TraderFeed

BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 12 Apr 2026 11:06:00 +0000

Below are resources to help traders become their own trading coaches, improve their trading processes, and develop a positive work-life balance. All the TraderFeed posts also contain links to valuable resources and perspectives.

RADICAL RENEWAL - Free blog book on trading, psychology, spirituality, and leading a fulfilling life

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The Three Minute Trading Coach Videos

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Forbes Articles:

https://www.forbes.com/sites/brettsteenbarger/

My coaching work applies evidence-based psychological techniques (see my background and my book on the topic) to the improvement of productivity, quality of life, teamwork, leadership, hiring best practices, and creativity/idea generation. An important part of the "solution-focused" approach that I write about is that we can often best grow by focusing on what we do well and how we do it--and then doing more of what works for us. The key is to know our cognitive, interpersonal, and personality strengths and leverage those in the pursuit of performance.

FURTHER RESOURCES

* A Creative Way to Use TraderFeed

* Brett Steenbarger Bio

* Brett's Books on Trading Psychology

I wish you the best of luck in your development as a trader and in your personal evolution. In the end, those are one and the same: paths to becoming who we already are when we are at our best.

Brett
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How Mindset Helps Us Win

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 10 Apr 2026 12:10:00 +0000

4/17/2026 - A big mistake is to think of mindset purely in emotional terms. Imagine two intersecting dimensions drawn as X and Y axes. Positive/negative mindset might be the Y axis, describing our emotional mind frame. The X axis might be focused/distracted, capturing our cognitive state. We can be distracted because we're fatigued or disorganized in our process, not necessarily because of emotional factors. Focus does not have to imply freedom from emotion. That sniper who is laser focused on a target is also in a super aggressive state.

Of course, the worst quadrant for trading is to be negative in our emotionality and distracted. The two feed one another. When we are positive in our emotional state and opportunity focused, that is when we are most likely to be open to what markets are doing and receptive to patterns that emerge. One reason I like to start my market day with research is that it is inherently opportunity-focused.

A great exercise for breaks in the trading day: Draw the X and Y axes and then identify where you're at in your focus and your emotional state. Stepping back from trading and getting back into sniper mode through biofeedback, meditation, visualization, and searching/researching can turn your trading day around and build the right habits for your trading psychology.

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4/16/2026 - What upsets the mindsets of many traders is frustration. They don't want to lose money and they wait patiently for a good entry setup and the market roars ahead without them. They are careful to not lose too much money and end up stopping out at the worst time. They want to make money, markets are slow and choppy. All of these are frustration scenarios that traders are familiar with.

Another kind of frustration is frustration with ourselves. We don't do our homework thoroughly and miss an opportunity. We break one of our own rules and lose too much money. We take a vacation at the worst possible time to be away from screens.

All of us have been there and done that. It's not that successful traders don't get frustrated; it's that they channel their frustration productively. Very often, we're frustrated because we know better and sense that we could be making better decisions. The frustration can become a prod to tighten up our processes and do the right things.

In the upcoming "Ask Me Anything" webinar with Agnieszka Wood (Wednesday, April 29th at 7 PM ET), we'll be fielding questions from traders and helping them use their frustrations for self-improvement rather than self-blame. Our frustrations are there for a reason and have something to teach us. I look forward to learning together!

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4/15/2026 - Here's a mindset factor that I've found consistently differentiates the best from the rest. The majority of traders reach out for coaching help when they're struggling. By that time, they've tried everything they can think of. It hasn't worked, and they're frustrated. A big part of the coaching is getting past that frustration so that they can approach opportunity and risk in a different way.

The best traders and teams, however, reach out when they're doing well. They are energized by their success, and they're looking to grow their businesses. Their goal is to get to that next level of success, and to do that, they have to understand what has worked for them to this point and how they can build upon it.

In the majority of cases, the request for coaching is driven by need. Among the best traders, however, the coaching is all about defining, expanding, and achieving a vision. It's great to identify and correct weaknesses--all great performers do that--but simply eliminating the negative will not achieve the positive. As I mentioned in my recent talk at the SMB summit, you are meant to do something great. The right coach never loses sight of who and what you're meant to be.

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4/14/2026 - Quite a while ago I wrote a blog post called The Devon Principle. If you weren't around 20 years ago when I wrote it, it's worth a read. The basic idea is that we are always absorbing life experience. What we do and who we do it with become parts of us. Many times, we find ourselves in the wrong mindsets--with diminished energy and productivity--because we're doing things in life that don't play to our strengths. The wrong jobs/careers, the wrong relationships: these drain us. When we are doing what we love doing and do best, our efforts *bring* us energy.

What about the *process* of trading most excites you, plays to the best within you, and represents your unique talents? If what excites you is merely P/L, you'll always be vulnerable during inevitable periods of drawdown. The key to success is finding a way to engage markets that also engages what we love doing.

Life is way too short to be lived without passion.

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4/13/2026 - How does mindset help us win in life? In the middle of the night it came to me: In an ideal mindset, we approach life as venture capitalists, looking to invest ourselves in people and activities that are amazing, unique, and promising. Put yourself in as many interesting situations and opportunities as possible. The adventure is seeing what stands out as worthy of investing your time and energy. That mindset sees the world as a place of limitless creativity where there are always people who inspire.

Too often, in markets and relationships, people focus on how they can avoid getting hurt and so they never truly invest themselves in the opportunities that are all around them. When Margie and I went on a cruise to Alaska, we were amazed at the icebergs and the wildlife on those. Our ship was too large, however, to get very close. So we rented out a small boat and an experienced guide and went right up to the birds and seals and caught a sweet view of a whale. It was a bumpy ride, and it led to a lifetime of memories.

Dream often.

Dream big.

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4/12/2026 - If I had to identify one mindset quality setting successful traders apart from the others, it would be a *hungry* mindset. The really good traders actively look for where they might be wrong. They love information and making sense of information. They dig and dig: in news reports, in conversations with other traders, in their readings. Because they're integrating more information, their views tend to be more nuanced. For instance, they'll dissect an inflation report, drilling down to various parts of the economy, to identify relative winners and losers. They don't just say, "Stocks are going down because inflation is rising".

The desire to know--that intellectual curiosity--came through as a primary predictor of success in the research I conducted at several hedge funds. Very often, the confident mindset and the defeated mindset are focused on one or two things, such as recent wins and losses. When a trader hungers for the big picture, they're more likely to come up with multiple ideas and big ideas. The best traders demonstrate that intellectual hunger in other parts of their lives and at previous points in their life histories. It's a talent, not just a skill.

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4/10/2026 - It's been fascinating to see who has done well--in terms of trading psychology and in terms of P/L--during this recent period of volatility, correction, and rebound in the stock market. My most striking observation is that the most successful traders during this period are among the most successful traders in general. They have succeeded by focusing on opportunity during periods of threat and focusing on threat during periods when they were making money. The traders who have struggled have been rather uniformly optimistic or pessimistic. It's the flexibility of perspective that has distinguished the recent winners.

For the recently successful traders, it's as if they are looking for what is stretched and where they might take profits or hedge when things go their way. When things are going against them, they're looking for areas where good trades now are becoming great trades. They are sized in such a way that they are never really big or small in an idea...they always leave room for getting bigger or smaller. Instead of trying to predict how things will go in world events, they're creating multiple scenarios and preparing themselves to pounce once one of those is playing out.

A flexible mindset creates flexibility in trading.

What Inflation Does To Stock Market Investments

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 05 Apr 2026 13:02:00 +0000

4/9/2026 - Thanks to Mike Bellafiore and SMB Capital for this video of my talk at the recent SMB Summit. The talk builds on the topic of positive trading psychology, emphasizing that all success in trading comes from talents *that we already possess*. The role of training is to instill the learned skills that leverage those talents. The role of coaching is to guide and help implement this training. You can see below, in yesterday's posting, that the collection of data and running of analyses is one of my talents. Talents can always be recognized because their exercise produces meaning and fulfillment. Digging deeper and creating understanding makes all the hours of data collection and analysis worthwhile for me.

But talent is not skill. Just because one can analyze market data doesn't mean that they can translate that understanding into profitable trades. Mentoring is all about modeling the process of turning insight into action. As the video indicates, what I saw in SMB was a program that provided that modeling day after day for developing traders.

Because we have a ceasefire doesn't mean that oil prices will return to their recent lows, stimulating economies. The damage that has been done to production facilities and the ongoing conflict over control of the Strait helps ensure that energy prices will remain high, contributing to inflation and weighing on economic growth. I will be using my analyses to identify which stock market sectors are most and least vulnerable going forward and structuring trades on that basis. When market action lines up with analyzed market edge, there we will find unique trading opportunity.

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4/8/2026 - With the overnight ceasefire, we see estimates of inflation (especially as reflected in oil prices) coming down and stocks rallying significantly. I went back to 2006 (over 4900 market days) and looked at all occasions when we closed with over 80% of all stocks above their 3- and 5-day moving averages, but less than 50% of stocks above their 50-day averages. That represented only 157 of the days. Near-term returns in SPY (next five days) underperformed and were barely positive, but over 20 days, the upthrust days significantly outperformed (+1.69% vs +.78% for the rest of the sample; 105 days up, 52 down). That outperformance continued to out 50 days.

This is a great example of how many of the directional edges in the stock market play out over time frames longer than most traders are looking. In the current market, it may well be that the oil market will be a sensitive gauge of whether peace or conflict will prevail in the Middle East. What market history is telling us is that near-term pullbacks are often valuable entries for medium-term upside momentum following bullish breadth thrusts.

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4/7/2026 - I'm seeing a number of articles in the media outlining the potential impacts of crude oil going above $150, emphasizing the impact of higher energy prices on consumer confidence and consumer spending. A number of the traders I work with are therefore carefully monitoring crude oil and natural gas prices and assessing how these might affect countries that are importers vs. those that produce and export energy. This is a great example of how world events lead to investment and trading themes that find diverse expression. Inflation would not affect all markets and all countries equally, setting up potential opportunities for market participants, even as there are broader economic threats.

Indeed, my AI summary of this topic indicated quite a threat to oil exceeding $150/barrel (see below). Conversely, indications of renewed production would be especially helpful to estimates of future growth. All eyes will be on oil and related markets near term.

"Crude oil at $150 per barrel would likely trigger a severe global recession, a substantial rise in inflation, and intense volatility in financial markets. This price surge, equivalent to a major tax on consumers, would stifle demand, cause gasoline prices to potentially exceed $6–$7 per gallon in some regions, and force sharp contraction in manufacturing."

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4/5/2026 - Here is a chart of historical stock market data that, unfortunately, may be of increasing relevance. Please note the following:

* From 1929 to 1949, the Standard and Poor's 500 Index, measured in inflation-adjusted terms, went from 545 to 193, losing over half its value in a 20-year period.

* From 1968 to 1982, the inflation-adjusted index went from 957 to 359, again losing over half its value.

* From 2000 to 2009, the inflation-adjusted index went from 2860 to 1226, once again losing over half its value.

The good news is that, over the broad span of history, stock prices--even in inflation-adjusted terms--have been in a bull mode, rising over 15-fold since 1982. The bad news is that there have been significant declines along the way that hurt investors near retirement.

Since 2009, the Index has risen over five-fold in inflation-adjusted terms. Now we see rising oil prices and signs of rising inflation and the beginning of slower growth. We see long-term rising debt in the economy.

History teaches us that we may be entering a period in which the return of our assets becomes as important as the return on our assets.

Lessons From Working At Hedge Funds

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 29 Mar 2026 12:17:00 +0000

4/3/2026 - How can a trader achieve outstanding returns by trading patterns that everyone else is looking at: the same indicators, the same charts, the same information? Uniquely positive returns come from unique trading ideas. Like any great entrepreneur, the great trader has to innovate. Simply duplicating the competition won't stand out.

The best traders I've worked with are looking at things that others haven't even considered. One trader, for instance, tracked the best trade of each day in the overall market and fed information about those opportunities to an AI engine for modeling. Now, he gets alerts when those best opportunities are setting up.

Another trader has succeeded by asking new questions. For example, he studied times of day when his market behaves most predictably, given a set of market indicators. He only trades those times of day when opportunity sets up--and he trades those occasions with meaningful size. A big part of his edge is not trading when markets are less predictable.

The real edge for these traders is twofold: 1) the creative ability to ask new questions; and 2) the willingness to dive into market data and market tools to get new answers. When they make new discoveries, they experience excitement, but also the confidence that comes from finding your own niche and understanding it deeply.

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4/2/2026 - Success among professional market participants is a combination of investing and trading. As investors, portfolio managers research market themes and historical patterns and enter core positions that they hold over time. For instance, they may perceive an increase in inflation and a rise in fuel prices and will look to profit from that development by expressing views in fixed income (bond), equity (stock), and commodity markets. Perhaps they will be long the assets of energy-producing countries and short those that are energy-dependent. That might be combined by shorting consumer discretionary shares and buying commodity-related stocks. Altogether, they create portfolios of multiple positions expressing multiple themes, so that--even if they're wrong in one view or position--they can profit in others.

As these positions move, the best market participants update risk/reward and either add to their positions (if new information and/or price action confirms their core views) or trim. Their goal is to minimize damage if themes aren't playing out and maximize reward if their view starts working. In regularly adjusting their positions, they are traders; in holding a variety of assets expressing a variety of views, they are investors.

Individual, active traders achieve this diversification sequentially: They track many stocks/assets and will find patterns to exploit as they move from one stock/market to another. Even if they are going flat at the end of each day, they have core positions in something they like--i.e., they act as position traders--and will add and trim risk if short-term movement and news go for or against them. The basics of success are similar, combining an overall view with a navigating of risk/reward as positions are open. Much of the success of a portfolio manager or an active trader comes not just from their views, but from how they manage risk and reward while holding those views.

Notice how this active management of risk and reward also helps them navigate the trading psychology of being risk-prudent and being risk-seeking. The successful trader is cautious *and* confident.

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4/1/2026 - What I've seen among the best performing traders at hedge funds is that they study market history, not just current charts. They use historical studies to identify whether there may be a directional edge going forward. So, for instance, if an inflation report comes out hot, they'll look for all occasions in the past 20 years or so when we've had such a report and they'll track which assets performed best and worst; which stock market sectors benefited most and least; etc. Many times, there won't be a dramatic edge, but sometimes a pattern stands out that becomes a hypothesis going forward. *Then* they'll look at charts to identify favorable entry points to manage risk/reward.

So, for instance, yesterday we had a nearly 3% jump in SPY. That is unusual; there have only been 49 occasions out of around 4000 since 2010 when a similar rise has occurred. The average return over the next five days has been negative, but quite positive over the next 30 trading days. Perhaps more important, the next five day volatility has been over twice as high following the big jump compared with the rest of the market sample. This little study then invites further investigation of price paths for the most bullish and bearish outcomes, so that the trader can update the odds of directional movement day by day and trade accordingly.

What I've learned by working with these traders is that they don't spout their views. They let history give them ideas and they're quick to turn those ideas into opportunities.

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3/31/2026 - Years of working with top hedge funds and hedge fund managers have taught me how important it is to know--and accept--when you're wrong. The great traders know that they'll be wrong close to half the time on each directional trade and they accept that in advance. They plan for being wrong with stop loss points that become automatic exits. For them, a losing trade is information. What they expected didn't materialize. That says something about the market.

But the really great traders? They are quick to recognize the moment when the market tells them they're right. In other words, they see in real time that their ideas are playing out and they are quick to get big in those trades. They know when and how to pounce on opportunity. They're like the poker player who is willing to muck one hand after another, losing small money, but who will not be afraid to bet big when the odds are on their side.

The market is always dealing us cards. The great traders know in advance what they need to see to really go after a clear opportunity. They plan, not only for stop loss, but for go win. They blend caution and aggressiveness, like a lion waiting in the brush ready to strike at the right moment.

It's not at all that the best traders win all the time. They go through drawdowns and periods of flat performance. It's those few times each year when everything lines up for them that they make their money. Being prudent and limiting losses is necessary for success; being aggressive and maximizing opportunity is necessary for great success.

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3/30/2026 - Once upon a time, the big innovation at hedge funds was trading as teams rather than as solo portfolio managers. Teams could manage more money and indeed were self-managing. The best of the teams, powered by leadership, helped junior members (who typically were analysts) become risk takers/traders/investors. But now things have changed.

The new teams are much larger and consist of members with a variety of strategies and market specializations. They act like a trading firm within a trading firm. Within the team are "pods", where a more senior member is assisted by juniors and helps those juniors develop. The larger team structure enables the members to keep each other abreast of developments around the world and across markets. Everyone shares research and insights gained from interactions and observations. It is an enriched environment.

But now the teams are different still. They are decentralized, where the pods operate in different parts of the world. Some team members might be in the U.S., some in London and Europe, and some in Asia. This enables the big team to stay abreast of global news, data releases, and markets in real time. Everyone communicates with everyone and--every so often--everyone gets together in one location for bonding and team building. These teams are quite successful in recruiting talent, because they don't necessarily need traders to relocate.

Smart individual traders can learn from this. They can team up with other traders with complementary skills and experience, so that each one is learning from every other one. The team can link with a community and create teams of teams, tracking different stocks/markets/regions of the world and quickly identifying shifts in market themes. The lesson I've learned from years of work at hedge funds is that the business is always changing and we have to be ahead of the curve with our own evolution. Spending our time making better horses and buggies will be of limited value when others are developing automobiles.

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3/29/2026 - As I move toward retirement, I look back on my work at multiple large ("multistrat") hedge funds and all the lessons I've learned during that time. This series of posts will capture some of those lessons.

The first lesson is that of professionalism. Once in a great while I've seen portfolio managers puff themselves up, point the finger at themselves, and make it clear to everyone that they're at the top of the world. I've never seen those managers last. Rather, the successful managers always feel as though they don't know enough. They scour for more news, they talk with more colleagues, they perform more analytical studies. If they feel confidence and conviction, they double down and look for what they might be missing before acting on how they feel. They invest in themselves, learning new skills, strategies, and markets, because they know that markets are ever-changing. I see it now in terms of the applications of AI to trading and in new forms of teamwork in trading. I see it in terms of new and different market research.

As I write this, the overall stock market is in a downturn and has failed to bounce from short-term oversold conditions. A few traders I've spoken with have been buying, convinced that this is a time to pick up bargains. Others, fearful of the situation in the Middle East and the debt overhanging the economy--as well as the deterioration of high-yield markets--have taken a very defensive posture. One successful manager I've spoken with has gathered decades of market data and investigated markets in history that have behaved similarly to the current one.

