TraderFeed - Brett Steenbarger, Ph.D.

[Ann]

TraderFeed is a very interesting psychology of trading blog. There are other threads here about this site but they seem to get bogged down into personal opinion. I am hoping just to keep this as a regular upload of his posts without it becoming littered with negativity. It may be of help for beginners more than those who have their own set psychology and style of trading.
Brett Steenbarger, Ph.D.
Author of The Psychology of Trading (Wiley, 2003), Enhancing Trader Performance (Wiley, 2006), The Daily Trading Coach (Wiley, 2009), and Trading Psychology 2.0 (Wiley, 2015) with an interest in using historical patterns in markets to find a trading edge. As a performance coach for portfolio managers and traders at financial organizations, I am also interested in performance enhancement among traders, drawing upon research from expert performers in various fields.


A Formula for Trading and Investing Disaster

 

[barney]

TraderFeed
Brett Steenbarger, Ph.D.

A Formula for Trading and Investing Disaster

For the record @Trembling Hand , wherever he is (probably kicking up powder snow down some random slope in Japan)

Anyway, TH was a great advocate of Brett Steenbarger … and whatever TH said, I listened to

Post away Anne …. I doubt you will find any negativity relating to Brett S.

 

[Gringotts Bank]

TH used to mock me endlessly (along with a few others) about the importance of psychology in trading then he changed his mind.

There was something he said once which captured my attention, but I forgot to copy it down. The gist of it was that he was quite good at monitoring his emotional state during a trade. Essential, imo.

 

[tech/a]

Well you won’t
He has a PHD in computer science
Has proven Technical analysis can have an edge.
Uses Python to create systems
Runs $5000 courses.

I’m a bit the same way re psychology
If your undercapitalised, un educated
And un disciplined you’ll have psychological issues with trading.

Being Psychologically ready to trade won’t help undercapitalisation. Lack of education
You may solve your discipline issues.

 

[barney]

TH used to mock me endlessly (along with a few others) .

I do recall you and he had a few OK Corral moments Gringo …… as did he and Tech.

A lot of those "confrontations" created some excellent learning opportunities for all and sundry though.

Years ago I asked TH who he regarded as a useful "educator" regarding trading and he mentioned Steenbarger in this way ….

He won't/doesn't teach you how to trade ….. he teaches you how to "learn how to trade"

To paraphrase that for myself … you have to get the correct foundations in place before you can hope to do any good. As Tech has eluded to, psychology is just one of the foundations.

 

[Ann]

Four Essential Ingredients of Trading Success

 

[kahuna1]

First ingredient ...

Is NOT to pay $5,000- for a course, or $10,000 for a program ..... read a few books. I do love the trading record of these people, and in most cases, it is none. Trading, is well covered on U tube for free. So too public library, or buy 5 books for $200- .

Be honest with yourself .... most, in fact 90% of those who trade, loose ,,, of that 90% about half loose everything. Lots of rules, lots that work, lots that never work for some. Having an ego, if your a trader, where sometimes you get it wrong 80% of the time is dangerous. One can make money, a lot of money even if you loose 80% of the time.

STOP LOSS. CUT LOSSES. Run profits. And that's worth $20,000- ... via a course, but the only real rule, trading. Other than that, don't margin trade too leveraged. Too much leverage is a recipe for disaster. Small losses highly leveraged, lead to exponential destruction of capital and all your assets.

Take care

 

[Ann]

What Is YOUR Self-Talk?

 

[barney]

First ingredient ...

Is NOT to pay $5,000- for a course

No doubt 90% of Traders would agree with that Kahuna …

On the flip side, and giving appropriate credit, Steenbarger gives the essence of his knowledge on line for free … or traders can buy a couple of his books for less than $200 …..

As you suggest, a couple of decent trading books can be very beneficial. Of course there is no substitute for experience ….

In my humble opinion … the best Traders that I've had experience with, seem to be those that initially lost a lot … worked out why they lost a lot …. and then went about constructing a plan/method on how to fix whatever issues they had which caused them to lose a lot

I agree with you ….. honesty on why/how/ we arrive at our trading situation (whether that be winning or losing) is paramount to getting better at it ……

ie. Traders must take responsibility for their choices/actions ….

I personally took responsibility about 5 years ago ….. Interestingly, I still consider myself a crap Trader … and probably am compared to many others around here …. however …

For some strange reason I have done ok since I became honest on why I was losing

 

[kahuna1]

Yep fair enough.


Some quick thoughts on trading or investing, two different things but similar rules.

Prior to psychology, trading and even investing some things are needed. One does NOT self treat a brain tumor, or a tooth cavity. Trading is an art.

Many different ways to trade. Different styles, objectives and so on. As a person who started as a trainee dealer in 1983, some things change, and others, are the same.

Without an edge, an advantage OVER the market, trading for a living or investing is NOT something, in my opinion that most should do. Whether that edge be via technical side, charts ... or Fundamental side, via valuation, or by a larger MACRO side, bottom down look at the whole market, WITHOUT an edge, it makes life and investing likely a loss.

