Take A Personality Strengths Quiz!

Below are 18 adjectives.  Please select the six that best describe you, where number one is the adjective most like you, number 2 is next most like you, etc.  

Disciplined Organized Diligent Calm Competent Prudent Friendly Energetic Outgoing Intellectually Curious Loves Variety Accepts Others Cooperative Caring Helpful Achievement Oriented Competitive Driven

Save your results.  In the next post, I will go into detail about what your choices tell you about your personality strengths and what those mean for your trading. 

Please refer to the previous post regarding the role of strengths in our trading (and life) performance.   

I'll post the key to the questionnaire later this weekend, and we can explore how our best trading comes from the best inside us!

Further Reading:

Radical Renewal - The Role of Spirituality In Trading

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Why Are Your Strengths Important To Your Trading?

Our strengths reflect what we do well:  they are the essence of us at our best.

Engaging our strengths is naturally enjoyable and fulfilling, giving us energy and fueling our performance.

We are most likely to pour ourselves into our work and relationships and find success if our work and relationships actively engage our strengths.

One source of failure, in trading and in all of life, occurs when we fail to recognize and play to our strengths.

Another source of failure occurs when we overutilize strengths and become one-sided and rigid.

An important source of personal and trading growth comes from building our latent strengths:  those capabilities we haven't fully developed.

Tracking our successes and failures can teach us a great deal about our strengths and how we need to deploy those.

The techniques that are most effective in building our strengths are different from those used by psychologists to correct weaknesses.

In coming posts and webinars, I will be helping traders identify their core and latent strengths and figure out how to best make use of those in their trading.  

Let's grow.  

Together.

Further Reading:

Our Struggles Develop Our Strengths

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Controlled Aggression: Trading Like A Sniper

When I wrote the book on developing trader performance, one group that I studied intensively was military snipers.  (See this post for an overview of how good trading is like good sniper technique).  Good trading is all about the integration of aggressiveness and self-control.  The sniper is concerned, not only with the kill shot, but doing so in a way that will not be detected.  That means that the sniper must only act when reward is high relative to risk.

In practice, that means that the sniper does not simply start firing when the high-value target first appears.  The sniper waits, slows his breathing, and looks for the ideal opportunity for a lethal head shot or an unobstructed shot at center mass.  Then it's a single pull of the trigger and a quick move to another location before the enemy can figure out where the shot came from.  It's all about controlled aggression and the patience, selectivity, and self-control that leads up to the ideal shot.

A sniper who "overshoots", like a trader who overtrades, is not one with a long career.  It's not enough to wait for the "setup" to occur.  You want to wait that extra few seconds to see price confirming your idea before you fire.  You want the lethal shot.  That means you don't try to catch exact tops and bottoms:  you hold your fire until you have *reason* to believe a top or bottom has been put into place.  

A good sniper does not feel confident or anxious; a good sniper does not feel excitement or fear.  

A good sniper feels a bit of recoil.  

That's controlled aggression.

Further Reading:

The Trader As Sniper

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A Few Big Ideas For The Weekend

Here are a few thoughts and links for the weekend:

*  The thoughts, emotions, and behaviors that we repeat in our day-to-day lives are those that will inevitably dominate our trading.  Our trading psychology will never be better than the psychology of our daily lives.

*  Successful people--and successful traders--face limitations and restrictions creatively, by finding new ways to thrive in their new environments:  How we make working from home work for us.

*  Amazing things happen when team becomes a verb--something we do--and not just a noun: The workplace (and teamwork) of the future will be a flexible one.

*  If the Fed indeed targets an *average* inflation rate of 2%, then it will tolerate periods of even higher inflation without tightening policy.  Stocks, commodities, bonds:  could we be relatively early in the process of fueling asset inflation?  

*  Greatness is the sum of small improvements, rigorously and continually implemented: The goal is consistency, not just profitability.

