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BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 28 Aug 2026 11:45:00 +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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Techniques for Mastering Our Trading Psychology

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 28 Aug 2026 11:44:12 +0000

9/1/2026 - Dr. Ari Kiev, in his book Trading to Win, points out that "When you trade from commitment--and do what you said you would do--you generate an extraordinary amount of energy. You begin to see opportunities in the market that you couldn't see earlier" (p. 18). He also explains that "Commitment to a specific objective is the most critical dimension of trading to win since it provides more of the focus and energy than any other single factor" (p. 94).

Notice that Dr. Kiev talks about goals in terms of "commitments". A goal is not just something we write down and hope for. It is the north star of all our performance efforts, because it is our "focus". Having that positive focus allows our commitment to give us energy. A goal is meaningless if it is not inspiring.

An alcoholic may express the desire and intention to no drink, but when he hits bottom and sees that he *must* change, then his intention becomes a commitment. In the AA world, such a person may commit to 90 meetings in 90 days, building a community around the commitment and creating a daily focus. Dr. Kiev points out that goals that are commitments are what inspires and guides Olympic athletes: every workout becomes a step in the realization of an ideal.

Many traders focus on how much money they want to make, how they want to control their emotions, how they want to find the next big move in markets--but they lack an overarching vision of the future. That vision has to be lived out each day to bring it to reality and to energize our efforts even in the face of a drawdown. Dr. Kiev teaches that "You create the future by speaking it and then living in terms of what you said...you create yourself by committing to a vision and then becoming the living embodiment of that vision" (p. 247).

The ideal trading psychology is visionary *and* living that vision each day.

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8/31/2026 - Stress and anxiety are responses to perceived threat. Our bodies are mobilizing in their "flight or fight" mode to cope with the danger that we sense. Once we're in that fight or flight mode, blood flow shifts from our frontal cortex (our brain regions of thinking/reasoning) to our motor regions (mobilizing our response to threat). If it ever seems as though you do things in the heat of the moment that you would normally never do, this is the reason why. Quite literally, you're not in your right mind!

This is why it's essential to work on our trading in ways that do not trigger perceptions of threat. If we take risk before we've properly trained ourselves or if we take more risk that we can truly absorb, then we will experience stress and anxiety as normal, natural responses to the perceived danger. Learning trading and making all our mistakes when we're taking minimal risk--and while we're focused (see yesterday's post)--trains us to maintain our best problem-solving when we most need it.

Once we enter that fight or flight mode, the best thing we can do is pull back from the screens and return our mindsets to their proper focus. The rule here is to only engage markets when we are able to process information optimally. A best practice of taking time outs and using that time to calm ourselves with deep, rhythmical breathing--and then returning to markets with modest risk can be cultivated into a habit pattern. "Above all else, do no harm" is the physician's creed. The goal is not to trade. It's to trade when we perceive opportunity--and when we're in a proper mindset to pounce on that opportunity!

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8/30/2026 - Many traders identify emotion as the key enemy to trading success. Emotion, however, is just one manifestation of a larger trading challenge: focus. Successful traders are able to achieve a laser focus on markets--and they are able to sustain that focus throughout their trading. Building our capacity for focus is one of the most important things we can do to achieve trading success.

When we are fully focused, we see more in markets. We see more detail, and we see more context. In an earlier post, I distinguished three facets of focus: 1) intensity of focus; 2) flexibility of focus; and 3) sustainability of focus. In other words, we want to zoom in on what is important, shift our attention to view the context of what is important, and maintain this process without undue distraction. Many, many times, emotional disruptions of trading occur when we first lose our concentration. The emotions are the result of the problem, not the primary problem themselves.

It is better to trade only part of the trading day with full focus than attempt to trade the entire day with distractions. Indeed, we build our focus muscles when we practice trading and review and replay market action. As I point out in the Positive Trading Psychology book, we can monitor our heart rate and brain waves in real time to actually see how calm and focused we are. We can also practice meditative techniques with these same monitors to directly work on achieving and sustaining focus. Indeed, performing meditation prior to market sessions is a great way to prepare ourselves for the trading day.

Focus is our magnifying glass. We can turn every trading session and every review into an exercise in sustained concentration. Our great trading enemy is not emotion. It is distraction.

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8/28/2026 - We have to lose many times before we internalize the resilience to know that we have what it takes to succeed. If each loss is a learning lesson that we review in intensive detail and burn into our brains, then we have moved forward in our development even as we step back in our P/L. It's necessary to bounce back many times before we truly know that nothing can keep us down. Confidence doesn't come from positive thinking. It comes from overcoming loss, again and again.

In his book Best Loser Wins, Tom Hougaard points out that "An elite soldier is scared to death the first time he is in a combat situation. That is why his first combat situation will be a simulation. And the next one. And the next one. And little by little, his fear is trained out of him, through the use of repetition, breathing awareness, and habituation" (p. 37).

We start by trading in simulation mode or very small. We lose. We jump at the opportunity to learn from the loss: learn how to better enter and exit, how to better identify opportunities. We lose again. We again jump at the opportunity. As we start to win, we get a little bigger. We lose. We delve into learning from the losses. Again and again. Soon, as Hougaard notes, our fear is trained out of us. It's not that we're confident that each trade will be a winner. We're confident that our development will win even when we lose. We know that our development will win *because* of what we will do when we lose. Turning losses into learning is perhaps the most important trading psychology technique. The intensity and repetition of our learning is directly responsible for its impact on our mindset.

What Is The Best Way To Learn Trading?

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 20 Aug 2026 11:47:17 +0000

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

None.

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

How Well Do You Coach Your Own Trading Performance?

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Tue, 11 Aug 2026 11:08:38 +0000

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

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

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

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

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

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

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

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

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

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

More to come.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What Separates The Best Traders From The Rest

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 02 Aug 2026 12:18:16 +0000

8/9/2026 - I'm seeing a widening gap between traders and money managers who make active and innovative use of AI and those that do not. The first generation of AI applications was all about number crunching and assembling written information on a given topic from a number of places. This turned AI into a virtual trading analyst, a kind of super search engine that not only collated data but made sense of it. Thus, a simple query can quickly pull together economic data from around the world (growth, employment) and identify which countries and regions of the world are expanding and which are not. Similarly, the AI engine can pull together data from individual companies--earnings, revenues, expenses--and quickly identify patterns of growth and stagnation.

The newer applications of AI are studying traders themselves and identifying patterns in profitability and drawdowns. For instance, once the AI is fed the P/L data for a trader, it can identify profitability as a function of market movement, market volatility, time of day, position sizing, etc. Once patterns of profitability are identified, they can be tracked in real time, alerting a trader to market conditions that have been more and less profitable in the past.

If you know that you're in an environment that has been profitable in the past, you can size up positions. If you know that you're in an unfavorable environment, you take pull back risk taking. Suddenly AI has gone from being an analyst to being a real time coach. That is a game changer.

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8/8/2026 - What is your relationship to time? Some people spend a good amount of their time moving from activity to activity without any overarching plan or purpose. Others keep a calendar to structure their priorities and get important things accomplished. Still others utilize time to prioritize activities that actively challenge them and grow various strengths. These three ways of relating to time occur in our personal lives, our relationships, our work lives, and in our involvements with markets.

When we develop ourselves, we expand our capacity for intentional action and that moves us from random ways of spending time to planned activities that expand our capacities. The best traders I have worked with are masters of time. They not only get things done, but also prioritize activities that push them to grow.

When we are at the gym and comfortable lifting a given weight on the machine, it's time to move the weight higher.

The best traders are always on machines and always moving past their levels of comfort.

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8/7/2026 - Back in December, 2010, I wrote the following for the SpecList discussion group led by Victor Niederhoffer. The key idea is that, for someone who has done their homework, frustration and the taking of losses is valuable information. It is when markets are changing that the old, winning trades no longer work--and that is when we can adapt ahead of the crowd and create new winning trades. I heartily recommend all of Vic's writings to developing traders:

Maslow one commented that, when all you have is a hammer, you tend to treat everything as a nail. So it is with psychologists that involve themselves in markets. Lacking an understanding of actual speculative strategies and tactics--not to mention portfolio construction--they reduce performance problems to the lowest, psychological denominator. In so doing, they confuse cause and effect: they observe frustrated traders and assume that relieving frustration is the key to making money.

The professional speculator, unlike the retail daytrader, rarely falls into performance problems because of derelict discipline or runaway emotions. Rather, it is the very competence of the professional that leads to performance challenges. It is when pros are most in sync with markets, identifying and profiting from themes and patterns, that they are most vulnerable to ever-changing patterns of direction, volatility, and correlation. The confidence that permits healthy risk-taking under the best of speculative conditions inevitably gives way to confusion and frustration when skilled participants are no longer in sync with their markets.

The wise speculator utilizes this confusion and frustration as information: they often are early signs that something meaningful has shifted in the marketplace. The proper intervention in such circumstances is not to quell the frustration with psychological exercises. Rather, it is to extract the information from the situation and feed that forward into strategy and tactics. Very often, today's bad trade was a good trade in yesterday's regime: there is information in that.

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8/6/2026 - An interesting question that came up during last evening's webinar was what to do if your trading system, which has backtested well, now shows a string of five or six losses. Should you stop trading? Should you continue to trust your edge? And how can you control the emotions associated with such a drawdown?

My response is that successful traders don't have "an edge" in their trading. They have many ways of making money in different market environments. A simple example would be to track relative volume (whether volume at a given time of day is average, high, or low) and study, study, study how markets move in different volume regimes. What you'll see is that there are different edges in markets with different volumes, because you're trading against different market participants. How the market moves depends, in part, on who is in the market.

So now we can go back to the question and see the premise that needs to be checked, as Ms. Rand would say. When we have a string of losses on trades that have been consistently profitable, it's a likely sign that the market has changed. When we look at volume closely, we might detect that change. When we look at what is moving with the market, we might see a change (for example, interest rates are moving higher along with commodities and the US dollar is weakening, all suggesting higher odds of inflation). The string of losses are telling us to step back, reassess, and find a fresh edge in that new environment.

The losses are information. They are like physical pain, a warning sign that something is amiss. If we have an edge--and only one edge--we will be vulnerable to changing market conditions and that will take a toll on our emotions--and our bottom lines.

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8/5/2026 - Here are some challenging questions to ask yourself about your trading. I'll be touching on these in the webinar this evening (see below):

* What do you see in markets that other traders don't focus on?

* What are the opportunities that you pursue in markets that provide you with unique returns (i.e., profits that others don't pursue)?

* What is unique about how you review markets and performance that helps you learn and internalize unique lessons?

* How well do you track changes in markets and adapt to them ?

The idea that you can trade the same chart patterns and indicator readings as everyone else and outperform them simply because you maintain a better psychology is absolute nonsense. Read the Market Wizards books and you'll see that the great traders are uniquely successful because they're doing unique things.

A great psychology comes from pursuing trading entrepreneurially and maintaining the excitement of discovering and doing new and unique things.

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8/4/2026 - This Wednesday (August 6th) at 7 PM ET, I'll be participating in a trading psychology webinar with Peter Robbins and Agnieszka Wood. It will be a great opportunity to delve into what drives the best traders and how they are able to sustain high levels of performance day after day, week after week, for an entire career. Here's a link for the (free) registration.

In my portion of the program, I'll go into some detail regarding the research review I'm doing to identify the dimensions of elite trading success. Here's a very simple example: A developing trader saved charts on multiple time frames of the market he was interested in and reviewed these to identify how the best trades each day set up across a variety of indicators. He not only took copious notes, but replayed each of the days and time frames to get a feel for how those setups looked in real time.

Every day. For many months.

He figured out that how buy and sell signals set up is different in slow and busy markets.

So now he developed ways of identifying when days were slow, medium, and busy and developed what Mike Bellafiore calls "playbooks" for the different kinds of markets.

But then he figured out that, within slow, medium, and busy days, there were differences in how markets move depending upon whether market components were moving in a single direction or moving in different directions. So he identified signals for slow, medium, and busy days depending upon what was moving and how.

All of this took many months of immersed study and review and painstaking note taking. He is now a highly successful money manager who leads a successful team.

Creative thinking. Deep practice. Immersion. Resilience.

This is what makes greatness in any field.

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8/3/2026 - Back in 2002, I wrote that "The only way to stand on the shoulders of giants is to hoist them on our own". What I meant by that is that, in honoring our own heroes and heroines, we internalize some of their heroic dimensions and elevate ourselves. When we explore the lives of great traders, we find that they not only have good teachers, but they have had role models that they deeply value and respect. In learning from their heroes, they absorb something of the heroic themselves. The greatness that they perceive in their mentors becomes the foundation for their own quests.

This is why effective education and training is conveyed through the medium of dedicated relationships. The best traders have had the best role models and synthesize their influence into their unique styles of finding and exploiting opportunity. Books, videos, and social media messages can be helpful, but cannot replace the dynamic of finding our own heroes and hoisting them on our shoulders by internalizing their greatness.

As noted in the previous post, when mentors are our heroes, our pursuit of trading goes from being a challenge to embodying a quest. No one will work hard enough to absorb the subtleties of markets unless their motivation reaches the level of inspiration. If you can't find greatness in your teacher, it's unlikely you'll be able to elevate yourself by standing on their shoulders--and it's unlikely that you'll be sufficiently inspired to hoist them on your own.

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8/2/2026 - I once noted that the point at which we grow old is the point at which we decide that the best of life is behind us. It could be at age 30, 50, 70, or never. A youthful mindset is one in which we perceive a bright future and decide to pursue it. That could be in markets, in relationships, or in our work efforts; it could be in all of these. When we fight for the future, as Ayn Rand pointed out, we live in it today. The brightness of the future we work toward illuminates each of our days.

In the Trading Psychology 3.0 book that I'm currently writing, I review the large number of books written either about or by accomplished traders. What is clear as I research is that the great traders pursue markets not merely as a career or even as a passion, but as a quest. When we are on a quest, we dedicate ourselves to a noble and inspiring end. P/L by itself is not a quest. For the greats, the true quest is for mastery and understanding. Profitability is simply a way of keeping score.

