading each day is not a true workout can we truly expect to transform ourselves as traders?