That manager is not bearish. That manager is not bullish. That manager is curious. Because he learns, he earns.

Positive Training Psychology

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 22 Mar 2026 11:07:00 +0000

3/27/2026 - Traders commonly think of markets as either rangebound or trending. Many trading signals reflect shifts from range mode to trend mode, attempting to catch the momentum of this transition.

A different way to think about markets is as a combination of short, medium, and longer-term cycles. Indeed, many commonly used market indicators, such as RSI, attempt to capture such cyclical behavior.

A big part of the training I've gone through in markets is learning to identify market cycles and their turning points. From this perspective, a trend is simply the upside or downside phase of a cycle; a range market represents turning phases of cycles. As John Ehlers has shown, correlation is a trend indicator and a cycle indicator. When cycles are aligned, we have "trend"; there is high correlation among stocks to the upside and downside. When correlation begins to come down, we typically are seeing a divergence of cycles, leading to more rangebound markets.

Reviewing markets day after day, identifying the interplay of shorter and longer-term cycles and the rise and fall of correlation, helps us adapt to shifting market conditions. How we trade strong trends when cycles are aligned and correlation is high is different from how we trade range markets where cycles are not aligned and correlation is falling/low.

The active trader thrives on pattern recognition. When we think in cycle terms across timeframes, patterns become more than shapes on a chart. They suddenly make sense.

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3/26/2026 - The guru who will lead you to profitability in your trading can be found within yourself. This may be the most important lesson in trading psychology and training psychology:

In some ways, at some times, each of us is already the person we wish to become. The aim of our development is to discover who we are at our best and to be that person more and more consistently.

The path to greatness lies within us, in the actions we already perform greatly. Our challenge is to figure out where that greatness lies and how we can access it in our relationships, in our work, and in our trading. The essence of positive trading psychology is to build what is already positive in us and in our trading.

If our trading is to become consistently successful, it has to consistently access the best within us.

I write a blog about cat rescue and the four rescue cats in my home: how they've gone from homeless and often frightened animals to loving family members who have bonded with each other. The blog is not written for popularity; it's there to remind me of who I am at my best. If my trading ignores that reality and becomes all about P/L, I cannot learn and grow.

The best training psychology has to be grounded in the psychology of what we do at our best. Everything else is distraction. Be. Your. Own. Guru.

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3/25/2026 - We've seen it in recent markets: traders have trouble adjusting to markets that display high volatility. Their training is grounded in a particular volatility regime and they are accustomed to holding positions for a certain period of time. When volatility expands greatly, there is much more movement during each time period. Unable to make the adjustment, traders who were doing well in one volatility regime now find themselves whipped in and out of positions.

As I've shared in the past, a breakthrough in my own trading has been to track charts and indicators where each bar represents a unit of volume, not a time period. Thus, for example, we might draw open/high/low/close candles for each 50,000 contracts traded in the stock index futures. When markets get busier/more volatile, we draw more bars; when markets slow down, we get fewer bars. That means that, for a given pattern (such as a moving average crossover), we will get more signals in busy markets; fewer when markets slow down. This allows us to not get whipped around in the volatile markets, and it prevents us from overtrading slow periods.

For training purposes, we can make use of replay platforms where we can replay a market day bar by bar--and we can change the speed of the replay. This also helps us to adapt to slower and busier market conditions. The volume-based bars help us perceive in real time when a market is picking up volume, when buying or selling is drying up, etc. Those volume bars also help us see how well volume is able to move the market. Small bars for a given volume unit mean that the volume is not able to move the market very much. Range expansion on a bar--on a breakout, for instance--tells us that control of the market has changed.

We achieve a positive training psychology when the patterns we follow make sense to us. Seeing volume and price interacting in real time trains us to see when control of the market is expanding, contracting, and changing. Replaying those scenarios again and again is the most lasting way of building confidence and conviction in our trading.

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3/24/2026 - A valuable aspect of the training exercise described below is that, over time, you can categorize market conditions and see how trading opportunities set up in volatile markets, quiet markets, range markets, trending markets, morning markets, afternoon markets, etc. Just as a general will employ different strategies in mountain warfare than in desert warfare or ocean warfare, we want to be prepared to win in unique market environments. Many, many times traders fail to perform because they are employing the tactics successful in one environment long after that environment has changed. Adaptability of mindset and trading style is key to the mastery of the active trader.

Once we have a scheme for categorizing various market environments, we can then review our trading and identify what we do right and what we do wrong in each environment. By studying winning and losing trades as a function of market condition, we grow our adaptability and create a grounded sense of confidence in shifting market conditions.

When I first learned trading, I printed out charts of the market and categorized those by market condition, marking up each chart to identify the opportunities and also highlighting mistakes I had made. I grouped these printed charts by the type of market we were in and, over time, built an encyclopedia of charts to study best trades in each environment.

Traders who understand market condition and how to adapt to market condition don't go on tilt. They are prepared.

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3/23/2026 - In any performance field, professionals are always in training. It is not an activity limited to new, developing performers. From football teams to musicians, there is always practice and there is always new and different performance. A trading process without a training process cannot adapt to new markets and conditions.

The exercise I have found most helpful in my development was to track, at the end of each day, the one or two best opportunities in the market I was trading (stock index futures). I diagrammed and summarized how those best trades set up with respect to time of day, volume, movement relative to moving averages, larger contexts of time frame, overbought/oversold indicators, indicators of supply/demand (such as NYSE TICK), etc. Day after day, market after market.

Clearly this is training in pattern recognition. It's a bit like the radiologist reading one X-ray after another with feedback to gain a sense for the nuances of each. What I found is that the clearest patterns did not necessarily occur at absolute market tops or bottoms. Rather, we would rally after making a low or sell off after a high and then the next round of selling or buying would be unable to push the market to new lows/highs. In other words, the most reliable entries occurred after an absolute low or high had been established. That provided an excellent risk/reward entry, because there was a logical stop out level if the market made a further low or high.

Tracking indicators for each of these opportunities gave me a sense for which ones worked best in slower markets, busier markets, trending markets, range markets, etc. By grouping the best trades of the day by market condition, I found the best signals for different market conditions, different times of day, etc. By tracking these best trades going forward, I could also identify the best signals to exit trades under different market conditions. For instance, it was here that I found the anchored VWAP described by Brian Shannon to be particularly useful in staying in trades and logically exiting them.

What happens when we train ourselves in pattern recognition is that we become more familiar with patterns, more comfortable trading them, and more confident in our trading psychology. There is no room for FOMO, revenge trading, and impulsive trading if we're grounded in pattern recognition.

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3/22/2026 - For the developing trader, a positive trading psychology begins with a positive *training* psychology. How we approach our development shapes our developmental path.

It's amazing how many traders recognize the need to follow a trading plan, but don't structure their development along a training plan. It's like going to the gym and randomly working on various stations and weights. Are we really going to achieve an aerobic fitness integrated with our fitness of strength and flexibility? Notice how professional athletes invariably work with professional trainers. The goal is to get the most from each session--and to get the right things from each session.

Left to our own devices, are we truly going to test and push our limits? Will we even keep score and know if we're getting better?

A platform such as TradingSim allows a trader to replay a market bar by bar, track relevant indicators, make trading decisions, and see how those decisions work out--all without risking any money. It is a kind of gym where we can work on selecting the best opportunities, finding the best risk/reward entries, managing risk and positions, etc. This is especially helpful for day traders, who can practice identifying the kind of day we're in and figuring out how to best trade it.

Notice how this is practice in pattern recognition, but also practice in executing trading skills. We can track our simulation P/L and identify--specifically--the parts of our game that we need to work on. Maintaining a positive training psychology--coaching ourselves for progressive improvement--is key to maintaining a positive trading psychology. Through practice trading, we can practice the skills we need to coach ourselves to success.

How we learn determines how we perform.

How to Change Your Trading

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 15 Mar 2026 12:06:00 +0000

3/20/2026 - In his excellent book The Trader's Journey, Peter Robbins points out that most traders spend their time trying to establish an edge in markets--a "positive expectancy", but spend less time on "the second component of their edge, which is their ability to trade the strategy consistently and accurately" (p. 106). To change your trading, it's important to figure out whether your rules need adjusting or whether you need to work on the trading of those rules. A very valuable strategy is to investigate how your rules would have performed in different past market conditions. Often, rules that work in one kind of market environment fall down when trends, correlations, and volatility change. No rules work ideally in all market conditions. That is why it is important to first have metarules that tell you the kind of market we're in and then develop the rules that work in each market condition. Thus, you will have metarules that tell you when we're in a range market, a trending market, a topping market, a bottoming market, etc. Each market condition will have its own "playbook", enabling you to adapt to shifts in trading conditions. When you review your trading, you want to see if you indeed identified market conditions correctly and, if so, whether you made the adaptation necessary for that type of market.

Peter Robbins' observation about the ability to trade the strategy consistently requires that you be able to assess market environments consistently and adapt your trading processes to each market condition. Changing your trading means first identifying market conditions and then seeing if your rules for trading those conditions: a) were followed; and b) were profitable, if they had been followed. Every market day is like a new basketball or football game, requiring preparation for the contest and adapting decision making to the unique opportunities of the situation. Very often, traders lose money by doing what had made money before market conditions had radically changed.

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3/19/2026 - Successful discretionary trading is not subjective trading, just as successful discretionary medical practice is not subjective. The discretion of the professional is based upon rules and principles and those rules and principles are based upon research into what is helpful and what is not. The systematic trader automates those rules and principles; the discretionary trader adds to those rules and principles an element of judgment regarding the immediate situation. Thus, in my own field of psychology, there is a wealth of research regarding what people need to do to combat anxiety or depression. It is the discretionary job of the therapist to apply this research in the best way for a given client, keeping in mind what the client is ready for.

So how is this related to how we change our trading? Many times, we make subjective attempts to assess and correct what we have done, but none of it is grounded in rules and principles that have guided our past success. Every element of trading process should be rule-based and clearly written out: What constitutes an opportunity; how much capital should be risked on that opportunity; how trading that opportunity should be entered; how exits should be constructed; how stop loss levels should be calculated; etc.

Only once we have the various elements of trading process clearly identified can we then go back and see what we did well and what we could have done better. How can we be consistently profitable traders if we haven't grounded our decision-making in consistent rules? A big part of the learning process in trading is gaining enough experience, first in practice trading and then by trading small, to create the rules that bring you success.

We change our trading by first identifying what part of our trading needs to be changed.

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3/18/2026 - In trading, as in medicine, the right course of action to make improvements is to first diagnose the situation. If we're trying to change our trading, we first need to clearly identify what needs to be changed. The most basic distinction is: Do I need to change how I'm finding opportunity? (i.e., are my ideas wrong?) or do I need to change how I'm trading the opportunity that is there? (i.e., do I need to improve timing/entries/exits/sizing/expression of the idea/etc.?) How can we figure that out?

The key best practice is to examine closely what happens to your trades *after* you have exited them. Did your ideas generally work out, or were you right to get out when you did? Many traders examine their P/L and review markets, but they don't intensively re-view how they got into and out of the trade. As a result, they're in a poor position to truly know if they need to change how they come up with trades or whether they need to figure out how to better execute and manage the trades they initiate.

There's a principle in positive psychology that, when we make too much use of a strength, it can become a weakness. That was the case for my trading. I was so careful about risk management that I exited trades too early. Many of them would have worked out well if I had let them breathe. The answer was to initiate trades with smaller size and give them a good amount of room to play out. Then, when they started to work out, I added a second, larger clip to the trade that had a relatively tight stop. For instance, if we broke out of a range in my direction, I exited if we reversed back into that range.

This allowed me to get bigger in ideas that were showing promise, and it allowed me to not micromanage my trades. Most important of all, it changed the psychology of my trading. I now actually looked forward to my initial position going against me so that I might have the opportunity to get bigger in an idea I liked. This is a great example of how changing our trading can change our psychology.

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3/17/2026 - I'd like to take a step back and ask a question that comes before, "How can I change my trading?" That question is "Should I continue trading?"

I recently received an email from the spouse of a trader who was worried about the trader's history of emotional trading, blowing up, vowing to trade better, and then repeating the cycle all over again. That pattern was taking a toll on the relationship.

Please read the following closely: I have worked with dozens and dozens of highly successful traders. None of them has reached their success after patterns of emotionality and repeated blowup.

None of them.

Yes, successful traders have gone through painful drawdowns and, as we read in the Market Wizards books, they learn from those and turn their trading around. When risk-taking occurs again and again and again with emotionality and repeated losses, that is not a learning curve. That is not healthy. That is addictive behavior.

Do successful physicians learn by becoming emotional and killing one patient after another?

Do successful airline pilots learn by flying emotionally and crashing one plane after another?

Few people will tell you your trading is addictive. Not the person who wants you to hire them as their "trading coach". Not the person who wants to sell you their software or their trading seminars. Anyone who offers to "mentor" emotional traders who blow up again and again is something other than a mentor.

Trading addiction causes trauma. You can learn more about trading addiction through these articles and links and by asking these questions.

Changing your trading can mean changing yourself before you ever resume activity in markets. And maybe activity in markets is simply poison for you and your life and you should find work that makes you feel good about yourself and that helps you do good for others.

The worst trading loss of all is the loss of your happiness and the loss of those who care about you.

Do the right thing.

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3/16/2026 - How can we change the negative thought patterns that stand in the way of the solution-focused mindset described in the previous post? Fortunately, research in psychology provides us with ways to shift our mindsets. Craske and colleagues (2022) describe four exercises that research has shown increase our feelings of happiness and fulfillment. Those four practices are: 1) loving-kindness; 2) gratitude; 3) generosity; and 4) appreciative joy. In loving-kindness, we meditate on and rehearse the feelings of love and caring we have toward others. In gratitude, we rehearse feelings of appreciation for all that we have. Through generosity, we focus on bringing joy to others and through appreciative joy we find happiness in the joy of others. Many times, by focusing on who and what we love we can rehearse all four of these experiences. Spending quality time with my cats, for example, is a way of immersing myself in these feelings. The idea is to make these four experiences regular parts of our daily life.

There are many cognitive therapy exercises that help us combat negative thought patterns. It turns out, however, that we can best combat the negative by rehearsing and building the positive. It is much easier being constructive and solution-focused in our trading if we've been actively positive in our daily lives. It's also a great example of how building spiritual strengths helps us overcome negative tendencies. We best achieve a positive trading psychology when we bring positivity to our lives.

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3/15/2026 - In this series of posts, we'll take a look at what you specifically need to do in order to make improvements in your trading. These various change efforts, when combined, provide you with a platform for growth that can make improvement an ongoing process.

The first key to changing your trading is to prioritize the changes you want to make and focus on one change at a time. Change requires concentrated effort, and it requires consistent effort. When we try to change everything, the odds are good that this is coming from frustration, not from a sustainable plan.

As described earlier on the blog and in the Positive Trading Psychology book, the first step toward change is the solution-focused recognition that the odds are good that the change you want to make is already happening, but on occasions you're not recognizing. When your trading problems are not occurring, you quite possibly are doing something right and already making the change that you want to see more consistently in your trading. So that is why it is important to journal and analyze occasions when you trade well and figure out how you did that. For instance, a more focused preview of markets and preparation of your trading may have prevented you from overtrading. That is super important. Once you recognize this, you can turn the focused preview into a consistent daily process.

The solution-focused mindset is a game-changer. We don't have to make ourselves totally different. We simply need to be more consistent in being who we already are at our best. In the next post, we'll look at how you can achieve that consistency.

Key Lessons From The SMB Summit

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 08 Mar 2026 11:52:00 +0000

3/13/2026 - When computers came to the fore, trading completely changed. I recall the days when I had to phone my broker to place a trade and could only follow the market by calling for quotes. With computers, the trading process became much more efficient and that led to the rise of day trading and much more active trading.

A topic discussed at the SMB Summit was that AI will lead to a similar revolution in trading. One advanced trader I work with has already programmed AI with the long history of his trades in different markets and market conditions. The AI is able to treat his discretionary trading in a systematic way and flag opportunities going forward that fit with his past trading success. This enables him to track opportunities on many more time frames and many more markets. That has the potential to make any individual trader an active money manager, benefitting from diversification.

It's silly now to think of an active trader who doesn't make use of a computer. In the not so distant future, it will be silly to think of an active trader who doesn't trade with the enhanced information sets provided by AI. Notice how our cars now monitor driving performance, provide alerts, and inform us of needed maintenance in real time--and are quickly getting to the point where they do the driving for the majority of us. Until now, most of us have thought of discretionary and systematic trading as different things. But what if we can more systematically trade our discretionary ideas?

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3/12/2026 - One of the topics discussed at the SMB Summit was theme-based trading. Large market participants often scan news items, data releases, central bank actions, and geopolitical developments to identify themes likely to guide investment in such macro assets as gold, oil, stocks, bonds, etc. These themes show up in the stock market as relative strength and weakness among particular sectors. For example, concern over growing economic weakness and the ability of companies to pay their debt might show up as weakness in high-yield bonds and weakness among financial shares. Doubts about a quick resolution of tensions in the Middle East might lead to continued strength in oil and energy stocks.

Stocks in play are often a reflection of themes in play. We can identify the companies and ETFs most likely to benefit from a theme and make those a focus of our trading. Traders often make the mistake of scanning for stocks that are moving without understanding the basis for that movement. By following the footsteps of larger market participants, traders can nimbly participate in short-term trends and breakouts.

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3/11/2026 - A major theme at the SMB Summit was the emerging role of AI in trading. Until recently, AI was used for its coding ability. If you had a pattern in mind for trading, one of the platforms could readily code it up and track that for you. What we're seeing now is the AI, and especially Claude, is an expert pattern recognizer in other contexts. For example, given enough examples of your winning trades, Claude can track the variables that have led to your success (news releases; volume and VWAP breaks; etc.) and signal you when these variables are lining up in real time. In that sense, AI becomes a real time coach, standing on the sidelines and signaling you when opportunity arises. Having access to those signals allows you to track more stocks, more markets, and more opportunities. It increases your trading bandwidth, which increases your diversification. We're not so distant from a future in which our AI coach evaluates the market environment for us and cues us to the opportunities that we've traded successfully in the past.

Now imagine that you're part of a team and everyone is getting signals for their best trading opportunities. Suddenly you're trading a great expanded opportunity set. And what if multiple traders on the team are getting similar signals at a given point in time? Might that be a great objective basis for our conviction in a trade?