*  Very big picture thinking from Ray Dalio re: historical cycles and what they mean for the U.S. and the U.S. dollar.

*  Achievement is a twin function of 1) pushing ourselves to do better and 2) being pulled by a vision of what is possible.  The first gives us our direction; the second provides our energy.

Have a great weekend--

Brett
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How Trading Reviews Build Your Trading Psychology

Trading psychology is a strange field.  We find people offering coaching who show no evidence whatsoever of playing the game or even knowing much about the game.  Can you imagine a swimming coach who works on people's mindsets, but knows nothing about diving technique or how to hit the right water depth in a breaststroke?  How about a golf coach that counsels people about staying calm, but hasn't the first clue about which clubs to use on different holes, how to adjust stance and swing, etc.?

Sigh.

The truth is that, especially for developing traders, a bad psychology typically results from bad trading.  Learning to trade well and working on trading technique is great for the mindset.  

The latest Three Minute Trading Coach video takes a look at traders' review processes and how we can review opportunities that set up in markets.  In that video, I describe one of the patterns I have found most effective in my recent trading.

If you click the charts above (top chart is for Friday's market; bottom chart is for today's), you can see the patterns I review and study.  The pattern occurs in the broad market (ES futures or SPY).  The top panel shows price action and the yellow arrows highlight short-term oversold conditions that are occurring at higher price lows.  The panel below tracks the proportion of volume traded at the market offer price minus the volume traded at the bid, so that we can see buying and selling pressure come in and out of the market.  The arrows on that panel show selling pressure waning, even as the market bottoms.  The panels at the bottom are different ways of capturing short-term overbought and oversold conditions through moving averages of bid/offer volume, RSI, etc.  (Charts created in Sierra Chart).

Viewing and re-viewing these patterns cements them in our mind.  In that way, Friday's review acted as a heads up for trading today's early strength.  As the video emphasizes, the purpose of review is training in pattern recognition.  With enough exposure, we become able to see patterns unfold in real time and perceive solid risk/reward opportunities.

Allow me to add one additional element to the charts and video.  Reviewing optimal execution of the patterns is just as important as reviewing the patterns themselves.  The key to consistent trading is not just finding good ideas, but finding ways to trade them that offers solid reward relative to risk taken.  I don't try to capture exact bottoms of the pattern above.  Rather, I wait to see selling pressure wane and then I want to see buyers start to assert themselves.  The idea is to ride that initial wave of buying and lean against the low for superior risk/reward.  Especially for active traders, the proper execution of the pattern is as important to work on as the recognition of the pattern.  

Just like swimming.  Just like golf.  Working on great execution is key to winning and key to a winning mindset.

Further Resources:

Reviewing Trading Opportunities

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Letting The Market Reveal Its Psychology

I recently posted one of my favorite trading patterns in the broad market that reveals the psychology of market participants.  Here is another favorite trading practice:

I let the opening minutes in the market go by without making any trades.  I'm watching the flows in the NY day session and getting a sense for how the market is moving.  Specifically, I'm looking at:

1)  Breadth and Market Sector Behavior - Is everything going up or down on extreme breadth, or are we seeing a mixed market with rotation among sectors?  The former gets me thinking about a trend day; the latter has me thinking about trading relative strength or weakness with the sectors that are strongest or weakest.  The advance-decline line can also be helpful in this regard.

2)  Relative Volume in the Market - Are we seeing more volume than average come into the general market in opening minutes, same, or less?  Volume tells us about *who* is in the market.  Fewer institutional participants means less movement and greater likelihood of choppy or range trading; more participants leads to greater momentum in the overall market.

3)  Buying and Selling Pressure in the Market - I use the upticks versus the downticks among the stocks in the market averages to tell me how many stocks are attracting buying or selling in real time.  Especially important is the degree to which the buying or selling is capable of moving the market. 

