How to master trading psychology | Brett Steenbarger

that was tried as episode 65 the biggest secret of the best traders in the world is that they're just like everyone else however they worked hard to learn the markets and discover what works and what doesn't but how can you hear about these journeys and getting on the strategies and tactics they use you can do it by listening to chat with traders here's your host Aaron fight field all right what's up traders and 54 here host of the chat with traders podcast thank you very much for tuning in to this week's episode and for this

episode i interviewed dr. bread steyn berger after many many requests from this is brett is a very well known in trading psychology coach and has consulted to some of the biggest names in the industry he's also a respected author who is now published four books some of which have been recommended reading by previous guests on this podcast during our conversation I a spread how to break bad trading habits and introduce new best practices to explain why traders need to be adaptable in markets Plus how we should think about goal setting and measure progress and of

course much more about how to enhance your performance as a trader now if you do enjoy the interview please go ahead and leave and itunes review like I've said in the past it literally takes you two minutes you can do it while you're listening and it really helps to boost your rankings in itunes and attract more Lissa's so if you'd like to support the podcast please go to chat with traders . com /i Jones ok folks let's skip to the interview you're listening to the chat with traders podcast and here is a very special guest

for episode 65 dr. Brett steyn berger rat many people have been asking for this so i have to say straight off the bat thanks a million for being here I appreciate it and I know listeners will also has your day been what's going on days been good thank you very much Aaron I appreciate the opportunity to be here and to share some ideas with the listeners sure thing the pleasure is mine so as most writers already know you are the go-to guy for all things related to trading psychology of course that will be the ultimate

focus for a chat today but starting from the get-go Brett if you could give us a little insight to your background - like how did you get into the psychology field and where did you initially start out after getting your pick eh day ok uh yes the initial impetus for my entry psychology was a an unconventional one I came to psychology via philosophy as a sophomore in college I was interested in psychology and indeed had declared psychology as my major but I never really considered it a career field until i read a novel called The

Fountainhead by ion Rand and that novel illustrated something that i hadn't encountered before and that is the vision of people as heroic as reaching their ideals their potential and the thought came to me it was during a winter break in my sophomore year the thought came to me that this was a proper role for psychology to not just treat mental illness but to expand the best of people's potentials and that's what has interested be in psychology ever since and what i do now in working with traders and portfolio managers and earlier before that working with

medical students and residents of the medical field it really has been working with healthy people people who are bright and creative and energetic and helping them make the most out of what they do ok right answer and very interesting to get your backstory there so we did the interest in trading come from like when did that creep into the picture you know the training thing is something that I first expressed interest in his a project when I was in grade school and uh later became more interested in in a formal way during my graduate school

education at the University of Kansas and I actually open to trading account began trading individual stocks and that was in the late nineteen seventies but that was completely separate from my interest in psychology my degree was in clinical psychology and my interest was in becoming a psychologist the trading was a side interest a challenge and it's something I found stimulating and interesting and those two preceded in parallel for a number of years I shoot trading as an application and I pursued psychology is my vocation and it wasn't to tell around the year 2000 that I

seriously contemplated putting the two of them together and began writing a book it was my first book in the area called the psychology of trading which was later published by why light and that was encouraged by my good friend and mentor Victor need her offer so that's how the two came together but up to that point for a number of years they were completely parallel interests are the book became popular and was discovered by trading firm in Chicago and they began asking me to work with their traders and then made me a full-time offer so

i left the academic setting that I was in I was teaching at that time in the medical school and Syracuse and also running a counseling program and went full time to working with traders in chicago and that's when the psychology and with trading interest truly came together ok excellent so let's talk a little bit about your time in chicago like what we doing like how were you actually helping these traders with the mental aspect the psychology and everything that goes on on that side of the field well in chicago i was working primarily with market

makers and electronic futures these were people placing dozens if not more trades per day also trading on a very short time frame the average holding period for many of the traders was around three minutes so they are very actively engaged in markets and it fascinated me because they were trading in ways that were completely different from what I had read in the textbooks the books on trading talked about technical analysis fundamental analysis and these traders who I was encountering Chicago did none of it obviously they didn't know fundamental analysis because the fundamentals don't change in

