Author: Ivanhoff

1. The most important thing is to learn how to learn. Study past winners from different time frames and reverse engineer. Keep a journal, set goals, and work deliberately towards achieving them, one step a time. Improve yourself every week.

2. Less is more. First, learn everything about one great setup – how to find it, when to trade it, how to trade it, when not to trade it. Become a master in trading that setup. Understand that this one setup is not going to work in every market environment, so there will be a time when you will have to stay on the sidelines and do nothing. As you get better at trading your one setup, gradually start adding more setups to your arsenal until you have the right tool for any market environment.

3. Find a mentor who can accelerate your learning curve. There are two ways to learn – from your own mistakes and successes and from other people’s mistakes and successes. You can learn a lot by studying your past trades and reading practical and thought-provoking books and blogs. In most cases, those efforts are not enough. Most people need the help of an outside mentor on their journey to profitable trading.

There has never been a better time in financial history to find a good mentor. There are many tools that could help accelerate your learning and building of trading skills. Some of them are free sources like StockTwits, Twitter, Sparkfin, and various trading blogs. There are also many amazing paid trading services. Find one or two or three that best meet your personality and desired trading style. Try different services that can help you learn new skills and offer you new and insightful market perspectives.

Be honest with yourself. It takes a lot of time and efforts to properly prepare for the trading day/week. If you have a full-time job outside of trading, time is an extremely valuable resource. Becoming a fully independent trader and idea generation machine can be your ultimate goal, but to get there faster you can use the help of an outside mentor – someone who can share good trading ideas, teach you how to approach financial markets and manage risk.

As Christian Siva-Jothy says in “Inside the House of Money” – “ No one gets paid for originality. You get paid for making money. I am happy to take other people’s good ideas and run with them, as long as I understand why I am in a trade.”

4. Take the occasional mental breaks from trading. Trading could be very emotionally draining. Find a balance between work and life. Have a hobby outside of trading to occupy your mind. Trading can be a joyful and a profitable experience. If it is not, you are doing it wrong and you need to look for some help.

5. Take care of your health – physical, mental, and emotional. Your trading results depend on your overall well-being. Eat healthy, move a lot, sleep as much as you need to, practice empathy, travel to new destinations to nourish your creativity. Regular 2-minute meditation per day may help to improve your focus and alleviate your anxiety. Do you know what is three times better than meditation for reducing stress? – laughing. Watching some stand-up comedy every day can boost your immune system and make you a sharper thinker.

Check out my new book: Top 10 Trading Setups – How to find them, when to trade them, how to make money with them.

“The market plays the music. How you dance depends on the music played.” – Brett Steenbarger

They say that the definition of insanity is doing the same things over and over again and expecting different results. If you do the same things over and over again in the stock market, you are guaranteed to get very different results. Do you know why? Because the market is constantly changing. This is the big secret of financial markets. Nothing works all the time.

Different setups work in different markets. Everyone makes money in a bull market. Not everyone keeps it when the market goes into correction or a range-bound, choppy mode. A good trader is able to adapt to changing markets.
Many get into trading with dreams of getting rich quickly and becoming financially independent. The problem is that most expect things to happen immediately. At the beginning of their career, most people are undercapitalized and have no idea what they are doing. When you are undercapitalized, you are likely to do at least one of the following five major mistakes:
• trade too big,
• trade without an edge or in other words – gamble,
• overtrade,
• trade low-priced junk stocks,
• use excessive leverage.

Some say that discipline and risk management are the solutions to all trading challenges, but they are not going to help you if you trade a setup without an edge in the current market.

Discipline + A losing setup = Consistent losses and frustration.

The one big thing that can improve your trading life is learning how to recognize changes in markets and being able to quickly adapt to them. Different setups work in different markets. Knowing what works and what doesn’t work in each environment is 80% of the battle.
There are four major types of markets and each of them requires a different method: Uptrend, Range-bound, Downtrend, and Bottoming Process. On these pages, I share my approach to each of them.
There are six main factors that have the biggest impact on stocks’ price action in a short-term perspective:
• the general market direction,
• price momentum,
• industry momentum,
• float and newness – is it a recent IPO,
• market reaction to a recent earnings surprise,
• and short interest.

In this book and in my personal trading, I focus on setups that have at least two of the above-mentioned catalysts going for them.

This is one of the most practical trading books ever written. It doesn’t waste your time with personal stories of grandeur. It is all about setups. I explain what setups to trade and when, why they work, how to find them, how to trade them, where to exit. It is a complete game plan for any market environment.

And since I believe a good picture is worth a thousand words, there are 140 annotated charts with examples for the ten major setups discussed in the book.

Here’s the table of contents for the book:

INTRODUCTION – The one thing that will make you a better trader.

Chapter 1. BREAKOUT SETUPS – How to profit from range expansion.

Chapter2. PULLBACK SETUPS – How to enter an established trend with low risk and for high reward.

Chapter 3. IPO SETUPS – How to find stocks that can go up 50% in a month.

Chapter 4. INDUSTRY MOMENTUM SETUPS – How to benefit from one of the most powerful market forces.

Chapter 5. EARNINGS GAP SETUPS – How to profit from post-earnings-announcement drift.

Chapter 6. SHORT SQUEEZE SETUPS – How high short interest might lead to explosive short-term moves.

Chapter 7. HUGE VOLUME SETUPS – How to quickly grow a small account.

Chapter 8. BEARISH SETUPS – How to make money during corrections.

Chapter 9. RELATIVE STRENGTH SETUPS – How to gain from the moves of big players.

Chapter 10. MEAN-REVERSION SETUPS – When is the right time to go against a trend.

Summary

It is available on Amazon.

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