Watching the football teams psych up for the playoffs today, I’m reminded how big a factor emotion can be! In sports and many other competitve endeavors we strive to pump ourselves up emotionally to win. Check out this video by Adam Hewison to see how dangerous those same emotions can be to your trading.
Engaging the audience at an early-morning session of the Trader’s Expo is not an easy thing but Dr. Brett Steenbarger showed up with the energy, good advice, and R-rated language to wake us up to the mportance of psychology in trading. Dr. Steenbarger is an expert in “brief therapy” which is getting things done in a few minutes rather than years on the couch. He’s applied his skills to helping professional traders improve their craft. Institutional/hedge fund traders only – attending an Expo session or reading his book is the only way us private traders can take advantage of his work. However, after his talk, the good doctor did stay for another hour answering questions and helping people with their particular issues. A trader himself, Dr. Steenbarger’s blog packs as much if not more info about trading the markets than about psychology.
Key take-aways from the LA Trader’s Expo session:
Trading is a performance art (like music or athletics) and we can improve by building on our strengths as well as interrupting and reprogramming our patterns of problem behavior (impulsiveness, not adapting to conditions, acting on anxiety, etc).
Five Best Practices
1. Break trading into components and work one at a time, e.g. getting good entry prices.
2. Evaluate performance with metrics
3. Identify strengths and weaknesses, especially find strengths.
4. Set realistic goals for development. 2 per day: one strength to enhance, one weakness to curb
5. Institute mechanisms for review
Especially emphasized the role of our personal strengths and positive emotions. A brief quiz showed us that we need a ratio of 2:1 positive to negative emotional states to achieve high performance. (positive: joy, contentment, energy, affection. negative: anxiety, depression, guilt, anger)
In short to improve:
- Find things that went well and do more of that.
- Train self to follow sensible rules.
- Stay in the zone.