three minutes but technical analysis in terms of chart patterns and of indicator readings those were much too slow for these traders these traders were entering positions and eggs a position is very quickly and they were working off a depth of market screen they were working off the order flow not a backward-looking technical information so that was an education in itself and sensitize to me to the psychological challenges that they faced in making decisions so rapidly it was easy for them to become frustrated to become overconfident and for all of those emotional factors to slant their

decision making and so my work as a trading coach was to help them keep a level head keep focused and make good decisions in real time and the fact that I was a full-time working with them and so on site watching them trade and and standing with them and helping them really help with psychology become part of the trading right yeah that's that's very interesting Brett and we're going to dig deeper into that in just a moment a question I have for you is like you know over the years you've been in the field for

a long time now you've worked with many many you know top traders like some very very hard-hitting heavy white traders and asset manages fun manages you know they're pretty broad spectrum of of market participants now these are all guys who are struggling some of these guys are extremely profitable and make huge amounts of money why do they come to you for your help on the psychology side it's a great question Erin it's the same reason that successful professional athletes work with our coaches as well you know at that point they're not struggling they would have

never gotten to that quite for the large a large majority of cases if they were marginal participants so these are people with real experience real strengths but uh what happens is that markets are always changing and even the most talented participants have to evolve with the markets and that need to involve itself brings its own psychological challenges that need to be creative they need to be resilient in the face of frustrations and also the need to identify and build upon strength so many times the portfolio managers are seeking me out when they are doing very

well because they want to stay grounded in their strength they want to make sure they understand what they're doing well so that they can be more consistent going forward in making use of those strengths and so that's the difference with working with someone who is struggling and wants to work on their weaknesses or vulnerabilities ok that's a great answer it makes total sense I really like he explained that the bread let's bring us up to speed now what are you doing today like what's your work involved you know in current times well I work with

several hedge funds and other financial firms so uh I'm not full time in any one place I consult with a variety of funds and and what that's done is exposed me to a variety of trading strategies some of those strategies are discretionary summer more systematic some of the strategies are more directional sub are more based on relative value movement some are in macro markets the big liquid markets and some of them are very specialized in individual markets such as commodity market to reach markets so I've been exposed to a variety of trading strategies and training

settings it's been a great great great education as a result but in all cases my main work is to help the traders the money managers with their performance help them build on their strengths and help them learn from their mistakes so that they keep improving a secondary focus has been at most of the places where i worked we've conducted an internal research about what makes traders successful and so I've been able to help the trading firms with their hiring processes and help them make better decisions about who to bring on board so that's been a

separate kind of work but a very fulfilling area as well sure ok that's really cool now that we have caught up on your background that's really hard in on the subject of trading psychology so one of the things many traders will admit and a will aware of is that they take profits to sown and they cut losses to light you know that's mostly due to psychological reasons or imagine what advice would you give to those traders in that situation what is the question Erin and high as Iran would say i would encourage you and listeners

to check your premises with respect to the question because I i think that it can be a psychological issue what is not always a psychological issue i mentioned that markets are always changing and one of the ways that they change is in there volatility and so market the market as we are talking right now the market is trading with a fix of which is implied volatility of 14 and change wasn't so long ago that we were seeing a fix readings well into the twenties so markets were moving much more a few weeks ago then they

are currently what that what happens is that traders don't adapt to that either in their trading or emotional life and so they're likely to take profits too quickly or likely to allow things to move against them because they are operating from an old regime from an old set of assumptions that don't apply to the current market so for example when volatility comes down traders will start to make some money and then when the it when they tried to let the market elected position go it eventually just reverses against them because the volatility isn't there and

you get much more mean reversion on a short time frame and so the end up scratching the trade where is in a higher volatility receive that might have been profitable so sometimes a problem that trader has might have is logical not psychological it's a function of not adapting to market it's a function of training well but you're right there are other times where traders respond emotionally to making money losing money and as we know from the behavioral or finance research people are much more sensitive to losing money than they are making money and so they're

likely to be threatened by losses and not want to take those they're likely to be afraid of losing whatever they gain and exiting trades early and so forth so a huge issue in trading psychology is identifying when is a trading problem a logical problem a problem with one's trading methods and when is it the result of a psychological problem result of being not in a wrong mindset that biases your information processing ok that's and that's an awesome answer that was those really really good something I guess that is an example of a lack of adaptability