So let's put it all together.  If you click on the chart above, you'll see the upticks versus downticks among all Russell 2000 stocks in the top panel, along with a moving average of the ticks (green line).  I've also drawn a yellow line at the zero level so that you can easily see when the short-term moving average of the ticks is above and below zero.  The bottom panel shows the price of IWM on a one-minute basis (Chart and data from Sierra Chart). 

The early action in the day, as well as recent days, suggested to me that the smaller cap stocks are showing relative weakness.  Waiting out the first minutes of opening trade, we can see more downticking among the Russell stocks than upticking.  Notice them (yellow arrows) how bounces in the Russell TICK occur at lower price highs, providing nice risk/reward opportunities to sell IWM.

Three things help me let the market reveal its psychology:

1)  Looking at all market sectors, not just the overall market or the same stocks that everyone else is trading;

2)  Waiting out the opening minutes of trade to let the market patterns come to me;

3)  Looking at data that the majority of players don't look at, such as upticks/downticks that are sector specific.

As I've stressed in the past, you become a good trader by improving your game.  You become far better when you figure out ways to play different games.

Further Reading:

Looking at the Market Through Different Lenses

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Three Common Mistakes Traders Make With Their Trading Reviews

In a recent post, I described the process of making frequent reviews and small, steady improvements as a way of building the consistency and success of our trading.  Our trading results will never be more consistent than our trading process.  But how do we construct a good review, so that we can extract the greatest learning from our experience?  The recent Three Minute Trading Coach video kicks off that topic and emphasizes the importance of reviewing both what we trade and how we trade.

What I find is that traders commonly make three mistakes when they review their trading:

1)  They review too much - If reviews are very broad and attempt to capture all market opportunities, all the mistakes we made, and all the goals we can set, then nothing is truly prioritized.  A good review is an efficient review, targeting our greatest successes and shortcomings on the day or week and then making those the focus on our efforts at improvement.  Working on fewer goals more intensively leads to more lasting change.  If we look at everything, we internalize very little.

2)  They aren't actionable - Reviews often summarize problems and intentions.  "I traded too large, so I need to be more careful with my sizing tomorrow" might be a journal entry.  That doesn't cut it.  What, specifically will you do to be careful with your sizing?  How will you determine proper sizing?  How will you address frustration factors that might lead to poor sizing decisions.  A review should finish with a highly concrete game plan for the next day, week, etc.  A review without a plan is merely a look in the rear view mirror.  By itself, it cannot get you to your desired destination.

3)  They are throwaway - Once we conduct a review and set goals and plans, we need to then return to that review and those goals and plans after our next day or week of trading and ask ourselves, "Did I succeed with the goals I set?"  If not, we need to tweak our plans for the next time period.  If we did succeed, we need to make note of what we did so that those actions can become more consistent, more part of an automatic process.  If we don't revisit our goals and plans, we aren't truly holding ourselves accountable.

Good reviews give you fresh views.  Good reviews help you see new things in the markets you trade and in how you're trading them.  If reviews aren't providing you with insights, they probably aren't providing you with learning.

Further Resources:

Conducting A Great Trading Review

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Why Is Process So Important To Trading?

When I wrote my book Trading Psychology 2.0, I chose the subtitle:  From Best Practices To Best Processes.

As traders, we want to discover what we do well.  Our successes reflect our strengths, and we are most likely to succeed when we draw upon our strengths.  An excellent short-term trader, for example, may have strengths in the areas of speed and breadth of mental processing.  The ability to look at many markets or stocks and quickly perceive evolving patterns is not something everyone can do well.  When we study our successes and figure out how we are making use of our strengths at those times, we become able to define our best practices.  Best practices are what we do to increase the odds of our success.

Once we identify a number of best practices, we can unite them and create effective work processes.  For instance, an operating room at a hospital will have best practices for staffing, sanitation, prepping of patients, medications before and after surgery, specifics of surgical procedures, recovery, and lengths of stay.  The entire series of best practices comprises a process, which ensures the most consistent positive outcomes possible.  As new best practices are discovered, these are integrated into existing processes, creating ongoing quality improvement.  The entire framework is known as evidence-based medicine.