The playbooks of the future will be dynamic real-time guides to trading, grounded in your strengths and your patterns of success. Tomorrow's successful traders are building that future today.

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3/10/2026 - How well do you mentor your own trading? If you taught a developing trader with the methods you use to improve your own trading, how well would they develop? As I described in my talk at the SMB Summit, a thorough review includes a detailed look at what you did well on the day and what you didn't do well. Those then feed specific goals: to do more of what you did well and correct where you fell short.

But wait; review is not only about us. It's also about markets. We want our reviews to be a true re-viewing of the markets we traded and a fresh look at the opportunities we missed, the opportunities we saw well, and the opportunities we saw but could have traded better. Each review is thus exercise of our capacities for pattern recognition. When we see more markets and track how opportunity appeared, we become more sensitive to "setups" for our trades.

Detailed review feeds our learning and is one of the best ways of mentoring ourselves. This is why sports teams spend hours watching game film, stopping the film, and observing/learning. Reviewing creates better viewing when we return to real time performance.

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3/9/2026 - The idea of creating "playbooks" that capture patterns of opportunity in trading is central to the SMB traders. What traders often miss is the need to create different playbooks for different market conditions. The consistently profitable trader needs tools to tell them the kind of market we're in, because that will tell them how movement is likely to occur. A calm, trending market trades differently from a volatile one--and both trade differently from a rotational environment and a rangebound, calm environment. That means that we find different opportunities in different markets, but also trade them differently, size them differently, and manage their risk differently. Many, many times a trader's frustration is a sign that what had been working is no longer working--and that is a sign that market conditions have changed.

Frustration in trading is often a signal that we need to be following a different playbook. In that sense, our emotions are information, not just negatives that we try to control.

One of the most useful indicators that I've created looks at the breadth of each sector of the market (the percentage of stocks within each major sector trading above various moving averages--from 3 day to 200 day) and then tracks the standard deviation of that number. A high standard deviation means that there is great variability of breadth among the sectors; a low standard deviation means that sectors are moving similarly. Before this most recent drop in stocks, the standard deviation was well over 2.0. Beneath the surface, the bull market was coming apart.

Indicators such as this can tell us when we need to be considering switching our playbooks. If we don't know the environment we're in, how can we possibly adapt?

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3/8/2026 - It's hard to believe that SMB Capital was just getting off the ground 20 years ago. At the recent Summit, well over 200 active traders from many countries around the world and many states joined in a weekend of learning. There were lots of hot topics discussed, including AI, the importance of mentoring and teamwork, and the importance of developing "playbooks"--best trading rules and practices--for different kinds of markets. One of the big takeaways for me was seeing, firsthand, how a team environment creates dramatic trader growth. Many of the former developing traders who presented are now mentors at SMB, such as Justin Spero, Garrett Drinon, Jeff Holden, Carlton Bryan, and Max Ganik. From the options trading skills shared by Seth Freudberg to the lessons taught by founders Mike Bellafiore and Steve Spencer and Market Wizards Lance Breitstein and Kenny Sharkness, SMB has become a learning and talent incubator, with many of the lessons captured for all time by Kurt vonWeisenstein.

One of the points that I made in my talk is that "You cannot achieve world class performance with world class isolation". In every performance field, from sports to the performing arts, greatness is achieved through mentoring and intensive practice. That practice has to be structured, and it needs to be accompanied by feedback that helps us identify and build upon our strengths and correct our mistakes. Even with that investment in human capital, it takes years to achieve world-class success. Seeing the traders I had known as relative newbies now succeeding as traders and mentors told me, beyond a shadow of a doubt, IT CAN BE DONE! With the right support and guidance, we can achieve world class performance. But only when we emerge from isolation and open ourselves to the guidance of those who have been there and done that.

And maybe the best takeaway? We learn great trading psychology when we learn to trade greatly. First we copy a mentor and then another mentor and then another and eventually we synthesize all of that into our own market understanding. That is how I learned how to do therapy: working with multiple, experienced supervisors and taking away "best practices" from each of them. Over the course of that synthesis, we develop insight, confidence, and consistent performance.

Seek many mentors. Copy what they do. Before long, you'll start putting it all together and become like the former developing traders at SMB who are now succeeding and mentoring others.

New Techniques For Improving Trading Psychology

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 26 Feb 2026 12:32:00 +0000

3/6/2026 - In their research review of successful psychological techniques, Barlow et al discuss methods by which we can achieve "cognitive flexibility". This is important because how we think greatly impacts how we feel and how we act. If traders can become more flexible in how they think about markets and their trading of markets, they can avoid the negative traps associated with fear, greed, and frustration.

This is a great example of how advances in psychological research can lead to new and better practices in trading psychology.

The authors identify two specific "thinking traps": jumping to conclusions (probability overestimation) and thinking the worst (catastrophizing). These lead us to overreact to situations and respond to those situations in rigid ways. The first step in changing these patterns is to become aware of them in real time. This means that we must build our skills at "metacognition": thinking about our thinking.

The first step in that process is to recognize--as it's happening--when we are overreacting to a situation. Typically that will be signaled to us by feelings of frustration. We need to make frustration a cue to take a brief timeout, so that we can challenge the automatic thoughts that are frustrating us. In taking that time out, we're reminding ourselves, "It's my thinking that's making me feel this way; it's not the only way to see the situation and respond to it". Or, more simply, "Here I go again, overreacting! How can I put this situation in perspective?"

Taking the time out to think about our thinking is half the battle. In the next post, we'll look at the other half: what the researchers recommend to change our thought patterns.

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3/5/2026 - The 48 positive emotional experiences listed in yesterday's post (below) create a checklist both for your daily experience and for your trading experience. The idea here is the reverse of what traders typically do with their journaling. Instead of writing down all your mistakes and negative experiences, write down your best trading decisions and most productive experiences and then identify, from the list of 48, which emotions accompanied your productivity. If you do this over a period of time, you'll notice a pattern in the positive emotions that contribute to your best ideas and best actions.

For instance, your market experience that is accompanied by inspiration and curiosity and also by a sense of serenity and calm may mark the generation of your most profitable trade ideas. Conversely, when you're trading out of stress and fear of missing opportunities, that could mark your worst trading.

Once you know your best patterns, you can set up routines/processes that draw upon these emotional experiences. Instead of only combating the negative, we are looking to understand ourselves and build our positives.

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3/4/2026 - What are the positive emotions that lead to enhanced overall wellness and to peak performance? If we can track our positive emotions--and what helps generate them--then we become able to trade at our best. Craske and colleagues offer a "positive emotions dial" that actually is a system for "diagnosing" our optimal experience. Here are the categories on their dial:

Optimism: Hopefulness, Positivity, Encouragement

Exuberance: Vivacity, Liveliness, Animation

Serenity: Peacefulness, Calm, Relaxation

Gratitude: Thankfulness, Appreciation, Contentment

Euphoria: Joyfulness, Merriment, Cheerfulness

Love: Affection, Compassion, Empathy

Zeal: Passion, Determination, Motivation

Delight: Enjoyment, Amusement, Pleasure

Fulfillment: Honor, Pride, Confidence

Exhilaration: Excitement, Enthusiasm, Eagerness

Inspiration: Fascination, Interest, Curiosity

Elation: Happiness, Pleasure, Satisfaction

Please pay close attention: Here is the foundation for an entirely fresh approach to trading psychology. Study your best trades and your best trading periods and identify where you stand on the above dimensions at those times. That includes what you're experiencing in your personal life and during your trading. What is the positive context that drives your greatest successes? Those are the emotional experiences that you want to cultivate, day to day and week to week.

What if we've had it wrong all this time? What is combatting our most negative thoughts, feelings, and actions is *not* the way to win at trading? What if we've been ignorant of what drives our success all along and simply need to do more of what makes us our best selves?

No amount of fighting losing will bring us what we need for winning.

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3/3/2026 - In the Positive Trading Psychology book (p. 132), I cite reviews of research that conclude "that happiness contributes to our work success and the quality of our relationships contributes to our happiness". I point out that "The challenge for our trading processes is to create happiness habits that keep us energized, inspired, and fulfilled, so that the power of repetition can not only help us undo our negative patterns, but instill new, positive ones. For the peak performer, every day should be practice in building happiness habits".

Negative thinking and self-blaming can be thought of as unhappiness habits. Happiness habits are ones that energize us physically, that make us feel appreciation and gratitude, and that focus on opportunity. It is not enough to avoid the negatives; we want to build the cognitive, emotional, and physical positives that keep us at our peak. As I discuss a bit later in the book, we not only have triggers for our worst thoughts and actions, but also positive triggers that cue us to act upon opportunity. One of my positive triggers is a brisk walk each morning to start my day after feeding the cats. It is during that walk that I engage in prayer and meditation, voicing my thanks for the day, for my family, and for the challenges that help me grow. The goal is to start the day invigorated and inspired--and then to carry those experiences forward throughout the day.

When we make happiness a habit, we are much less likely to fall into the negative emotional traps experienced by traders.

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3/2/2026 - An important insight from recent research in psychology is that it takes emotion to change emotion. Simply talking about problems or writing about them in a journal does not truly help us internalize solutions. In emotion-focused therapy (EFT), couples work on their problems by giving voice to the positive feelings that typically underlie the negative reactions that bring them for help in the first place. For example, members of a couple might distance from each other and grow further and further apart. In EFT, they learn to express the feelings of hurt and disappointment that lie behind the distancing--and the desire for love, closeness, and acceptance beneath their pain. In expressing these feelings constructively (with the therapist's help), the couple regains a sense of openness and connection.

For traders, reactions of anger, frustration, and revenge trading mask their disappointment over their results and their positive desire to find and act upon opportunity. When the trading coach points out that occasions of frustration are occurring at points where markets are acting in unexpected ways and that many other traders are likely to be fooled by this unexpected market action, the trader is then able to view the period of frustration as a potential period of opportunity. This enables them to replace the negative emotions that can lead to tilt trading with the positive curiosity of digging into market action and detecting new patterns.

Traders do not talk themselves out of tilt. The trader learns to replace the negative emotions of tilt with the positive emotions that accompany best trading practices. Once the trader recognizes that frustration occurs when new and different things are happening in the market, it becomes possible to step back, identify the fresh opportunity, and return to successful trading and a successful mindset.

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3/1/2026 - With the bombing of Iran over the weekend, the death of the Iranian leader, and subsequent retaliation, we have the prospect of markets in turmoil this week. A spike in oil prices, a flight away from risk (stocks), and a move toward the safety of fixed income instruments (bonds) are expected. With VIX already hovering in the 20 region, we can expect a meaningful degree of volatility in the near term.

Here is a great opportunity to work on our trading psychology. The game has changed for the time being. New participants may enter the market (keep an eye on volume), reflecting the need of money managers to limit their downside. Too, it is not clear that this will be very temporary. China receives a large amount of their oil from Iran and surrounding countries and would be quite impacted by any disruption of the Straits of Hormuz. Russia has already made it clear that it will be more willing to act unilaterally in the face of this action by the U.S. and Israel. In short, we will have more (and different) market participation and more uncertainty and volatility.

The worst thing traders can do is blindly go forward, trading the same themes and chart patterns that have guided them recently. A valuable technique employed by psychologists is exposure work, in which we face stresses through imagery work and mentally rehearse our coping. Doing that again and again helps prepare us for actual stressful events, because we've already prepared ourselves and activated our responses to challenge. This same approach can be very helpful in a new and volatile market environment. We can observe and observe and see how markets are trading and note the patterns that are appearing. We can mentally rehearse trading those patterns and make the unfamiliar more familiar. The key to the success of this method is giving ourselves the time and space to observe the new market conditions and figure out how we can best trade them.

By itself, market movement is not opportunity. It only becomes opportunity when we are prepared and understand the movement. Exposing ourselves again and again to various scenarios prepares our psychology as well as our trading.

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2/27/2026 - An important body of research suggests that our lives are not disrupted by an excess of stress, but by our lack of balance between stress and well-being. When we have many things in our lives providing happiness, fulfillment, and closeness with others, we can tolerate very high levels of stress and emotional demand. It's when that balance is disrupted that our stress becomes distress.

In their recent summary of research, Craske et al outline a number of "positive affect treatments" that combat depression and anxiety. Their research finds that techniques that enhance our positive experience are more effective in improving mood and functioning than techniques designed to reduce negative states. Among the techniques they employ are methods for enhancing loving-kindness, gratitude, generosity, and appreciative joy. Notice that we can think of these methods as ways of growing our spiritual strengths.

The implications of this line of research are profound. It may well be that the ups and downs of market performance and the stresses we feel as a result are only problems if we don't have sufficient positive emotional experience in our lives. By literally exercising our capacities for joy, gratitude, love, and giving, we create buffers for all of life's stresses--and we become better people in the process!

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2/26/2025 - Well, the new book is finally available! The subtitle says it all: Turning personal strengths into trading strengths. The big challenge for developing traders is figuring out what they do well and then leveraging that in their trading processes. Yes, it's important to avoid trading on tilt, fear, greed, etc. Doing less of the negative, however, will not achieve positives. The important perspective that the book discusses is that your trading success will draw upon the same strengths that have created your life's successes to this point. Think of your greatest accomplishments, your greatest areas of mastery. Somehow, in some way, your trading has to leverage the talents and skills behind your life's greatest achievements.

In this series of posts, we'll look at innovations in positive psychology that can improve our trading psychology and our trading practice. The solution focus is one of the most basic innovations, where we turn our attention to situations in which our problems are not occurring. We don't always trade with poor discipline. We don't always trade emotionally. What are we doing when we are disciplined and level-headed? Is there something we're doing that we're not aware of that actually is the solution to our problems? Many, many times, our best practices are hiding in the situations where our problem patterns are not occurring. Let's journal those exceptions! Let's learn from what we're doing right!

In the book, I describe the learning process at SMB Capital, where newer traders operate in teams with more experienced traders. In some teams, the experienced mentor and the developing trader will share a joint account and make decisions together: what to trade, how to size it, how to manage the risk, etc. Yes, this is a great practice for learning trading, but notice how it is also a great way to study successes and identify best practices. If everyone you team up with shares just one thing each day that they did well and breaks it down to show how they did it, imagine the acceleration of learning and development that would occur! Even if you use a trading community to find just one trading buddy, that could greatly expand the development of your trading strengths.

Studying the one or two or three great trades you placed in the last week helps you internalize the ingredients of your success, but more importantly helps you internalize a sense for your own greatness.

How Can New Research In Psychology Help Our Trading? - Physical Exercise

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 20 Feb 2026 13:24:00 +0000

2/25/2026 - A major challenge for physical exercise is that it, like many things in life, can become routine. Ideally, exercise pushes us hard enough that it becomes truly effortful, not at all comfortable and routine. Also, when we vary exercise, we practice making efforts in multiple ways. For instance, I alternate days of working on flexibility and strength (upper and lower body) and working on aerobic fitness and core strength. This creates a structure for regularly challenging ourselves and pushing our limits.

What we're really exercising is our capacity to sustain effort. We only possess free will to the degree that we can form and sustain our intentions. Everything we exercise strengthens our free will muscles, because we're exercising goal-oriented behavior. As we build our intentionality, that carries over to other areas of our lives. Recent research (cited below) finds that an ongoing program of exercise enables us to get more out of each session. In other words, not only are we "fertilizing" the brain (see below), but we're adding more fertilizer over time.

In my routine, I wake up at 4:15 AM; greet and feed four hungry cats; immediately go on a power walk and begin my quest for 10,000 steps daily; then work out at home or the local gym; and then engage in prayer and study before actually beginning the work day. Exercising love. Exercising the body. Exercising the soul. Every day.

To keep going, we have to keep growing.

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2/24/2026 - The finding that exercise leads to enhanced BDNF (brain-derived neurotrophic factor; see below) has led to research documenting the ways in which combining exercise with important cognitive activities helps us process the information from those activities more deeply and effectively. As one example, we can combine exercise with our market preparation for the day or with our trading reviews. The heightened brain activity created by the exercise improves our processing and makes our preparation more likely to stick.

What if it's not fear, greed, and lack of discipline that interfere with our trading, but suboptimal brain functioning? By not working out the body, we keep our minds in more sluggish and distractible states. I'm currently working out with a fitness organization, and the coach there routinely prescribes new exercises for me to improve my core functioning, my strength, my flexibility, etc. I find that mastering new exercises--and exercising new body areas and functions--creates overall well-being that carries over to other areas of life.

The ultimate workout is a workout of our willpower. By continually challenging our limits, we become comfortable with challenge and more able to respond to the market's challenges. By increasing our BDNF, we fertilize our ability to process market information and identify emerging opportunity and threat. The important conclusion of recent research is that exercising the body sharpens the mind and trains us to tolerate uncertainty and challenge.

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2/23/2026 - Recent research in psychology suggests that physical exercise not only helps our mood and the clarity of our thinking, but also significantly contributes to our resilience (Smits & Otto, 2024, p. 76-78). Resilience refers to our ability to tolerate stress and discomfort and persist in our planned activities. It is difficult to think of anything more relevant and valuable for traders. Indeed, we can think of the lack of "discipline" often discussed in trading psychology texts as actually a limited degree of resilience. We need to get better at tolerating discomfort and persisting with our efforts if we are going to succeed in difficult market conditions.

There are two ways in which we can use exercise to improve our resilience during trading. First, we can turn each exercise into an opportunity to build resilience. That means that we make conscious efforts to push past our comfort zones and lift enough weights, run with enough speed and incline, to expand our capacities. Every workout thus becomes a workout of our willpower. Indeed, a training coach can help us make sure that we perform exercises the right way and also persist long enough to build our endurance and strength.

Second, we can use each routine in our workouts as an opportunity to exercise mindfulness. Note how many people working out at a gym will listen to music on their phones while they're on the treadmill or doing calisthenics. They are distracting themselves from the difficult experience of physical effort. Suppose, however, they were to sustain attention throughout their routine, thus exercising their capacity for awareness at the same time that they exercise their bodies. Our routines become training in cognitive focus under conditions of stress--quite relevant to trading.

By training ourselves to strive for goals under conditions of challenge, we become more capable of maintaining our functioning in challenging market conditions. If we don't challenge ourselves and develop our intentionality outside of markets, can we expect to trade with free will?

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2/22/2026 - The discovery that exercise impacts the mind in ways strikingly similar to antidepressant medications (see below) is a complete game changer. Yes, we've long known that exercise is a component of well-being and that when we have more energy, we can perceive more and accomplish more. That is important. We cannot get very far in life with a sluggish body.