you know and in some cases possibly even a bad habit but in general when we recognize bad habits and out riding what's the best way to break these habits of the first step in breaking any habit whether it's a trading habit or personal habit is to become exquisitely aware of its presence so we want to become mindful we want to be self-aware we want to realize that the habit pattern is playing out as it is starting so let's say my habit pattern is overeating I but first step in change is directed nuys when I'm starting

to feel a craving for food or when I'm starting to reach for the refrigerator if I can't identify it at the time it's happening how could I possibly control it so building awareness is in southwest is the first step in the change process then once you have that self-awareness once you can become an observer to your habit patterns rather than someone who is caught up in those patterns then you want to make a conscious effort to reach annal yourself so let's say for argument's sake i have this habit of overeating and I tend to overeat

most when i'm bored so I catch myself reaching for the refrigerator and then I calmed myself down I focus myself and I purposely engage in an activity that I will find engaging that will absorb my energy maybe it will be some physical exercise up maybe Allah go play with one of my four cats but uh the idea is I would address the boredom so that I no longer feel the need to compensate with food the same principle occurs with what is wrong with trading so my habit with trading might be to place trades after a

website to place trades out of frustration after I've taken a loss revenge trading and so that comes from frustration i have a losing trade I'm frustrated I want to make that money back so i want to become self-aware about that frustration I want to catch myself being frustrated and reach and all that emotion so step away from the screen temporarily calming myself down and doing something that is gratifying that's fulfilling to counteract the frustration will help put me in the right state of mind so that i can go back to the screen and make good

decisions I can show and I like how you mentioned earlier in that answer but i will be an observer to your bad habits then getting caught up in the middle of it i think that was a really cool concept yep important one that shows up actually in Eastern philosophy as well as in psychology research that we can't change something if we're not aware of it if the pattern controls us if the habit controls us then we're passive but yet we have no say in what happens well so the first element of control is being able

to step apart from the habit pattern whether it's a habit of drinking habit in trading I have it in our relationships we stand apart from it and we recognize that this is causing us pain this is causing us losses and then were able to try and do something differently right right ok now the intro to trading psychology to point out you mentioned that all the traders you've worked with varied greatly and how they actually traded yet they had many commonalities and how they did what they did so here you are of course referring to process

and habits could you elaborate on these observations for us yes absolutely obviously the traders I work with have very different strategies some more short-term some more long term some are long short investors building very large portfolios are among individual socks some of them are training macro assets globally and trading macroeconomic themes so they're very very different in their approach to markets and in their training styles but a process level there's some real similarity and that's what I talk about in the trading psychology true . notebook with those up basic a b c d themes not

a being adapting to market be being building on strengths see being cultivating creativity and d being developing best practices and so what the really successful traders are doing is studying themselves and figuring out what works what they're good at and where their vulnerabilities live where the weaknesses lie and they do more of what works the active ways that make that and more of who they actually are and they may be different strengths in different markets but all of them study themselves just as they study markets and stay grounded in what makes them successful ok so

the ABCD that you mentioned there could you just walk us through each one of those in a little more detail just so we can understand you know get a better grasp of each . yeah absolutely yes so a you know is adapting to changing markets and this is I point out in the book is no different than it would be for any entrepreneur you start a business and your marketplace is always changing and so at one point in time you're if you're starting a restaurant you have your marketplace may have one set of taste and

then something else will become popular and and so you have to adapt by changing your menu by changing your de coeur by changing how you deliver service successful businesses never stay static we see this in the technology industry new smartphones are coming out with regularity because the marketplace demands new features and functionality so we're always having to adapt markets change in their trend markets change in their volatility as i mentioned markets change in their patterns of participation the people who dominate markets now are not the people who dominated 10 years ago or 20 years ago

and so we see different patterns and markets to assume that markets are static and that our edge will last forever does not work any better in financial markets that it does in the business world a great way to go out of business in the business world is to assume that what you're doing well will last forever and you never have to change that's how to become a dinosaur that's how to become obsolete and that happens in financial markets as well so the successful traders are always studying markets and only studying how markets are changing and

the interesting part aaron is that many times our mistakes and trading our losses are setbacks are drawdowns tell us about changing markets because we do what we did do when we were making muddy and suddenly it's not making money for us and if we reasonably disciplined doing what we have been doing when we made money that we have to ask ourselves well how could smell working anymore what has changed and that helps us go back to the market learn from our mistakes and adapt so we're using our drawdowns we're using our losses as real information