When we pursue our quest, our lives become ones of purpose, meaning, challenge, and fulfillment. Our efforts give us energy: they inspire us. We look forward to each day--and that is the mindset of those who remain perpetually passionate, ever-youthful, knowing that the rest of their lives will be the best of their lives.

Coaching Yourself To Trading Success

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Thu, 23 Jul 2026 11:03:59 +0000

7/31/2026 - Many years ago I met with a very successful prop trader who wanted to ask me questions about psychology. We discussed the psychology of success and then he asked me if I had anything I wanted to discuss regarding trading. I said, "Sure!" He asked, "What is the size of your largest trades compared with your average size?" I thought for a moment and said, "Maybe 3:1". He gave me a hard look and simply said, "Consider 20:1".

Years later, this trader would become the head of one of the world's largest hedge funds. I never forgot his advice.

It is advice that could be dangerous in the wrong hands. What made this trader special was that he was intimately familiar with the markets he traded and had deeply studied the patterns they displayed and what happened when those patterns played out very successfully. His ability to recognize in real time that the pattern was recurring enabled him to size up to a huge degree, even as he was aware of what to do if the trade should reverse on him.

His self coaching followed from his intensive study of the patterns that he traded. He viewed so many examples that he knew when the trades were working and could quickly size up. He also viewed so many examples that he knew when the trades stopped working and he could quickly exit. What enabled him to size up to such a degree and not let fear and greed get the better of him was the repetition of studying the trades so many times in so many ways.

A huge percentage of his year's profitability came from the small number of trades that he sized up in this manner. His intensive, sustained market preparation made his real time coaching automatic.

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7/30/2026 - An impressive developing trader recently wrote to me, not to ask questions and seek answers but to share what he was doing successfully in his trading. Right away that stood out. What he shared, however, taught me an important lesson.

He observed that the specifics of his trade planning--tracking market patterns he had observed and outlining in depth every detail of how each pattern has played out--made it possible to see more clearly what was happening in real time and respond without hesitation.

In other words, trading with confidence was a function, not merely of his self-talk, but his intensive preparation. Because he had seen and noted every facet of every setup, doubts and self-talk did not interfere with his trading. Indeed, the right actions came to him.

This trader was succeeding because of his self-coaching. He wasn't just creating chartbooks of setups; he was looking within each of these patterns to see what to do when. That has enabled him to size up his best trades and has bolstered his confidence.

Truly, this is what success looks like in markets. I'm hoping this trader will give me permission to give him a proper, personal shout out in my upcoming Trading Psychology 3.0 book!

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7/29/2026 - How we manage time is how we manage ourselves. We can be highly purposeful in our structuring of time, or we can go with the flow. Once we're intentional about our use of time, then we can ask questions about how productive we were, how we could become more productive, how we could use the time more effectively. Each block of time becomes a project, an enterprise, and we can use each block to become more and more intentional.

The goal is to do the right things and to do them more and more effectively. Working on each block of time and learning from our performance of each block *is* our way of working on ourselves. It is how we manage ourselves.

It is how we train.

Every day can be a workout. Every day can make us better. It starts with how we manage time.

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7/28/2026 - In any performance field, coaching has very limited value unless the performer is actively involved in training. Much of what is offered to traders is framed as "education". So we see online courses, videos, and talks from educators, influencers, and others offering secrets to success.

But in what performance field do people expect to become successful by taking courses and watching videos? Will that make someone a successful athlete? Musician? Painter? Broadway actor/actress?

And imagine performers signing up for coaching without involving themselves in a structured training program! Would a legitimate football or basketball coach offer their services if the players were not training each day?

Coaching ourselves to trading success can only occur in the context of our ongoing training. Each day we build our fitness to sustain concentration, gather and organize information, recognize market patterns, and act on them flexibly: sizing up when indicated, stopping out when they don't play out. How in the world are those skills going to develop by talking to a coach or by reading books or watching videos?

When we try to succeed in markets without rigorous training, we quickly become frustrated when success doesn't follow. And then we tell ourselves that the problem is with our "psychology". And we listen to other coaches and watch other videos. Sigh.

Training involves daily, directed effort to build specific competencies and grow our ability to sustain market focus. I work with many successful portfolio managers, and I've read every Market Wizards book. No one achieved distinctive success by watching videos and following influencers.

No one.

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7/27/2026 - A unique aspect of the upcoming trading psychology webinar will be the opportunity to hear from different coaches on topics important to trading. (See below for registration information). A great exercise is to assume that all of the coaching perspectives contain useful information. Your job is to pull it together in a way that makes sense to you so that the suggestions of the three coaches can become your own self-coaching.

In any performance field, what we find is that successful performers work with multiple mentors and coaches. They pick up different things from different experienced professionals and then synthesize these in their own ways. One way of accomplishing that is to review performance each day and then ask, "What would each of my mentors say about what I did?" Out of those perspectives, you can then create goals for the next day.

When you pull together the inputs from different coaches, you develop your own perspectives on performance. This enables you to identify your strengths (and ways of building these), as well as your shortcomings. At times, the coaches will offer the same advice, and that's when you know there's an important theme to work on.

Imagine collaborating with other traders, each of whom is coaching themselves. Their lessons become your lessons and yours become theirs: everyone is both mentor and student. This accelerates development and also broadens it, as we grow in many ways that we would otherwise never think of on our own.

On a great team, everyone is both coach and student.

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7/26/2026 - August 5th at 7:00 PM ET will be the free trading psychology webinar where I'll join Peter Robbins, author of The Trader's Journey, and trading coach Agniezska Wood for a sharing of perspectives on how aspiring traders can get to that next level in their development. Here is the registration information.

Most traders work on their trading, some more intensively than others. Fewer traders work on their self-coaching. How well are you developing yourself as a trader? What positive changes have you made in your trading? How did you make those changes? How could you apply your self-coaching successes to new areas of growth and expand your performance?

Every trader is both a performer and a performance coach. The best way you could utilize your time in the upcoming webinar is to figure out how you become better and better at guiding your own trading success. You'll make your greatest changes when you train yourself to be your own best change agent. You can begin by figuring out the most positive changes you've already made as a trader and identify how you helped yourself make those changes.

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7/24/2026 - Please see the post below for information about the free trading psychology webinar a week from Wednesday. This will be a great opportunity to ask Agniezska Wood, Peter Robbins, and me questions about how you can take your trading to that proverbial next level.

A hard working developing trader shared his journal with me recently and made a very interesting and valuable observation. He noted that he trades much better--with better clarity--if he has no distractions at all in his preparation. I've explained in past posts how interactive teamwork helps traders process more information in different ways, helping ideas stick in the mind. What this trader found is that such interaction *is* a distraction for him. By preparing in a quiet, focused environment, his ideas became clearer and his execution of those ideas improved. Yes, he could benefit from interactive review and research with other traders after hours, but what underlies his success is deep focus.

The risk is that traders can pursue breadth of processing--looking at more things, talking with more traders--that they compromise depth of processing. Clarity gives birth to conviction. Great traders have a process for teamwork, but they have separate processes for deep work.

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7/23/2026 - On Wednesday, August 5th at 7 PM ET, I will join Peter Robbins and Agniezska Wood for a free trading psychology webinar. Registration is here. This will be a great way to get different coaching perspectives and practical takeaways that can improve your trading.

During my portion of the program, I will share a trading framework that I employ that helps trade execution, identifying spots of unusually good reward relative to risk. If we can find those great execution spots, it is much easier to size up promising ideas and still control risk well. The key is spotting inflection points and (psychologically) being prepared to exit quickly if the trade does not go your way promptly and also being prepared to size the position meaningfully. That means adopting a mind frame that is simultaneously cautious and aggressive.

To identify those inflection points, we need to follow price and volume action at a higher frequency timeframe than the one we are trading. This is very important. Great trade ideas set up on one time frame; great execution occurs at a quicker time frame. The same idea applies to exits. What gets us out of a good trade occurs at a more rapid time frame than the one we're primarily trading. When time frames line up, we can quickly size up our positions. When time frames fail to line up, we can quickly exit. We coach ourselves by mindfully blending tactics with well-researched ideas. Think of a football team. They depend upon calling the right plays, but their success crucially depends upon how they execute those plays. Many trading psychology problems occur because we're not properly focused on execution. More to come in the webinar.

Key Ideas From Trading Psychology 3.0

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Wed, 15 Jul 2026 11:51:40 +0000

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lessons From Ayn Rand And Objectivism

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Tue, 07 Jul 2026 11:55:05 +0000

7/14/2026 - The solution-focused approach to change is a straightforward framework for coaching ourselves to trading success. You start by writing down all your trading problems: everything you've identified that you're doing wrong in your trading processes. What have been the problems with your research and idea generation? With how you express your ideas? With your trade execution? With your risk management? With your trading reviews and planning for the next day? In other words, you're breaking trading process down into components and identifying all the things that you've done wrong and that have hindered your success.

Now, in your weekly reviews, examine when each of those problems *did not occur*. You're looking day by day when you didn't make mistakes in each element of your trading process. Then you examine what you *did* do on those occasions. The key to the solution focused approach is the understanding that, when you're problems are not occurring, you may (without even realizing it!) be enacting solutions. When you're not messing up, you're doing something right! Once you've identified those potential solutions, they become explicit goals to work on, so that you're doing more and more of what works for you.

Each day, you find one thing you did right and then you turn that into a goal for the next day and a habit for your trading going forward. Over time you build your own set of best practices--and they're the ones that work for you, not ones you've picked up from a would-be guru.

What if, hidden in your trading, is the best coaching of all? That's a complete game changer.

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7/13/2026 - The greatest psychological challenges faced by traders are not emotional disruptions. We experience emotional dis-ease when we seek the wrong things in markets. When we jump from market to market, time frame to time frame, looking frantically for "setups", we are controlled by P/L. We are no longer in the mode of *understanding* what is going on and digging deeper to achieve better understanding. Rather, we're desperately searching for profits. So when we have profits, we feel good. When we lose money, we feel like losers. With P/L as our god, our feelings about ourselves ride with our results. When we step back and strive for ever better understanding and mastery of skills, P/L becomes a scorecard, but not our god.

"Trading in the zone" requires focus and intention (see below). If markets control us, can we ever truly find the zone? Wealth is the result of greatness; it cannot substitute for greatness.

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7/12/2026 - What is a heroic life? It is a life of noble purpose, a life dedicated to a positive ideal. Heroism begins with intentionality, the capacity to pursue desired ends. Intentionality is the exercise of free will. Life is a gymnasium in which we can expand our abilities to live purposefully. When we live from moment to moment, day to day without effortfully pursuing chosen ends, we gradually lose our capacity to sustain effort. There can be no heroism in a life lived randomly.

In the earlier series of posts on Market Wizards, we learned that a common characteristic of elite traders is the amount of effort they expend in pursuit of opportunity. They spend long hours each day throughout the week reviewing markets, reviewing their performance, and uncovering new patterns to exploit in their trading. This deep processing of market information enables them to see what others miss. In absorbing more markets and more patterns, they find more and different opportunity.

The great traders pursue markets heroically. They trade with intentionality, making each day a learning experience. Interestingly, the best traders I have worked with approach life in the same way: purposefully. If you look at how they organize and manage their time, you'll see a continual focus on getting important things done. The calendar thus becomes a tool in the development of their intentionality. In effortfully pursuing purpose each day, they train the free will that ultimately creates their heroic trading.

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7/10/2026 - Confusion is information. When we are confused about what is going on in markets, that is likely because beneath our thoughts is some contradiction. One line of thought and feeling lead us in a particular direction; another leads us somewhere else. Such confusion is uncomfortable for many people. We want to know. We want "conviction" and the trades that come from deep inner certainty. So what do we do with confusion?

The worst thing we can do is try to prematurely resolve the contradiction and push ourselves in one direction or the other. That ignores one side of the confusion and often means that we're ignoring important information. Great trades come to us. When we try to make great trades happen, it's often because nothing is clear to us. That is a caution light.

Ayn Rand, in her classic novel Atlas Shrugged, pointed out that "Contradictions do not exist. Whenever you think you're facing a contradiction, check your premises. You will find that one of them is wrong". When we're confused in markets, we want to embrace that confusion and use it as a catalyst to check our assumptions. Somewhere there is a premise we're operating on that needs to be challenged.

Far from being a negative emotion, confusion is valuable information. In checking our premises, we clarify our thinking--and that leads to good decisions in all areas of life.

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7/9/2026 - In the book Capitalism: The Unknown Ideal, Ayn Rand points out that "There is only one power that determines the course of history, just as it determines the course of every individual life: the power of man's rational faculty--the power of ideas". The entrepreneur is one who pursues ideas in the marketplace, guided by a vision of unique opportunity. From this perspective, we can define greatness as a life led entrepreneurially. In other words, the great individual approaches life as a startup venture: a pursuit of goals and ideals, not just as a succession of needs to be met.

So here is a good question for traders: Apart from your life in markets, how are you living entrepreneurially? What vision are you pursuing and realizing in your personal life? Your relationships? Your physical development? Your personal interests? What energizes and challenges you from hour to hour, day to day, week to week?

Can we expect to sustain entrepreneurial purpose in our trading if we're living our lives reactively? If we're not exercising our capacities for pursuing visions, will we be able to sustain our quest for trading success? Entrepreneurship is a lifestyle--an approach to what we do in life. Everything we pursue purposefully in life builds our capacity to pursue opportunity in markets. We don't just try to lead a good life; we find the good life in becoming the leaders of each of our life's activities.

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7/8/2026 - A well-known quote from Ayn Rand is "To say 'I love you' one must first know how to say the I". In other words, love is an expression and affirmation of who we are. It is not meant to fill the void of an undeveloped self. One important implication of this view is that need can never be the foundation for a successful relationship. Love is a sharing of the positives of each person--their values, personalities, passions--not a desperate path for filling the voids when those things are missing.

