Always take a break after a large trade, clear your head, and assess the opportunity set with fresh eyes.  It is just as important to reset after big wins as big losses.  Both can lead to taking trades for the wrong reasons. 

BRETT STEENBARGER, PH.D.

Big expectations lead to big frustrations.

BRETT STEENBARGER, PH.D.

Every trade should be accompanied by a very specific idea of what would tell you you’re wrong and how much you’re willing to lose on the trade.  It’s when losses surprise us and become too large that they’re likely to create disruptions in our mindset.

BRETT STEENBARGER, PH.D.

Too much size creates unusual P/L volatility and that leads to emotional volatility.  Your goal is to be consistently profitable and then grow your size while you retain your consistency.

BRETT STEENBARGER, PH.D.

If you *need* to be profitable, that creates undue performance pressure and emotional distraction.

BRETT STEENBARGER, PH.D.

…the best traders sustain self-awareness.  They know they have flaws and they want to be aware of those flaws, so that they can minimize those.  They are also aware of their strengths and seek to stay grounded in those. 

BRETT STEENBARGER, PH.D.

Successful traders spend as much time studying themselves and their trading as studying markets.  In the patterns of your best and worst trades is the information that can make you the best trader you can be.

BRETT STEENBARGER, PH.D.

If you are not continuously keeping score and taking concrete action on the scores you receive, you can’t be continuously learning and improving. 

BRETT STEENBARGER, PH.D.

Writing in a journal is a great first step, but ultimately matters little if the journal entries don’t guide concrete goal setting and efforts at improvement.

BRETT STEENBARGER, PH.D.

By adopting a mindset that anticipates dry spells, the trader achieves a kind of psychological inoculation.

BRETT STEENBARGER, PH.D.

Lesser traders become mired in discouragement and frustration, spinning their wheels by venting (or acting out) their emotions or by avoiding trading altogether. I find that a competitive spirit is a key part of this resilience: the successful trader uses this drive to draw upon motivation during slumps.

BRETT STEENBARGER, PH.D.

The flexible mindset also enables the resilient trader to not take slumps and losses personally.

BRETT STEENBARGER, PH.D.

Many traders, surprisingly, are not competitive at all: they’re drawn to trading because of a perceived easy lifestyle. These are among the least resilient traders. As soon as it becomes clear that trading out of a hole means real work, they lose motivation and interest.

BRETT STEENBARGER, PH.D.

It is stressful enough to go through a trading slump; to have to worry about making mortgage payments or supporting a family is too much pressure. The resilient traders prevent the pressures from becoming too great by maintaining healthy cash reserves for those dry periods and by having secondary sources of income wherever possible.

BRETT STEENBARGER, PH.D.

The way in which we often sabotage our trading is through our automatic, negative thought patterns…. When we focus on our negative thoughts, we internalize negativity.  Ironically, we end up using our magnifying glass to accentuate the very thinking that sabotages us:  in trading, and in life.

BRETT STEENBARGER, PH.D.

…If you harbor multiple traders within you–some careful, some impulsive, some successful, some losing–your first task is to avoid labeling these traders and instead take an Observing stance. You need to figure out why these lousy traders within you are trading! The chances are good that they are trading to achieve something other than a good return on equity: a sense of excitement, a feeling of self-esteem, or an imposed self-image.

BRETT STEENBARGER, PH.D.

Many times, when traders don’t follow their trading plans, it’s because those plans don’t truly fit who they are.

BRETT STEENBARGER, PH.D.

 …if we make one decision after another without pause, our behavior becomes random.  It is during pauses that we can reflect, and it is reflection that enables us to make sense of markets and adapt our trading accordingly.

BRETT STEENBARGER, PH.D.

Our triggers distract us from our best ideas and taking advantage of these.  Truly, we cannot accomplish big things if we’re distracted by little things.  When we fear our triggers more than we fear missing market movement, we’ve taken a huge step toward gaining self-control and consistency in our trading.

BRETT STEENBARGER, PH.D.