that helps us adapt to markets that have changed their correlation patterns or other trend patterns and so forth so that's a adapt that's the a party adapting to changing markets of the B part is building on strengths and I i alluded to this earlier of why I found in my research with successful traders and portfolio managers is that all of them have different strengths but all of them have at least one distinct and strength and it could be a personality strengths could be a cognitive strengths but really successful traders are really strong in some areas

as a rule the higher frequency traders the day traders are very good at fast thinking skills they see things broadly they see many things across different stocks or markets and they process real-time information across a wide area very quickly so that they can make quick decisions the traders i worked with in Chicago were very much like that they were great at pattern recognition on the other hand traders with a longer time verizon behave more like investors they're slower thinkers but deeper thinkers are more analytical and so they are going into depth in different areas and

finding out information that other people just aren't looking at and so that becomes their strength and happened help them let's say find an undervalued company that they can invest in over a longer time horizon so we we all have our strengths and the really distinctive traders that traders who make distinctive returns have distinctive strength and so the success is based on making the most of your strengths not just correcting your weak areas the C stands for cultivating creativity and and and that's a topic that i have found tremendously neglected in the trading psychology research and

writing creativity is all about seeing the world through fresh eyes if we trade the same way that everyone trades we're going to get the same returns with everyone gets we have to see some fresh opportunity we have to see the world differently from others if we're going to achieve distinctive results again it's like the entrepreneur entrepreneur sees an opportunity that others don't see and is able to build a business based on that perception of opportunity the successful traders that I work with have very distinctive strategies and i've been involved as i mentioned in hiring success

hiring traders and successful traders at I different firms and I always know who has the potential to be a successful trader because we talk about their strategy and when I hear the strategy it hits me upside the head it smacks you in the face and I said Wow why didn't I think that it's something unique it's something different if what they tell me is something i could have read in any of a dozen books I know that that's not a distinctive skill set so cultivating creativity is an essential for success and of course creativity is

a big part of what helps us adapt to changing markets and finally the fourth topic is developing breast best practices and turning best practices into best processes so when we look at best practices we want to look at them in every facet of trading how we generate our track paid ideas how we manage our positions and how we manage our risk how we review our results and learn from those all of these are separate elements of a training process and we want to identify our best practices in each area are best practices and generating ideas

are best practices in damaging positions are best practices in managing risk and reward our best practices and managing ourselves as performers and we leave those together those best practices into best processes and the successful traders I work with are always working on themselves and improving their processes over time that's awesome bread and very very insightful thanks a lot for taking the time to to flush that out for us and obviously if guys want to learn more about that definitely check out your book trading psychology too . our link to that in the show notes at

chat with traders . calm and just a couple questions to bounce off your answer there firstly what about habits early we covered and bad habits how to break bad habits what's the best way to form new habits and implement those introduce new new habits yes and you're absolutely right we want to develop best practices by turning those into habit patterns are so often we hear that traders need to motivate themselves and y'all do various things with imagery they'll do various things like have sticky notes I don't have a computer screen to motivate them to do

the right thing but in fact motivating us it ourselves is not the best source of up influencing the behavior of the best method for influencing behavior if you look at the things we do consistently in life it's not things we do through motivation it's things we do through habit so i don't have to motivate myself to eat breakfast take a shower in the morning uh I don't have to motivate myself to do the right things for the people i work with as a psychologist because that is part of me and part of my routine and

so we want to take our best practices are trading practices that work well and repeat them with fidelity repeat them in a routine way so that time and time again with repetition they start to become habit patterns so repetition is really the our source of developing positive habits once we identify best practice once we identify something that works for us we want to be very conscious about employing that day after day after day after day Tony Robbins the the well-known a motivational speaker makes the case that if we repeat something for 30 consecutive days in

a reliable way it eventually becomes part of us and I think there's some truth to that that by doing things again and again it they start to feel familiar and they start to become part of us mmm very very great points their breath thank you very much now you also mentioned weaknesses so you know every single one of us we have their own weaknesses how should we treat our weaknesses i mean some people with the school of thought that you should just focus on your strong points and really drew down on those others say you