The finding that exercise enhances the neurotransmitters serotonin, norepinephrine, and GABA (Otto & Smits, 2024) raises the possibility that we can engage in specific exercises to achieve specific improvements in our cognitive and emotional functioning. Research finds that "Exercise also has important effects on a crucial brain-maintenance molecule known as BDNF (brain-derived neurotrophic factor). BDNF has been called a memory molecule because it is involved in the way the brain forms memories, helping those memories to be available for guiding ongoing functioning" (p. 12). The authors refer to BDNF as a kind of "Miracle-Gro" for the brain, fertilizing our brain's functions as we might fertilize a plant's growth.

When we exercise before an activity that involves important learning (a therapy session, a trading session, a review of trading), three benefits become evident: "better mood, less anxiety reactivity, and enhanced memory" (p. 91). In short, exercise helps us process information better and more deeply. If our goal is to learn, it is best accomplished in an optimal physical state.

Work on our strength conditioning? Work on our aerobic conditioning? Work on our flexibility? Our core? What if each has a unique, distinctive impact when pursued regularly and properly? It doesn't matter how many trades, research reports, and charts we process if we're not in our best state of mind and body.

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2/20/2026 - In this series of posts, we'll take a look at recent research in psychology and how that research might be relevant to our trading performance. The idea is that all work on performance should be based upon objective evidence, not just practical "coaching" advice. It turns out that recent research finds an amazing correlation between our physical fitness/conditioning and our psychology/performance.

A significant portion of the population is quite lacking in fitness. According to research from the Centers for Disease Control, 25% of the population reports no deliberate physical exercise in the past month and fewer than 25% of adults meet recommended guidelines for strength and aerobic conditioning. Interestingly, exercise boosts our levels of neurotransmitters, much as psychiatric medication does. Indeed, Smits and Otto, in their review, suggest that "exercise may be conceptualized as a non-pharmacological analogue of antidepressant medication" (p. 8).

From a positive psychology perspective, exercise boosts our sense of wellness, which in turn energizes our work efforts. The right kind of session in the gym not only exercises our strength and aerobic capacity, but also is a direct experience of goal setting and achievement. Smits and Otto also point out that exercise benefits sleep quality, providing us with a clearer mindset and boosting our sense of resilience.

In the next post, we'll take a closer look at how we can use exercise as a psychological treatment.

Best Practices For Coaching Our Own Trading

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 13 Feb 2026 12:18:00 +0000

2/19/2026 - Note how in every performance activity--acting, music, sports, dancing--there are active practice sessions that accomplish two purposes: they keep the performer in shape, and they rehearse the challenges that are likely to be faced during live performance. Active coaching guides the structure of those practice sessions and provides real time feedback, so that the performer can make corrections and improve performance before everything goes live. As the saying goes, it's not practice that makes perfect, but perfect practice that makes perfect. The coach's job is to create perfect practice.

If we understand the importance of the above, we can appreciate why so few developing traders succeed. They don't engage in active practice, and they don't receive real-time coaching during their practice that enables them to make changes that will carry over to market hours. Going over P/L and making some notes in a journal is great, but it is not active practice. No sports team would improve on the field simply by writing in journals.

Without practice trading, our live trading becomes practice--and few can survive the toll that learning curve takes on our accounts. The "setups" we trade don't matter if we fail to practice recognizing and acting upon them. Successful self-coaching means guiding ourselves in practice, so that we're programmed to do the right things in real time.

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2/18/2026 - One way to coach your own trading is during review processes. At the end of the day, week, and month, you can track what you did well and what needs improvement. Both provide opportunities for goal setting, as you have goals to repeat and expand what you did well and goals to correct what you didn't do well. Those goals provide a motivational focus each day as you track how well you're reaching your goals and encouraging yourself to tackle the next set of goals. Notice that there is a motivational component to this self-coaching that is often missing in traders' reviews. As your own coach, you are like a coach in the gym assisting a workout. Your role is to instruct and guide, but also to encourage, push, and motivate. A coach doesn't allow a performer to stay in their comfort zone.

I was in the gym this morning and heard someone on the mats yelling out instructions: "Do three more!" and "Let's pick it up!" He sounded a little like a drill sergeant, but also like a motivational coach. "You can do it!" When I walked over to his area, I saw that he was talking to himself! He was exercising, but he was coaching himself while performing the exercises. His self-coaching was in real time.

We are always talking to ourselves, including during our trading. By making our self-talk coaching talk, we can bring our motivation and change efforts to real time. We don't need to wait for performance review to coach our performance.

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2/17/2026 - What is the ideal team structure? If we're going to team up with other traders, who should be part of our team and how should we structure team interactions?

As the posts below suggest, how we coach ourselves helps shape our performance. When we reach out for teamwork--even a collaboration with one other trader--we want to select someone who meets the following criteria: 1) They have some area of experience/skill that could benefit our trading; 2) They have areas for improvement in their own trading that could benefit from our experience/skills; 3) They show the performance and leadership mindsets necessary to coach themselves and benefit from the coaching of others.

Teamwork accelerates development. It does so because it takes your self-coaching and raises it exponentially by turning coaching into a team process.

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2/16/2026 - Quick reflection: What emotional tone do you use with yourself when you're reviewing your trading? Is it pretty much emotionless: a summary of what happened, etc? Is it a negative tone, blaming yourself for mistakes? If a sports coach used your tone in reviewing game performance with a team, how effective would that coach be? How often do you motivate and inspire yourself? How often do you get fired up by what you did well?

Most of us coach ourselves in ways that we would never coach someone in a performance field. How we talk to ourselves shapes how we perform.

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2/15/2026 - I'm going to ask a very important question, one that is rarely addressed by traders or coaches.

Ready?

How do you get the discipline to follow your discipline?

You have a discipline: a process for finding trading opportunities, a process for managing the risk of positions, etc. You also have a personal discipline around things like diet, exercise, sleep, relationships, etc.

As we all know, however, willpower is typically not sufficient for sticking to our discipline. We can overtrade, we can fail to manage the risk of a position, we can eat too much, etc. We have a discipline, but not the discipline to follow our discipline!

The discipline to follow our discipline comes from inspiration. If we are energized and inspired by what we do, no one can stand in the way of our doing the right things. If I'm an Olympic athlete, I'm inspired by the competition and the possibility of representing my country and winning a medal. That vision keeps me performing difficult training, day after day.

So now you see: we lack the discipline to follow our discipline because we lack a visionary goal that inspires and energizes us. Making money is not a visionary goal. For many of us, it simply expresses a need. The portfolio manager I work with who uses a portion of his profits to benefit at-risk youth--and who devotes meaningful time to mentoring those youth--now has an overarching *reason* to trade well and succeed. He is not pushed by his needs; he is pulled by a greater ideal.

So often, we don't fail because of shortcomings, but because of the absence of greatness. If we don't think and feel greatly about our lives, how in the world are we to trade greatly?

Again, if we don't think and feel greatly about our lives, how will be sustain great trading?

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2/13/2026 - In this set of posts, we'll take a look at how traders can successfully coach themselves and accelerate their development. A point that I made in the recent trading psychology conference was that my goal is not to become a trader's coach for life, but to teach traders tools for coaching themselves for life. Coaching ourselves means that we need to dedicate time each day to standing apart from our trading, reviewing markets, reviewing our trading, looking for patterns in both, and learning from those.

Note the key word here: patterns. There are patterns to markets, and there are patterns to our trading of markets. One exercise that I engaged in when I first learned trading--and that I have resumed recently--is identifying the one or two best trading opportunities each day in the SPX and how those could have been identified with my toolkit: NYSE/NQ/SPX TICK; cycles based upon volume bars; moving average crossovers and divergences from moving averages/VWAP based upon volume bars; areas of volume expansion; and confirmations/divergences among different market indexes. In the past, I did not have such an extensive toolkit, so returning to the exercise now provides fresh learning. The goal is not just to understand the market better, but to become better as a pattern recognizer.

So what is the best practice here? It's performance review, but directed toward the market, not toward ourselves. We want to become better and better at finding opportunity, and we can only do that by looking at opportunity after opportunity, day after day. Over time, we internalize the patterns that we trade.

And, by the way, patterns trend. Patterns that show up at one point in time tend to recur: at later times, on larger and shorter time frames, etc. And if you do want to hire a trading coach? Find out, with specifics, how they coach their own trading.

The Power of Diversification

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 06 Feb 2026 12:47:00 +0000

2/12/2026 - Take a look at a six-month chart of XLE, the SPX energy sector. Now take a look at a six-month chart of XLB, the SPX raw materials sector. Compare those with a six-month chart of the financial (XLF) or consumer discretionary (XLY) sector. What we're seeing is a concentration of risk-taking among large institutions into those industries that will provide the basic materials for the AI boom. (Note similar strength among a number of the commodities and in the commodity index DBC overall). Other sectors of the market are not in decline, but have not been going much of anywhere for the last few months.

This is an example of thematic diversification. Large institutional investors base their investment decisions on themes that are supported by economic data, fundamental data within industries and companies, and by geopolitical developments. When they detect new themes, they often will shift funds out of certain assets and sectors of the market and into others. This thematic diversification requires active traders to track where funds are flowing, so that they can ride those waves. By trading different themes that are gaining interest, we are most likely to exploit opportunity even in overall markets that have been relatively flat.

Diversification enables us to go where the action is.

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2/11/2026 - Here's a simple example of how developing traders can diversify their trading and adapt to shifting market conditions. Since the summer of 2010, when I first began collecting the data, the correlation between the day's range in SPY and the VIX for that day has been .76. Think about what that means. To a statistically significant level, if we know how options are pricing volatility (VIX), we can anticipate the amount of directional movement within the trading day. Moreover, the SPY volume for that day correlates quite significantly with the size of the day's trading range.

What does that mean in practice? As we move forward in the trading day, we can track the relative volume of the market (how the volume for each minute of trading compares with the average volume for that minute) and we can track the level and direction of VIX. That tells us in real time whether we're likely to experience a day of big moves or a relatively narrow, choppy day. We can then adjust our trading accordingly--but only if we have diverse trading strategies: some that make money in momentum/breakout conditions, some that make money in reversal conditions, etc.

Like the football or basketball team, we see how the opponent's defense is aligned and we use that information to call the trading plays most likely to work. That can only happen if we have a diverse playbook to draw from: different edges for different situations. Once we develop such a playbook, the result is a sense of mastery: a positive trading psychology.

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2/10/2026 - Diversification, as explained below, means that we treat each day, week, month, and year as a portfolio of activities that are meaningful to us and that draw upon our best characteristics. There may be ups and downs in our relationships, in our P/L, in our health, etc., but over the entire life portfolio we are generating positivity. Putting all of our eggs in one basket leaves us vulnerable to blowups--in markets and in life.

But we achieve diversification over the course of our lifetimes as well. A career that is rewarding and fulfilling at one phase of life may give way to a different one as we mature. The joy of a romantic relationship will evolve into the joy of raising a family. I began my career as a full-time faculty member at a medical school and greatly enjoyed coordinating counseling services for the students. Over time, as my interest in markets grew, I saw that many of the approaches to psychology that I had been teaching and applying could be very relevant to helping traders with their performance. Still later, I began applying these methods not only to trading firms, but investment banks and large hedge funds. What might look like a happy and successful career is actually a succession of careers.

What that means is that if we are to live diversified lives, we have to be able to let go of one set of activities to move on to others. In a very important sense, every life activity--including trading--needs a stop level. If we never stop out of what we're doing, we never transition to what can lie ahead. Becoming too attached to any life activity--including trading--prevents us from finding what we're meant to be doing. As I mentioned during our visit to Devon in Colorado, the point at which we grow old is the point at which we determine our best years are behind us. Only when we can stop out of activities that we outgrow can we rejuvenate with fresh challenges.

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2/9/2026 - One of the greatest mistakes traders make is working on their development by focusing on their negative emotions and performance. If you keep emphasizing everything you do wrong, you eventually internalize the sense of being a f*ck up. Correcting errors is certainly necessary for performance improvement, but it is not sufficient.

A major theme of the Positive Trading Psychology book that will be coming out later this month is that we grow by leveraging our strengths and finding ways to trade that draw upon the best of who we are. Every truly successful trader I've worked with has succeeded by bringing talents and skills from previous accomplishments and adapting these to markets. When we draw upon what we do best and what means the most to us, our efforts give energy--and that energizes our creative search for opportunity.

So how is this related to diversification? All of us possess a portfolio of experiences, skills, and abilities. Life success comes from drawing upon these in everything we do: relationships, leisure activity, career efforts, trading, family life, etc. A way of viewing this diversification is to ask: What will make today a great success even if my P/L is down for the day? A diversified life gives us so many ways to win that each day brings us energy and well-being.

How we live eventually shapes how we trade.

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2/8/2026 - Investors and active day traders achieve diversification differently. An investor creates a portfolio of positions with positive expected return, where these positions are not highly correlated with one another. One bet might be on economic strength in emerging markets vs. developed markets and could be expressed with a position that is long EEM and short SPX. Another bet might be a long position in crude oil, expressing a view of economic growth/demand and weather-related demand. Capital is divided among these different positions, so that the combination can make money even if individual views prove incorrect. This diversification requires knowledge of multiple markets/stocks and strategies. Its goal is not only solid absolute returns, but a smooth curve of returns buffering losses (i.e., high Sharpe ratio).

The active day trader achieves diversification by trading many instruments in a given day and trading different patterns among those instruments. Thus, I could be long the ES futures on an anticipated morning breakout and then I could trade an individual stock short based on flows moving out of its sector and toward others. Still another trade might be a volatility bet expressed through options by purchasing a straddle. Diversification is achieved sequentially rather than simultaneously in a portfolio.

Understanding how diversification balances our returns helps us appreciate how diversification balances our mindset. When we have multiple ways to adapt to ever-changing markets, we achieve a higher level of control over our returns. One of the most common--and least appreciated--sources of emotional disruption of trading is our rigidity: our failure to adapt to shifting opportunity sets in markets.

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2/6/2026 - We get married to benefit from a concentrated investment. We have friends, family, and colleagues to benefit from multiple investments, each of which pays off uniquely. Together, our concentrated efforts and our diverse efforts make for a deep life and a broad and stimulating life.

So it is within our careers. To succeed, we typically need to concentrate on an area of expertise where we bring unique depth and value. We also have to apply our knowledge broadly enough to ensure that we're learning from new challenges and applying our expertise as widely as possible.

Success is a function of breadth and depth. We need enough variety to keep life interesting and stimulating; we need enough depth to make our efforts not just successful, but meaning-full.

I've been hearing from a number of portfolio managers and traders who have benefited recently from concentrated bets in growth areas of the stock market, but who have been losing money lately. This has shaken their confidence and will make it difficult to reengage when opportunity arises. So much of what happens in the stock market--and across global equity, currency, and rates markets--is a rotation of assets out of one area and into others. Notice in the US stock market how raw materials and energy shares have been strong, but tech stocks have been weak. Just a matter of months ago, that was hardly the case!

Diversification means that we have the tools to find opportunity in multiple markets and the flexibility to deploy resources in those different areas. When we don't just have an edge, but a set of edges that are unique (not highly correlated with one another), we create a much smoother equity curve. Balancing the ups and downs of our returns is crucial to preserving a positive psychology.

The more we can achieve consistency of returns, the more likely it will be that we can maintain a consistent mindset.

How To Make Changes In Your Life

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 29 Jan 2026 11:17:00 +0000

2/4/2026 - Because of the accumulation of painful consequences over time, most people are pretty clear about what they need to change. They are typically less clear about how to change and often very unclear about what they need to change to. For example, we might fully understand that we need to eliminate overtrading, but we don't necessarily have a clear, step-by-step plan for addressing the causes of overtrading and implementing those steps. Even if they have the plan, they often don't have a clear idea about what will replace the overtrading. The problem pattern is there because it is meeting a need. If we don't identify that need and find a constructive way to meet it, it will eventually seep into our trading in unhelpful ways.

In the post below, we looked at the importance of following a plan--a playbook--for implementing what we're meant to be doing. That is necessary, but for many traders it won't be sufficient. The overtrading occurs because there is a need for stimulation--and not just any stimulation. The trader may be craving a need to be productive and creative and is channeling those needs through (over)trading. Giving the trader a more disciplined framework does not, in itself, meet the need for creative productivity. In a sense, we need two kinds of playbooks: one to combat our weaknesses; the other to implement our strengths.

Just as much as a need to combat poor trading is the need to channel what we're good at--and what matters to us--through our trading. The ideal trading process is one that thoroughly immerses us in the best of who we are. It is much easier to change from what we don't want to be when we have a clear vision of what we want to become.

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2/3/2026 - The 90 in 90 framework for making changes truly stick in our lives is directly applicable to trading. As I've emphasized in the past, whatever we do repeatedly becomes part of us. In that sense, we're always doing 90 in 90 when we follow habit patterns. The key to changing our trading is making habit formation intentional.

For example, suppose we study our best trades and best trading opportunities and create a set of rules for identifying these patterns, knowing where to enter positions, knowing how to size those positions, and knowing where to stop out and where to take profits. In short, we're creating what Mike Bellafiore has called a "playbook". Is that playbook a guide for our trading? Of course. But it's something more: it's a guide for rehearsing our best trading again and again as part of deliberate practice.

Imagine using your playbook to anchor your 90 in 90 change process. You are going to conduct 90 reviews in 90 days, tracking the opportunities that fit within your playbook and walking yourself through each step of the play. This is a detailed review in which you literally move forward bar by bar and track what you are meant to do according to your rules. You talk aloud each step of the trade and train yourself to operate in a way that is planned, not reactive.

90 reviews in 90 days: that is three months of intensively training yourself to operate at your best. Now imagine doing those reviews within a team, where each replay of each trade reinforces what the team members are doing. One day at a time, as they say in AA. Because after many days, what started as our goals now are part of us.

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2/2/2026 - So far, the posts have talked about what creates change: emotional experiences in the context of relationships that reorganize how we view ourselves and what we're doing. This is how we initiate meaningful changes in life, but typically it takes more than this to sustain the changes that we make.

This is known as the problem of relapse. It is very easy to go back to old ways, well-worn by habit. To make change lasting, we need to create new habits--and that typically requires repetition. So let's say I have a powerful insight and recognize that I need to be more loving and caring in my personal relationships. That leads me to reach out to those I care about and rebuild connections.