We hear people talking about loving trading. What kind of love are they referring to? Is it the love of finding in markets the kinds of challenges and complexities that engage our greatest cognitive and personality strengths, or is it the love of trying to fill what is missing in life when one hasn't been successful in other arenas? For love based upon fullness, losses are challenges to dig deeper, learn, and adapt. For love based on emptiness and needs, losses are threatening. Without P/L to fill the void, the needy person cannot tolerate the pain of digging deeper into markets.

When you enter a good romantic relationship, there is something about the other person that makes you want to dig deeper and get to know them better. That's also what drives the person who truly loves trading--or any field of endeavor. Those who fall in love are driven by positives; they're not running from negatives. Markets can affirm who we are, but they can never fill what is missing.

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7/7/2026 - It was way back in 1974 that I was on college vacation in Florida, sitting on a beach reading Ayn Rand's novel The Fountainhead. It's a book about an innovative, creative architect who has to fight mediocrity (and more) to see his visions realized. There's a loose parallel to the work of Frank Lloyd Wright, which is why Fallingwater has always held a special place in my heart. There was a moment on the beach when I looked across the water and was struck by an intense insight: *This* is what psychology should be all about. Not just treating illness and solving problems, but helping people find "the hero in your soul". From this perspective, the goal is to live a visionary life of values, purpose, and meaning. The best way to sustain the fire of a heroic life is to stay connected to the greatness in others. The best relationships inspire and a true positive psychology leverages that connection.

Wealth--in all its forms--is not a vision; it is the consequence of realizing a great vision. When we pursue trading for wealth and without a vision, is it any wonder that we stumble blindly through markets? The important question for any trader/entrepreneur is, "What is your Fallingwater?". What is the vision you're pursuing that will guide your innovation and your success? If you're not doing something uniquely, you'll never achieve unique and distinctive returns. You'll copy what the gurus tell you, you'll pursue one funded trading possibility after another, and your fire will "go out, spark by irreplaceable spark...in lonely frustration for the life you deserved".

True passion comes from purpose and true purpose expresses a vision of what is and what is possible. What you see uniquely and distinctively is your vision and in its pursuit lies your heroism and your key to a meaningful life. No guru will tell you that. They want you to follow them, not your own vision. When you discover something new and promising in markets and you feel the excitement of possibility, you know you're on your heroic path.

Key Insights From The Latest Market Wizards

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Mon, 29 Jun 2026 11:57:45 +0000

7/6/2026 - The epilogue to the most recent Market Wizards book explains that "Two critical factors limit the possibility of becoming a Market Wizard: 1) Not everyone possesses an ineffable talent and the emotional composition that would make this goal possible, just as not everyone has the innate genes and skill to be a world-class athlete; 2) Achieving extraordinary performance in the markets requires tremendous dedication, passion, hard work, and forgoing other interests and endeavors--a sacrifice that most people are not willing to make" (p. 318).

It's easy to see how the shortcuts developing traders often take to achieve success--watching videos and following the social media postings of gurus--just don't work. It is only when we draw upon our "ineffable talent" that we develop the drive to hone our skills and become the best we can be. Then, the hard work is not a sacrifice--it's fulfilling.

I'm working with someone currently who is working on a large research project to track swing patterns in the stock market. The goal is to automate this research so that there is a constant flow of signals across multiple patterns and stocks. The quant signals thus act as an analyst, informing when and where there is opportunity, when to step aside, etc. The trader follows the best historical signals by looking at the charts of past successful trades and developing criteria for entering, exiting, etc. Market history thus becomes his mentor.

What's the "ineffable talent" in this case? It's the love of learning. It's the joy of discovery. When our process draws upon what truly speaks to us, the hard work becomes absorbing play and we can achieve amazing results. That's the lesson of market wizardry.

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7/5/2026 - Jason Berry's interview in the latest Market Wizard book contains a number of insights. He mentions that he trains traders to "find triple-F trades: fantastic fill feeling. These are trades where the market instantly goes in your direction" (p. 238). He points out that he trades by following a trend "on different short-term time intervals, using 1-, 2-, and 5-minute bars. By breaking down market activity into multiple short-term intervals, he is able to see quickly when trades are likely to go his way and when they are failing. This allows for unusually good risk management. If the trade doesn't work right away, it's not an A+ trade.

Berry also offers a unique perspective on trend behavior. Markets don't trade the same at every hour of the day. There are certain time periods for each market each day in which trends are most likely to continue. "I trade each market during specific times every day. I know how the markets move during those times. I don't trade during the times of day when a market typically experiences choppy bars" (p. 238).

Berry's trading is anything but mechanical. He explains that "Innovation is one of my secrets to longevity in the markets. My best trades often result from thorough research, where the findings are so compelling that they lead to trades with a high probability of success" (p. 241). He reviews his trades each day and then again at month's end to refine his process.

George Coyle, reflecting on Berry's interview, observes that the "gut feel" from repeated market study and experience allows Berry to quickly recognize when a market is behaving normally and when it isn't (p. 252). Jack Schwager explains that Berry's ability to sustain "a trainee mindset" (p. 254), continually learning from changing market patterns, is essential to his success.

The idea that markets trade differently at different times of day and that certain times offer particular opportunity is, in my view, a game changer. Success results from trading only when the odds are in your favor...not so unlike poker.

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7/3/2026 - Lukas Frohlich, interviewed in the most recent Market Wizard book, asserts that "If you don't have the willpower to fight through the pain, you shouldn't be a trader" (p. 164). He observes that "The trading landscape is constantly changing, especially when moving between different liquidity brackets. My job is simply to find the opportunities with the best expected value" (p. 166). George Coyle, reflecting on Frohlich, points out that "It is unusual to find traders who can switch trading styles successfully, especially when the styles are radically different" (p. 167). Jack Schwager, noting Frohlich's flexibility, observes "To succeed as a trader, you not only need strategies with an edge, but also the ability to use the right strategies in the right environment" (p. 169).

The clear implication is that even the best traders need to "have the willpower to fight through the pain", because there will always be pain (i.e., drawdown) when regimes change and what had been working no longer succeeds. Psychologically, what is outstanding about Frohlich is that, not only does he not wilt under the pain of drawdown, he draws upon it to feed his creativity and trade with a radically different style. Drawdown, for the trader who follows rules well, is a sign that the market has changed. This requires rapid adaptation.

Great traders, like great companies, are adaptive. They make and remake themselves to fit the new demands of the environment. For the excellent rule follower, drawdown signals the end of one opportunity set and triggers the search for new ones. Instead of viewing the drawdown as failure, the great trader responds to it as a call for creativity and adaptation.

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7/2/2026 - In his interview in the new Market Wizards book, Kenny Sharkness observes that "Another pattern I've noticed is that many successful traders are former gamers, and they look at the market and speculation as a game. They're more focused on winning the game than the money that results from winning" (p. 284). In my research regarding success at hedge funds, this theme also came up. Interestingly, the games that were most popular with active/day traders were different from those that appealed to portfolio managers with longer holding periods. The active group loved video games, for example. The money managers loved slower games of strategy such as chess and poker.

There's an important insight here. Whatever will fuel your trading success will draw upon something you already do and have a passion for. Yes, we learn unique skills as traders, but ultimately we channel our talents and interests to create our success. One of the greatest challenges of trading psychology is to identify what we do well, how we do it well, and how we can draw upon those strengths to fuel our development as traders.

Sharkness also offers something revealing when he was asked what he would do if he were starting out today. He responded, "I would try to get a seat somewhere with exceptional traders so that they could instill in me a sense of what is possible. Seeing others achieve greatness inspires people to strive for the same level of excellence" (p. 286). It is not just talent and skill that make for great traders; it's also a vision "of what is possible". This is one of the great shortcomings of traditional mentoring and coaching in trading: It focuses on correcting weaknesses, but rarely offers models of elite success. A continual emphasis on problems cannot create a visionary mind frame of success.

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7/1/2026 - Lance Breitstein, in his interview in the latest Market Wizards text, makes a very interesting point regarding edges in trading. He points out that "Most patterns are indeed noise, but when you align enough nuances, there are very specific moments in time that provide tremendous positive expected value" (p. 46). And how did Breitstein identify these specific moments of opportunity, particularly after 11 consecutive months of losing money? He spent his Sundays watching recordings of the trading sessions, focusing on "the most critical points each day" (p. 47). He watched these at advanced speeds, thereby exercising his pattern recognition ability. When patterns then showed up in live trading his "real-time trading felt slowed down" (p. 47).

What's the key insight here? Once again we see the value of immersion in developing real-time pattern recognition. To trade all week and then immerse oneself on Sundays to hone one's game takes determination and a real love for markets. But the most important insight is that success does not rely on indicator patterns, but on "nuances" within these indicators that occur at "very specific moments in time". In other words, what Breitstein found were the patterns within patterns: the nuances.

The nuances that offer "tremendous positive expected value" can only be identified through extensive, focused exposure to market turning points. George Coyle, in the book, points out Breitstein's "commitment to work harder than anyone else...He adhered to his plan regardless of whether he felt amazing or awful" (p. 77). The insight here is that it is the intensity and consistency of effort that produces unusual returns. We cannot find and exploit subtle nuances if we are only casually engaged with markets.

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6/30/2026 - It is fascinating to see that many themes cut across the most recent set of Market Wizards. A few of these are demonstrated by Kristjan Kullamagi in his interview:

1) Learning by immersion - Kullamagi insists that there is nothing original in the patterns he successfully trades. He indicates that "I got them from other people...I haven't invented anything" (p. 27-28). But he also explains, "I looked at thousands of historical charts and verified that these patterns occurred repeatedly" (p. 27). Seeing firsthand that these patterns are reliable gave him the confidence to trade and bounce back from losses.

2) Innovation - George Coyle points out that "Kullamagi's amazing results came from playing where many say you shouldn't play" (p. 29): very high volatility situations. Jack Schwager explains that Kullamagi spent 60-80 hours a week for a decade honing his skills (p. 30) with patterns that only make money 25-30% of the time (p. 31). Most traders would avoid such patterns, but Kullamagi has succeeded with them because of his ability to tolerate--and control--losses. He's not playing the game better; he found a better game that works for him.

3) Persistence - Schwager explains that "One of the critical qualities of Market Wizards is that they refuse to give up" (p. 33). Their resilience comes from a deep belief in the rightness of what they are pursuing: they see something unique and distinctive in markets and are not willing to walk away from that. Kullamagi experienced several early setbacks, but retained his confidence and his quest.

Great traders are intellectual entrepreneurs. They delve deeply into markets and perceive unique opportunity. It is the depth and beauty of their vision that provides them with the drive to overcome their learning curves and achieve success in their own, distinctive ways.

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6/29/2026 - One of the most insightful interviews in the latest Market Wizards book is with Simon Russo, who first became passionately attracted to music and then to financial markets. Like many of the greats, he blew up multiple times in his early trading development, but retained the sense that "I had learned a lot about how to make money in the markets". He wrote a letter to his parents explaining his decision to drop out of school and pursue trading. In that letter, he explained that "It has never been about the money for me; it is about the path of self-discovery and mastery necessary to become proficient" (p. 97).

Comparing music and trading he told his parents, "That is what attracts me so much to these two areas; you can never master them, and you have to be self-aware to excel at them. You can't be a sheep or sell out to become a good musician or trader; you have to put in hard work and countless hours to get where you want to be. And guess what? Hard work and countless hours are the best part; it's what fires me up" (p. 97).

Later he noted to his parents, "I will not go with a Plan B because I am worried I will fail. I have learned to accept and even welcome failure because I don't think you can ever truly succeed without failing first" (p. 126). Jack Schwager quotes Russo, "I love every part of the process, the entire journey, not just the results. I love studying and doing the research" (p. 129-130).

What's the key insight here? Passion comes from mission. When we find something that speaks to us deeply, it becomes our purpose, our mission. Quite literally, Russo found two areas that he fell in love with, so that "hard work and countless hours" did not tire or overwhelm him; they fired him up. A mission is an organizing principle in our lives. It is what gives us purpose and meaning. It is what we are meant to do. An important challenge for those who wish to excel in markets is to find something so meaningful in your trading that it becomes your guiding principle, your mission to develop. Then the work will give you energy; it will never exhaust you.

This is what positive trading psychology is all about: discipline comes from love. When we fall in love--in any sphere--our effort fuels our passion and our passion fuels our effort.

Unique Applications of Psychology to Markets

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Mon, 22 Jun 2026 11:47:06 +0000

6/28/2026 - A key element in positive trading psychology is ensuring that your trading process draws upon the values and interests that bring your greatest happiness and fulfillment. In other words, trading should be an expression of strengths that have already provided you with success, joy, and meaning.

Here's a personal example: What gives me the greatest well-being in life are long-term commitments to what I find meaningful: a romantic relationship; having children; raising my rescue cats; helping people as a psychologist. Being a significant part of the lives of others is the source of my greatest fulfillment.

At various times in my life I've tried very active, short-term trading. It has taken a very short time for me to realize that my passion lies elsewhere. I enjoy discovering and making good trades, but it feels as though something is missing for me if that's all I'm doing.

Conversely, I *love* research, finding new things, and sharing them with others. That brought me to the academic world and is a big part of what is driving my latest market project, which is detecting patterns of breadth and market movement that accompany big trend shifts in the stock market. That project is so interesting to me that I devote many hours each week creating and analyzing databases covering many years of market activity. Sharing my findings with others who are equally passionate in their discovery process is tremendously fulfilling.

And applying the research to participate in big market trends is immensely gratifying. Not because I love trading per se, but because I love discovery, sharing discoveries, and seeing discoveries validated. It's great to be passionate about trading; also great to be passionate about investing oneself in markets and sharing those investments with others who are immersed in creative discovery.

What makes us most successful and fulfilled in markets is an expression of what makes us successful and fulfilled in life.