should you know improve on your weaknesses how do you feel on on this subject yeah yeah that's a great question and yep ar-ar-ar strong areas are strengths are there because those are competencies we built over time and and and they're also talents that we've been born with and so we want to make the most of those and you know when you see people have been distinctively successful there are people who have really made the most of their competencies with the weaknesses of into rare that you could ever turn a weakness into a strength but we

can our work around our week this is so there are some kinds of trading that i personally am not good at in fact the training that we were talking about in Chicago very high frequency trading banking rapid decisions I don't have have the stain kind of fast information processing skills that the very successful traders in chicago had and if i try to do that I quickly in a point of saturation well cognitively and emotionally inside that's not a strength of mine so I want to avoid having to make rapid decisions and process lots of information

in a short amount of time so in my own trading i will trade short term but those tend to be introduced wings or maybe swings from one day to the next where I have enough time to process relevant information and not get overloaded so by altering my time frame of holding positions on able to dodge or avoid some of my weaker areas and play to some of my strengths some of which are more research oriented ok so this might be just to continue on this on this tangent here this might be a little bit of

a strange question but how do you know that that was a weakness of yours that you wouldn't actually be able to trade like the guys you work with in Chicago because I mean all of us even those who could process information very rapidly and even on day one we would still struggle when you know for the first few months you know it may be for first few years and even guys who could process information very quickly and might still struggle in the beginning how do you know when it's a when it's a weakness of yours

and just not a skill that you get to develop a great question uh it wasn't simply the I tried it initially and didn't make money from it it's that I I rapidly hit a point of cognitive overload and in fact that had happened to me in other areas of my life apart from trading if I was in a situation where I add to process too much information at one time and make rapid decisions I often would not make my best decisions so let's say for argument's sake that I was in a situation in a relationship

and there was some disagreement or some issue in the relationship of if I tried to deal with that right then and right there often I was not as effective as if I took a step back really thought about what was going on really reflected upon myself and then responded in the way that I felt a new was best and that typically wasn't a huge amount of time but it wasn't spur of the moment either so I had recognized myself that I do well when I'm able to reflect and the pattern recognition that the people were

doing in chicago was relatively instantaneous and really a remarkable skill i admire people who can do that and when I tried to do anything similar I just hit a point of cognitive overload and that's how i know that i'm just not wired that way I don't operate that way in any area of my life and when I'm pushed it to process information that way is unpleasant where is when we act on our strengths there's an intrinsic pleasure to that because we're doing what we're really good at it it feels fulfilling to us so some kinds

of analysis I really enjoy doing I look at markets in a rather quantitative way and being able to solve the puzzle so to speak in and see quantitative patterns and markets is very gratifying for me very fulfilling and then being able to trade based on those and see them work out that's very fulfilling and gratifying to me so when we act on our strengths we feel strongly feel good we feel fulfilled and when we act counter to our strength it's intrinsically frustrating that's a big part of how we can know right i can ally kay

mentioned that you pull on you know your strengths and your in witnesses and you find those in and other areas of your life and United the cross-eyed it's a train is all very relevant so excellent point yeah let me add another point that i've i've mentioned my writings up I have never traded full time in my career and a couple of times I tried to do it I tried to trade full time and I actually was making money and I hated it I absolutely hated the experience of trading full time why because one of my

strengths is working with people and one of the things that drew me to psychology was the opportunity to be a meaningful part of people's lives and it and so trading full-time wasn't playing to one of my greatest strength and became frustrating so we have to know ourselves and often what it's our feelings of happiness and fulfillment that tell us whether we're playing to our strengths or not ok yeah that's really interesting Brenda going now something i'm curious about when you're working with other traders and you know implementing techniques to get them closer to peak performance

do any of the techniques that you work on operate on a subconscious level to provide change I it depends on what depends what you mean by that are you say subconscious yeah any technique that as you were saying develops a habit pattern is making that pattern automatic and therefore out of consciousness uh and so you see dating techniques let's say like guided imagery let's say a trader is afraid to lose money and we will do some guided imagery to have them mentally rehearse scenarios in which they hit their stop levels and they keep themselves calm

and they keep themselves focused while they're going through this guided imagery and they do that again and again and again and again and pretty soon the feeling of hitting your stop and get stopped out I is something that becomes familiar to them not threatening to them and they're able to keep themselves calm and controlled and so is in a sense reprogramming their emotional responses to a situation they have experienced this threatening and that is happening at an emotional level until you could say that it's subconscious ok ok sure but what you're really trying to do