Stick to what you KNOW. Not what you think you KNOW, WHAT YOU KNOW and understand. Not some idiotic conspiracy theory or view about where Uranium is going to $200- a lb next week.

Admit defeat EARLY and without remorse. Taking a loss, if necessary, but learning why you were wrong if necessary. NO REVENGE trading !!

Diversify, and this idiotic view by Buffet shared of late NOT to diversify, is, well, just stupid. HE CAN ... buy the whole company and prefers to do so. YOU CANT, and as such, without the resources or experience to see the whole picture, unable to CONTROL the company eventually, without diversification in shares to some extent and putting all your eggs in one, or two or three baskets, the likely hood of a massive draw-down are MASSIVE. Companies don't tell the truth quite often, the CEO is often NOT there for shareholders but themselves, and his job either way, honest companies alike, the CEO will and DOES present a best case 90% of the time so it may be in serious trouble and you .... YOU will be the last to know.

Too much Diversification, is IDIOTIC. There is a happy medium between the two and buying an index hugging fund where your buying all the stocks including the DOGS ... ones on fire and unlikely ever to be the value the share is right NOW, is again, after fee;s likely and always going to leave you BEHIND the overall market. IF it were shares, 12-20 is enough in my view to take a hit on the chin where one, or two hit a loss of 25% and you take it, even prior to NEWS coming out. That loss is 25% RELATIVE to the index. You may be the last to know the company has massive issues and if a share moves in the opposite direction to the index overall, your bloody wrong. If they admit their are fleas, EXIT because their is likely fleas and ticks.

If you HAVE an edge, and your stupid NOT to ... STICK TO IT LIKE GLUE. Why the hell would you give UP an edge you have over the overall market ? Most don't have an edge, most when they do, give it up, doing stupid things, buying into peaks and doubling up as it STARTS to fall as opposed to buying into TERROR. BUY into END OF THE WORLD .... sell into Tulip season.

Stop loss, stop loss and stop loss.

I could go on, but the psychological side, most fail at and temperament is key. Greed and FEAR are battles one wages, so too ego and stupidity.

Have fun

 

[Ann]

Your Energy And Your Environment: Accessing Your Strengths

 

[ducati916]

Steenbarger has been around, commenting on trading a long time. I remember him back in 2001 on forums.

That being said, I don't believe that he actually trades. He is a spectator.

The issue [for me] with spectators is: they have a multiplicity of models, strategies, advice, etc, but lack the crucial ingredient which is the [eventual] style of trading that sits comfortably enough in the psych that actually allows you to trade.

Which is to say: if you already trade and were at some point successful, they can point out bad habits that have crept in. If you have never traded, then they can show you a number of different ways to trade, but until you actually trade, it is an open question whether it works for you.

You can be shown any number of profitable trading strategies, none of which you can make work for various reasons. The strategy[ies] that [eventually] work are those that you discover yourself as they will be the ones that leave you with a clear mind when trading and able to function calmly.

It boils down to: some can trade/play golf and some can't [and never will be able to] trade.

jog on
duc

 

[Newt]

Which is to say: if you already trade and were at some point successful, they can point out bad habits that have crept in. If you have never traded, then they can show you a number of different ways to trade, but until you actually trade, it is an open question whether it works for you.

You can be shown any number of profitable trading strategies, none of which you can make work for various reasons. The strategy[ies] that [eventually] work are those that you discover yourself as they will be the ones that leave you with a clear mind when trading and able to function calmly.

Gee that's a good post Duc - worth being a sticky for those starting out.....

 

[Ann]

That being said, I don't believe that he actually trades.

He probably doesn't duc, why would he need to other than a bit of hobby trading for fun. He is involved with some of the most important trading companies in the world. Why would he bother, he would just choose the best fund and give them his money. Why stress and spend time trying to make a quid when it would be done for you by the best in the world? I don't think this man is stupid, why on earth would he waste his time trying to do it himself?

 

[ducati916]

He probably doesn't duc, why would he need to other than a bit of hobby trading for fun. He is involved with some of the most important trading companies in the world. Why would he bother, he would just choose the best fund and give them his money. Why stress and spend time trying to make a quid when it would be done for you by the best in the world? I don't think this man is stupid, why on earth would he waste his time trying to do it himself?

Because (a) he purports to teach others how to do it and (b) pure ego.

We have all had teachers/coaches in various areas of life/academics/sports/etc. There is always, I have found, a significant difference between those that teach/coach on a purely academic basis and those that teach/coach from extensive experience and a certain level of achievement. The latter have always proven more valuable.

It feels good to be able to trade profitably. Looking at his blog, this is a man obsessed with financial markets. I would wager a fairly substantial sum that he [Steenbarger] would love to be able to trade profitably, but can't [for whatever reason]. He has gone to the next best thing, which is involvement in the markets tangentially.

Trading is a practical undertaking. It is not purely abstract and academic. At the end of the day...you must be able to execute when everything has turned to custard. If you cannot, you cannot trade safely and you will at some point, likely blow yourself up.

The point [in trading] that you must reach is...boredom. There is no massive excitement or panic, it is simply business as usual.