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6/26/2026 - Why is it that top performing traders who lead teams or who describe their "setups" and trading style online--even walking people through their trades--can't produce the same level of success among followers that they have had? If trading can be boiled down to rules, patterns, and setups, why can't Market Wizard levels of success be replicated?

There is a parallel phenomenon in psychology. Leading therapists map out their therapy in workbooks and manuals so that patients can overcome their anxiety, depression, etc. using the best practices of best therapists. The problem is that it doesn't work. The advice is sound, the exercises are evidence-based, but there is something to live therapy that cannot be replicated in a self-help guide.

And how about simply programming the top traders' setups and letting the computer do the trading? Or programming the computer to take the role of therapist? Why doesn't that work as well as live performance?

So much of trading success is based on what people trade, not just how they trade it. So much of psychotherapy's success is based upon how and when it is applied. When there is true mentoring, a person learns to replicate not only what the mentor says, but *how* they apply it. The expertise of the mentor is captured in how they do what they do. A painter could verbally describe all their strokes and colors, but no one would become a world-class artist by simply listening to such descriptions.

We learn by copying the masters. We broaden our learning by working with multiple masters. We develop our own style when we integrate the lessons from those masters. Trying to learn on our own from books, videos, and websites doesn't work. If it did, we'd see many more Wizards and masters. No "trading psychology" can correct the injuries that result from learning a performance field the wrong way.

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6/25/2026 - Professor Ed Diener, in his above quote, points to an important insight from his research: Happiness is a process. It is not just an emotional state that we sometimes experience; it is something that we *do*. Happiness is actually a combination of two emotional states: joy and fulfillment. We are truly happy when we are immersed in what we love doing and in what is meaningful to us. This is why relationships are such powerful vehicles for happiness: they can make us happy and they are deeply meaningful.

Many of our problems occur when we lack happiness in our lives and seek "feel good" activities as a substitute. That is how we can end up eating and drinking too much, how we can become involved in drugs and other activities that feel good at the time, but are ultimately empty in terms of fulfillment. What is fulfilling is what speaks to our values: what is most important to us. It is what speaks to our souls.

Overtrading occurs when we lack fulfillment and turn to trading to fill our voids. It is not merely a lapse of discipline. Rather, we are missing something in our lives and are trying to make up for that by engaging in the thrills and profits of trading. Of course, that ultimately creates losses and an even deeper sense of emptiness. Conversely, many of the most successful traders I've known work closely with others--often in teams. They enjoy the challenges of trading, but they also find the rewards of teamwork deeply satisfying. For them, trading is more than exploiting setups and trade ideas. It is a way of connecting to the aspirations of others and sharing aspirations with them.

When we read the Market Wizards interviews, it becomes clear that the happiness they find in trading is not only a place; it's a process. They love to learn, they love to dig for opportunity, they love to learn with others and from others. Trading, for them, is more than a feel-good activity. It is a deep expression of who they are.

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6/24/2026 - In the Positive Trading Psychology book, I go into detail regarding the use of neurofeedback (real time feedback about our brain wave patterns) and its application to trading and trading psychology. The key idea is that, when we learn to identify the brain wave patterns that accompany focus and good trading, as well as the patterns associated with frustration and impulsivity, we can ensure that we truly only trade when we're "in the zone".

What makes biofeedback especially helpful is that we typically see changes in our brain wave patterns *before* we are consciously aware that we're losing concentration, becoming frustrated, etc. Once we see that our brain waves are no longer in our zone, we can step back and engage in exercises (such as meditation) that will return our focus. That is proactive trading psychology: working on our problem patterns before they actually occur.

I have also used real time heart rate feedback from the Fitbit watch as a way of monitoring calm vs. agitation. Increased variability in heart rate readings is typically associated with poorer cognitive focus. This often occurs at times of distraction and frustration, not always connected to markets. Starting the trading session with a meditation routine can be useful in defusing such frustration.

The smartwatch also measures the quality of sleep each night, which I have found to be correlated with my ability to sustain focus. These real time readings allow us to adjust our trading to our state, avoiding trading when we are not fully calm and focused. Real time readings also help us identify what we need to do to start our days in the zone. For instance, I know that drinking alcohol in the evening leads to lower sleep quality that night, which in turn leads to difficulty in sustaining concentration. I also have learned that going to bed an hour earlier than usual and waking up earlier leads to better sleep quality and improved productivity in my morning routine.

Traders are like athletes in training. We are most likely to perform at our peak if we keep our bodies and minds at their peak. We don't have to wait for FOMO, greed, and fear in order to work on our psychology, and we can improve our psychology even when we're not beset with FOMO, greed, and fear!

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6/23/2026 - One of the great tragedies in the trading world is that trading psychology has become equated with the psychology of beginning traders, thus focusing on such things as discipline, emotional control, fear, greed, and frustration. To use the analogy I often turn to as one who teaches at a medical school, it is as if we were to discuss the psychology of the emergency room physician in the terms that apply to beginning medical students. Of course the beginner in any field has doubts, needs, ambitions, etc. and those can color decision-making. What makes a professional a true pro is that they have moved beyond those initial self-doubts and concerns and now can focus on the challenges of peak performance.

An area of psychology that applies to the pros is the ability to access intuition in generating trade ideas. Intuition is implicit or tacit knowledge: it's what we know, but don't know that we know. It shows up as gut feelings and flashes of insight. Intuition comes to us; it's not something we can manufacture upon demand.

There are, however, things we can do to access and activate intuition. The more things we see, the more things we can connect. That is why, in the interviews of the Market Wizards, we find that so many of them spend hours and hours reviewing charts and markets. They are feeding their heads with example after example, confident that intuition will capture the patterns of strength, weakness, reversal, and continuation.

Because their review is conducted in a state of intense focus, the successful trader is not only seeing more things, but processing them more deeply. The quality of focus--its sustained intensity--fuels the generation of intuitive insights. To the outside observer, it simply looks as though the Market Wizard works harder than others. It's more than that, however. What makes the magic of a Wizard is how they work--and what that work generates in terms of intuitive learning.

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6/22/2026 - When a psychologist/therapist speaks with a person, the truly important themes emerge when there is a discrepancy between *what* a person says and *how* they say it. The mood and tone and body language suddenly don't fit with the meaning of the message. That is the first sign of potential conflict, and it signals an opportunity for the therapy. Growth occurs when we are physically, emotionally, and cognitively aligned. That is when we're most open to absorbing new meanings from life and pursuing fresh sources of purpose.

In markets, trends persist when there is an alignment between the behavior of the parts of the market and the market as a whole. When the components of an index begin going their own way, that is an early sign that the market sector is losing alignment. The tide is no longer lifting all boats; the winds are shifting. Changes occur within the alignment of the market before those changes manifest themselves as clear price reversals and new patterns of movement.

Listening to the market the way a therapist listens to a client--carefully gauging not only what is happening but how--allows for flexible trading. Conviction makes convicts: We become trapped by what we attach ourselves to. When we listen with an open mind, the subtle shifts in market behavior become clear.

The meaning of market action lies in *how* it gets from Point A to Point B.

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What We Can Learn From The Market Wizards

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Mon, 15 Jun 2026 11:34:57 +0000

6/21/2026 - In The New Market Wizards book, Jack Schwager asks Linda Raschke if she's concerned about giving away her trading secrets. She replies, "I truly feel that I could give away all my secrets and it wouldn't make any difference. Most people can't control their emotions or follow a system. Also, most traders wouldn't follow my system, even if I gave them step-by-step instructions, because my approach wouldn't feel right to them" (p. 308). She advises developing traders to "Start by finding a niche and specializing. Pick one market or pattern and learn it inside out before expanding your focus" (p. 308-309). She recommends that new traders *don't* look at charts and instead write down prices every five minutes from open to close and do this for an entire week. Such immersion fuels pattern recognition--and, from the patterns we perceive, we can develop our own trading styles and methods.

"Only by acting and thinking independently can a trader hope to know when a trade isn't working out", she observes (p. 309). Jack Schwager observes that "exuberant confidence appears to be one of the essential elements in exceptional achievement as a trader" (p. 310). This confidence isn't simply a personality trait or the result of positive self talk. It comes from immersing oneself in markets, discovering patterns that make sense, and "acting and thinking independently".

The successful trader is an intellectual entrepreneur, studying and studying the market place, finding unique opportunities, and pursuing them with the confidence of one who has truly done their work.

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6/19/2026 - A fascinating example of Market Wizardry comes from The Next Generation book: Kristjan Kullamagi. George Coyle observes, "I found it incredible that Kullamagi achieved such astounding returns while risking 1% of his account on most trades" (p. 29). On one hand, Kullamagi is "willing to rush headlong into extreme volatility" (p. 28). On the other, he has a highly structured approach to trading, as noted by Jack Schwager: "He has precisely three types of setups that he has traded for years and continues to trade. Each of these setups is well-defined in terms of multiple characteristics..." (p. 30). The edge here is the willingness to dive into volatile market situations, but in a very structured manner.

Even so, Schwager observes that most of Kullamagi's trades are losers (p. 31), with only 25-30% of trades being profitable. His unusual success occurs for two reasons: 1) being in volatile markets, when he wins, he wins big; and 2) his relentless risk management. Early in his career, he failed multiple times, but "he persevered and ultimately transformed his small $5000 account into tens of millions in profit" (p. 33).

The various Wizards achieve their results differently, but the combination of unique search for opportunity, rigorous risk management, and perseverance enables each great trader to find their distinctive road to success. What Wizards don't do is lazily copy others.

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6/18/2026 - During my years working at SMB Capital, I had the privilege of working with one of the great traders included in the Market Wizards: The Next Generation book. His name is Kenny Sharkness, but to those at the firm, he's known as Shark. One of the qualities that Jack Schwager and George Coyle capture about Shark is his "multitasking". Coyle explains that, "Sharkness succeeded with a trading method that requires such extreme multitasking that it sounds like a recipe for disaster: trading a continually changing list of a score of strategies over multiple timeframes" (p. 288). Schwager adds, "A key component of Sharkness's success is his constant striving to learn what is working for other traders and then incorporating that knowledge to create new strategies to add to his repertoire of trading approaches" (p. 289).

One of the ways that Shark achieves this ongoing learning is by journaling his best and worst trades each day and and noting, in detail, what he has done right and wrong. Schwager observes that Shark's journaling also includes his psychology during his trading "as he notes how his moods affect his trading and vice versa" (p. 290).

In the past, I've mentioned that one psychological quality distinguishing great portfolio managers is intellectual curiosity. The research I've conducted at hedge funds suggests that cognitive strengths are every bit as important as emotional ones in terms of trading performance. Through Shark's interview, we can see this curiosity first hand. He is constantly learning, which means he is constantly adapting.

When I first met Shark, what struck me were the number of screens open on his desk. He literally looked at dozens of stocks over multiple time frames. Driven by curiosity, he literally saw more opportunities than other traders, which increased the odds of finding really great opportunities. When Shark began leading a team, that search for opportunity increased manyfold.

Curiosity drives multitasking. Multitasking drives learning. Learning drives greatness.

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6/17/2026 - In the Unknown Market Wizards book, Jack Schwager is interviewed and asked about his three favorite quotes from Wizards. One of those particularly stood out from a psychological perspective. Jim Rogers explained, "I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime" (p. 418). In other words, Rogers doesn't hunt and hunt to find something to trade; his default mode is to "do nothing". What drives Rogers is clarity. If the opportunity is not clear and apparent, he doesn't take risk.

A different aspect of clarity is Schwager's favorite quote, which is from Bruce Kovner: "Know where you will get out before you get in" (p. 416). If a trader is very clear what would tell him his trade is wrong, then managing risk becomes a straightforward task, not something laden with emotion.

Achieving such clarity requires considerable experience, which is why the paramount priority for developing traders is surviving their learning curves. When we've seen enough opportunities and understand what would tell us to stay in the trades and what we would need to see to get out, then decisions are no longer tainted with fight or flight reactions.

The great trades come to us as the result of deep pattern recognition. That is why so many Wizards, in their development, have spent long hours tracking markets. Not many traders have the inner security and confidence to sit and sit and sit, trusting that the right opportunities will come along. And not many clearly know and accept what they'll need to do if those opportunities don't work out.

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6/16/2026 - The most recent Market Wizards book, Market Wizards: The Next Generation, contains a number of gems. In the interview with Lance Breitstein, he is asked whether he was confident he would succeed when he started out. He replied, "I wasn't confident that I would succeed, but I was highly confident that I would outwork everyone at that firm." Indeed, he spent hours recording his trading and reviewing key decision points on Sunday. This extra exposure cemented his ability to recognize patterns in real time.

For Breitstein, this was not simply experienced as hard work. Jack Schwager points out "that for Breitstein, trading was like an elaborate game, something fun that he loved to do, just like he loved playing video games as a kid" (p. 80). There's an important psychological point here. Lots of traders work hard. Many work long hours. What makes the Wizard stand out is working long hours in what is known as the flow state: being so immersed in what is fun that the learning becomes supercharged and internalized.

This is why many of the Wizards work just as hard when markets are closed as when they're open. They love the discovery process. They love the hunt. They love markets, not just trading. Those who love trading tend to overtrade. Those who love markets will learn to master those markets long after trading hours are over.

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6/15/2026 - A surprising percentage of the Market Wizards blew up at some relatively early point in their careers. They were immersed in markets and aggressive in their pursuit of opportunity and their eagerness and ambition led them over their skis. What was noteworthy among these expert traders--Paul Tudor Jones in the first Wizard book is a great example--is their resilience and their ability to learn from defeat. The losses stung, but the successful traders did not allow the losses to define or control them. They began their comeback in relatively short order. They did not lose their belief in themselves, and they did not lose their drive to succeed.

Equally important, however, they did not simply return to what they had been doing. The big loss led them to change their approach to trading in a way that prioritized risk management and avoidance of large losses. Instead of going for large absolute returns, they focused on solid risk-adjusted returns, where the amounts gained relative to the amounts lost were high. They redefined success and created a business that was sustainable: financially and emotionally.

