Episode 65 ... Brett Steenbarger (59:20)

Read The Fountainhead by Ayn Rand as sophomore in college
Thought psychology could be used to make people do their best
University of Kansas grad school, late 1970s, political psychology degree
Trading his avocation, psychology his vocation -- parallel interest
The Psychology of Trading, his first book, written in 2000
Victor Niederhoffer, a friend and mentor, encouraged him to write a book
Teaching at Syracuse University medical school at that time
Chicago trading firm hired him away to work for them full time as trading coach
Market makers he was working with didn't use charts or fundamentals, just the book (DOM)
Pro athletes still work with coaches even after they've made it; same is true of pro traders
Markets change, traders need to evolve
Identify and build upon strengths
Now he works with several hedge funds and financial firms as a consultant
Market volatility expands and contracts, traders need to adapt to that
Separate logical from psychological errors -- correctly identify that first
People are more sensitive to losing money than making money
Become exquisitely aware of your habits -- build self-awareness
Observe yourself, then re-channel yourself
He has four cats
Revenge trading comes from frustration, you want to make it back
Be aware that you are about to revenge trade, step away from screens, calm down
You can't change something you're not aware of
Commonalities of successful traders:

Adapting to changing markets (trends, volatility, people participating all change)
Building on strengths (day traders are good at fast thinking skills and pattern recognition; investors are slower, deeper thinkers)
Cultivating creativity (seeing the world differently from others, seeing opportunities others don't see)
Developing best practices (and turning them into best processes)

Best practices: how you generate ideas, manage positions, manage risk and reward, review your results
Trading Psychology 2.0 is his second book
You don't have to motivate yourself to eat breakfast, it's just routine
All your best trading practices should also just be routine, no motivational sticky notes on monitor needed
Repeat what you do every day until it becomes a routine ... all about repetition
Make the most of your competencies
Work around your weaknesses
Steenbarger knows he can't make markets, cognitively and emotionally he's unable to make rapid decisions and process lots of information
Steenbarger himself suffers from cognitive overload easily, needs to be able to reflect
Steenbarger tried to trade full time and absolutely hated it because he wasn't working with people [I'm the opposite]
Uses guided imagery to have traders imagine hitting their stops, losing money ... but staying calm and controlled
Effective goal setting requires a specific plan, a day to day plan
A goal without a plan is a wish
Not a fan of monetary goals -- performance anxiety is real
P&L front and center (the outcome) will mess up your processes
Better to look at improvement ... month to month, not just P&L, but risk-adjusted P&L
Make friends with loss and failure ... your losing trades teach you things, what changed?
Embrace the mistakes you make, ultimately how we become better is by learning from mistakes
Don't think about your results in dollar terms, think in percentage terms
Hard to take risk and make good decisions when you think you must succeed
Make sure you have something in your life that's more important than trading
Trading shouldn't be the major part of your life ... you need to be balanced
Traders with longevity have some source of satisfaction separate from profits
A fascination with the markets themselves could be that source of satisfaction
Website: traderfeed.blogspot.com
Twitter: @steenbab