Process is important to trading because it turns inconsistent, subjective trading into  evidence-based trading.  When we discover our best practices for identifying opportunity, expressing opportunity as solid risk/reward trades, and managing positions in real time, we can unite these elements of success into a rigorous process.  In becoming process based, we find our most consistent profitability.  Do we see operating room surgeons going on tilt or over-cutting?  Of course not.  When we train ourselves in a process framework, doing the right things becomes second nature. 

Further Reading:

Building Your Trading Consistency

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How To Build Your Trading Consistency

Above you can see a recent reading from my glucose meter.  As a person with Type II diabetes, controlling my blood sugar is important to my health.  To achieve that control, I wear a sensor on my upper arm that provides real time blood sugar readings to the meter shown above.  In the beginning, wearing the sensor and using the meter, my readings were all over the place.

By taking readings frequently through the day, I gradually learned the times of day when my blood sugar tends to be highest and lowest, how foods and exercise influence my readings, and how much medication to take to stay in my target zone.  This took a lot of trial and error.  I made many mistakes with what/when I ate and many mistakes with medications in order to learn what works.  The recent meter reading shown above illustrates what is possible when we measure outcomes continually and make small, targeted improvements with frequent feedback.  

Some people with diabetes jump from diet to diet and medication to medication and never make these improvements.  They look for big changes to their readings, and so they fail to make smaller, steadier improvements.

It's the same with trading.  The successful traders try lots of things, make lots of mistakes, get daily feedback, and then make very specific, targeted improvements in what they trade, when they enter, when they add size or scale out of positions, when they stop out, etc.  Every trade gives them a "meter reading" and they learn what works and what doesn't.  Other traders look for big changes to their trading and jump from "setup" to "setup", one style of trading to another, one time frame to another.  There is nothing cumulative to their experience, and their results show that.

We can't build a building jumping from one set of blueprints to another.  Ultimately we have to decide on our structure and lay the foundation brick by brick, gaining relevant experience as we go along.  The consistency of our trading will never exceed the consistency of our learning processes.

Further Resources:

The Three Minute Trading Coach - short videos on trading psychology techniques

Consistent Trading, Intensive Learning

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One Of My Favorite Trading Patterns

If you click on the above, you'll see a screenshot from my trading platform (Sierra Chart).  There are five measures arrayed from top to bottom:  1) ES futures, each bar represents 50,000 contracts traded and lines represent shorter and longer moving averages; 2) amount of volume for each bar that is traded at the offer price (buyers more aggressive) minus the amount of volume traded at the bid price (sellers more aggressive); 3) a 10-period moving average of volume at offer minus bid; 4) a five-period RSI for the ES futures; 5) a five-period detrended oscillator reading for the ES futures.

The idea is that, in one view, I can see:

1)  Are we overbought or oversold?  (RSI, Detrended Oscillator; Price vs. moving averages)
2)  Have we seen dominant buying or selling pressure? (Volume at offer/bid; moving average of volume at offer/bid)
3)  How much price change are we seeing in response to buying and selling pressure?  

The yellow arrows point to occasions in which we are getting short-term selling pressure and oversold levels with very modest downside price change.  These are occasions in which there is meaningful selling pressure, but it's unable to move price meaningfully lower.  These sellers are eventually trapped and help fuel the next leg higher in the uptrend.

The proportion of volume traded at offer vs. bid correlates with actual price change around +.46 over the past 10 months.  That is a significant correlation, but note that the amount of variance in price change accounted for by buyers lifting offers vs. hitting bids is only a little over 20% (.46 squared).  It's when we get decent buying and selling pressure that cannot move price significantly that we see reversal opportunities set up.  Many of the best short-term trading opportunities come from occasions in which buyers or sellers become trapped and must run for exits.  We can identify those occasions and anticipate the unwinds.