Again and again, we read the words of the Wizards and risk management comes up as a key element of success. What I find noteworthy as a psychologist is that the high focus on managing loss does not come at the expense of excitement over discovering opportunity. The Wizard has the unique ability to keep one eye on the horizon of growth and achievement and the other eye on the bottom line.

Best Practices In Trading: Getting To The Next Level

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Mon, 08 Jun 2026 11:40:26 +0000

6/14/2026 - With the recent release of the latest Market Wizards book, my latest project is a review of all the Market Wizards books alongside a review of books written by accomplished traders. This is known in academic circles as a "literature review" and the goal is to capture the state of knowledge in a field and also identify questions/issues that remain unanswered.

It's clear that the Wizards trade very different markets and trade in very different ways over very different time frames. To use an analogy, great singers don't sing the same songs and they don't sing the same way. Something else makes them great. There's a talent element, and there's also a process they've gone through to cultivate that talent and build the necessary skills and experience.

What we see among the Wizards--and what I believe gets them to that next level of performance--is immersion in markets. They don't just work hard; they live and breathe markets. And it's not that they live and breathe trading; rather, they absorb themselves in the pursuit of opportunity. This is apparent in the interview with Mark Minervini in the Stock Market Wizards book. He is fully immersed in the hunt and, yes, he has his trading methods and his ways of managing risk and reward. What makes the Wizards truly special, I believe, is the degree to which they internalize what they do. It is not unlike an Olympic athlete or world-class concert pianist who are immersed in practice every day.

Constant working out produces unusual strength. The market greats have such a passion for what they do that they are always working out. Average traders are forever looking for the next video, the next secret trade setup, the next secret sauce. Their very search for easy answers tells you that they lack what it takes to be a Market Wizard.

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6/12/2026 - Getting to the next level of trading performance doesn't necessarily mean getting bigger and bigger. Very successful traders get broader and broader and find opportunities in different markets and different regions of the world. There's a way of getting broader, however, that I especially notice among teams and traders that have excellent risk-adjusted returns. They not only make money, but do so consistently. They are able to make money in different market environments.

Many traders define opportunity as directional movement. When markets are not trading in trends, they assume that those markets are "noisy", "choppy", and untradeable. Nothing could be further from the case. Two sets of opportunities appear in slow and choppy markets:

1) Movements in relative value - Traders will be long one instrument and short another closely connected one to take advantage of occasions where one moves too far relative to the other. For instance, the entire stock market may be trading in a range, but value stocks (SPYV) will be strong relative to growth stocks (SPYG). This can occur when weak buyers are getting out of the growth names. Buying growth stocks and selling value stocks, adjusting the pair for volatility, profits from occasions where the two groups get more in line. The overall market can go up or down, but as long as your pair moves the right way, you profit. This is a common strategy in interest rate markets when central banks are not in play. Flows will take one bond higher relative to a nearby instrument and the RV trader can play for the two to come back in line.

2) Cyclical movement - Many markets that aren't trading in trends display dominant cycles. These can be intraday, short-term, and longer-term. Often there are cycles within cycles, which greatly aid in entry and exit execution. John Ehlers' work is particularly helpful; an amazing set of resources can be found here. My experience is that even trending, directional markets display cyclical elements. Understanding those is very helpful in timing. Conversely, truly choppy/noisy markets are often dominated by short-term cycles, which can provide opportunities for active traders.

A true sign of mastery is the ability to sit back, see how a market is trading, and then utilize the tools to take advantage of the environment. Frustrated traders frequently lack those tools.

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6/11/2026 - A marriage lasts for decades and flourishes, not because there aren't problems and challenges, but because there is such a deep sense of love that the setbacks simply become opportunities to collaborate and approach things in new and different ways. We can see in the Market Wizards books that the great traders fall in love with markets and cultivate unique approaches to finding and managing risk and reward. They truly *love* what they do, which is why they pursue it passionately. It is out of that love that they dig and dig and discover what others miss.

It's tempting for new traders to look for answers from others and simply try to copy their techniques. No Market Wizard has reached their status by copying other Wizards...greatness cannot be found in following the same "setups" and indicators that others look at. Copying others cannot bring the passion and meaning of finding one's own edges that express the deep fit between who you are and what you do.

Your true edge is an expression of who you are: how you see and act upon things. When we fall in love with what we do, setbacks are not threatening. We succeed because of commitment, not because of "motivation".

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6/10/2026 - Often, it's the less sexy parts of trading that lead to the greatest performance improvements. It's great coming up with new trade ideas and opportunities and that is essential to success. What gets many traders to the next level, however, is work on the execution of their ideas.

Once you figure out that the market is likely to move in a particular way, how do you enter that trade so that your reward is maximized relative to your risk? Good execution is the beginning point of sound risk management. Also, when we have sound execution criteria, we achieve clarity in the trade, which is essential to a positive trading psychology.

I have found it to be helpful to get into a long trade *after* I believe the market has found a bottom and to go short *after* I believe we've seen a top. That means that sound execution is based upon how the market is behaving. It's not based on our predictions.

For instance, the market will be strong, get to an overbought point, and then sell off. The sell off occurs on weak breadth, which means that the majority of stocks retreat from their highs. I then look at the very short-term indicators of buying/selling to see if the subsequent buying fails to bring us to new highs and fails to bring the majority of stocks meaningfully higher. For example, we will get a bounce in the NYSE TICK and we will get to an overbought point on an intraday measure such as RSI with prices failing to make new highs and that is where I want to sell. The prior high is a natural stop level and the market is telling me that the buyers are no longer in control.

The advantage of such execution is that we know clearly where we are wrong and can get out quickly, easily, and without too much of a loss. We can also use medium-term oversold levels to identify areas for taking at least partial profits and we can use subsequent weak bounces to add to our position, using prior highs as trailing stops.

Our work on execution gives us a sense of control and understanding, both essential to a winning mindset. As noted below, the right strategy is necessary but will not win without the right tactics.

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6/9/2026 - The most successful people I've worked with in markets combine strategic thinking--a vision of the big picture--with tactical thinking, a sense for here-and-now opportunity. This is not so different from success on the battlefield, where a sound strategy is necessary, but must be implemented tactically: in the right way at the right time. Similarly, a basketball team will pursue a strategy to take advantage of an opponent's weaknesses, and will look for tactical situations to press this strategy.

Pursuing short-term opportunity without a grounding in strategy leads to small gains punctuated with periods of getting run over. Pursuing a good strategy without the patience to wait for the right tactical implementation leads to getting shaken out of good ideas.

The successful market participants are investors--they are invested in ideas--and they are traders: they know how and when to press those ideas.

Success is one part vision, one part patience. When the strategy doesn't line up with opportunity, the great trader can wait. When the strategy and opportunity align, the great trader can go for it.

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6/8/2026 - In this series of posts, we'll take a look at best trading practices that contribute to long term success. The first best practice is utilizing time effectively when you are *not* trading. There are always slow periods in markets, and there are always periods when you just need to let your trades play out. During those periods when you're not trading, how productive is your time? Do your activities during slow portions of the day and before and after market hours contribute to your trading success?

The best traders I've worked with are actively engaged in markets when they are not trading. They are looking for--and testing--new trading edges. They are talking with other traders and picking up on market sentiment and news they might have missed. They are reading research reports; they are conducting their own studies; they are reviewing fresh market opportunities. In short, the best traders are just as immersed in idea generation as they are in placing and managing risk.

Many, many traders crave stimulation and can't tolerate any feeling of inactivity and boredom during the day. That leads them to trade when they have no documented edge. Such overtrading is not a function of fear and greed. It results from the need to fill a void: the need for excitement. The best traders have well-developed lives outside of market hours and don't need markets to provide them with stimulation. They are free to use their time searching for fresh ideas and researching new edges because they find the discovery process itself to be stimulating. They also get stimulation from their personal activities and relationships and don't need to get it from taking risk in markets.

A great way to identify excellent traders is to see what they do when they are not trading. Productive non-trading time builds the mindset...and ultimately builds the trading.

Emotions Traders Don't Talk About

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Mon, 01 Jun 2026 11:58:38 +0000

6/7/2026 - I once had a therapy session in which the client announced that he was depressed and wanted to end his life. He then showed me the gun he was carrying. I assumed it was loaded, and I assumed things would not go well if I called for help.

My response was immediate. I showed no particular emotion and actually felt calm. I said to him, "Look, if you definitely wanted to end your life, you would have done it by now. You certainly wouldn't come here. We're here together and that tells me that at least a part of you wants to work this out. What do you say if you put the gun down and we talk about the part of you that wants to live?"

To my surprise, he put the gun down and we had a great session. He surrendered the weapon at the end of the meeting and went on to make progress in therapy, including help for his depression.

The point here is that when you've seen enough crisis situations, you can respond to crisis with understanding and familiarity, not with panic. If you engage in enough practice trading, you'll see plenty of moves against your positions and you'll respond with experience. In a crisis with someone I work with, I react with focus, not emotionally. It's a sense of "all hands on deck".

That hyper focus during times of crisis is itself an emotion, a definite feeling. It comes from experience and the realization that you can handle adversity. The best way to handle fear and greed is focus and that only comes from practice and practice.

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6/5/2026 - Suppose you were looking for a romantic partner because you were feeling very isolated and lonely. Every part of you wants and *needs* to find someone. The odds are good that you'll jump at the first possibilities to fill your void. Need, not values, will guide your choice--and will help ensure that you never truly connect.

So it is when we *need* to be successful in our trading. We define ourselves--and our life's success--by our P/L. In such a situation, the one thing we can't tolerate is sitting out of the market. We *need* to trade because we *need* P/L.

Neediness begets greediness.

If we need profits to feel good about ourselves, we will overtrade and oversize trades. That neediness is an emotion that no one talks about because it betrays the bankruptcy behind the quest for P/L.

The measure of a trader is what they do when markets are closed and especially when markets don't offer opportunity. The great traders are motivated by curiosity and the quest for ideas; they love the process of digging deeper and seeing what others miss.

In their relationship with markets, they are not motivated by need; they are motivated by values. That is what drives great romantic relationships as well.

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6/4/2026 - One source of trading and investment ideas that I highly recommend is The Roppel Report, written by hedge fund manager Jim Roppel. The report contains many actionable growth stock ideas that are relevant to both active traders and longer-term investors. But what I really like about the Report is its psychology. One emotion that I rarely hear from traders is the sense of entrepreneurial opportunity and excitement.

In my Positive Trading Psychology book, an important theme is that "You are the entrepreneur of your life". Everyone starts their lives somewhere. At that point, your life is your startup. Those who are successful in life find opportunities that excite them and give them energy. They live with meaning and purpose. An entrepreneurial life is anything but routine.

When we live life as a startup, we approach trading entrepreneurially. We focus on opportunity and, when it's distinctively present, we don't just place small trades to avoid possible losses. We invest ourselves in the search and invest meaningful money in those ideas. We go for it, managing risk prudently but pursuing unusual reward.

Trading psychology is not about fear, greed, and emotional stress. For successful traders, it's about taking the time to search and research opportunity and then trading with vision and entrepreneurial zeal.

Life is way too short to be lived timidly.

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6/3/2026 - Many of our emotions reflect how our minds work. For years, I've been involved in hiring analysts and assistants for hedge fund teams and for hiring hedge fund traders and team leaders. One of the emotions that distinguish the best from the rest is intense curiosity. The really great traders have an insatiable appetite for figuring markets out and discovering new relationships. This is readily apparent in the Market Wizards interviews. The great traders spend as much time absorbed in markets when the markets are closed as when they're open. Their curiosity drives them to figure out what others can't and don't see.

It is precisely this curiosity that leads the great traders to develop their own unique approaches to markets. They are not copying what others are doing, and they are not trading the usual market indicators and relationships. They see something unique and their curiosity leads them to carefully define and refine the relationship and see how it interacts with other relationships. For example, one active trader I've worked with found a pattern that reliably leads market trending, but only at certain times of day. He views the market as a collection of markets, each defined by time of day and the nature of participation. Each kind of market has its own edge.

Only a strong sense of intellectual curiosity can sustain the hunt for such edges. The emotions that are obvious among such traders are a sense of wonder, an excitement over discovery, and a sense of awe at the complexity that they uncover. They maintain their involvement in markets regardless of P/L and regardless of whether markets are open or closed. Their reward is the fulfillment of discovery.

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6/2/2026 - Some of the emotions traders don't talk about--or work on--are positive ones! A great example is gratitude. When a trade works out well, a feeling of thanks and fulfillment goes a long way. Research in psychology consistently finds that gratitude is an important contributor to overall emotional and physical wellbeing. In the hustle and bustle of market movement, however, it's easy to take the winning trade for granted. When we are grateful for the success, we are more likely to reflect upon it subsequently and use it as part of our learning and development.

Things really go wrong for traders when the winning trade isn't good enough. That's the opposite of gratitude. We could have held a little longer; we could have sized it larger; we could have gotten in at a better point; we could have traded something else that moved even more; etc. etc. Perfectionism destroys mindset. It turns success into failure and sabotages energy.

Gratitude is far different from complacency. We can be grateful for our progress and still find learning lessons for the future. We live in a free society with a (relatively!) free economy and we have the freedom to invest in the future. That is surely worthy of our gratitude!!

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6/1/2026 - We've heard it all a million times: fear, greed, frustration, etc. But there are many emotions that traders experience and don't talk about that are equally important to performance. One of those is boredom. There are times in markets when not much is happening. Volume is low, volatility is low, and there are no news and world event catalysts driving price trends. So we're sitting in front of the screens, and sitting, and sitting...with not much to do.

I submit that what drives a great deal of overtrading is not FOMO and greed, but boredom. Many traders crave action and action without an edge can feel better than no action at all. The really good traders know how to utilize their time productively when not much is going on in markets. They might scan stocks and markets that *are* moving for possible trading opportunities. They might step back and look at what's happening on longer time frames for possible ideas. They might develop strategies for trading quiet markets, such as options strategies that profit from decay and mean reversion.

