The first post in this three-part series on positive trading psychology emphasized the emotional and physical side of optimal performance, which has been called flourishing.  The second post looked at the cognitive side of trading success, including the development of focus and deeper, faster processing of information.  In this post, we'll examine the importance of developing a framework for understanding markets and creating our trading edge. In any competitive endeavor, whether it is chess, basketball, or boxing, we have to understand who we are competing against.  No ..read more

  In the next several posts, I will outline an approach to trading psychology based upon recent research in the field of "positive psychology".  I believe this can be a game-changer for many traders and trading teams. To use the analogy of positive psychology's founding researcher, Dr. Martin Seligman, the goal of positive psychology is not to go from -5 to 0, but to go from +2 to +5.  This means that feeling good and performing well is not enough.  We are meant to "flourish" by amplifying what is already positive.  According to Dr. Seligman's research, there are fiv ..read more

  There is a very important difference between acting on desire and acting on commitment, as anyone in a successful long-term romantic relationship can attest.  If a relationship is only about desire, it quickly burns out and fails when circumstances call for commitment.  Successful relationships translate desire into commitment:  it is because someone is incredibly emotionally special to me that I am committed to them. Many traders begin with a desire for market success, but never get to the point of commitment to the practices and processes that lead to ongoing profitabil ..read more

  *  Setting just one goal for change and working on it consistently for at least a month:  it doesn't lead to revolutionary change, but it creates the evolutionary change that lasts. *  Very interesting research from Concretum Research regarding time of day when SPX tends to make intraday highs and lows.  Not too surprising that highs and lows for the day are made when market participants are most active.  This sets up valuable research on relative volume, intraday trends, and probability of trend days.  Would be interesting to see how these stats look for ..read more

  We internalize what we do consistently. If we consistently avoid effort, we will internalize lack of initiative.  If we consistently reach out to others with love, we will internalize warmth and caring.  Change begins with doing.  Simply shifting goals or mindsets will not produce lasting change. Notice how athletes work out in structured routines.  Surgeons learn their craft by following evidence-based procedures and following these faithfully.  Performing artists master their craft through feedback and repetition.  When practice and performance are pro ..read more

  *  Every trade plan is an opportunity to work on our psychology, training us to act on opportunity and not react to fear;  *  Lance Breitstein does a great job of explaining why success in trading requires investment in ourselves; *  Such a valuable point from Adam Fiske:  What indicators/signals do you track regularly to tell you *not* to trade? *  Jeff Holden from SMB Capital observes that we need to work on proper bet sizing--and understand the relative degrees of edge we have in trades--before we start betting big; Have a great finish to the week ..read more

  The right mindset won't substitute for a rigorously developed edge in the markets, but the wrong one can certainly undo all our training and experience.  Here are some valuable trading psychology perspectives that can help you make the most out of your experience: *  It's not enough to control our emotions and stick to time-tested processes.  We have to actively develop a positive mindset if we're going to maximize our creativity, productivity, and performance. *  Akil Stokes offers a diverse trading psychology podcast for developing traders. *  Valuable tra ..read more

  Working on mastering the psychology of trading is different for beginning/developing traders and for experienced traders.  I have worked with rookies at proprietary trading firms, and I have worked with experienced money managers who guide large teams.  The psychological challenges faced by the two groups are entirely different.  What you need to do to master your trading psychology very much depends upon where you are at in your learning curve. Here is an analogy that might clarify things.  Freud's revolutionary contribution to psychology can be found in his dictum ..read more

  Resilience is not the absence of stress, but rather the ability to channel stress toward greater performance.  Here are some worthwhile perspectives on resilience in trading: *  How we learn trading can also be how we learn resilience; *  Here's an excellent thread from Dr. Steven Goldstein re: how resilience comes from aligning our trading with our personalities; *  Lance Breitstein passes along nuggets of wisdom from James Clear, emphasizing the importance of peace of mind and inner satisfaction toward resilience and performance.  Here's a great thread from Ja ..read more

  I'm hearing from more traders than usual about their struggles with performance anxiety.  As one successful developing trader put it, the problem tends to happen "on high profile trades that you could say most traders have an eye on".  This is a very good observation.  The higher profile the trade--i.e., the greater the perceived opportunity--the more room there is for performance pressure.  As Epictetus observes, the issue is not the "real problems" about the trades, but rather the "anxieties" about those trades. Let's look at this from a psychological angle.  ..read more