That initiates change, but the change will only take root if my way of conducting relationships becomes a regular part of how I interact with others. So each visit with friends, each conversation, each family interaction becomes an opportunity to practice being the kind of person I wish to be. Quite literally, I am training myself to implement the change that had inspired me.

In Alcoholics Anonymous, when a person is quite serious about discontinuing drinking, they are encouraged to attend 90 meetings in 90 days. Quite simply, if we repeat something every day for three months, it becomes a new routine--a new part of us. "Bring the body and the mind will follow" is the slogan that recognizes that we internalize what we do regularly. Indeed, this principle occurs across areas of life. See, for instance, how 90 days of physical training can train us for a fit mindset.

Whatever change you want to become an ongoing part of you can benefit from a 90 in 90 process. After ninety days of living a new life, we experience ourselves as new people. In the next post, we'll look specifically at applying these ideas to our trading.

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2/1/2026 - In the two posts below, we took a look at how painful consequences open us to new modes of thought, feeling, and action--particularly when those consequences are processed in relationships that provide the new perspectives. There is, however, another mode in which emotion catalyzes lasting life change: powerful positive emotional experience, often captured in inspiration, can take us in entirely new directions. This experience enables us to see ourselves and our lives in a fresh way reorganizing our priorities.

When Margie and I took our first trip to Israel, literally walking the paths of religious history, the impact was so profound that I immediately returned to a more spiritual, religious life. I've worked with traders who have been so inspired by the mentors they've worked with that they radically reshaped their approaches to markets.

A narrow focus on P/L and catching moves in markets not only exposes us to negative emotion (as we know well from greed, fear/FOMO, overtrading, etc.), but more crucially it keeps us from any experience of inspiration. Eye-opening novelty and perspective is what can amaze us and lead us to reorganize our trading. If we lack amazement, we cannot tap into inspiration. The narrowness of our perspective prevents us from broadening our horizons.

This leads to questions rarely asked: What am I doing today and this week (month, year) that is wholly new, interesting, exciting, and potentially inspiring? Is it a mentor we tap into or a new perspective on our markets and trading? Is it an insight into a particularly successful trade? What in my trading is giving me energy and renewal?

We make great changes by greatly changing our experiences.

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1/31/2026 - Emotional arousal and awareness of the consequences of our actions often is the spark for personal change (see below). By itself, however, it is not enough. It is during that emotional awareness that we can become exposed to new thoughts, new ideas, new ways of doing things. Take the example of the alcoholic who goes to AA. Pain over the consequences of drinking brings the person to AA, but it is at AA that new experiences of community and new understandings of the need to replace alcohol with support--including the support of a "higher power"--take root. The group experiences provide a new way of handling life's challenges.

So it is with trading. We make the same mistakes over and over again until the pain (and the financial losses) become too great to bear. One of the most interesting aspects of the Market Wizards interviews was how common it was for very successful traders to go through harrowing losses early in their careers. (Paul Tudor Jones is a great example). The pain of that experience completely opened the Wizards up to a new set of priorities regarding risk management and the need to trade in planned and not reactive ways.

We change by completely reorganizing what we do and how we do it, because the pain of what we went through is something we never want to repeat. That happens in relationships; it happens with drugs and alcohol; it happens in markets. We don't change because we want to. We change because we have to.

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1/29/2026 - The integrative perspective in psychology is that the various approaches to change, such as cognitive therapy and psychoanalysis, are different ways of tapping into a common change process. Research tells us that, by directly tapping into this process, we can accelerate change and make our change efforts more effective. In these posts, I will highlight what we need to do to make meaningful changes, whether it's in our personal lives or in our trading.

The first element in the change process is emotional arousal. We cannot sustain change if we stay in our usual states of mind and body. It is when we are experiencing our lives most deeply and powerfully that we're open to the deepest and most powerful changes. Very often, the emotional catalyst for change is emotional pain. We have repeated a problem pattern so often and to such an extent that we feel despair. We feel that we can't go on this way. In AA, this is known as "hitting bottom". Our pain becomes our greatest motivator to do things differently.

Sometimes there is a positive source of the emotional arousal. We have such a powerful experience that it completely changes our perspective and our priorities. Examples of this would be falling in love and committing to a life together; deep religious experiences; and unusual success in one of our pursuits. Change occurs through inspiration: by shaking up our priorities.

In both cases, emotion is a gateway to change. The enemy of change is routine--and routine states of mind. A simple example would be trading reviews at the end of a day, week, or month that are conducted quickly and in a rote fashion. We write down some goals and observations and move on to other life activities. There is nothing in the process that moves us. It's not the lack of work or effort that prevents traders from succeeding; it's the absence of emotional arousal. We either have to be so disgusted with our bad trading or so inspired by our successes that change becomes a must, not something to check on a list.

If we're not passionate about change, nothing ultimately changes.

The Special Talents and Skills of Short-Term Trading

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 22 Jan 2026 11:21:00 +0000

1/28/2026 - How do short-term traders work on their long-term development? This is one of the greatest weaknesses I have found among very active traders. They are often quite good at reviewing the past day's activity and performance (see below), but there is little formal carryover of goals from week to week and month to month. In other words, they are good at setting goals and priorities for tomorrow's trade, but they rarely step back and examine how they can broaden the strategies and markets they trade, how they can better make use of teamwork, and how they can adapt from one market environment to another. When opportunity sets change, they are poorly equipped to make the larger changes needed in their trading.

It is worth noting that, among the professional traders I work with, monthly meetings and reviews are most popular. The teams are focused on annual performance and monthly meetings give them twelve opportunities to learn from the past month, develop ideas for the next month, and renew teamwork and team focus. That's twelve opportunities to do the bigger picture thinking that goes missing in the heat of daily market activity. It's a process worth adopting for short-term traders as well. It's great to adapt from day to day, but the ultimate goal is building a career.

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1/27/2026 - Short-term trading requires short-term coaching. When I began working with traders whose average holding periods for trades was a matter of minutes, I was struck by one of their performance processes. They prepared for trading at the start of the day, tracking order flow and short-term price action across a variety of markets. They then took a midday break when markets slowed down and reviewed their morning trading and their morning P/L. They adjusted their trading (direction, what was moving best) during that break and then took a longer review period after the market closed. Often they would use the replay feature on their platform to see what they missed during the day and how they could have picked it up or traded it better.

Each day thus had three separate coaching periods. This provided more opportunities for pattern recognition and more opportunities for learning. Indeed, the morning sessions had their own stop loss levels, which preserved capital for the afternoon session. Every day was really two days. Their short-term trading was amazingly successful because they had turned performance improvement into a short-term process.

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1/26/2026 - What creates success among short-term traders is not only pattern recognition, but the ability to process many patterns quickly. One of the reasons I chose to track the mentoring process at SMB Capital for my latest book is that I wanted a better sense for how active traders gain their performance edge. What stood out is something I had observed in interacting with their best traders: the ability to look at many different trading instruments and quickly find patterns worth trading. The use of scanners greatly assisted this process, but there was also scanning being done by the trader to see how things were moving across different time frames. Their expertise came not only from knowing how to trade, but by focusing on the best things to trade. The ability to process large amounts of information quickly and identify patterns of patterns allowed them to participate in the greatest areas of opportunity.

The broaden and build model in psychology suggests that positive emotional experience helps us process more information and process that information better. A positive mindset expands our awareness and makes us better at finding opportunity. When we are in the right mindset, there is joy in preparing for trading: the process of finding opportunity is intrinsically rewarding. It is that joy that energizes our pattern recognition and helps us trade better ideas in better ways.

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1/25/2026 - As noted below, there are tremendous trading advantages to blending rapid pattern recognition skill with traditional analytical skill. The current market is a great example of this, as we've seen very bullish moves in small cap stocks and in metals (copper, silver, gold), raw materials shares (XLB) and energy stocks (XLE). That has led to considerable bullish speculation regarding the impact of the AI trade, as noted below. But sector analysis provides caution. Since 2020, when more than 85% of XLE and XLB stocks are trading above their 20-day moving averages, next 20-day returns in SPY have been subnormal. Indeed, the next 20 days in SPY have averaged a loss of -.56% (N=134), an eye-opening return during a bull market period. If I were only looking at charts and patterns, I might look for the uptrend to continue. Based on the analysis, however, I can approach this week's market with a balanced perspective and let the market show its hand.

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1/25/2026 - I'll share what I've been discussing with a number of traders in recent days, addressing their frustration over not making more money in the AI stocks and missing the moves in silver, gold, and mining shares. Note that, while this issue has psychological implications, no amount of work on psychology is going to provide answers as to asset allocation and trade selection. Rather, a proper understanding of the situation might just help the psychology!

The AI theme is alive and well, but the focus among the people I read and speak with has been toward the geopolitical competition for the raw materials that are in short supply if there is to be broad AI development. So what we're seeing (Greenland is an example) are efforts to lock in these resources and generate the power and mining needed to exploit them. That is why we're seeing recent relative strength, for example, in the XLE (energy) and XLB (materials) ETFs.

These might represent promising investment themes, but for the short-term trader the question becomes, "What price/volume action do I need to see to participate in these trends with favorable reward relative to risk?" The short-term trader can thus participate in big picture market developments by breaking trends down into component moves. A different way of saying this is that cycles occur even within strong trends, and those can offer excellent timing opportunities for the short-term trader.

A promising combination is having the perspective of an investor and the nimbleness of a trader.

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1/23/2026 - Quickly review the previous sets of posts on hidden edges in the market. All of these were over longer time frames, and all of them involved data collection and analysis. By seeing how markets have behaved historically, we can develop hypotheses about how they might behave going forward. Then we can use real time price action to gauge whether these scenarios are actually playing out. Notice that this is a highly analytical process. The hedge fund team managers who collect data and develop ideas based on the data are called analysts for a reason!

Short-term trading--particularly trading intraday--is a completely different activity. Data collection and analysis are less important and pattern recognition becomes key. For instance, if I see small cap stocks breaking out to new highs, resulting in strong market breadth, I can observe where selling in other areas of the market might pose opportunities to buy. Alternatively, if I see that the market has traded in a relatively narrow range and now breaks higher on increased volume following a similar move in small caps, I can infer that large market players are perceiving opportunity on the long side and join their move.

Where investing requires slower, deeper thinking, short-term trading involves faster, nimbler processing. This has important implications for training. The only way to build faster pattern recognition is to be exposed to many patterns many times so that you can internalize those. A major reason traders fail at daytrading is that they don't spend enough time experiencing patterns to be able to recognize those in real time. When I wrote the book The Positive Psychology of Trading, I spent time with Jeff Holden and his group of trainees at SMB Capital to see how they were learning to trade the market actively. What I saw is that he walked students through trades bar by bar, showing what was happening and what that meant. This was something the group did day after day, until they could perceive opportunity on their own.

Training in short-term trading is training in perception. Only by seeing things again and again can we recognize them in real time and take the right steps. That is true for medical students learning to make diagnoses and treatment plans, and it's true of active traders. Sound training builds a sound psychology. No amount of psychological work can substitute for understanding what is happening in markets.

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1/22/2026 - Talents represent our inborn strengths. As Goethe points out, we find our greatest happiness and fulfillment when what we're doing in life is aligned with our talents. To make the most of our talent, we typically have to develop skills in any field. Those are not inborn; they are conveyed through mentoring and practice. Skills put talents into action; together they create success. The football player who has natural athletic talents spends hours and hours in practice and in sessions with coaches to hone the skills that will turn raw talent into successful performance. A key performance principle is that elite performers typically spend more time in practice and rehearsal than in formal performance. That process of deliberate practice not only hones skills, but develops the winning mindset of the performer. It is the role of the coach to structure practice sessions and provide the feedback that will allow performers to make the most of their talents.

Without mentoring/coaching and structured deliberate practice, talents never find their way to skills and elite performance. In the upcoming posts, we'll take a look at the special talents and skills required by short-term trading and the ways in which these can be honed through the right kinds of learning processes.

Finding Hidden Edges In The Market

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 15 Jan 2026 13:19:00 +0000

1/21/2026 - One last edge that is hidden because few people are looking there: Let's take the percentage of stocks in the SPX each day that are trading above their longer-term moving averages. In this case, we'll look at the percentage above their 50-day averages (once again, data can be found on the Market Charts site). We then look at see what the index (SPY) does five days later. Sure enough, when the percentage of stocks above their 50-day averages is in its highest quartile, the next five day returns in SPY are subnormal: .11% vs almost four times that amount when they're in their lowest quartile. This makes sense...overbought markets tend to pull back and oversold markets are more likely to bounce.

But, wait! What do we see when we look at the next 50-day returns? Sure enough, returns are significantly more favorable following the strongest 50-day periods and after the weakest 50-day periods. In other words, at longer time horizons, we see both momentum and reversal.

What this means is that, following a strong 50-day period of breadth, on average pullbacks are meant to be bought. This goes hidden, however, because traders are unwilling/unable to take losses and bail out long before the bounce tends to occur. To take advantage of the edge, it's necessary to think like an investor as well as like a trader. And that dual mindset is rare indeed!

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1/20/2026 - Do we find hidden edges among small cap stocks as well as the large cap issues in the SPX? For this analysis, we go back to 2015 and examine the percentage of stocks in the S&P 600 universe ($SML) that are trading above their 3, 5, 10, 20, 50, 100, and 200-day moving averages. These data are readily available on the excellent MarketCharts site. I specifically examined the variability of the breadth readings: the standard deviation of each day's data. The variability captures two market scenarios: when short term breadth turns much higher following a longer-term period of weakness and when it turns much lower following a longer-term period of strength. Note that this is a different way of identifying breadth thrusts.

When variability has been in its highest quartile (thrust conditions), the next 20 day return in $SML has been +1.70%. That compares to a 20-day return of -.05% when breadth readings have been least variable.

There are many other patterns that can be found in the small cap data.

Once again, the idea is not that you should trade small caps or trade them based on these particular historical patterns. Rather, the idea is that a large number of traders focus on the information that is most readily available and that takes the least analysis (chart patterns, news reports), leaving significant opportunities to those willing and able to collect and analyze data. Meaningful edges are to be found over time frames longer than most traders look, and that's why they're hiding in plain sight.

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1/19/2026 - Many traders view technical indicators as something to chart; then they look for chart patterns. In fact, many technical indicators produce data that, when backtested, yield important hidden edges. The stockcharts.com site gives daily readings on a number of technical measures that can be downloaded and tested. For example, when a large number of stocks in the NYSE display an improving Chaikin Money Flow (top quartile of distribution since 2021), the next 30 days in SPY average a gain of only +.55% compared with almost three times that much for the rest of the sample. When a large number of stocks display a weakening Money Flow (weakest half of the distribution), returns average twice as much over the next 30 days than the rest of the sample.

Consider Bollinger Bands. When very few stocks in the NYSE close above their upper Bollinger Bands since 2021 (lowest quartile of distribution), the next 30 days in SPY have shown a dramatic upside edge: three times the average returns of the remainder of the sample.

Most powerful is when relatively uncorrelated indicators display historical edges that line up with one another. Conviction is not just a state of mind. It follows from rigorous analysis and understanding of market behavior.

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1/18/2026 - Now let's take a look at a different hidden edge in the market: not strength, but the absence of weakness. For this analysis, we'll go back to August, 2010 when I began collecting these data (available via Barchart.com) and take a look at the number of stocks in the NYSE universe that are making fresh monthly highs and fresh monthly lows. What we find is that next 20-day returns in SPY average +1.44% when monthly lows are in their lowest quartile. That is about double the return of the next two quartiles. When few stocks are weak, overall market declines are rarer. It takes weakness in some areas of the market to lead the broad averages lower.

Interestingly, next 20-day returns are also superior (+1.27%) when new monthly lows are in their highest quartile. In other words, when we have lots of stocks making new lows and the market is flushing out, that has often been a good time to find value. A similar pattern shows quite superior returns 50 days out when three-month new lows are either very low or very high.

So why are these edges hidden to most traders? They haven't taken the time to download and analyze the data, and they are looking for things to trade in the next few minutes and days--not what has dramatic edge over a period of weeks to months. The need to trade actively hides the edges that play out over time.

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1/16/2026 - Some of the best hidden edges in the market occur, not when institutions are piling into stocks or fleeing them, but when they are rotating existing assets from one sector of the market/economy to others. This sector rotation can easily be tracked by following the breadth within each sector. In this post, we'll use the percentage of stocks trading above their 20-day moving averages as a breadth proxy for each sector. (Data available from Barchart.com).

So let's take the breadth within the energy sector (XLE) minus the breadth of the overall market (SPY). When energy breadth is in the top half of its distribution since 2020, returns in SPY over the next 10, 20, and 30 days are distinctly subnormal. Indeed, when energy sector breadth is highest relative to overall market breadth, the returns over the next 3-5 days have been negative--quite a feat in a bull market period!

Energy stocks do well when energy prices are rising. But that is not an environment that is necessarily good for the overall economy. Seeing where money is flowing alerts us to potential headwinds and tailwinds in the broad market.

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1/15/2026 - Some of the most promising edges in the stock market are found in places traders generally don't look. Actually, this dynamic occurs across markets. For example, the majority of traders in the fixed income (interest rates) markets look for events (central bank policy changes; shifts in patterns of growth) to buy or sell rates. A more subtle approach looks at how rates vary from one another within and across bond markets and trades those relative relationships. So, for instance, if nothing has changed in central bank policies and in macroeconomic news, one part of the rate curve may be priced cheaply relative to another point, or rates in one region of the world will be expensive relative to another region. This offers the opportunity to buy what's cheap, sell what's expensive, and profit from the "mean reversion" when rates return to a more normal relationship.

This is a great example of how we can improve our trading psychology by expanding our understanding and perception of opportunity.

So let's start looking at relative relationships within the stock market. I went back to 2020 and calculated the difference between the percentage of stocks above their 5-day moving averages within the consumer staples sector minus the percentage of stocks above their 5-day moving averages within the consumer discretionary sector. These data are readily available on the Barchart.com site. When investors are expecting growth and a strong economy, they are drawn to the consumer discretionary shares which benefit from consumer spending on things like travel, entertainment, etc. When investors are expecting economic weakness, they expect that spending on essential staples will continue, while discretionary spending will decline. By tracking the percentage of stocks in the consumer staples sector above given moving averages minus the percentage of stocks in the consumer discretionary sector, we have a handy economic sentiment measure.