Reading the psychology of the markets is just as important as being aware of your own psychology.

Further Reading:

Finding Unique Opportunity in the Market

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Reprocessing Emotions For A New Trading Psychology

Our losses, our mistakes are part of who we are.  We cannot eliminate all emotion around our setbacks, nor do we want to.  Self esteem means embracing the experiences that shape us, including the bad and the good.  All are potential fuel for learning.

Imagine vividly mentally rehearsing making various trading mistakes and, during the visualizations, filling yourself with excitement over learning from these or gratitude for the opportunity to learn or peacefulness over the realization that you can embrace the losses and move forward.  Again, again, again, you conduct the visualizations while keeping yourself in an eager mindset, a learning mindset, a grateful mindset, a peaceful mindset.  With that repetition, we reprocess our emotions, so that, in real time, what we rehearse will become our experience, because it has become part of us.  

This Forbes article explains how we can develop an enhanced mindset: one that we can rehearse as part of reprocessing.  This short video introduces the mindset concept.

Experiencing our problems in a fresh mindset: this is a powerful avenue for creating a new trading psychology.

Mastering Your Mindset

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Valuable Trading Psychology Lessons From My Cats

Well, at present we have four rescue cats and that makes for a full house.  Every morning they wake me up (around 4 AM), and I start every morning by petting them, feeding them, and cleaning up their litter.  I'm a firm believer that we set the tone for our day by what we do at the start of the day.  I don't start by looking at market quotes, news, emails, or chats.  I start by loving and serving those I love.

Actions, repeated, transform us: We become what we do.

Here are three trading lessons I've learned from our cats over the years:

*  We can overcome even the greatest adversity by making use of the strengths we have and finding something in our environment that engages us:  The story of Mali

*  If we want to change a negative pattern in our thinking, feeling, or acting, we need to tap into a motivation greater than the one that underlies our problems:  The story of Naomi

*  We don't create our opportunities.  We put everything of ourselves out there, and opportunity finds us:  The story of Mia

Once we can put our egos aside, we can learn from everything in life--even humble cats.

Brett
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The Key To Becoming Your Own Trading Coach

There are many techniques in psychology that can help us overcome negative emotions and thought patterns, and also ones that help us build positive patterns.  The Three Minute Trading Coach series of short videos is an introduction to these techniques.  Each video focuses on a different exercise that can help you improve the consistency of your trading by working on the consistency of your mindset.

There is a secret to making each of these methods work:  practice.  Most of our negative patterns have been with us long enough that they have become habits.  To break a habit pattern, we need to work at recognizing what triggers it, work on interrupting it, and work on replacing the old habit pattern with a new, positive one.  The goal is to create new ways of thinking, feeling, and acting that are so well rehearsed that they become a natural part of us.  That takes daily (and sometimes more than daily) practice.

A rule I've found helpful is to rehearse these techniques religiously for 90 days and they will become a natural part of you.  If you want consistency of trading mindset and consistency of trading, you need to work on those things consistently.  Once you do that, you don't need to hire an expensive professional.  You've become your own best trading coach.

The Three Minute Trading Coach Videos

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Two Best Practices I See Among Successful Developing Traders

I've worked over a period of years with two proprietary trading firms:  Kingstree in Chicago and SMB Capital/Kershner Trading in New York.  The advantage of working inside such trading firms is that I get to see what is really going on and, most important, I get to see the P/L of each trader.  Putting these experiences together, I can identify two best practices that have been associated with success among developing traders:

1)  A rigorous planning and review process - Winning basketball and football teams prepare intensively for each opponent.  They stay in shape with drills, review game film to find weaknesses in the opponent and correct their own weaknesses, and practice plays over and over again before game day. Similarly, successful developing traders review in detail what happened over the past day and week, plan for potential opportunity, and track their performance so that they are actively working on goals that enable them to get better.  One practice I've seen that works especially well is recording the market day and then replaying the video, stopping at key points, and seeing--frame by frame--how opportunity set up.  Think of how many more reps those traders are getting than the average noob.  SMB provides a nice example of a "monster trade review", in which the trader studies ways in which good trades could have become great trades.  Note how that reinforces--every single day--the idea of becoming a great trader.