To reach that point, requires massive effort, probably measured in years. In the case of 'fundamentals' that effort continues behind the scenes, technicals requires ongoing research and study I'm sure, as do other forms of trading.

The relevant point is however that you must reach a point of boredom. Only then are you calm enough and devoid of any number of bad habits that can [and will] get you in trouble, to trade your methodology successfully.

jog on
duc

 

[Ann]

The relevant point is however that you must reach a point of boredom. Only then are you calm enough and devoid of any number of bad habits that can [and will] get you in trouble, to trade your methodology successfully.

So you are suggesting successful people can only be successful once they are bored!?

I fervently disagree with this comment, the most successful people in any endeavour maintain their passion, their focus, their hard work and they seek out the best coaches/mentors/teachers to help them hone their skills.

I have yet to meet a highly successful, motivated person who sits there and says the secret to their success is boredom! Boredom leads to mediocrity, not success.

Boredom is natures way to tell you to get up off your backside and do something else.

A great coach may not be able to sing/play golf/dance/run/swim/trade stocks as well as their tutee but they will be able to coach how to be centred and calm and point out where they could improve and make them better in whatever endeavour they are trying to become proficient and excell. A great coach can make a great success story.

 

[kahuna1]

It boils down to: some can trade/play golf and some can't [and never will be able to] trade.

Oh so true ... and as a trader for a bank for a long time, we had 1,000 applications to any jobs. Interviewed I suppose 20, and hired 4. Of the 4, less than one made it. Some over the years did, but more often than not, people without qualifications, more often from the back office performed better than those with degree's and post grad degrees.

Nowadays, most trading is done via computers, Not humans. In fact, bad news comes out and the idiot savant computer driven systems will see people react to awful news, diabolical in many cases, and destruction of capital in that company is assured over time, the HUMANS who read the news react and sell. The selling stops and computers seeing the weakness, BUY and keep buying and for those who went short, often, markets end HIGHER than their starting point despite reality that the game is over. Higher because the trend following computer, sees its weak on the top side, stop losses triggered by those who went short, triggered and hey presto a market that should be DOWN 25% is only down 5% or in some cases UP.

Trading, logic and dealing with ego, is not possible to teach too much. Despite a very very long trading and investing background, a person with one trade and they made money, often becomes the expert. I certainly despite years in service, and lots of academic stuff, would not presume to ever think I was in control or expert.

Things evolve and not always in good ways. Bend or be broken. Accept defeat and stop loss or perish.

 

[ducati916]

So you are suggesting successful people can only be successful once they are bored!?

I fervently disagree with this comment, the most successful people in any endeavour maintain their passion, their focus, their hard work and they seek out the best coaches/mentors/teachers to help them hone their skills.

I have yet to meet a highly successful, motivated person who sits there and says the secret to their success is boredom! Boredom leads to mediocrity, not success.

Boredom is natures way to tell you to get up off your backside and do something else.

A great coach may not be able to sing/play golf/dance/run/swim/trade stocks as well as their tutee but they will be able to coach how to be centred and calm and point out where they could improve and make them better in whatever endeavour they are trying to become proficient and excell. A great coach can make a great success story.

I think you need to re-read the post.

It is the outcome that must be the subject of boredom, not the process. The process, as stated, requires ongoing commitment.

To execute in times of extreme custard, you need to be detached, bored. Then, you will execute and do, whatever it is that needs to be done.

jog on
duc

 

[Ann]

I think you need to re-read the post.

It is the outcome that must be the subject of boredom, not the process. The process, as stated, requires ongoing commitment.

To execute in times of extreme custard, you need to be detached, bored. Then, you will execute and do, whatever it is that needs to be done.

jog on
duc

I can certainly accept the word 'detached' you have used in this most recent post.

Detached -
dispassionate, disinterested, indifferent, objective, uninvolved, aloof, outside, remote, distant, impersonal, open-minded, neutral, unbiased, unprejudiced, impartial, non-partisan

but never,

Bored-
weariness, ennui, lack of enthusiasm, lack of interest, lack of concern, apathy, uninterestedness, unconcern, languor, sluggishness, accidie, malaise, world-weariness;
frustration, dissatisfaction, restlessness, restiveness;
tedium, tediousness, dullness, monotony, repetitiveness, lack of variety, lack of variation, flatness, blandness, sameness, uniformity, routine, humdrum, dreariness, lack of excitement

Steenbarger is a coach of traders

Here is a selection of a few of the key qualities that distinguish a good coach from a great coach. Ref.

• Leadership. The goal of great coaching is to guide, inspire and empower an athlete or team to achieve their full potential. ...
• Knowledge. ...
• Motivation. ...
• Knows the Athlete. ...
• Consistency. ...
• Effective communication skills.

Nowhere does it say the coach needs to be a better player, or even be a player.

I find it interesting when people try to diminish others who are demonstrably more successful than the critic. It is the 'tall poppy' syndrome. Ego driven I would suspect.

 

[Ann]

I am hoping just to keep this as a regular upload of his posts without it becoming littered with negativity.

...and wasn't that a false hope from my initial post in this place!