in a sense is rewire a person you're trying to re-program their responses to certain situations right now brick one of the things i'd like to ask you more about his goal setting I think your advice on the topic would be really valuable so how do you suggest developing traders best go about setting goals for themselves yeah it's actually research and I've written on this a on the trader feed log his research on effective goal setting what what happens a lot of times that people are set a goal but they don't follow up the goal with

a specific plan and so if i have a goal let's say by goal is let's say my goal is to lose weight well that's only going to work if it's part of a day to day plan and that's only going to work if its meal by meal I have to eat less calories I have to do more exercise and that's day in day out and so the goal is the big picture but what makes it happen what makes an effective is the day-to-day implementation of a plan and what traders often this is all set a

goal for themselves to make a certain amount of money order to avoid losing a certain amount of money or trade a certain way but they don't drill down so that the goal is something they are concretely working on each day in each trade so we want effective if we want to be effective in goal setting by being very planned and very consistent in working those plans a goal without a plan is a wish you know if you have a goal you don't have a specific plan but that's just a good intention that's a wish that's

nice but it is like new years resolutions it for the most part they're not going to happen unless we have a concrete plan to actualize them ok she brought up an interesting point there in your answer about child is wanting to make a certain amount of money what - what's your take on goals that have a monetary value attached to them well not a fan you know uh one of the things one of the problems that affects traders and affects people in all performance fields is something called performance anxiety and performance anxiety arises when we

become so concerned about the outcome of the performance that it starts to interfere with the process of performing and so if I'm a public speaker and I become very worried about how my audience is going to think of me and whether they're going to be interested my topic will pretty soon all forgot what i was speaking about so we by putting the profit loss of P&L up front and center in our goals were emphasizing outcomes and that can enter that can put pressure on us and interfere with processes sometimes markets offer more opportunity than others

and to have a fixed P&L goal doesn't really take that into account what I would rather do as an outcome related ball is look at improvement so am I improving from month to month year to year in my trading performance and I would look not only at pnl in absolute terms but i would look at it the way that hedge funds look at it and the way most financial professionals look at it in terms of risk-adjusted returns how much money am I making per unit of risk that I'm taking and try to improve not only

in my absolute returns but in my Sharpe ratio or in my risk-adjusted returns and and that I think is meaningful okay good good . now just continuing on this path how do you think traders should think about failure or loss because i know that some people are genuinely afraid to file single work do you ever try to get tried as to reframe negative thought patterns or anything similar to this yes and I i think an important part of trading is in his it's fine making friends with loss and a sentence making friends with failure that

it's as i mentioned earlier it's often are losing trades that teach us about how markets have changed look at it this way if we follow a best practice and we are relatively diligent if we're relatively consistent are trading and we follow our best practice and then we start losing money well something has changed in the market we're doing the same thing but something has changed in the market we want to use those losses as a prod as a stimulus to learn about what has changed in markets so that we can adapt our losses are information

they're telling us something if i'm running a store let's say I own a department store and I normally sell of you know 500 pair of blue jeans and a week and now suddenly I'm set up playing a hundred fifty in a week and that happens in week one that happens a week to that happens we three pretty soon I say to myself what the hack you know why are people buying blue jeans and sure enough i go to the fashion magazines and people are into something else and I realize I have to adapt I have

to change my inventory as a retailer well that's how business works that's how trading works our losses are mistakes are there for a reason they are there to teach us something and if we embrace them if we don't push them away we can learn from our mistakes it makes us stronger makes us more adaptable so yes it's frustrating yes it it sets us back temporarily but ultimately that's how we become better by learning from our mistakes absolutely now Bret I'd like to ask you about the actual subject of money so let me ask you this

when you're coaching and working with traders do you try to change how they think about and he'll give you money because straight away by default many people have a tight psychological attachment to money so how do you treat this gosh it's a great question and had the answer I don't know maybe I'll surprise people I don't ever think about money hey where I work haha you know the the minimum portfolio size for a regular trader at one of the funds right work is two hundred million dollars uh but no one thinks about money you think

in percentages and basis points and so whatever you ask someone how much did you make her lose today or this week or this month will always say I made 50 basis points I made yeah I made one percent so they're not thinking in dollar terms that's very very helpful because if you start to think of it in dollar terms will try if you're crazy yeah this if you have a 200 million dollar portfolio and you lose one percent you just lost two million dollars uh but of by putting it basis points then when you grow