2)  Developing multiple ways to win - To use Mike Bellafiore's phrase, successful traders work on developing a playbook outlining patterns associated with opportunity and how those set up in real time.  Like a good football team, the successful trader has a deep playbook that allows for an adaptation to many different conditions.  So, for example, any football team has a diverse set of running plays and passing plays that can exploit a wide range of defensive setups, field conditions, and game clock constraints.  Knowing which plays to run under particular situations is a key strength of any coach and quarterback.  Successful traders have studied opportunities in various kinds of markets and that set up at various times of day and over various time frames.  That means that, like the star quarterback, they can run the right plays given the conditions they face.  Successful traders are anything but one-trick ponies.

As I emphasized in the trading performance book, success in any performance domain is a function of talents we're born with and skills we cultivate through deliberate practice.  The traders I see succeeding are ones spending an unusual amount of time working on their trading outside of market hours.  They are getting feedback from coaches, mentors, and peer traders, and they keep score of their trading with detailed statistics.  The great traders love markets, love learning, and love growing.  To use Ellen Winner's phrase, they display a "rage to master".  It's not P/L that motivates them.  It's the process of mastering a field that speaks to their greatest talents and interests--and that is what brings the P/L.

Further Reading:

How To Get The Most From Your Trading Practice

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Your Self-Talk Shapes Your Trading Psychology

Self-talk is our ongoing processing of life events.  Most often, this processing reflects whether events are good or bad for us, what we would like to happen, etc.  This is why I emphasize in the Radical Renewal book that self-talk is our ego.  To the extent that our egos intrude upon our trading, we cannot be fully market focused.  One way of dealing with this problem is meditation, which quiets self-talk and takes us out of ego mode. Another way of dealing with disruptive self-talk is to learn to step back from negative processing and interrupt its damaging effects, as described in the recent Three Minute Trading Coach video.

The meditation approach attempts to exit us from ego.  The cognitive approach keeps us in ego mode, but shifts the focus from negative to constructive.  From the cognitive perspective, the problem is not self-talk, but disruptive self-talk.  If we talk to ourselves in constructive, encouraging ways, we can maintain a positive mindset--and that is associated with superior learning and performance.  The key question is whether our self-talk is helpful to our subsequent processing of market information or whether it distorts our plans and intentions.  

One of my favorite forms of self-talk following a losing trade or missed opportunity is, "What can I learn from this?"  I don't continue trading until I have a concrete takeaway either in terms of the market or in terms of how I'm trading the market.  For example, I recently shorted the market in early morning trade and then watched as the market initially went my way and then rebounded sharply on higher-than-expected TICK readings.  I immediately said to myself that the buying support was significant and that I should be alert for a pullback to a higher low.  Sure enough, that scenario materialized and I was able to take the long side and profit from a move to overnight highs.

This form of self-talk is more about processing what *is* happening, rather than what is happening to me and my P/L.  Talking what is happening out loud is a kind of real-time journaling.  We talk it, we hear it, we internalize it.  A great goal for traders is to become better and better at constructive self-talk.  

More:

Cognitive Techniques For Improving Self-Talk

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An Important Takeaway From The Recent Market

This past Monday, we had roughly 92% of all stocks in the Standard and Poors 500 Index trading above their ten-day moving averages.  That is very broad strength.  Just three days later, the percentage trading above their ten-day averages was a touch over 2%.  That is very broad weakness.  All within one week!  (Data from the excellent Index Indicators site).