Interestingly, in the quartile of occasions in which the difference between the percentage of stocks above their 5-day moving averages for XLP (staples) minus those for XLY (discretionary) is greatest, the next 20 days of performance in SPY averages only +.42%. All other occasions average +1.36%. When investors flee growth relative to stability, that theme tends to continue in the short run. When we look at the difference between the percentage of stocks above their 20-day moving averages for XLP minus those for XLY, we find a similar pattern 20-50 days ahead. Forward returns in SPY are subnormal when investors are fleeing to the safety of staples.

The point isn't that you should run to trade this pattern. The point is that patterns exist where most traders aren't looking. While the noobs are looking at directional charts, a world of opportunity is being found by the pros in relative space. When you have more ways to identify opportunity, you build an opportunity mindset. Better trading leads to better psychology.

Self-Care and Performance

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 09 Jan 2026 12:30:00 +0000

1/14/2026 - One consistent piece of advice I've given traders is to always, always, always have something more important in your life than trading and P/L. That might be a very special relationship with a spouse or family; it might be your faith and religion; it might be a career pursuit outside of markets or a life activity you're passionate about. But trading must fit into your life. It cannot run your life, and it cannot substitute for the joys that come from our physical, relationship, and spiritual well-being.

When trading becomes all-important, we find our moods and outlook dominated by P/L. Our self-esteem becomes conditional: we feel only as good as our performance. The ups and downs of P/L become ups and downs of our energy level and that stress takes a toll on everything else we do. One consistent finding from my research on successful traders is that they lead very full lives. They have lots of sources of joy and energy that sustain them through difficult trading periods. In broadening our lives, we can cope with any life setback and we maximize overall positive psychology.

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1/13/2026 - The best way to deal with stress is to make sure it doesn't become distress. All of us feel overloaded and stressed at times with life's challenges and the ups and downs of markets. The problem is not the stress--that is inevitable--but our letting it accumulate to the point where it turns into anxiety, self-doubt, and a loss of energy.

Research in positive psychology is clear: when we balance our sources of stress with activities that bring well-being, we do not experience distress. This is why it's so important that there be elements in your trading processes that are rewarding and fulfilling to you whether or not you're enjoying solid P/L. Perhaps what brings you happiness and fulfillment is working closely with other traders and participating in their growth. Perhaps your well-being comes from learning and the stimulation of finding new ideas and opportunities. Perhaps your balance comes from life activities outside of trading that are rewarding when markets are not.

The best way to deal with stress is enjoy a broad portfolio of activities that will always pay off in some fashion. Happy and fulfilled people do get stressed--life would be boring otherwise!--but they don't fall into the trap of distress.

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1/12/2026 - Our life's tank can be empty, not because we've been working so long and hard, but because the work we're doing does not truly inspire and challenge us. Similarly, the tank of our romantic and family lives can be empty because we fail to engage in the kind of new, stimulating activities that keep relationships fresh. When Margie and I felt overloaded with our responsibilities, we didn't automatically assume that we needed rest. In fact, many times those occasions led us to travel to interesting locations, whether it be a tour of Iceland, a small boat trip to the glaciers surrounding Alaska, or a drive down Italy's Amalfi coast. Recharging meant making new and different efforts and sharing fresh activities--even if it was just going to a new creperie or looking for cats to rescue.

The answer to burnout is often not to do less, but to do different. At some point, routine becomes deadening. Our challenge amidst life's routines is to always pursue activities that energize us, challenge us, and stimulate us. Work-life balance is great, but what is most important is ensuring that the "life" part of that equation truly gives us life. Burnout does not come from too much work, but too little rejuvenation.

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1/11/2026 - A great life is the culmination of individual days, weeks, months, and years lived greatly. Can we lead a meaningful life if we aren't doing things meaningfully on a regular basis? Can we lead a productive life if productivity isn't our norm? Such an important question is: What can I do today that will move me forward toward my goals for the new year and for my life?

I recently tried on a sport coat that I had not worn in quite a while. In the jacket pocket, I found notes in a diary that I wrote in preparation for a talk to a hedge fund in NYC. The notes were headed "Questions to Consider" and the first item was as follows:

If every day was like this day:

a) How would that impact my physical health/wellbeing?

b) How would that impact my emotional wellness?

c) How would that impact my significant relationships?

Today is not a toss away trade. Today is an investment in the future. What are you doing today that will pay off manyfold in the days to come?

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1/9/2026 - It is very easy--particularly for driven, achievement-oriented people--to work so hard and push so persistently for success that they stop taking proper care of themselves and the people that matter to them. If we think of our lives as gardens--and our friends, family, and colleagues as the flowers and plants of the garden--then we can ask ourselves how often we're fertilizing, planting, watering, and weeding. Or, to use another analogy, our relationships are essential sources of emotional and spiritual fuel. We can work so hard that we burn out and run out of fuel.

Great questions for self-assessment are: During this past week, how often did I connect meaningfully with people I care about? How often did I engage in activities that are fun and enjoyable? That are fresh and stimulating? Essential to an energized mind state is variety. That includes activities that work us out physically, that grow us intellectually, that inspire us spiritually, and connect us socially. When we care for ourselves, we keep ourselves in peak creative condition and peak focus.

If athletes spent all their time working out and playing competitively, their bodies would break down and their performance would suffer. Perfect performance never comes from perfectionism.

How we spend our time shapes the value of our life's efforts. Drive hard and refuel often.

Marjorie Sue Steenbarger: Leaving Your Legacy

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Mon, 05 Jan 2026 12:54:00 +0000

1/8/2026 - With Margie's passing, all the family--myself, kids, and grandkids--assembled their photos of her and with her, creating quite an album. I contributed many pictures and was surprised at how many of them (like the one above) were taken during our travels. We had pictures from the UK, from Alaska, from Israel, from Europe, from Iceland, and of course from all over the U.S. I'm convinced that one of the best ways of keeping relationships fresh is to share in fresh experiences. Seeing and doing new things kept a 42 year marriage fresh. Inscribed in our wedding rings--and now also on our gravestone--is "Perpetual Passion".

Keeping the passion alive in any endeavor, whether it be marriage, career, or trading, requires a breaking from routine and a willingness to explore new and different things. See the world, see and experience the whole trading world, see and experience different people and cultures.

May we all live life with perpetual passion.

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1/7/2026 - The most recent post encouraged us to focus on the legacy we would like to leave behind and concentrate our efforts on what is truly most important to us. Might it be possible that the best way to leave our legacy is to connect deeply with the legacies of those we most admire?

A number of years ago, I wrote something that Margie liked so much she had it framed as a gift to me. It reads "The best way to stand on the shoulders of giants is to hoist them upon our own". In other words, if we want to elevate our lives, we can do no better than to elevate those we most respect and cherish and draw upon their inspiration and example.

Imagine that you are writing a book that captures the meaning, purpose, and essence of who you are. Who would you dedicate that book to? Who would be counted in your "acknowledgements" section? How can we hoist those people on our shoulders each day, week, month, and year by following their examples?

In furthering the legacies of those we love and respect through our actions and accomplishments, we build a life worthy of legacy. By honoring others through our example, we live an honorable life.

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1/6/2026 - I have been touched by the number of traders who have reached out, including ones who shared their personal experiences with Margie. It's amazing how we have so much more impact than we realize when we live the right kinds of lives.

How would you like to be remembered after you leave this earth? What impacts would you want to have; what memories would you like to leave? These are important measures of wealth, and yet we can spend more time anguishing over day to day P/L and ups/downs than on doing the things that enrich our lives--and the lives of others.

Here we are in a new year, so here's a great new year's challenge:

Imagine that you will pass away at the end of the year. Knowing that, how would you want to spend 2026? What would you most want to do to cement your legacy--your impact on those you love, on your community, and on the world?

In this exercise, every single day that passes places you one day closer to your own passing. There's no time to fret about bad trading or daily frustrations. Your single mission is to live your life in a way that will truly live on in its positive influence.

This exercise is more than the making of a new year's resolution. It is turning your life into an expression of your resolve.

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1/5/2026 - Margie Steenbarger, my wife of 42 years, passed away this weekend. For me, it's been a tremendous loss and also an inspiration. Family members have come from all over to be with each other and to celebrate her life. We have been sharing photos and stories and have created a website where all our memories can be shared for years to come. Leaving a legacy means leaving others with experiences and lessons that make everyone better. A life well-lived is a life that keeps living even beyond our passing. It lives on with those whose lives we have touched.

So what is the mark on the world that you will be leaving when your days come to an end? How will you live on in ways that enrich the lives of others? It's great to focus on P/L and the next set of trade ideas, but that will never build your legacy. It is how we impact others that makes the mark that can't be erased.

What are you doing right now that will make a positive difference later?

With Margie's passing, a close family has grown even closer and family members that were only loosely connected are now committed to one another. That was Margie's legacy: building lasting bonds--in the students she taught, in her family, and, yes, with me. With her passing, I am committed to becoming a better bond-builder and crafting a legacy as meaningful and valuable as hers.

A saying in the Jewish religion is "May their memory be a blessing", taken from Proverbs 10:7 ("The memory of the righteous is blessed"). When we leave a positive legacy, we don't leave others with a sense of loss, but a sense of having been blessed.

The legacy we build is the most important P/L of all.

Special Sale on Positive Trading Psychology Book

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Wed, 31 Dec 2025 11:36:00 +0000

1/1/2026 - Happy New Year! This end of year period is a perfect opportunity to reflect on the past year and especially on what we can do in 2026 to make the coming year as rewarding in all ways. The Barnes & Noble sale on the Positive Trading Psychology book ends today (see below). What I've found in my personal life as well as my professional work is that positive psychology is a game changer. So much of what we focus on is the negative: correcting the mistakes we make. That is necessary for success, but it is not sufficient. Your experiences of meaning and fulfillment are your best coaches of all, telling you what you need to do to make the most of your trading, your relationships, and your life activities. Our passion points the way to our path; our positive psychology points the way to a positive life.

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12/31/2025 - Many thanks to Barnes & Noble for sponsoring this sale of the upcoming Positive Trading Psychology book. The sale runs today and tomorrow and covers both the print/electronic book and the audiobook for B&N members. When ordering the text, all you have to do is enter the code PREORDER25 and you'll get 25% off the book price.

My hope is that the book can be a helpful resource for you personally as well as for your trading. The idea is to clearly identify you at your best--your ideal self--and then build your life around that vision and inspiration. I wish you a very happy New Year and look forward to being a resource for you and your trading in 2026!

Brett

What Creates Trading Success

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 25 Dec 2025 13:46:00 +0000

12/30/2025 - What creates success in trading is what creates success in life. Not minimizing life's negatives and avoiding conflicts, but pursuing meaningful opportunity and developing "processes"--sets of life activities--that offer joy, fulfillment, stimulation, and significant connection with others. The psychological well-being that I cover in detail in my upcoming book, Positive Trading Psychology, is something that can be achieved in every facet of trading--and every facet of life. There is a big part of each of us that seeks comfort and that avoids strenuous effort. That doesn't work in the gym, and it doesn't work in life. Psychological well-being represents our personal, psychological fitness and that fitness means that we seek challenges in our work, in our relationships, and in our personal pursuits. We grow through tackling new things in new ways, whether in trading or in romantic relationships.

As we approach the new year, it's worth asking how you will grow in every aspect of your life--including your trading. How will your life become more enjoyable, more meaningful, more stimulating, more connected to those who matter? It's difficult to trade positively if we're not leading positive lives.

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12/29/2025 - The complexity of markets guarantees that no one will ever achieve complete mastery in their trading. Indeed, as I've shared in the past, even the best discretionary, directional traders are not profitable on much more than half of their trades. They have the conscientiousness to limit their downside and the aggressiveness to size up trades as they work. But their trading is always a work in progress. That is why the drive for improvement is essential to trading success.

The drive for improvement shows up in the effort, detail, and amount of time spent in performance review; the seriousness of journaling and pre-market preparation; and the continuous work on finding new sources of edge. Think of all the ways in which the drive for improvement shows up in an Olympic athlete; a winning sports team; a world-class performing artist; or a state-of-the art medical program. Motivation comes, not only from winning, but from becoming better and better versions of ourselves.

There will always be winning and losing periods in markets. The great traders turn both into fuel for development of their craft.

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12/28/2025 - Perhaps nothing is as commonplace--and superficial--as declaring that one has a "passion" for trading. Usually that means a passion for making money. One might have a passion for sex as well, but that is not what makes a lifelong, successful relationship. Still, passion is clearly evident among the world's best traders. It's not a job or even a career. It's a calling. It's what they feel that they are meant to do. And that pertains to every aspect of trading process, from generating ideas through research and collaboration to finding better and better ways to express and manage the positions that come from idea generation. Many traders hope to make money so that they don't have to work from 9 to 5. The great traders track markets and generate ideas well before 9 am and well after 5 pm. We pursue a job; a calling tugs at us.

Nothing is more important to developing traders than figuring out where your calling in markets might lie. Or perhaps in figuring out that your calling is to be found elsewhere in life. All the silliness about controlling emotions and avoiding FOMO goes away when markets call to our highest aspirations.

Callings call to the best of us.

When Margie and I got married, this was our wedding dance song. Not a fun song or an ordinary song of love, but an expression of what a romantic calling is all about. Almost 42 years later, it's still one of the few songs I listen to for inspiration.

May you always live life passionately!

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12/26/2025 - Closely related to curiosity (see below) is insight. Insight into markets comes from intuition and intuition comes from pattern recognition. Our curiosity leads us to observe markets again and again--and in many different ways--and that leads us to observe patterns. Just because we perceive a pattern doesn't necessarily mean that the pattern is uniquely informative, but it does provide us with a useful hypothesis worth testing. Some of the best trade ideas begin with a flash of intuitive insight. Our minds are putting together the information we've been processing again and again in different ways, enabling us to perceive what we would otherwise miss.

The other day I was reviewing my market breadth data and comparing the information from one database (sector specific breadth) with the information from another (overall market breadth across multiple time periods). A thought popped into my head that what is important in the breadth data is "height" and "width". The thought came with the striking clarity that has usually accompanied my best insights--whether about people or markets.

"Height", I decided, meant the vertical component of the spreadsheets, which is time. "Width" meant the distribution of the breadth data across various sectors or various lookback periods. I immediately constructed spreadsheets to capture upside and downside breadth thrusts (which I had been reading about on the SentimenTrader site) over varying time periods and for various indexes and sectors. From my analysis of the data, it became clear that thrusts that occur in the context of multiple overbought and oversold markets and periods display promising price continuation and reversal. An upside short-term breadth thrust in an oversold market, for example, often begins a short-term trend--particularly when it occurs across multiple sectors.

The point here is not that you should necessarily trade breadth patterns in equities. The point is that, if you true examine enough important information in enough ways, promising ideas will come to you. Creativity begins with creative perception--and that can only come when we look at new things in new ways.

Insight provides us with our greatest market vision.

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12/25/2025 - Reducing and eliminating trading mistakes is necessary for success but not sufficient. Having worked at many successful trading firms, I've been able to see success up close and personal. In these posts, I hope to share what I've learned.

The first element in success is curiosity. The really great traders spend a good amount of time screening for opportunity: across the universe of stocks and stock markets, across a variety of strategies and systems, across a range of asset classes. They explore what is happening in the world--and what is happening in markets--and actively looking for what is likely to move next. I spoke with a portfolio manager recently who described scouring the interest rate curves of various sovereign markets to see what might be mispriced within and across markets. This process requires digesting news across the world, an understanding of central bank policies, and a continual updating of economic and geopolitical developments. No one can sustain that kind of curiosity without unusual open-mindedness and a passion for puzzle-solving.

Day traders in the stock market may not be scanning for those global drivers of markets, but will be equally detailed in tracking the prices where volume expands and contracts; the ways in which stocks are moving together or in rotational patterns; and the patterns of shares that are most active and volatile. In my books, I've shared how successful traders I worked with spent all day following and trading the market--and then spent further time replaying the day and examining what happened, how it happened, what they missed, and how they could improve their execution and trade selection. Day after day. That is more than motivation. It is a passion for learning and an undying curiosity. It's what drives world-class athletes to spend hour after hour watching game videos...Their motivation is not just to win, but to live life as a winner.

Trading and Spiritual Strengths

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 18 Dec 2025 12:55:00 +0000

12/24/2025 - What if you could rely on an AI platform to review and analyze your trading, integrate your journaling with its recommendations, interact with you by voice in real time, and even monitor your physiological data from wearable devices? Moreover, what if you could bring the analyses and recommendations of the AI to a live trading coach for ideas about implementation, so that the coaching is truly a hybrid of AI-based analyses and experienced psychological guidance? I look forward to collaborating with Tradefulness in 2026 to explore how coaching can take real-time feedback and turn it into real-time coaching--and then monitor how well the coaching is actually put into practice! Could this be a framework for accelerating trader development and improving the success rate of new traders? There can't be any great answers without first asking valuable questions.

Happy holidays!

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12/22/2025 - Here is the most powerful motivation I've found for trading well: generosity. A while back, I decided to dedicate a meaningful percentage of my trading profits to support my family. The idea is that, if I trade well, I will do good by helping those I care about. The same dynamic would be present if a trader decided to dedicate a percentage of profits to a charity or social cause that they strongly supported and believed in.

Now all of a sudden there's a different motivation for trading psychology. I would never want to hurt someone or something I cared deeply about. My desire is to live generously and see others benefit from my success. I would feel much worse taking away something from a person I love than taking it away from myself. That motivation to be caring and generous pushes me to make the right decisions: take breaks when needed, manage position sizes and risk correctly, and remain patient for A+ opportunities. It also incentivizes me to take proper risk when those good opportunities arise and make the most of my trading.

Every so often, I visualize the people I hope will benefit from my work (including my trading) and feel the love for them. That motivates me to be generous and help them through my success. What otherwise could be an ego-filled set of activities now becomes an opportunity to turn doing well into doing good.

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12/21/2025 - Related to the spiritual strength of acceptance (see below) is forgiveness. If someone we care about unintentionally hurts us, we let them know and the odds are good that they will apologize. At that point, we forgive. Forgiveness doesn't mean ignoring a wrongdoing or blindly accepting it; it means that we're all fallible and we don't allow individual mistakes to fracture important relationships.

Well, how about our relationship with ourselves? When we make a mistake that hurts someone--or that hurts us--we own up to that mistake and vow to not repeat it. But then we forgive ourselves. Just as forgiveness preserves our personal relationships during times of conflict, it preserves our relationship with ourselves. We vow to learn from our trading mistakes--and we outline plans to put that learning into practice--and then we forgive ourselves and move forward constructively.