The really good traders utilize the boring times in markets productively. They are stimulated by ideas and opportunity and enjoy searching and re-searching for ways to exploit a variety of market conditions. Because they're stimulated by ideas and the search/research process, they don't need to be trading to relieve boredom.

And when markets aren't open? The bored trader doesn't bother with closed markets because there's nothing to trade. The successful trader, who is stimulated by the hunt for opportunity, is vitally engaged in the market when nothing is trading.

Loving to trade is very different from loving the process of understanding markets. If you need to trade to stay engaged in markets, you'll inevitably overtrade.

Lessons From The Next Book

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 24 May 2026 11:23:46 +0000

5/31/2026 - Imagine that people become really interested in dating. A host of dating services spring up, experts offer their services on successful dating, and people spend considerable money on videos and courses to date more people, find better dates, enjoy dates more, etc. They don't do any work on themselves to become better romantic partners, so they get lots of dates, but never achieve successful long-term marriages.

Lots of people want to trade. They seek out courses and videos and advice on trading and they find lots of opportunities for trades, but they don't invest. They don't do any work on themselves to become better investors in the best opportunities, so they get lots of trades, but cultivate no long-term wealth.

The people I work with who have achieved mind-boggling returns this year: 1) don't trade in and out; 2) don't get their information from social media; 3) don't try to be trading gurus. They have made millions and millions of dollars thus far in the year tracking themes that institutions are beginning to discover and then riding those themes as significant investments.

Working on dating is fun. It's not what brings the fulfillment of long-term relationships.

Working at different jobs is stimulating. It's not what brings the success of a long-term career.

In all areas of life, the greatest returns come from well thought out, meaningful investments and the ability to commit to those.

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5/29/2026 - One thing I'll discuss in the upcoming book is the importance of breadth of thinking. Yes, deep thought is important: going into depth to understand an economic report, analyzing price action at multiple time frames, etc. The very successful market participants I've worked with have also displayed an amazing breadth of thinking. They won't just look at their market; they'll analyze related markets and pick up advance signals. They won't just trade agricultural commodities; they'll go on crop tours and talk with the farmers who see growing conditions first hand. They won't just read a research report; they'll contact the author with important questions. Deeper, deeper: they'll uncover what others fail to see. They make more connections in the data because they unearth more data.

Among day traders, breadth of thought is achieved through the collaboration of teamwork and especially where each team member looks at different things. I recently worked with a team where a member picked up on strength in the South Korean market, which led to an exploration of semiconductor stocks, and a phenomenal trading opportunity. The new book will track an actual successful team in real time and illustrate how they operate and the opportunities they uncover. It will be an opportunity to learn from people managing hundreds of millions of dollars and see what they do and how they do it.

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5/28/2026 - The upcoming book will feature an inside look at a group of professional traders and how they find opportunity, balance their risk taking, control risk, and hang in there for the few really large moves that make up a big part of their profitability. The book will track their day to day activities and performance and illustrate how they generate ideas and learn from their experience.

It is noteworthy that the group meets each week and, prior to each meeting, write up their ideas, summarize their performance, and highlight lessons learned. This is especially valuable in that it highlights developing trends and opportunities. Having a group of people each keeping their eyes on opportunity and sharing with each other greatly enriches performance and also keeps everyone in an opportunity mindset. Equally valuable is learning from everyone else's successes and mistakes, week after week. That cements learning and expands the lessons learned.

Another group that I work with conducts an online chat throughout the day, documenting what's moving, breaking news, and other observations. The chat is saved and printed out and forms the backbone for the daily review process. Once again, the interaction becomes a mechanism for learning and development. I highly recommend reading the interview with David Ryan in the first Market Wizards book. His journal keeping--and the intensity of his review--are eye-opening. Good traders learn; great traders immerse themselves in learning.

Expertise is a commitment, not a 9-5 job.

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5/27/2026 - When you read through the interviews in the Market Wizards texts, you come across something noteworthy: The most successful traders/investors have a highly elaborated view of what is and isn't opportunity. No one is just trading a news release or a chart pattern. Rather, they have a clear idea of what opportunity is, how it sets up, and how to get involved. We see this, for example, in William O'Neil's interview where he talks about riding growth stocks. The companies he gets involved in need to have strong earnings, strong relative performance, and a good risk/reward opportunity to ride the trend. One of the traders featured in the most recent Market Wizards book, Kenny Sharkness ("Shark"), couldn't be more different in his trading approach. But, true to the SMB approach to trading, he looks for stocks "in play" that are setting up for strong short-term moves. Those criteria are elaborated in playbooks and form the backbone of what makes for short-term opportunity.

There couldn't be more different approaches to markets than the growth investment approach of O'Neil and the very active trading of multiple stocks by Shark. The common element is a detailed approach to trading, a clear view of what constitutes opportunity, and an ability to tolerate volatility on the way to significant gains.

When I learned how to be a therapist in graduate school, I benefited from having multiple teachers/mentors. Eventually, I was able to synthesize their approaches and develop my own view of how to help people change. You know you have your own distinctive approach when you begin to elaborate a unique philosophy of opportunity and find methods that truly speak to you.

The greatest risk for developing traders is that they are too eager to trade and not absorbed in learning markets. What you see uniquely in markets will generate your unique returns.

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5/26/2026 - A major assumption that developing traders make is that trading success is the result of finding the right trading method. They scour markets for trading signals and chart patterns, hoping to find the secret to success. What we see in the Market Wizards books, however, is that the trading greats trade different markets, different time frames, and different methods. They develop their own approach to trading that blends the pursuit of gain and the management of loss, but there is no single formula for success.

What I've come to respect is that a major part of trading success is finding and trading the right opportunities. A trader can have flawless discipline and deep insight, but if the market they're trading isn't moving, they're not likely to make much money.

A powerful example of this is the book The Lifecycle Trade by Eve Boboch, Kathy Donnelly, Eric Krull, and Kurt Daill. The book identifies how to find "super growth" stocks, including IPOs. The goal is to find big winners early in their moves and then implement the discipline and risk/reward management to ride the often volatile moves higher. What makes these traders successful is insight into the developing opportunity and the ability to stick with the vision of growth. Clearly, this approach to trading is relevant to the current period, in which the pursuit of AI-related themes has been a major area of opportunity.

This is yet another way in which successful trading is a function of entrepreneurialism. The entrepreneur sees opportunity in the marketplace and doggedly but flexibly pursues it. The great trader finds opportunity in the same way and builds a business around their unique vision.

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5/25/2026 - My first part of writing the new book will be to review every one of the Market Wizards books and figure out the common themes and threads that connect the top traders. Then I will read books from many of these top performers to get a more detailed look at what makes them tick. The idea is that we are most likely to develop our own greatness if we study and emulate those who have achieved great things.

One of the earliest observations from Jack Schwager is that what connects the top performers is not what and how they trade. Some are fundamentally oriented portfolio managers; some are technical traders. Some operate in the stock market; others are involved in fixed income or commodities. All of them operate with a clear edge in markets, but all have their own edges.

What is clear is that all of them live and breathe markets. They are just as engaged outside of trading hours as while they're glued to screens. They follow overseas markets; they talk with traders they respect; they read research reports; they review their trading: they are always immersed. Some might call this a passion for trading, but that misses the point. They have a passion for understanding and mastering markets--and they sustain that passion even when they are not trading.

Day after day of the immersion in markets feeds a superior capacity for pattern recognition. The best traders see more in markets because they've seen more markets! It's not just the amount of time they spend in front of screens and processing market information; it's the intensity of their focus that enables them to internalize so much more from their market time.

Greatness emerges from passion.

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5/24/2026 - The next book, tentatively titled Professional Trading Psychology, is going to be a look at trading and trading psychology from the vantage point of successful traders who trade and invest for a living. In other words, the book will look at the actual trading practices of great traders and how those contribute to their winning psychology. There are plenty of texts that help developing traders cultivate discipline, avoid emotional trading, etc. This will be different. This will be a look at what it takes to be very successful. As a result, the first part of the book will summarize the lessons of great traders over the years and identify what they do that accounts for their ongoing success.

One of my eye-opening observations is that great traders are genuinely excited about the ideas and themes that they uncover through their research. Whether they are trading an individual company's stock, the entire stock market, or fresh developments in a particular country or region, they develop a vision of the future and become energized by that vision. They are not just trading chart patterns or signals or directional hunches. They see a bigger picture. Even when the trading is quite detailed and technical, there is an underlying idea that defines the trader's perspective. And they are excited about that idea.

This fits with the idea that successful money managers and traders treat their work as an entrepreneurial venture. They develop a vision regarding opportunity and they are consumed by the pursuit of that vision. And, yes, they reach some dead ends and disappointing avenues, but often they discover their beautiful paths by getting lost in the weeds of research, discussion, and review. The energy level is not just about making money, because it is sustained even when trades aren't being placed. The energy level of the great trader is not so different from the energy level of the research scientist or the businessperson pursuing a new venture. It's about vision and discovery and bringing something new to life. When you find your path in life--whether it's in your career, in markets, or in relationships--your efforts bring you energy because you are fueled by inspiration.

Questioning Our Assumptions

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 17 May 2026 11:32:19 +0000

5/22/2026 - A common assumption that even experienced traders make is that good trading means getting into good ideas at good prices. Indeed, much market preparation goes into finding the right ideas and then waiting for those to set up as good trades. So what's missing? Surprisingly little preparation and planning go into exiting the trade. Yes, there is probably a stop level, but less often is there an elaborated plan for taking profits. Some of the greatest frustrations occur when trades move favorably only to reverse before hitting targets. Or perhaps there is no clearly identified target in the first place.

When we place a long or short trade, we make an assumption about the direction we're trading, but we also make an assumption about volatility. We assume that the instrument will go to the target and not significantly beyond. That assumption is rarely backed up with research and a careful tracking of volume/volatility. As a result, traders often fail to hit their targets or, equally often, leave money on the table.

The best traders I work with typically have multiple price targets for their positions. They take a portion of the position off at a nearby target, locking in profits, and then let the rest of the position ride to subsequent targets. Their approach is to create a win-win, where they can harvest profits if volume/volatility dies out, but also participate if we see an extended move. Sometimes they have processes for adding to positions if they notice volume and volatility going their way. Sometimes they use options alongside cash positions to leverage their bets without too much added downside.

The point here is that the process of targeting trade exits is every bit as important for the successful trader as the process of finding and executing good trades. We assume that planning means finding opportunity. It also means figuring out best ways of exploiting that opportunity.

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5/21/2026 - What's the most basic assumption that developing traders make? They assume that they'll make money by anticipating the directional price movement of a particular instrument. Their choice is to go long or to go short.

When we enter the professional trading world, we find a variety of trading strategies. For example, many money managers trade relative price movement. They take two related instruments and trade one long and one short. If they think the yield curve is steepening, they will sell a basket of bonds at the long end and buy a volatility-weighted basket at the short end and profit from the relative movement. Or they will be long one stock in a given industry that is showing recent growth and short another stock in that same industry, again volatility weighting the pair. As long as the one stock outperforms the other, it doesn't matter what the overall market does. It's a different game.

Or perhaps the professional trader expects an increase in volatility given likely geopolitical developments. Buying equivalent amounts of puts and calls across relevant instruments allows for profitability regardless of the direction of the reaction of the underlying instrument.

There are so many strategies for making money in markets and the question is which ones most play to our interests and strengths. When we assume that there is one way to make money, we limit ourselves to a crowded universe and fail to take advantage of much greater, lesser-known opportunities.

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5/20/2026 - One of the most common challenges I hear from experienced, successful traders and money managers is balancing the need to hold onto positions that have further to run and the need to hold onto profits during volatile price retracements. In other words, how can traders participate as fully as possible in a trending move without getting shaken out along the way? This need to blend vision and opportunity with prudence and risk management is not an issue of fighting weaknesses, but rather ones of balancing strengths.

This is a classic example of how better trading can create a better trading psychology. For instance, if the trader can find inexpensive options structures as hedges, this could very much cushion the downside on retracements while allowing the trader to remain in a meaningful trending position. Similarly, if the trader can define a core position that will be held onto through an anticipated move and then trade around that core when retracements offer good risk/reward opportunities, that too can bolster the trader's psychology, as pullbacks now are no longer threatening. Too, if the trader holds multiple positions that are not highly correlated, one might retrace, while others continue to profit, cushioning overall P/L. In such a case, diversification is a trading psychology strategy, not just a trading strategy.

The beginning trader uses psychology to avoid mistakes. The advanced trader draws upon best practices to cultivate a winning mindset and sustain motivation. This is why it is so important to study, study, study one's best trades and best trading periods. Hiding among our successes are our strengths and what ultimately will bring us to our trading goals. All trading reviews should be exercises in positive psychology.

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5/19/2026 - The Barchart site notes that the yield on 30-year Treasuries has climbed above 5% for the first time since 2007, which preceded the global financial crisis. While markets are focused on AI and related growth themes, how will higher long-term rates affect the housing market? Payments on U.S. debt? Inflation and the value of the U.S. dollar?

Meanwhile, negotiations between the U.S. and Iran continue, as neither side wants all-out war, but neither side will concede control of the Straits. What if the only option becomes a military one and the Straits remain closed indefinitely? $150 per barrel for oil? $200?

The point is not that these scenarios will necessarily happen, but that the market is not pricing in anything remotely like these scenarios. Rates are telling us about inflation and oil prices are telling us what could further stoke inflationary expectations.

The best money managers I work with develop multiple "what-if" scenarios and then walk forward to see if the odds of those playing out are increasing are decreasing. That is very different from looking at chart patterns in a particular instrument. It is in the story told by multiple markets and regions of the world that we can gain a sense of the market's bigger picture.