The central psychological challenge for trading is that frustration and doubts over losses and missed opportunities can lead to self-doubt, and self-doubt can lead us to tinker with trading to the point of veering from our greatest talents.

BRETT STEENBARGER, PH.D.

Without focus, any thoughts and intentions are part of our ordinary flow and cannot transform us.

BRETT STEENBARGER, PH.D.

Quite simply, normal human consciousness is optimized for normal human functioning, but is subnormal for achieving goals beyond the ordinary.

BRETT STEENBARGER, PH.D.

…the quality of our focus mediates the quality of our access to intuition and prior learning.

BRETT STEENBARGER, PH.D.

…if we’re operating in the flow state–in the zone–we are absorbed in market action and understanding what markets are doing. It’s the presence of focus that provides us with emotional distance.

BRETT STEENBARGER, PH.D.

When traders become self-focused rather than market focused, perhaps out of a fear of losing or a concern over making money, they no longer remain receptive to market patterns.  This results in missed opportunities and the forcing of trades when opportunity is not present.

BRETT STEENBARGER, PH.D.

 By recognizing that burnout is a potential occupational hazard, traders can take a preventive stance by keeping expectations realistic and getting plenty of time away from work, in activities they enjoy and can control.

BRETT STEENBARGER, PH.D.

I am consistently impressed with how the most successful traders find work-related rewards outside of P/L.  Many of them work in teams and thus reap the psychological rewards of developing junior talent and contributing to others.

BRETT STEENBARGER, PH.D.

Balance in daily activities–and in life overall–ensures that no one setback in life will overwhelm us.

BRETT STEENBARGER, PH.D.

If setbacks are treated as learning experiences, they are unlikely to generate stress and distress. If we view setbacks as failures and reflections on our competence, then we generate our own stress.

BRETT STEENBARGER, PH.D.

Too often, in the quest for productivity we create routine and when we create routine, we narrow emotional experience. Over time, that generates a kind of burnout: a dampening of enthusiasm and engagement.[efn_note]https://www.forbes.com/sites/brettsteenbarger/2016/01/28/how-to-light-the-fire-when-youre-burned-out/?sh=29bc152c9659.[/efn_note]

BRETT STEENBARGER, PH.D.

Loss of discipline is not the problem.  Loss of discipline is the result of a problem, and we have to diagnose that problem to figure out how to address it.

BRETT STEENBARGER, PH.D.

Try to change who you are and you will fight yourself all the way and then wonder, amidst the resistance, why you lack discipline.

BRETT STEENBARGER, PH.D.

We become what we consistently do.

BRETT STEENBARGER, PH.D.

These are the three legs of the performance stool: (1) your talents and interests, (2) your trading style, and (3) markets and their personalities. The meshing of your qualities with your trading style will help determine your ability to trade that style with consistency and discipline.

BRETT STEENBARGER, PH.D.

The key to sustaining discipline is to identify the specific short-term needs that are occasionally overshadowing trading rules. Traders who overtrade, for example, often have problems during quiet market times. Their needs are for stimulation. By creating stimulating activities during the trading day that don’t take them away from their screens, they can avoid using unwanted market activity as their stimulation.

BRETT STEENBARGER, PH.D.

While the idea of planning your trade and trading your plan sounds wonderful as an ideal of discipline, what I find among successful traders is an ability to alter plans in real time as market conditions dictate. 

BRETT STEENBARGER, PH.D.

Show me how a trader utilizes their time outside of trading and I’ll show you the odds of their long-term success.

BRETT STEENBARGER, PH.D.

This is why so many traders who experience long-term success display unusual intellectual curiosity.  They are driven, not just by money, but by the process of discovery.

BRETT STEENBARGER, PH.D.

 True deliberate practice is a significant predictor of success.

BRETT STEENBARGER, PH.D.

Starting out with a drive to make money is, if anything, associated with greater odds of failure and emotional upheaval.  There *is* an association between dedicated effort and success, but it’s the ability to channel motivation into constructive effort that is key to success.  The louder the trader professes passion and motivation, the more I dig to look for substance.  I generally come away with very little.

BRETT STEENBARGER, PH.D.