If we can't forgive ourselves, then of course we'll resort to revenge trading and overtrading to undo what we did wrong. Forgiveness does not mean passively accepting falling short; it means that we support ourselves in correcting our inevitable failings.

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12/20/2025 - Yet another spiritual strength that can fuel our trading development is a sense of wonder. Here is an excellent recent article on the topic that cites research linking a sense of awe and wonder to improved health and emotional well-being. Most of us are familiar with experiences of wonder and awe in nature, such as when we survey a magnificent mountain landscape. Perceiving a wonder-full piece of artwork, taking in the sight of a newborn baby, contemplating the stars and our place in the universe--all of these can trigger a sense of awe.

So how does this relate to markets? When we study the stock market, we cannot help but be amazed at the interplay of timeframes, rotation of funds across sectors, and rotation of money across different asset classes--all impacted by news, economic developments, and geopolitical events. Are markets wholly predictable? Absolutely not. Every so often, however, we catch a glimpse of how funds are flowing and how markets are moving and we can benefit from that insight. The experience of grasping something that complex brings a feeling of awe and wonder. It has nothing to do with P/L and it never occurs when we're focused on ourselves and how much money we can make. It also never occurs when we try to reduce markets to simple chart patterns or trading signals. It's when we step back and appreciate how markets move that, like scientists immersed in the complexity of what they're studying, we can find a fresh source of motivation in grasping something truly awe-some.

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12/19/2025 - A second spiritual strength essential to trading success is acceptance. The ability to accept setbacks is essential to learning from them. Indeed, much of what we call "overtrading" and "revenge trading" is the result of the inability to accept prior losses. When we accept a loss or a trading mistake, that doesn't mean that we passively tolerate it. Rather, it means that we own it and, as noted below, accept it as a gift: a learning lesson that can make us better. We can't be grateful for what we learn as noted below unless we first accept it.

But there is a second way in which acceptance is key to our successful trading. We have to be accepting of ourselves. We have strengths. We have weaknesses. We are still learning. That is OK. Ayn Rand once noted that, "A quest for self-respect is proof of its lack". When we accept ourselves, we accept all of ourselves--and we respect our shortcomings as well as our abilities. We cannot trade to achieve self-respect. Our self-respect must guide our trading.

We must become our own gurus and develop our own expertise. The search for gurus who will give us the answers betrays our own lack of self-respect and self-acceptance. When we accept who we are and where we're at, we're ready to learn from that and move ourselves forward.

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12/18/2025 - In these posts I'll outline a few spiritual strengths that manifest themselves as trading strengths. The first of these is gratitude. When we feel grateful for what we have and who we are, we experience overall well-being. We know from the research on positive psychology that the dimensions of well-being contribute significantly to career success, success in relationships, and overall physical health.

But how can we be grateful if we're losing money in markets or if our personal lives are becoming rocky? If we view our setbacks as opportunities to learn and do things differently, then suddenly those negative events become tools for our growth. We can be thankful for challenges that come our way, because those will ultimately make us better.

Similarly, when we're grateful for our successes, we avoid perfectionism and the nagging need to always do more. Indeed, the energy of gratitude helps us build upon our successes and continually improve.

Gratitude shapes our mindset and guides our development.

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12/18/2025 - The life we plan is not always the life that's meant for us.

When I wrote the blog book Radical Renewal, I recognized that the needs of the ego were some of the greatest obstacles to successful trading. The really great ideas and trades came from letting go of our needs and learning to listen from deep within. As I mentioned in the conclusion to the book: "Not so long ago, the phrase 'trading spirituality' would have been viewed as an oxymoron. Among the traders I work with, there is growing recognition that how we lead our lives impacts how we interact with financial markets."

There are precious few places where traders can talk openly about their religious/spiritual development and how that impacts their trading--and their lives. We're all too cautious to bring up what we believe because we don't want to be seen to be preaching to others. So that part of our lives gets left behind. Which leaves us to trade with our egos. Indeed, my desire to not allow my day to day work in life and markets interfere with my spiritual development led me to begin the Integrative Judaism site.

But what if there was a community where participants could share their spiritual experiences as readily as their trading experiences? What if people shared best practices in their unique religious lives and explored how those become best practices throughout life, including trading? What if there was a community of traders from diverse spiritual traditions and backgrounds, where everyone could inspire everyone else?

I have no preconception as to the shape such a community would take, how it would communicate and collaborate, etc. The fun and adventure is to discover together. If you are a trader and would like to explore the intersection of your work in markets and your spiritual/religious work, by all means reach out to me at steenbab at aol dot com and we can explore possibilities. As always, I appreciate your interest and support--

Brett

Finding Trading Opportunity

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 14 Dec 2025 13:40:00 +0000

12/17/2025 - So here's what I'm going to do at the SMB Trading Summit in March: I'm going to ask all participants to bring their best and their worst. That means that every person will review their trading in Q1 and identify what they did really well and how they did it--and they will identify what they did poorly and why it happened. Then, during my talk and during the get-togethers, I will happily meet with attendees and provide coaching re: what links the best and worst and what can supercharge their performance in the second quarter. Best of all, everyone will be able to learn from everyone else's lessons and suddenly we've created a team environment! It takes a bit of courage to lay it all out there, but no one ever achieved greatness amidst safety. Let's go for it! (And, yes, I'll bring my best and worst as well!!)

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12/16/2025 - One of the first things I recognized when I began working with truly successful traders and portfolio managers was that they viewed markets differently from others. They looked at different things, gathered different information, and came up with different trade ideas and unique combinations of trade ideas. That was my first recognition that creativity is essential to trading psychology. The successful traders were excited about the hunt for fresh information and ideas and this energized their trading.

Recognizing this, I began to hold craft beer gatherings in Connecticut and Westchester County in New York. I selected the brewers crafting the most unique beers and the sites serving the best selection of distinctive brews. (DeCicco's stood out in that group!) Traders and money managers from different firms joined me for an exchange of ideas and a selection of amazing beers. The creativity of the brews definitely stimulated the creativity of the ideas shared and discussed. Most important of all, the outings ensured that participants were not trapped in isolation and could see new and different things and gather fresh information and perspectives. That was much better for the trading mindset than any self-help exercises!

When everyone shares, everyone goes away richer. The great enemy of trading is isolation and stale ideas and perceptions. Creativity is a team sport.

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12/15/2025 - When I first began working at large, successful hedge funds, I was surprised to learn that the top portfolio managers--ones managing hundreds of millions if not a billion or more--did not have win rates much greater than 50%. This was particularly true in macro investing, where teams sought to exploit economic patterns across asset classes and regions of the world. The reason they made money was that they were very good--and consistent--at risk management. They didn't have a large number of big losing trades, and they didn't have big losing periods. If they saw they weren't seeing things well, they were unusually quick to pull back and reassess.

But there was a second element to their success. They were quick to recognize when a good idea was becoming a good trade and pouncing on it with large size. It's not that they sized up favorite trades from the outset. It's that they tracked their initial positions and observed when price/volume was going their way (or when catalysts made the good trade even better). They then had the courage to take very large positions to exploit the opportunity--and continued to manage the risk tightly. As a result, they had a few truly large winning trades/periods during the year, many smaller wins and losses, and very few significant losers. Their profitability came from a relative handful of occasions when they had the perspective--and the courage--to take significant risk.

Years ago I met a very famous trader. He was quite generous and asked if he could help my trading. He asked me what the ratio was between the size of my largest trades and the size of my average trades. I replied, "Maybe two or three to one". He gave me a very direct look and said, "Consider ten to one". I didn't fully appreciate his mentoring at the time. But now I see it playing out with top traders at top firms. Just as important to trading psychology as controlling negative emotions is the willingness to commit to opportunity.

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12/14/2025 - Courage is not something we hear a lot about in discussions of trading psychology. To find new and different opportunity and pursue what others don't see and discuss, requires considerable courage. To refine your strategies and use your losses to persevere and improve what you do: that, too, takes courage. True entrepreneurs are courageous: they invest in their vision and accept the risks of failure. No one has ever achieved distinctive success in a "me too" mode.

Indeed, what gives us the courage to take risk and harvest reward is the presence of a vision: something that grabs us with its uniqueness. When an idea feels special to us, we commit ourselves to seeing it through. A positive psychology comes from vision, not from self-control exercises.

We've seen some amazingly rotational environments in the recent stock market. What might look "choppy" when we view the broad market indexes suddenly becomes clearer when we examine price and volume action sector by sector, subsector by subsector. A trend is a directional movement of an asset. Rotation is the different directional movements of related assets. Rates traders understand this well: there are environments where central banks are in play and interest rate instruments trend, and there are environments where central banks are sitting on their hands but individual instruments will move relative to one another. A key to success for a rates portfolio manager is knowing when to trade trends and when to trade relative value.

Many, many times large institutional participants are not broadly buying stocks or selling them, but are moving money from certain parts of the market to others, from certain countries to others. Seeing the relative movement and finding opportunity in trading it requires a willingness to do something different from the crowd. It requires a unique way of structuring trades. It requires courage.

Strengthening Your Trading By Leveraging Your Strengths

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Mon, 08 Dec 2025 23:05:00 +0000

12/12/2025 - The subtitle of my book that will be coming out in late February is important: Turning personal strengths into trading strengths. We come to markets with talents, skills, and experience. The challenge of developing as a trader is figuring out how to apply those to the various facets of trading process, from generating ideas to managing risk. As noted below, your success as a trader will come from what energizes and excites you: your passion will point the way to your purpose. There is so, so much more to trading psychology than overcoming negative emotions.

Research in psychology suggests that there are four major sources of psychological well-being: happiness (things we do that are enjoyable); purpose (things that we do that are meaningful); energy (things we do that build our vitality, strength, and endurance; and affection (things we do that connect us to others we care about). The activities that provide our greatest success fire on all four of these cylinders. Our challenge is to structure our trading--and the time of each day--to maximize the things that bring us joy, meaning, vitality, and closeness.

One of the strengths my research found is most closely associated with trading success is entrepreneurialism. Great traders treat their trading as a start-up business, and they have the energy, enthusiasm, and passion that great entrepreneurs bring to their undertakings. That is positive trading psychology--

12/11/2025 - What we are passionate about reveals our strengths, and those reveal our values and our talents. We don't have to push ourselves to get things done if what we're doing truly speaks to us. Yes, there are always life's errands and to-do activities to get out of the way, but if we're looking forward to what comes after, it's never a problem to check the boxes. Many beginning traders are passionate about making money, but that's different from being passionate about trading and understanding markets. If those traders don't make money, they are left with nothing to support them emotionally. They become frustrated, and that seeps into their trading. When we identify our passions and our strengths, then we're in a position to creatively integrate those into our trading processes. A great place to be psychologically is to be passionately involved and interested in markets even when we're not putting positions on.

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12/10/2025 - What is the most important strength for beginning and developing traders? Certainly high up on the list is emotional self-awareness: the ability to recognize what you're experiencing at the time you're experiencing it. This is useful in two regards: 1) it gives us the option to step back from trading when we're frustrated or confused, so that our trading does not become reactive; and 2) it allows us to more clearly recognize our intuition when we see patterns occurring in real time. In other words, emotional self-awareness is what enables us to avoid poor trading that results from acting on impulse, but it also makes it possible to better perceive opportunity in real time.

Emotional self-awareness is possible to practice in any area of life where emotions can get us in trouble--or where they could help us respond to challenges constructively. A great example of this is close relationships. By avoiding reactive responding due to frustration, hurt, or overload, we can step back and deal with misunderstandings in a helpful way. By recognizing our partner's needs in real time and empathizing with those, we can become better at reaching out and growing our closeness.

Everything in life that engages our emotions can be practice for emotional self awareness and control in our trading. How we live either reinforces the best within us, or it reinforces our vulnerabilities. Trading psychology is best worked on when it draws upon life psychology.

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12/9/2025 - What have been your best trades--and best trading periods--of 2025? From generating the trade idea to expressing it, sizing it, and managing its risk, identify *specifically* what you did well in these best trades. Very often, it is in analyzing our best trading that we can identify the cognitive and emotional strengths that contribute to our success. For instance, a while back I analyzed my profitability as a function of time of day (since most of my trading was intraday). Very early in the morning right after the NYSE open, I did poorly. Later in the morning, I did quite well. Around noon and midday, I was mediocre.

What led to my success was patience and listening carefully to the market and understand who was involved and how--and *then* placing my trades. I was successful only when listening--and I was specifically listening well during busy periods, because I could track the activity of the larger market participants. Because of years of work as a trading coach, I understood large traders and their behavior patterns--and I was successful when I drew on that awareness. When I simply tried to trade market patterns on my own, my results were basically random.

The point here is to dig deep into your best trading and figure out what makes you tick when you're successful. The goal is not to be like anyone else; it's to be more and more like yourself at your best.

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12/9/2025 - Tomorrow's free webinar at 4:15 PM ET will focus on assessing your strengths and applying them to your trading. Registration will close by the end of the trading day today.

What are your relationship strengths? What do you do best as a spouse, as a friend, as a family member? How are you able to grow your connections with people at your work and in your community? What makes you successful in collaborating with other traders?

This blog has covered the topic of teamwork and the value of being part of a trading group/pod/community. But how can you best help others and best receive help yourself? By drawing upon your relationship strengths, you can teach others (and thereby reinforce your own learning) and you can learn from others (and refine/broaden your trading).

Your strengths as a person are the foundation for your growth as a trader.

See you tomorrow!

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12/8/2025 - As we get to the end of the year, many traders reflect on the year past and formulate goals for the year ahead. An important concept in psychological research is that much of our growth comes, not from our top, "signature" strengths, but from expanding and developing what are called our "latent" strengths. These are areas where we excel, but don't necessarily know we excel and so we don't consciously draw upon them during times of challenge. We can think of these as relatively "hidden" strengths. Perhaps they show up only occasionally in life or in a limited number of life circumstances. They *are* strengths, however, and we can cultivate them to further our development.

My signature (top) strengths include a drive to learn and achieve. If you were to ask those I live with, however (especially my cats!), they would say that my ability to listen and understand others are some of my best qualities. Indeed, those have long driven my work as a psychologist. In pursuing trading, however, I've only recently worked on ways of becoming a better listener of markets: breaking down the market into components (sectors, subsectors) and hearing the (often unique) story each part of the market is telling. Getting inside the market and truly listening has opened insights that I had missed despite my work ethic.

What areas of strength might be relatively hidden in your life that could take your trading to the next level in 2026? How could you exercise those areas, so that your latent strengths get even stronger? Very often, looking to areas of life very different from trading can alert you to what you do well that could creatively be imported into your trading processes.

In the upcoming free Wednesday afternoon webinar (December 10th; 4:15 PM ET), we'll not only evaluate your strengths, but also identify your latent strengths and discuss ways of growing them.

Let's make the new year a year of new growth!

Being Outstanding By Standing Out

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Tue, 02 Dec 2025 11:30:00 +0000

12/7/2025 - Here is a very important concept: Any success you experience as a trader will be a leveraging of success you've already experienced in some other area of life. Success is a function of what you love (your passions) and what you're good at (your talents). The strengths that have made you successful in the past are what you have to draw upon to find success in markets.

Now you understand why it is so damaging to look for gurus to follow for your market success. There are many would-be gurus out there and they're in the social media business of gathering followers. But following them almost certainly takes you away from yourself. A true mentor or coach would get to know you and what has made you successful and then help you leverage that to find success in markets.

There's a saying, "If you find the Buddha on the road, kill him". The real Buddha is something that can only be found within you. Anyone claiming to be your source of enlightenment is by definition false.

What are *your* strengths; *your* sources of meaning, passion, and success? How can you succeed in trading by being more of who you already are when you're at your best? These are a few of the topics we'll explore in Wednesday's webinar. Details for signing up are in bold text below. Thanks for your interest!

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12/7/2025 - I've participated in recruitment/hiring at several large hedge funds and with quite a few hedge fund teams. The number one predictor of a good hire (and an eventual successful trader) is my reaction to their description of their trading processes. If I am surprised by the uniqueness of what I'm hearing and am struck by the innovation of what I'm hearing, that is a great predictor of success. Great traders do things greatly, and that means going beyond the herd.

But I'm not sure we can do things greatly if we don't understand the strengths that make up our potential greatness. What makes us different, special, unique, and successful? Can we truly build something great if we spend all of our time fretting about shortcomings and problems?

In the upcoming Zoom webinar on Wednesday at 4:15 PM (see below), we'll discuss strengths and I'll share a questionnaire that helps us identify the sources of our greatness. If our trading is not a reflection of what we do distinctively, we'll never achieve distinctive trading results.

Hope to see you on Wednesday!

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12/5/2025 - What makes us stand out--and what makes us outstanding--are the strengths we bring to our relationships, our work, and our personal pursuits. Research in positive psychology tells us that utilizing our strengths is what makes us flourish, providing us with energy, enthusiasm, and fulfillment. Unfortunately, many times we're so caught up in our challenges and problems that we lose sight of where our strengths actually lie. Too, we might know what provides us with joy, meaning, and purpose, but we can't figure out how to tap into those things in our trading.

On Wednesday (December 10th) at 4:15 PM ET (after the NYSE close), I will conduct a Zoom webinar on the topic of strengths. I'll share an online questionnaire from research I've conducted at hedge funds and will help you score it and interpret and apply the results--to life and to trading.

The webinar is free and I won't be trying to sell you any coaching services. Email me at steenbab at aol dot com and I'll send the Zoom link; registration will be limited.

Let's go!

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12/4/2025 - So here's what I'm investigating in my recent research:

We can identify market breadth by tracking the number of stocks in an index that are trading above various moving averages: 5 day, 10 day, 20 day, etc. We can also identify breadth within sectors by tracking the number of stocks in that sector trading above various moving averages. All good: we can see if the market is stretched and if individual sectors within the market are stretched. That allows us to backtest how the market and sectors have behaved in those stretched conditions.

Here's the new part: What do we learn from the variability of sector breadth? In other words, what does it tell us when sectors have very similar breadth and when their breadth is quite different at a given point in time? Might that variability be one way of quantifying rotational environments (sectors with highly variable breadth) versus trending ones (sectors with very similar breadth)? Might the trending/rotational environment be an important variable in forecasting future price movement?

I have more research to do, and it's looking like differentiating rotational environments will be promising: how the market is rotating may be just as important as the fact that it is rotating. The point here is that when we investigate new things and look at markets in new ways, we rejuvenate our trading.

