The Daily Trading Coach

BRETT N. STEENBARGER, PHD, is Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, New York. An active trader and author of the popular TraderFeed blog, Steenbarger coaches traders in hedge funds, proprietary trading groups, and investment bank settings. He is also the author of the Wiley titles Enhancing Trader Performance and The Psychology of Trading. Steenbarger received a BS from Duke University and a PhD in clinical psychology from the University of Kansas.

Preface xiii

Acknowledgments xvii

Introduction 1

Chapter 1 Change: The Process and the Practice 3

Lesson 1: Draw on Emotion to Become a Change Agent 4

Lesson 2: Psychological Visibility and Your Relationship with Your Trading Coach 7

Lesson 3: Make Friends with Your Weakness 9

Lesson 4: Change Your Environment, Change Yourself 11

Lesson 5: Transform Emotion by Trace-Formation 14

Lesson 6: Find the Right Mirrors 17

Lesson 7: Change Our Focus 20

Lesson 8: Create Scripts for Life Change 23

Lesson 9: How to Build Your Self-Confidence 25

Lesson 10: Five Best Practices for Effecting and Sustaining Change 29

Resources 32

Chapter 2 Stress and Distress: Creative Coping for Traders 33

Lesson 11: Understanding Stress 33

Lesson 12: Antidotes for Toxic Trading Assumptions 37

Lesson 13: What Causes the Distress That Interferes with Trading Decisions? 40

Lesson 14: Keep a Psychological Journal 43

Lesson 15: Pressing: When You Try Too Hard to Make Money 45

Lesson 16: When You’re Ready to Hang It Up 48

Lesson 17: What to Do When Fear Takes Over 51

Lesson 18: Performance Anxiety: The Most Common Trading Problem 54

Lesson 19: Square Pegs and Round Holes 58

Lesson 20: Volatility of Markets and Volatility of Mood 61

Resources 64

Chapter 3 Psychological Well-Being: Enhancing Trading Experience 67

Lesson 21: The Importance of Feeling Good 67

Lesson 22: Build Your Happiness 71

Lesson 23: Get into the Zone 73

Lesson 24: Trade with Energy 77

Lesson 25: Intention and Greatness: Exercise the Brain through Play 79

Lesson 26: Cultivate the Quiet Mind 83

Lesson 27: Build Emotional Resilience 86

Lesson 28: Integrity and Doing the Right Thing 89

Lesson 29: Maximize Confidence and Stay with Your Trades 91

Lesson 30: Coping—Turn Stress into Well-Being 95

Resources 97

Chapter 4 Steps toward Self-Improvement: The Coaching Process 99

Lesson 31: Self-Monitor by Keeping a Trading Journal 99

Lesson 32: Recognize Your Patterns 103

Lesson 33: Establish Costs and Benefits to Patterns 106

Lesson 34: Set Effective Goals 109

Lesson 35: Build on Your Best: Maintain a Solution Focus 111

Lesson 36: Disrupt Old Problem Patterns 114

Lesson 37: Build Your Consistency by Becoming Rule-Governed 118

Lesson 38: Relapse and Repetition 121

Lesson 39: Create a Safe Environment for Change 123

Lesson 40: Use Imagery to Advance the Change Process 126

Resources 130

Chapter 5 Breaking Old Patterns: Psychodynamic Frameworks for Self-Coaching 131

Lesson 41: Psychodynamics: Escape the Gravity of Past Relationships 132

Lesson 42: Crystallize Our Repetitive Patterns 135

Lesson 43: Challenge Our Defenses 138

Lesson 44: Once Again, with Feeling: Get Distance from Your Problem Patterns 141

Lesson 45: Make the Most Out of Your Coaching Relationship 144

Lesson 46: Find Positive Trading Relationships 147

Lesson 47: Tolerate Discomfort 150

Lesson 48: Master Transference 153

Lesson 49: The Power of Discrepancy 156

Lesson 50: Working Through 158

Resources 161

Chapter 6 Remapping the Mind: Cognitive Approaches to Self-Coaching 163

Lesson 51: Schemas of the Mind 164

Lesson 52: Use Feeling to Understand Your Thinking 167

Lesson 53: Learn from Your Worst Trades 170

Lesson 54: Use a Journal to Restructure Our Thinking 172

Lesson 55: Disrupt Negative Thought Patterns 176

Lesson 56: Reframe Negative Thought Patterns 179

Lesson 57: Use Intensive Guided Imagery to Change Thought Patterns 182

Lesson 58: Challenge Negative Thought Patterns with the Cognitive Journal 185

Lesson 59: Conduct Cognitive Experiments to Create Change 188

Lesson 60: Build Positive Thinking 190

Resources 193

Chapter 7 Learning New Action Patterns: Behavioral Approaches to Self-Coaching 195

Lesson 61: Understand Your Contingencies 196

Lesson 62: Identify Subtle Contingencies 199

Lesson 63: Harness the Power of Social Learning 201

Lesson 64: Shape Your Trading Behaviors 204

Lesson 65: The Conditioning of Markets 207

Lesson 66: The Power of Incompatibility 211

Lesson 67: Build on Positive Associations 214

Lesson 68: Exposure: A Powerful and Flexible Behavioral Method 217

Lesson 69: Extend Exposure Work to Build Skills 220

Lesson 70: A Behavioral Framework for Dealing with Worry 223

Resources 226

Chapter 8 Coaching Your Trading Business 227

Lesson 71: The Importance of Startup Capital 227

Lesson 72: Plan Your Trading Business 231

Lesson 73: Diversify Your Trading Business 233

Lesson 74: Track Your Trading Results 236

Lesson 75: Advanced Scorekeeping for Your Trading Business 240

Lesson 76: Track the Correlations of Your Returns 244

Lesson 77: Calibrate Your Risk and Reward 248

Lesson 78: The Importance of Execution in Trading 250

Lesson 79: Think in Themes—Generating Good Trading Ideas 254

Lesson 80: Manage the Trade 257

Resources 259

Chapter 9 Lessons from Trading Professionals: Resources and Perspectives on Self-Coaching 261

Lesson 81: Leverage Core Competencies and Cultivate Creativity 261

Lesson 82: I Alone Am Responsible 264

Lesson 83: Cultivate Self-Awareness 271

Lesson 84: Mentor Yourself for Success 275

Lesson 85: Keep Detailed Records 279

Lesson 86: Learn to Be Fallible 283

Lesson 87: The Power of Research 286

Lesson 88: Attitudes and Goals, the Building Blocks of Success 290

Lesson 89: A View from the Trading Firms 295

Lesson 90: Use Data to Improve Trading Performance 300

Resources 305

Chapter 10 Looking for the Edge: Finding Historical Patterns in Markets 307

Lesson 91: Use Historical Patterns in Trading 308

Lesson 92: Frame Good Hypotheses with the Right Data 310

Lesson 93: Excel Basics 313

Lesson 94: Visualize Your Data 317

Lesson 95: Create Your Independent and Dependent Variables 320

Lesson 96: Conduct Your Historical Investigations 324

Lesson 97: Code the Data 327

Lesson 98: Examine Context 329

Lesson 99: Filter Data 332

Lesson 100: Make Use of Your Findings 334

Resources 336

Conclusion 339

Lesson 101: Find Your Path 339

For More on Self-Coaching 341

About the Author 343

Index 345