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5/18/2026 - I recently spoke with an unusually successful hedge fund team. Their returns were particularly interesting because they didn't trade all that much. They developed big picture ideas--many of which were unique--and they occasionally tweaked the expression of these views and the combination of the positions in the portfolio. The lion's share of their time, however, was spent in developing ideas. Rarely did they express their ideas in terms of going long or short a particular market. Rather, they were interested in the relative performance of multiple markets in the face of changes in the world. For example, if their research pointed to higher oil prices, they would express a number of their views in rates markets (expressing an inflation perspective) and equity markets (expressing different growth perspectives for oil producers vs. consumers). The result was a diverse and unique combination of positions that provided multiple ways to win.

Still, that is not what I found most interesting in their approach. They had big picture views and therefore focused on big picture price targets. Perhaps their most unique quality was their ability to hold onto positions while they worked out. Moves that would have shaken out other traders had them contemplating adding to positions. Yes, they were wrong on occasion, but they had a number of amazing winners. Their skill was finding areas of unique opportunity and then committing to those. The capacity for commitment was their key talent.

Similarly, some people are great at dating and meeting people at social events. Others are great at committing to and cultivating long-term relationships. It's not that the team I spoke with was so great at controlling their emotions; their greatness could be found in their capacity for commitment.

Which few traders talk about.

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5/17/2026 - The U.S. stock market has been on a historic run. Many traders I hear about have not captured the lion's share of this rally and are frustrated. They are looking for a way to get in when the market is stretched and the market has not let them make their comfortable entry.

Please allow me to point out a few things.

* Energy (oil) prices continue higher in the face of seeming Middle East progress toward peace;

* Inflation expectations are on the rise and we're seeing higher yields at the long end of the curve;

* European stock prices (VGK) remain well below their late February highs;

* Europe and the Far East as a whole (EFA) remain below their late February highs;

* Oil importing countries such as Australia (EWA) and Japan (EWJ) have not made new highs;

* We have recently seen more U.S. stocks make fresh 52-week lows than highs.

* Many U.S. stock sectors have not made new highs, such as raw materials (XLB); financial (XLF); consumer discretionary (XLY); healthcare (XLV); and industrials (XLI).

* The equal-weighted version of the SP500 (RSP) has not made new highs.

Well, you get the idea. If and when this market corrects, everyone will look back at how obvious the top was.

It pays to question our assumptions and look beyond a broad market average to see what markets are actually doing. A rising tide lifts all boats. Many boats are not rising.

A Different View Of Trading Psychology

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 10 May 2026 12:38:00 +0000

5/15/2026 - I encourage you to check out this video of Neil Young singing Like A Hurricane. The song is great, but it's his performance that is extraordinary. Total energy and passion. Yes, I know that "process" is important in trading and "risk management" is essential. But we can become so immersed in P/L and the rules of trading that we don't trade with passion.

Whatever you do in life, do it with genuine passion. Life is meant to be celebrated. Relationships, trading, careers, personal interests: make them count. Make them passionate. Too much of trading psychology is about prudence and emotional self-control. There's a place to celebrate passion. Yes, we may grieve loss, but we're also meant to celebrate success.

Passionately.

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5/14/2026 - In her book on how children handle loss and grief, Dr. Corinne Masur makes an important point. During a time of upheaval and loss of an anchor in life, it's important to "keep rules and routines as consistent as possible" (p. 173). Loss brings a psychological sense of instability. Grounding life in consistency helps bring stability to the difficult life period.

This is rarely acknowledged in trading psychology, but the same principles hold. If traders go for significant gains in markets, they will occasionally experience significant losses. Sharpe Ratios for the usual directional trading ensure that the magnitude of losses will be correlated with the magnitude of the gains.

As emphasized below, what motivates traders is not just money, but a dream of success. When those large losses occur, the dream is threatened. Stability is lost. How can traders deal with such upheaval? We rarely read of this challenge.

For the trader, as for the child, the best coping comes from doubling down on routine and the familiar processes that have brought past success. This not only brings a sense of stability, but also helps prepare the trader for the eventual comeback. It is tempting to want to make the money back all at once, but such overtrading can only lead to further losses and emotional injury.

We often hear of the importance of remaining process driven in trading. Yes, this grounds us in our best practices, but it also grounds us emotionally when our large bets result in large losses.

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5/13/2026 - As AI becomes an increasing part of traders' processes of finding, expressing, sizing, and managing trades, how will this impact trading psychology? I am already working with professional traders who have expanded their analytical capabilities through AI platforms. They are finding more opportunities and different ones. This is exciting in one way, but poses a challenge in another.

As noted below, traders approach their work as entrepreneurs. They have a dream of beating the market. How will they feel if it's not them beating the market, but the computer? A major reason traders operate in a discretionary rather than systematic manner is that they want the trades to be *their* trades. Otherwise, they could turn on their systems, walk away from screens, and not be involved in market ups and downs at all.

AI has the potential to study the patterns of a trader's best trading and find opportunities that are in the trader's wheelhouse. Based on the trader's past performance, an AI platform can recommend ways of managing those trades--or could even place the trades independently! That would lead to amazing consistency in trading process, but it's achieved at the expense of the trader's discretionary participation. For many traders, this would be an emotional loss. It might similar to the response of store owners who find their businesses overwhelmed by the growth of large department stores and shopping malls. The store owner/entrepreneur doesn't want to manage a department store. Progress, at an emotional level, becomes a threat.

To be sure, even in a world of online shopping and shopping malls, there is room for small boutique stores with unique offerings. Innovation and uniqueness become central parts of the psychology for the entrepreneur. Today's trading psychology, so grounded in the fear/greed mindset of beginning traders, will evolve in the coming world of AI. Increasingly, the new trading psychology will be about innovation within niches and the ability to deliver unique returns. AI is great at finding answers. The new market entrepreneur will be great at asking questions and finding fresh niches.

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5/12/2026 - Let's take the example of overtrading. The common explanation for overtrading is that the trader has a fear of missing market moves (FOMO) and acts impulsively out of that fear. That's certainly true for some developing traders, but it misses the larger picture of *why* the trader fears missing moves.

As described below, many traders pursue trading as their dream. They pour their hearts into it; they pour their time into it. Often, outside of trading, they don't have much of a career or personal life. So how do they feel when the market is slow and they don't perceive opportunity? How would they feel if they spent the whole day watching screens and not placing a single trade?

They would feel empty.

They would feel purposeless.

They wouldn't just feel like a failure as a trader; they would feel like a failure. They would rather do something--place any trade--than feel that emptiness.

That is why a rich and fulfilling life outside of trading is necessary to success as a trader. If your life is a rich one, you'll never feel poor when you don't trade.

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5/11/2026 - The majority of people I have worked with in the trading world don't view trading as a job or even as a career. They are pursuing it as part of a dream, like true entrepreneurs. Their goal is not simply to make a living or make a good living. They seek to build something significant by achieving a high level of success.

This is why, as noted below, the essence of trading psychology is not fear and greed. Learning techniques to handle loss and pursue gain are necessary, but they don't address those situations in which the dream is threatened--or when it begins to flourish and needs to expand.

The idea of each trader developing a detailed business plan makes sense because such a plan is what translates the dream into concrete, day-to-day realities. The plan also addresses situations in which the dream needs to be modified and ways of keeping the dream alive in the face of performance challenges.

At a psychological level, the business plan allows traders to respond to challenges without overreacting to them. It's not fear and greed that throws traders off course. It's the grief and excitement that occur when our dreams are threatened--or when they play out unexpectedly quickly.

The great challenge for the trader--as for the entrepreneur--is to face situations in which the dream is fading away and to learn from them and emerge with a fresh vision. It is not unusual for an entrepreneur to start a few businesses and fold them before finding the right opportunity. They face loss and grief--and they use those to cultivate fresh visions and dreams.

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5/10/2026 - What if the essence of trading psychology is not fear and greed? What if handling those emotions is not what makes the best traders successful? Asking new questions is what brings us to new perspectives and new answers.

Trading and investing are all about gain and loss and balancing those via the sizing of positions and prudent risk management. Inevitably it occurs in a trader's career that, in pursuing gain and success, they experience significant loss. One portfolio manager I worked with developed a new approach to investing and fell in love with the promise of the method. When market conditions changed dramatically, the new approach could not keep up and adapt. The manager went through a potentially career-ending loss. But it wasn't the financial loss that was so difficult; it was the loss of something cherished: a dream.

Many of the most challenging problems traders face is not simply fear or greed, but the emotional impact of loss and gain. What brings many traders to their craft is also what brings many people to a significant romantic relationship: a dream. How do we respond when that dream changes? When it is lost? How do our responses to loss impact our subsequent trading? Our lives? Our future ability to dream?

I'm currently reading How Children Grieve by Dr. Corinne Masur. A core idea in that text is that how we are impacted by loss is a function of the stage of life that we're in. Loss and grief are different for a child than for an older adult who loses their spouse, for example. Similarly, the beginning trader is impacted by loss differently from the experienced one. New attachments impact us as well...and those impacts differ for people at various phases of life.

What we lose and what we gain impact us emotionally. A healthy psychology knows how to grieve--and how to celebrate. When we fail to deal with the emotions of loss and gain, our subsequent actions become distorted by what we don't process. A beautiful way to deal with loss is to more deeply attach to everything and everyone important to us that we haven't lost. In life as in finance, a rich and deep portfolio helps buffer us from traumatic losses. The deeper our love, the greater the grief we will experience in times of loss. It is the passion we feel, not the need and greed, that leaves us vulnerable to loss and open to the fulfillment of gain.

How To Become Your Own Trading Coach

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Fri, 01 May 2026 09:57:00 +0000

5/8/2026 - My dream for a next book is to go on the inside at one of the professional money management firms where I work and show, through detailed example, how the successful traders research markets, generate ideas, express their ideas as trades, combine the trades to achieve diversification, and manage the risk and reward. Out of that would come very specific best practices that individual traders could use to anchor their self-coaching efforts at development.

Of course, no trading firms are eager to give away their secret sauces, so that is why those inside looks are quite rare. It's great to have interviews with successful traders; even greater to see them in action and adopt them as role models. How successful professionals coach themselves can become inspirations and roadmaps for how we can guide our own development.

Show me a successful sports team and I'll show you a successful coach. Show me a successful performing artist and I'll show you mentors and a long process of mentoring. The trading world is in need of mentors and role models--not influencers and vendors hawking their market calls. That is why the Market Wizards books are so popular: real traders offering insights into their exemplary success. The next step is an ongoing process of market wizardry that can inform and inspire our work on ourselves.

Stay tuned...

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5/7/2026 - The solution focused approach to coaching that I describe in my books is perhaps the most relevant to our efforts at self-coaching. Solution work stands the change process on its head. The usual approach is to examine our problem patterns and make efforts to interrupt and change those. In the solution approach, we carefully analyze occasions when our problems *aren't* occurring and we see what those have in common.

The big idea is that, when our problem patterns aren't happening, it's because we're doing something right! When we're not allowing emotions to drive our trading reactively, perhaps that is when we're at our best in preparing trading and staying focused. If we can figure out how we do that, we create a repeatable solution.

We may feel dysfunctional and damaged, but at times we're already that person we wish to become. A good coach keeps your strengths clearly in your sight so that you can be more and more consistently your best. A real time journal, like the one mentioned yesterday but focused on what you do right, can be a powerful tool for becoming your best trader--and your best self!

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5/6/2026 - My favorite cognitive technique for self-coaching is keeping a real time journal of one's thoughts and feelings. The idea is to recognize when you are feeling anxious, greedy, discouraged, distracted, frustrated, etc. and quickly back away from the situation and fill out a journal entry. Notice that this by itself encourages you to be the observer of your experience and not someone who is caught up in that experience. The very act of stepping back from a situation and putting it into perspective strengthens the part of you that is *not* caught up in the problematic trading.

The classic cognitive journal entry works with a sheet divided into four columns. Column A stands for "activating event" and summarizes what has gone on that is associated with your emotion. Column B stands for "belief" and it's what you're telling yourself about what has just gone on in the market. Column C stands for "consequence" and it's identifying how your belief is making you feel. Column D stands for "disputation" and is your challenge of the negative belief and your effort to respond to the situation more constructively.

If you do this multiple times per day, you can become very good--and very quick--at recognizing negative thought patterns as they arise, challenging them, and then replacing them with a more constructive outlook. Eventually you internalize the journaling and can go through the exercise in your head in real time.

The goal is to become very good at "thinking about your thinking": standing apart from automatic thoughts and replacing them with more realistic alternatives. If you do this consistently, every day for a month, you'll find that you maintain a constructive perspective far more regularly.

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5/5/2026 - Again and again I hear from successful traders that a large portion of their annual profits comes from a relative handful of trades. Lots of trades make a little or lose a little, but very few lose a lot, and a few are big winners. When we explore those big winners, it's apparent that they typically start as good opportunities but at some point show up as great opportunities. That's what allows the trader to get large in the trade and ride it for significant profit.

This is hugely important to our self-coaching. If we're busy trying to avoid losses, we'll never get the confidence to go after the meaningful wins. That occurs in relationships, and it occurs in trading. At some point, "yeah!" becomes "hell, yeah!", and we go for it. The idea that great traders avoid emotion during trading is nowhere near correct. The great traders are entrepreneurs. They love to build; they are excited by opportunity. Yes, they manage risk well, but they also go for big success.

What is fascinating for me as a psychologist, is that the big, "hell, yeah!" trades often do not start that way. They are good ideas, executed with good risk/reward, but they show promise pretty much from the start. When everything lines up, the trader is inspired to go for it. Their self-coaching is not just about managing risk, but pursuing unusual opportunity. They are always asking of their good trades, "What do I need to see to make this a great trade?"

It's an opportunity mindset: an entrepreneurial mindset. It's hard to reach for the horizon when we're looking down and making sure we don't stumble.