When we team up with others who explore unique ways of looking at markets, we keep each other energized and engaged--and that is the best environment of all for our trading psychology.

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12/3/2025 - Successful traders ask unique questions, and that helps them generate new edges in their trading. When I left the recent team meeting, I found myself pondering the cyclical up-and-down behavior of market indexes and wondering if shifting variability in the action of various index components is a marker for cyclical shifts. For example, do we see more dispersion of price behavior in the components of the NYSE as we move from bull trends to topping behaviors to reversals to bottoming action? Of course, this leads to all sorts of experimentation with measuring dispersion. Do we do that by tracking the individual stocks? The sectors and subsectors within the index? How much dispersion and lack of dispersion is significant in signaling trend shifts?

I've already spent hours on the research and will spend a good amount of weekend time on it as well. What is significant with respect to trading psychology is that asking fresh questions has recharged my interest in trading. I find myself excited each day to see how dispersion and market behavior unfold in real time. The excitement comes, not from P/L and certainly not from doing little psychological and stress management exercises, but from innovation and the joy of participating in a process of discovery.

When I read the journals of traders, I find some of them constructive and informative. Rarely do I find them inspiring. Rarely do I find traders truly excited about building and doing new things. It's not the presence of stress and uncertainty that destroys traders; it's the absence of the joy of discovery and innovation.

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12/2/2025 - What goes into your trading that stands out? That is truly insightful and unique? What do you do in markets that is special? Too often, traders look for easy answers by following "gurus" and end up doing nothing distinctive themselves. Is this a formula for success in any area of life? If you aren't doing something special in your trading, why would you achieve special results?

Innovation, creativity, the ability to perceive unique opportunity: those make for success in any entrepreneurial effort. When we see and do unique and special things, our experience is exciting, meaningful, and purposeful. Our efforts give us energy. We can work on our psychology all we want, but if we're not innovating and inspiring ourselves by finding new and better opportunities, then all we'll accomplish is being more relaxed and level-headed in our mediocrity.

Those who achieve outstanding results do so by standing out, even in the smallest details of their work. I recently met with a group of successful traders and listened to what they think about and how they think. I went away with my head spinning, fresh with new ideas to research and pursue. The best mentors stimulate us to ask questions we've never asked before.

More to come...

Making Trading Enjoyable

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Wed, 26 Nov 2025 12:07:00 +0000

11/30/2025 - Research in psychology tells us that enjoyment is necessary for overall psychological well-being, but it is not sufficient. We can be happy and enjoy ourselves, but lack a larger sense of purpose and meaning. Our states of happiness also don't mean that we're meaningfully connected to others or that we live lives of physical energy and vitality. When I conducted a research project to identify the psychological characteristics of successful traders/portfolio managers, one factor stood out: entrepreneurialism. Successful traders find happiness and meaning and energy and connection to others through building their businesses.

How well are you building your trading business? Are you doing what great entrepreneurs do?

If your trading business was someone's actual business startup, would you invest in that business?

If you ran an actual startup business with the same effort, planning, and execution as you run your trading, how likely would you be to succeed?

In the long run, we're most likely to enjoy trading for the same reason that we enjoy a relationship: because we're building something meaningful.

Great trading requires an investment in ourselves.

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11/30/2025 - Suppose I continually focused on all people who are wealthier than me, all people who are more famous than me, all children who are more successful than my kids, and all women who are better looking than my wife. Every day, I would reinforce the sense that I am lacking. Life would be miserable. So much of enjoying life and living it to the fullest is accepting and appreciating what we have--and making the very most of it.

This is very important and relevant to our development as traders. The goal is not a perfectionistic one; we don't focus on every move that we don't catch. Rather, we focus on what we do well and where our talents and skills lie and make the most out of those. I am a trader, not a longer-term investor. I trade the stock market, not commodities or fixed income instruments. I excel in trading the morning hours in the U.S., not trading every minute of every day the exchanges are open.

As noted below, perfectionism is a destroyer of our trading psychology. Acceptance and appreciation, coupled with targeted efforts at growth, create fulfillment--and that fuels our further development. Nothing is more important than exploring, exploring, exploring and discovering what you're truly good at and what is meaningful to you. Before we can ever achieve a degree of greatness, we have to become great at self-understanding. We become what we repeatedly do. We internalize what we repeatedly feel. Focusing on our strengths makes us ever stronger.

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11/28/2025 - I worked with a portfolio manager who put on his initial positions with a pretty wide stop level and a pretty wide target. He saw a good opportunity with good risk/reward and didn't want to be perfectionistic about getting the absolute best price. Once the initial position was on, he told me he hoped it went against him so that he could add at better levels. As long as the trade didn't stop him out and nothing happened in the world that made him question his view, he treated adverse price movement as opportunity. He actually looked forward to the market moving against him.

Conversely, he established a first target to take profits before his positions hit his primary target. By taking profits at the first level, he ensured his position would be profitable overall. Further, once he hit his first target, he raised his stop to breakeven. How he managed his trade was how he managed his psychology. He enjoyed trading because he maximized the

consistency of his profitability rather than being a perfectionist about P/L. And while his position was doing its thing? He was already talking with the other traders he valued and generating the next promising idea. Instead of staring at screens, he was engaged in the enjoyable pursuit of creativity.

How we trade shapes our psychology--

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11/27/2025 - What is the most destructive emotion in trading? What destroys the joy of our progress and turns normal, expectable losses into catastrophes? I would argue that the most destructive approach we can take to trading is perfectionism. Once we adopt a perfectionistic mindset, we cannot enjoy trading. Good enough is never good enough. Progress is never perfect. Even our wins don't bring celebration, because we always could have won more.

Where does this perfectionism come from? It's a great example of how one of our strengths (in this case achievement motivation) becomes a weakness when taken to an extreme. When we so push for achievement that we cannot stop and appreciate our progress, we create a toxic psychological environment for trading.

It's great to strive for improvement; it's equally important to celebrate our progress. Indeed, celebrating what we've done well is the best way of providing fuel for the quest to improve further. If trading is not enjoyable, we quickly run out of fuel.

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11/26/2025 - When we adopted Nomi Lyn (chocolate point Siamese cat), our first priority was to integrate her with our three other cats. As you can see above, she's bonded well with Molly Ruth (white khao manee) and Ares Payton (reverse black tabby). Her bonding with Shay Gil has taken a bit longer, as I recently pointed out, because of Shay's difficult experiences in a rescue shelter. Providing an environment where they can all flourish is tremendously personally rewarding.

Let's say I felt the need to have each of the cats enter cat shows and win awards. All of a sudden, I have to control their access to one another, structure their time to teach them routines, and make sure that one of them doesn't get the others sick. In short order, I would no longer treasure my time with the cats. Instead of enjoying them as an end in itself, now they become means to my ends. For me, that ruins the experience.

Similarly, I enjoy writing. The joy of writing is learning about a subject and then using the writing as a way of thinking out loud, making connections, and deepening that learning. If I were to suddenly prioritize how popular my writing was to become--how many books I would sell, how many hits my posts would get--that would change what and how I write. I would no longer enjoy the experience. Writing would become a means to an external end, not a end in itself.

Trading is more challenging in many ways because we *do* pursue trading for the end of making money. Yes, it can be enjoyable, but it's different from treasuring the time with our cats or our children. Ultimately it *is* a means to an end. And that can spoil the experience for those who treasure the quality of our experience.

Every so often, I'll add something new to my trading: a different time frame, a new indicator, a different market instrument. When I add the new element, I reduce my size to the point where P/L absolutely doesn't matter. Then I see if I enjoy the new perspective; if it leads to fresh insights. By taking P/L out of the equation, I can see if the trading is a rewarding activity in other ways. If it is, I know it's worth including in the repertoire.

Growing the trading repertoire is like growing the cat family. Trading is most likely to be rewarding--emotionally and financially--if we make it personally rewarding.

How We Develop: As People, As Traders

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 21 Nov 2025 12:03:00 +0000

11/25/2025 - What if I told you that I had begun a romantic relationship and that, every day, my partner says or does something that I can't stand and I find myself becoming emotional and unsettled. I come to you and ask how I can improve my mind frame in the relationship. What would you say?

At some point, sooner rather than later, you would question whether this is the right relationship for me. A promising, good relationship should not spend most of its time in conflict! The answer to my dilemma is to find a more suitable partner, not to keep trying to change myself to fit into a situation that isn't working.

Now take that same reasoning and apply it to our trading. If trading is leaving you feeling stressed, anxious, and frustrated, perhaps the answer is not to pursue psychological help. Perhaps how you are trading doesn't fit who you are. If your style of trading frustrates your most basic interests, needs, and strengths, then you will always struggle with markets.

If I were to adopt a true "scalping" style of trading where I was buying bids and selling offers and holding positions for seconds to a few minutes, I would become frantic and overloaded. That style of trading does not fit the more analytical approach that represents what I'm good at and what I enjoy. As soon as I step back from the moment-to-moment trading, explore cycles in market behavior, and align my trading with the cycles that cannot bring us higher or lower, I feel in sync with markets and trading becomes fulfilling.

We develop as traders the way we develop as people because our best trading is always an extension of who we are. Tilt is often a sign that your trading is frustrating who you truly are.

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11/24/2025 - Every day, we exercise some part of our personalities and development. The question is whether that exercise is planned and directed, or whether it is random and unplanned. If we waste time routinely, we exercise laziness. If we overeat, we exercise a lack of discipline. If we reach out to others, we exercise kindness. Everything is exercise. What we do, we internalize.

So what are you exercising in your trading? A true process orientation to trading is one that exercises our greatest interests and talents and that opens us to listen to and follow markets. When we lack a rigorous trading process, we exercise the wrong functions, listening to ourselves rather than to markets. Great ideas come to us when we are focused and study the right things. Great trading exercises open-mindedness and flexibility--and our ability to live our lives with flexible open minds exercises our greatest trading abilities.

In the long run, how we live our lives is how we will trade.

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11/23/2025 - How does expertise develop? We begin as students and then we become apprentices to successful performers. That is how medical students grow into interns and then grow into becoming residents and attending physicians. It is how a freshman football player practices with the starters, helps them scrimmage, and eventually gets into games and becomes a starter. It is how a beginning actress becomes a small role-player in a production, becomes a backup to the star, and eventually gets larger roles herself. We develop expertise by developing professional roles. Through that development, we gain the experience of training, but we also gain the expertise of being a true performer. In the hedge fund world, a junior person begins as an analyst, sees how ideas are traded, grows into managing a "sleeve" of capital themselves, and eventually grows into becoming an associate portfolio manager and a full PM with their own team.

We grow through professional roles and from the feedback we get from our experience and from our mentors.

No one develops expertise in isolation. In any performance field.

Much of the frustration encountered in trading has nothing to do with lack of control over emotions, lack of discipline, etc. It is a function of a lack of training and mentoring--and a lack of opportunity to internalize the new roles and experiences of expertise. Trying to improve your psychology while trading in isolation is like trying to improve your game as a basketball player without being part of a team.

The most promising thing a developing trader can do is form a pod with other developing traders and learn from each other and with each other.

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11/21/2025 - The greatest part of our psychological growth occurs through social roles. When we take on a role with others, we inevitably receive feedback about who we are and how we perform and we internalize that feedback. When we take on many social roles, we absorb a wide range of such feedback and develop a broad sense of who we are and what we do well. A child takes on roles with parents, siblings, and peers and then broadens their sense of self through roles at school, in extracurricular activities, in social groups, etc. What is important in this process is that we internalize our sense of self through relationship experiences. Everyone we interact with is a mirror, showing us something of ourselves. In our work, our family lives, our social and community lives, we experience many mirrors and build a diversified sense of who we are.

If you understand this social role perspective, you can appreciate why solo trading is psychologically dangerous. Trading is a challenging activity, and it can be an enjoyable application of our skills and talents. But undertaken in isolation, it is a limited experience. We operate in a relative vacuum. We do not encounter fresh mirrors that stimulate new experiences of ourselves. Over time, we become stale. We do not grow as people. Sometimes we attempt to fill that void by trading more and more, hoping that profits will provide us with the fulfillment and inner satisfaction that we lack. We know how that ends up.

A major benefit of trading in a team is the opportunity to take on fresh roles as part of the trading process. We mentor others, we share ideas, we enjoy the company of our mates. At the firms where I work, an important part of the enjoyment and fulfillment traders experience in their work is in what they learn from others, what they give to others, and the roles they play within the team. When there is fulfillment in those roles, there is no need to put all of one's self-esteem eggs in the trading basket and overtrade. A rich personal life outside of markets and a broad range of roles within one's trading experience create psychological wealth--and that is what can help create trading wealth.

The Power of Perspective

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 13 Nov 2025 12:32:00 +0000

11/20/2025 - Recent markets have been a great example of how, across time frames, overbought levels that cannot push us higher and oversold levels that cannot push us lower lead to a covering of positions from trapped traders. The psychology of trading comes, not from simply focusing on our own mindsets, but by entering the mindsets of other participants.

11/18/2025 - An interesting and valuable exercise to change our trading--and our trading psychology--is to shift our perspective on trading opportunity. A major danger for active traders is that, in their desire to achieve, they do more and more and wind up overtrading, over-managing positions, and basically getting in their own way. They clearly see a trading opportunity, but have trouble simply holding onto the idea or the position. One thing I've observed over the years is that we tend to trade whatever timeframe in the market that we're actively watching. Inevitably we see patterns forming and find ourselves reacting to those. Thus, if we have a bigger picture view and watch the market tick-by-tick, it's easy to overtrade that view and miss out on our original idea.

The exercise to change our trading is to limit the number of trades we're allowed to place each day or week. For instance, suppose I'm an active trader and now only allow myself to place one trade per day. Wow; that pushes me to focus on my very best opportunities and my very best ways of trading those. With only one trade available to me, I have to make sure it counts. That prods me to truly allow the trade to set up, and it pushes me to avoid overtrading.

The real perspective changer is to see how our P/L actually changes as the result of trading less and staying less glued to screens. In my case, the profitability of trading has risen noticeably as I've let my ideas (and positions) breathe. There is a big difference between the need to trade and the need to be profitable. Often the first interferes with the second.

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11/17/2025 - How we manage our positions and our risk ultimately shapes our trading psychology. Sound trading process builds a sound trading mindset. Here's an important way in which that happens:

As I've worked on my trading, I've found it helpful to follow the lead of some of the best portfolio managers I've worked with and make a distinction between initial positions that I take in an idea and subsequent positions that get large in that idea. The first position is small enough to weather ups and downs without getting stopped out. There is a stop, but it's not close to the market. The first position is my "investment" in the idea that I've researched. It has a target, but also not close to the market.

The subsequent position is much larger and leverages the initial position once I've determined that the market is rewarding the original idea. It has a much tighter stop and is based upon the market flows that are telling me that the idea is playing out. Thus, if I have an initial long position and the market opens strongly with very positive TICK, I might go with that early strength and set my stop for that added piece (and perhaps the entire position) below the morning low. There is a short-term target for this larger piece based upon the levels that I believe we should be able to take out intraday. Those take-profit levels are entered into the market, allowing me to let the position ride.

What I've found is that, if my ideas are wrong, they're usually wrong pretty quickly. I'm sized smallest at the outset and only get larger once the market confirms my view. That keeps me in an opportunity mindset and keeps my losses contained, even as I pursue significant gains.

The important thing here is not to copy what I do, but to understand that trading psychology is something you can work on by shaping your trading process. How you trade reinforces how you experience your trading.

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11/16/2025 - A measure I have found helpful on an intraday basis is an indicator typically viewed on an end-of-day basis: the number of stocks across the NYSE universe that are advancing on the day versus declining. (On the Sierra Chart platform, the symbol is $NISS). When the market makes a new high or low or tests recent highs or lows, it's worthwhile seeing if the strength or weakness is confirmed across the universe of stocks. Often, the largest stocks are the ones displaying the directional movement, but many shares are not confirming the move. This can also be seen in the NYSE TICK statistic, which will show that a broad range of shares aren't confirming a move by trading on upticks or downticks. Once again, the edge here is finding market participants who will be trapped when the buying/selling is exhausted. Too often, traders are so focused on trend and momentum on the chart they're watching that they fail to look at broader market context and what is happening across market participants who ultimately move markets.

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11/14/2025 - We see with the recent price action in the U.S. stock market a sequence referenced below: The market rises toward new highs (or may make marginal new highs), but a number of segments of the market fail to show meaningful strength. Looking sector by sector, we can see that large-cap stocks (DJIA) made new highs recently, but small caps (IWM) lagged and many sectors stayed below their recent peaks, including the former leaders, technology shares (XLK). This rotation and failure to broadly make fresh highs was a sign of exhaustion and now is playing out in active selling. We will need to see some sign of the selling bringing in fresh buyers before we can think about any resumption of the upside. The balance in the NYSE TICK numbers will give a good short-term clue as to whether lower prices attract higher time-frame, larger participants.

The broader point is that, when we look inside price action, we can detect the first signs of whether a move is likely to continue or reverse. When we look across segments of the market, we can detect whether a move is broadening out or simply turning into a reallocation of existing positions. How we trade needs to be a function of the type of market we're seeing. Updating our perspectives each day--and sometimes within the day--allows us to trade flexibly and knowledgably.

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11/13/2025 - So often, the views we trade start with conviction and end in staleness. We become anchored to our conviction and thus become less able to pivot when markets change. A great trading process is to look at what you're trading with fresh eyes daily. For instance, I recently transitioned to a small short position in the S&P 500 index market. During the day and especially at the end of each trading day, I study the charts of the component sectors of the index, such as technology (XLK), consumer discretionary (XLY), etc. I also study other equity indexes, such as the Russell 2000 small/midcaps (IWM); the NASDAQ Index (QQQ); the Dow (DIA); etc. I use the Barchart website to identify how many stocks are making fresh one-month highs and lows and three-month highs and lows, and I use the StockCharts site to track the number of stocks producing buy and sell signals across various technical indicators. In short, I want to see the market from many perspectives to see if my view is gaining or losing support. In updating my view, I become prepared to hold my position, trim my position, add to my position, or exit my position.

Looking at the market from multiple perspectives ensures that we can adapt to the ever-changing flows in markets. The goal is to prevent your conviction from turning you into a convict. Our views can imprison us, or they can evolve and help us navigate opportunity. A key trading psychology strength is open-mindedness and the flexibility to strongly believe something and to be very prepared to shift that belief.