Brett Steenbarger is a well-renowned market psychologist and trading coach. He is the author of numerous books including The Psychology of Trading (Wiley, 2003), Enhancing Trader Performance (Wiley, 2006), The Daily Trading Coach (Wiley, 2009), and Trading Psychology 2.0 (Wiley, 2015). He is one of the most influential thought leaders among traders. Dr. Steenbarger shares his thoughts on markets, trading patterns, and psychology on his website Traderfeed. He can be followed on StockTwits and Twitter @steenbab.
Here are some of his insightful thoughts on markets and life:
1. The right questions lead to better answers.
Every action we take is preceded by a question. If we ask the right questions, not only we’ll get the right answers, but we are also likely to sustain a positive change in behavior. Imagine, however, that we start the day by asking questions such as: “What one important thing am I going to achieve today?”
“How can I best contribute to my team today?”
“How can I maximize my energy level throughout the day?”
“What one special thing can I do for my spouse today?”
“What will I do today that will push my boundaries and make me grow?”
Notice that these questions are not implicit. They frame one’s use of time, and they begin with overarching priorities and values. When the implicit question is about “What can I get done now?”, we are pushed by the demands of the present. When the question is “What will make today special?”, we are pulled toward our priorities.
2. Can we really expect great results from a series of ordinary days?
Our daily experience is what we process each day, and that is what we internalize–for better or for worse. The work we perform, the people we interact with, the activities we engage in: that provide our psychological diet.
What we do in life and who we do it with shapes our experience–and our experience shapes how we view ourselves.
3. Don’t try to be perfect
As a psychologist, I’ve worked with many high-achieving perfectionists. They often accomplish a great deal but experience more than their share of stress and distress in the process.
When outcomes are less than ideal—and in financial markets, that’s a near-certainty—there is plenty of room for second-guessing and self-criticizing.
For the perfectionist, so much time can be spent focusing on the rear-view mirror of imperfect performance that opportunities are missed in the present.
4. Good judgment requires experience and experience requires bad judgment. Mistakes are lessons.
If everything in life either provides you with blessings or lessons, you will always profit, even when you lose money.
Viewing life through the lens of blessings and lessons means that you approach the world with a sense of gratitude.
Perhaps we don’t suffer because of losses; perhaps suffering results from an absence of gratitude. It’s the lessons that ultimately bring the blessings.
There are a number of emotional and health benefits associated with gratitude, but perhaps the greatest benefit is that it promotes resilience.
It is through adversity that we stretch our boundaries and discover hidden reserves and talents.
As long as we take risks prudently, whether in romance or in markets, losses can become gifts once we seek and uncover their educational value.
5. Most people believe that they’ll be happy only after a certain goal is achieved. The reality is that you are more likely to achieve success if you feel happy on a daily basis.
When we are feeling fulfilled and enjoying life, there’s no reason to place capital at risk for any reason other than genuine opportunity. If that fulfillment and joy are missing, however, it is tempting to reach for the trade as we reach for the ice cream.
When we feel down, we think that success will bring us happiness when in fact, the opposite is true – happiness will bring us success.
6. If you want to change your life, change your habits first.
I’m not sure people can make positive changes in their lives without first changing their internal dialogues. Can we really sustain new patterns of behavior if we’re sustaining the same old thought patterns?
We eat well, sleep well, exercise–do a lot of things to maintain our hardware. That won’t get us where we want, however, if we’re running faulty software.
Keeping a journal can be a structured method for changing our self-talk. Not many traders actually use journals that way. But we really can reprogram ourselves.
Everything in life can be approached with intention and purpose or it can be approached mindlessly and routinely. In carrying out daily activities with self-direction, we strengthen our ability to stay mindful and purposeful for life’s greater goals.
Related reading: 15 Insights from Trading Psychology 2.0