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5/4/2026 - Too many traders focus on what is setting up as opportunities in markets rather than whether *they* are set up to properly trade opportunities. Notice that when cruise ships set forth for a transoceanic voyage; when airplanes prepare for a cross-country flight; and when racecar teams are getting ready for events like the Indy 500, there is always an extensive check of systems. You don't cross the ocean, get in the air, or approach the starting line without having made sure everything is in good working order or else there could be a disaster. Similarly, traders need their own "pre-flight checklist" to ensure that they are ready to trade. Some of what needs to be checked is whether the idea has been properly researched and whether rules of entry/exit are in place and some of what needs to be checked is the mindset of the trader: concentration/focus, energy level, mood, etc.

Maintaining a regular routine of monitoring and renewing your psychology allows you to avoid the pitfalls of poor preparation. So many times traders are afraid of missing opportunity and put on trades before they're properly planned and focused. I am willing to bet that, for most traders, P/L would improve significantly if they placed fewer trades and only traded when they were "in the zone".

The coaching that really matters is the self-coaching that occurs during the trading day.

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5/3/2026 - The most basic technique for changing our trading psychology is to recognize when our concentration has been disrupted by distraction, frustration, or excitement. In a state of optimal focus and concentration, we are most able to process what markets are doing and implement our trading plans. Distraction leads us to act impulsively and reactively, leading to suboptimal decisions.

Notice that the solution to anxious and upset feelings is not simply relaxation, taking breaks, or attempts at positive self-talk. Rather, we want to replace distraction and frustration with calm focus. This typically requires that we temporarily remove ourselves from screens and control our thinking and breathing. Meditation skills are very helpful in this context. By focusing on an image, slowing our breathing, and maintaining a very still posture, we shift the mind by altering the body. By slowing down our heart rate, focusing our attention, and quieting our bodies, we literally shift gears and return to states of optimal decision making.

As I describe in the Positive Trading Psychology book, this is where brain wave biofeedback (neurofeedback) devices can be super useful. These tell us in real time when we are in states of focus or distraction as well as states of calm or agitation. If we practice meditation routines with the biofeedback, we can learn how to calm and focus ourselves on demand. This becomes a great way to start the trading day, and it is a useful routine for breaks in trading.

Indeed, if we can learn to focus on demand, this skill becomes helpful in a variety of life situations. The idea is to respond to challenges in planned ways, not reactively.

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5/1/2026 - I'm in Syracuse, NY as I write this, getting ready to teach classes in short-term (brief) therapies to residents in psychiatry. I've been on the faculty of SUNY Upstate Medical University since the mid-1980s and have long enjoyed teaching change techniques to psychology and psychiatry students. In this series of posts, I'll teach a few of these techniques to you so that you can use them to help coach yourself to success. You'll find more on this topic in the Daily Trading Coach book and in the book that just came out, Positive Trading Psychology.

So let's start at the beginning and understand the nature of the problems we face. These problems occur in many situations and they can take different forms, but typically they are part of an underlying pattern. For instance, we may feel stress, anxiety, and fear in many different situations, but common to to all those experiences might be negative self-talk, where we catastrophize and anticipate the worst. This can occur in relationships, in trading, at work, etc. The goal of self-coaching is to understand the patterns that create our problems so that we can step back from those patterns and engage in new ways of thinking, feeling, and acting.

Very often, a key to identifying the patterns that are interfering with our trading is to recognize the thoughts and emotional experiences driving the patterns. We might, for instance, overtrade in different situations and take large losses. Driving this overtrading might be perfectionistic demands to participate in every market move and feelings of failure if a move occurs and we don't participate. For some people, the overtrading might be driven from thoughts, feelings, and experiences of the past: trying to make up for past life failures.

A technique from cognitive therapy is keeping a journal of all your negative thoughts, feelings, and actions during a trading day and identify what you're telling yourself on those occasions. Many times, the patterns will jump out at you: you'll see habit patterns of self-talk that lead to negative emotions and poor trading. The first step in the change process is to recognize our problem patterns in real time. Keeping a real time journal of our thoughts, feelings, and actions is a way of helping us recognize those problem patterns. In coming posts, we'll explore techniques for changing the patterns we recognize.

Mistakes Traders Make

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 26 Apr 2026 13:10:00 +0000

4/30/2026 - It was great meeting with a group of traders for the "ask me anything" webinar with Agnieszka Wood. A couple of mistakes were addressed in the session very effectively. Agnieszka discussed the mistake of trying to fix our trading before we've addressed the emotions we've been going through during difficult trading. It is all too easy to become reactive when we're frustrated. Stepping back from trading temporarily, recentering, and renewing our search for edge is an effective way to respond to loss.

Peter Robbins raised another great point. We had been discussing the importance of getting big in trades when our edge is playing out and he noted that there are some environments in which it is not prudent to get big. That is certainly true of highly volatile, uncertain markets. Volatility gets us big by itself! Good risk management takes market environment into account.

As I explain in the Positive Trading Psychology book, the quality most common to great traders is intellectual curiosity. Great traders love the hunt for ideas. They love to discover. That keeps them engaged even when they have small positions in the market. And that's what gives them the inspiration to put on larger positions. The best traders love the discovery process every bit as much as they love trading!

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4/29/2026 - Perhaps the greatest mistake traders make is not making enough mistakes. The trader who is innovating is always going to be getting things wrong, fixing them, and learning in the process. Avoiding mistakes too often means avoiding growth.

Years ago, I contrasted a Japanese car maker's operations with those of a U.S. car maker. The U.S. manufacturer ran the assembly line at a moderate speed, ensuring that line workers would keep up with the flow and make a minimum of mistakes. Indeed, if they had sped up the line, they would have heard from unions in a hurry!

The Japanese company, however, sped up the line every so often and then scanned to see where things broke down. They would then fix those areas, maintain the higher speed, and then speed things up some more. The U.S. company saw flaws in the assembly line as something to avoid; the Japanese company sought flaws for continual improvement. Which company do you think had a track record for most reliable vehicles?

There's an important lesson here. As long as we're managing risk the right way, we want to embrace our losses and use them as fuel for our improvement. Avoiding mistakes is perhaps the most subtle of all mistakes.

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4/28/2026 - The problem that beginning traders make is that they are too eager to take risk before they've developed robust processes to guide their generation of ideas, sizing, risk management, trade review, etc. The problem that experienced traders make is that they are fully grounded in routine and don't spend enough time and energy developing new sources of edge. In the first case, the trader is too eager and takes imprudent risk. In the second case, the trader lacks inspiration and lacks novelty and innovation.

It's not so unlike the problem that occurs in romantic relationships. They start with excitement and newness and run into challenges channeling that energy into daily coordination of individual needs. Over time, the constancy of daily routine makes it necessary for couples to find new energy from fresh interests and activities.

Every relationship should be comfortable and stimulating and challenging. Our relationship with markets needs to be comfortable enough that we can handle day to day challenges, but also stimulating in the exploration of new sources of edge.

Success is a balance between stability and innovation. Without excitement and curiosity--and a stable way of channeling those--trading (and our market edges) grow stale.

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4/27/2026 - I've consistently found that the majority of directional traders make their living from managing risk well (not having large losing trades) and from having (often only a handful) of large winning trades during a year. They make their money when they are *really* right and they take advantage of that.

The big mistake that traders make, leaving them as good traders but not great ones, is that they have a clearly defined criteria for finding opportunity and identifying entries and exits. They *don't* have a clear process, however, for taking full advantage of those situations when they are *really* right. In other words, they don't have a clear process for getting big in the right trades.

This is partly a trading psychology issue. Traders clearly visualize being wrong but not being amazingly right. They have a process for limiting losses, but not maximizing gains.

They think cautiously and prudently, but don't think greatly when the proper time comes.

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4/26/2026 - What makes our trading psychology is not whether we make mistakes, but what we do with those mistakes. In the coming series of posts, we'll take a look at common mistakes traders make and how they can use those mistakes to improve their trading.

An unfortunate number of traders have missed the bulk of the large upside move in stocks since the lows late in March. Out of a sense of prudence, they didn't want to "chase" the rebound and so waited for a pullback. The anticipated pullback simply hasn't occurred.

As the late Ayn Rand taught, when things don't make sense, it's worthwhile to check our premises. What's the premise that traders are relying upon that is leading them to miss opportunity?

Quite simply, traders are assuming that pullbacks are measured in price action alone. If we don't see a correction in price, traders assume we haven't seen a correction.

But suppose we measure correction in other ways. For example, off the late March lows, we subsequently saw breadth--as measured by the percentage of stocks trading above their three-day moving averages--pull back to 47.47 on April 7th and then back to 32.39 on April 10th and then back to 49.39 on April 15th. All of these pullbacks occurred at higher price levels, because a few groups of stocks kept the averages higher even as the bulk of stocks retreated from their recent highs. From a breadth perspective, the powerful rally offered *many* opportunities to get into the rally.

Price alone does not define the market.

What we look at determines how we trade.

Asking New And Better Questions

noreply@blogger.com (Brett Steenbarger, Ph.D.) — Sun, 19 Apr 2026 11:52:00 +0000

4/24/2026 - The best questions are sometimes the ones that you discover. I like collecting market data and then observing and backtesting for historical relationships. I know that the past is far from a perfect predictor of the present, but I also know that if several different historical studies are pointing in the same direction, there's a worthwhile hypothesis to be entertained.

For example, when the market recently rocketed higher after considerable weakness, we got to a point where just about everything was rebounding. I track the number of stocks in the NYSE universe that give buy and sell signals on a variety of technical indicators. (See the Market Charts site for historical data). Very few stocks were displaying sell signals following the bounce, indicating the breadth of the move higher. When we look historically, the market may pause in the near term, but tends to go significantly higher in the weeks ahead.

Interestingly, it's the lack of weakness that predicts strength. When we collect historical data and ask the right questions, new patterns show up to guide our thinking and our trading.

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4/23/2026 - Some of my best work with traders occurs when I sit in on team meetings and observe how productive those meetings are. What is a productive team meeting? It's one where team members question each other and gather new information. It's also one where team members challenge each other's views, add to those views, and offer related or different views. The best team meetings are highly active and interactive.

The less productive meetings are rote. Each person talks in turn, there is little dynamic interaction, and everyone goes away feeling like they've gotten an update, but not necessarily an insight.

Of course, traders trading on their own have no such teams. There is no one to challenge them, no one to stimulate them, and no one to hold them accountable for their plans. Having just one trading buddy can greatly broaden what you do and how you do it. The best trading psychology is a dynamic one, where we're stimulated, inspired, and challenged by those we respect. A great deal of the frustration traders experience (see the upcoming free webinar I'll be doing with Agnieszka Wood) is a function of their isolation and their inability to ask the right questions and get the right answers.

Teamwork makes the dream work.

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4/22/2026 - This set of questions was inspired by an interaction with a trader a while back. Suppose you went to your physician and found out that you have an aggressive tumor and that the cancer was beginning to spread. Removal of the tumor and radiation treatment of the area where the cancer had spread would maximize your health going forward. Realistically, however, you can only expect to live another several years.

What do you want to do in those several years? What haven't you done during your life that you'd want to tackle in the time remaining? What role would trading play in your life over those next few years...or would it play a role at all? What would you want to do in terms of family activities and relationships?

A scenario such as the one above forces us to prioritize what we do and who we do it with. It especially prods us to identify the role of trading in our lives and how important it truly is to us. Time is finite for all of us. What is important is to live that time without regrets.

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4/21/2026 - Take a look at your daily, weekly, and monthly returns for the past year or two. Take a look at index returns. Have you been making money? Have you outperformed the index?

Calculate the number of winning and losing trades over that period. Have you been successful in finding opportunity? Have you been consistent in finding opportunity? Have there been market periods/environments in which you've found particular opportunity and in which you've failed to find opportunity?

Calculate the average size of your winning and losing trades. Have you been successful in letting winners run? Have you been successful in limiting the losses of losers? What has been your Sharpe ratio?

Calculate the running three-month correlations between your returns and overall index returns. Are you making money in unique ways, relatively uncorrelated with what the overall market is doing?

These are but a few of the ways a professional trading firm would evaluate you if they were to hire you or allocate you capital. Do you evaluate yourself with this kind of rigor? Would you invest in the trading of someone else who had your track record and your review process?

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4/20/2026 - Macro traders at hedge funds will look at news items, economic data, and central bank activities to identify what might become a trend in various markets. Day traders at prop firms will look at charts on different time frames, observe patterns of volume, and figure out what is setting up as a profitable trade. Good traders dig for information, and they assemble their observations into views that they can trade.

Review processes provide opportunities to ask different questions: What trades worked, why did they work, and what did I do to take advantage of the opportunity? What trades didn't work, what went wrong, and what can I learn from that?

The question I've found most helpful to add to the above is: What kind of market are we in? Are all stocks moving in one direction, or are sectors doing very different things? Have we moved from rotational activity to broadly trending activity? Are we seeing a thrust in breadth and how has that played out historically? Are correlations among the various sectors breaking down?

Good questions address how to trade the market. Great questions ask what kind of market we're in and how we're meant to adapt our trading to the evolving market regime.

Speed of adaptation is central to trading success.

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4/19/2026 - I can almost always recognize a promising trader or investment team when they ask unique questions and search for answers in new and different places. Creativity begins with originality of thought. We put information together in new ways; we seek out new information. We don't just look to improve what we're doing. Rather, we look to do new things.

The best teams and traders are like the most successful businesses. They innovate.

Innovation starts by examining new data and old data in new ways. That's how we get to new and better questions.

The other day, I thought about analyzing stock market data in a new fashion. Instead of looking for patterns of strength, weakness, volatility, etc., I wondered about the times of day in which the broad market trades most predictably. In other words, imagine that different time periods are different markets. Then consider backtesting market patterns/setups for each time period. When do our trade ideas work best and worst? How could that inform how we think about (and size) our trades? Are there market patterns that play out at different times and over different amounts of time?

And what if the patterns play out over different volume regimes, not just time?

As artificial intelligence capabilities become more a part of the trading universe for individual traders, success will become a function of asking more and better questions and quickly implementing solutions.

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.