your capital a 30 basis . loss is the same when you're trading a smaller book is when you're trading a larger one and so that's a big part of how professional traders get around thinking about money uh they think in those percentage terms that's a really great that's really great . to the breath many many of us often feel you know many developing traders often feel a great amount of pressure to succeed and become great traders how do you feel about pressure I mean is it a good thing to place you know sometimes quite a

lot of pressure on yourself to succeed or can't have negative effects well it definitely can have negative effects and it's hard to take risk you know when when you feel under the gun it's hard to make good decisions under conditions of pressure so I absolutely think that that that is a challenge associated with trading of one of the things I've commonly told traders and I've written about it is that for me a 68 of element of success in trading is making sure that you have something in your life more important to you then trading because

if you have something in your life that's more important to you than markets than trading the profits then during periods of drawdown you'll always have something to turn to to renew you and inspire you and keep you positive sometimes I hear traders say to me you know i have a passion for trading and trading the most important thing to me and and I worked got it you have 14 hours a day and well that's being vulnerable training should not be the only part of the major part in your life because then you'll have nothing to

balance yourself and to balance the pressures during inevitable drawdowns so I think have living a balanced life having sources of happiness and fulfillment and energy and closeness to people apart from markets very very important to trading success right well this leads into an interesting topic so from what you've observed what factors have the greatest contribution to a try to satisfaction and and sense of accomplishment what what contributes to satisfaction and accomplishment like do they get excited about making huge profits and you know a month or are they do they find satisfaction in other areas of

the business I don't know is that an appropriate question it's always a great question and I'm pausing to reflect which is just what i mentioned i doing while processing information super quickly because i like to reflect and I'm thinking about specific trainers I'm thinking about my work with them and you know if I look and I certainly know traders who get a lot of excitement and satisfaction from making money and markets and I certainly find that to be gratifying but the ones who have longevity in the business who have been at this for a while

have some source of satisfaction and trading that is separate from their profitability in other words it's not that they find fulfillment in trading they find fulfillment in markets and I think that's an important distinction that if you find your fulfillment in markets and learning about markets and learning new strategies and trying new things then you can find gratification from your your intellectual curiosity is gratified your sense of puzzle solving and challenges are satisfied even during those periods drawdown if your only source of ratification and fulfillment comes from the profitability then psychologically your Baron so to

speak your ear your breath you don't have anything to sustain you during those periods of drawing down so I think it's important to have sources of fulfillment in trading that are separate from profitability even though profitability is obviously one of the important drivers of our satisfaction ok a lock it really really good answer Brett and all someone to take us outside that's one things down now weakness is going to find out more about you oh uh well the easiest way would be through the two blogs that I right one is trader feed the addresses trader

feed all one word trad erfe e dot blog spot.com and the second yeah r is the blog's I write for Forbes online and if you go to the Forbes online site and say goodbye name you'll see a lot of articles pertaining to positive psychology and financial markets so those are two ways that are free and that uh you'll find more information than you care to know and obviously I've written four books in the area of trading psychology and those go more into depth into the topics that we're discussing today show and you're also on Twitter

I know so which one hand like that so yeah sixteen bab st ii n da b is my twitter handle and so what I try to post at least the ones a day excellent now like you mentioned you've got a several books out the most recent one being trading psychology too . I which came out towards in the last year that will be sure to include all the links that Brett is mentioned just now at checkout strides . com including a link to his book and some of his prior box is there anything that really

separates this your most recent book from your previous material yeah that's why I called it the tray psychology to point out because i really wanted to touch upon themes that were not traditional in the writings on trading psychology so there are many topics related to positive psychology building on strengths there are many topics related to building creativity and well-being that typically we don't hear about when we read a book some trading psychology a lot of the traditional trading psychology dealt with controlling your emotions being disciplined and all those are great that I would take those

are necessary but not sufficient in the trading psychology to play book i tried to go beyond those traditional themes good one ok our guys will i'm yet check that out at chose tradus.com Brett thank you so much for doing this I really appreciate you taking the time out of your day I hope this is get a lot of value from this and I have no doubt that they will so again thank you well thank you for having me I appreciate the opportunity you've come to the end of this episode of chat with traders but don't

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