What we are seeing is a market with an unusual amount of herd behavior.  Many of the market participants that I speak with simply cannot take a lot of heat.  On Thursday alone, the market went down about 6%.  At many hedge funds, that kind of drawdown could knock one out of the game.  When risk limits are tight, traders have to pile into trades and have to run for exits, and that contributes to volatility and market extremes.

A key tell for the market is relative volume (RVol).  When volume expands significantly day over day, that tells us that the herd is active.  For example, volume in SPY on Monday and Tuesday was between 70 and 80 million shares.  On Thursday, we traded over 200 million shares!  When we see volume elevated in the first hour and negative extremes in the advance-decline ratio and the NYSE TICK, we want to think about front-running the herd and we want to think about the possibility of a downside trend day.  Conversely, low relative volume tells us that the herd is not active and that we could see sector rotation.  Volume shapes the opportunity set:  that's an important takeaway from the recent market.

Further Reading:

Identifying Trend Days in the Market

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Why I Am Proud To Be A Trader

I recently received the above note from a young, enterprising trader.  It's the opportunity to have positive impacts on people's lives that keeps me working long hours.  When we believe in what we're doing, work doesn't feel like work.  It feels like a privilege.

For years, I've heard all the cliches:  Traders are money-hungry and selfish; traders rape the public; traders are egotistical a**holes; traders take advantage of the public; etc. etc. etc.

For years, I've let it pass.  How do you respond to people who don't know what they don't know?

They don't see the young people I work with who are learning skills from the ground up, working every single day to master complexity, to master themselves.

They don't see that two-thirds of the investors in the hedge funds where I work are pension funds, dedicated to preserving and growing the life savings of hard working Americans.

They don't see the teamwork that goes into success; they don't see the hours spent staying up at night wrestling with ideas and positions; they don't see the daily mentoring, the daily preparation, the daily dedication to improvement.

And if portfolio managers and traders combine their talents, skills, and efforts to become successful, they are labeled by certain politicians as "looters", as part of the "one percent" that preys upon the public.

For years I've let it pass, but now it has to be said:  

The successful people I work with have earned every penny of their success.  I work with them, I see their efforts, and I see the dedication they bring to trading and investing the capital of those who trust them.

I am proud to be a trader.

I am proud to work with traders.

Ayn Rand said it best:

The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws.

As this post explains, success in financial markets requires that we become our best selves.  Trading pushes us to evolve.  When we make the most of ourselves, we have more to bring to the world.  

There will always be envy.  There will always be resentment and negativity.  Illegitimi Non Carborundum.  Don't let the bastards grind you down.  Be all you can be as a trader and you will have made a great investment in life, one that rewards you and others for years to come.

Brett     

Ask The Doc: Shifting Your Trading Mindset In Real Time

And that which consumes our minds, controls our trading!

Trader J recently wrote to me to explain something that has greatly helped his trading.  He rescued a kitten that had been abandoned and the cat has become a loving friend and companion.  As many readers know, my wife and I have rescued a number of cats and currently have four friends hanging out with us.

Trader J's observation is profound:  He notices that, when he is frustrated or upset with his trading, spending time with his kitten calms him down and enables him to return to good trading.  What is going on here?

There is a form of meditation called loving-kindness meditation in which we fill ourselves with feelings of love, gratitude, and closeness while sustaining a mindful state.  Regular practice of loving-kindness meditation enables us to anchor the positive feelings to the mindful state, so that we can access those emotional strengths whenever we become self-aware. 

What Trader J is doing is a kind of loving-kindness meditation, anchoring his closeness to the kitten to his mindful state.  While he is experiencing that bond, it's very difficult to stay frustrated, angry, or upset.  Focusing on the kitten enables Trader J to shift his mindset in real time.  Indeed, because of the power of anchoring, he can shift away from frustration any time he focuses on his little friend.

Your most powerful emotional bond can anchor your ability to exit tilt states in trading.  This is a very promising trading psychology method that anyone can learn for themselves.  With practice, you can access the love and closeness you feel for someone or something special, you can access powerful life experiences, or you can access favorite fulfilling memories and completely shift your mindstate.  The problem is not that we become frustrated in trading; the problem is that we have trouble exiting that frustrated state.  Trader J's experience points the way toward greater self-control.

More:

How to Benefit From Anchoring

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Three Research-Backed Ways To Change Your Trading Psychology

The problems that affect our lives--and that interfere with our trading--are patterned.  All of us have patterns of thought, behavior, and/or feeling that disrupt our work, our relationships, and our activities in markets.  Most often, those patterns are triggered by emotional events.  Once triggered, they can control us.  That loss of control can be devastating for our trading.

We change our trading psychology by: a) becoming aware of our patterns and triggers; b) interrupting those; and c) teaching ourselves to do something different in those situations.  If we can practice identifying, interrupting, and shifting our patterns, we can regain control over our lives and trading.

Recent videos from the Three Minute Trading Coach series highlight specific, research-based ways of changing our patterns and shifting our trading psychology:

*  This video teaches a technique to change your mental and physical state when you notice a trigger situation, so that you can focus yourself and regain control in real time.

*  This video shows how the technique can be used during your preparation for trading, so that you can anticipate triggers and defuse them before they occur!

*  This video shows how you can use the technique during your mental rehearsals of good trading, so that you literally train your mindset to be at its best when you're trading your best.

The beauty of this is that, by practicing these techniques regularly, you can become your own trading coach.  Those are skills you will have for life, and they will help you in many areas of life.  Once we gain control over our repetitive problem patterns, we open a whole new world of freedom and performance.

Further Reading:

Ask the Doc:  Changing Our Self-Talk

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Ask The Doc: Talking Aloud As A Trading Psychology Strategy

With this post, I'm starting a new feature that I'm calling "Ask The Doc".  This gives traders the opportunity to ask any trading psychology question that they're wrestling with.  When I see questions on related topics, I'll respond to those questions with a blog post here on TraderFeed.  To ask your question, you can use the comment section for the videos that are part of The Three Minute Trading Coach series or you can use the email address listed on the TraderFeed site.  

Trader Z referred to the section of The Daily Trading Coach where it discusses talking aloud as a strategy, and he asks how to best implement his talking aloud.  

The key idea here is that, when we talk an idea out loud--whether it's to ourselves or to a friend or fellow trader--we force ourselves to put the idea into clear words and make the idea understandable.  That allows us to not only speak the idea, but also hear it as we're talking.  Many times, hearing ourselves put thoughts, perceptions, and ideas into words, we gain a fresh perspective on what we're thinking.  We become an observer to our thinking...we become more mindful of our intentions.

Many times, we will hear ourselves talk aloud and realize that the idea is not a well-formed one.  Other times, we may surprise ourselves with the conviction we have in the idea.

Good advice for Trader Z is to pretend that he has been hired by a famous Market Wizard to serve as an analyst.  His job is to uncover and explain great ideas for the famous trader.  His job is also to follow the market in real time and identify good spots for entering trades based on the idea.  Of course, our trader won't want to let the Market Wizard down and won't want to get fired, so only the best ideas and best thinking will be talked aloud.  In other words, imagining that you're the analyst and are reporting to someone you look up to forces you to think about your thinking, focus on your best ideas, and be clear about your plans.

Talking aloud with another trader you respect is powerful because it allows for the possibility of feedback and keeps you actively--and interactively--engaged in your trading process.  Finding a trading partner for talking out loud and reviewing trading is one of the best strategies available for building mindful awareness of your thoughts and actions.  It's amazing how bad our worst ideas sound when we actually put them into words!

Further Reading:

Controlling Emotions Is *Not* The Goal Of Trading Psychology

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