Interview with Dr. Brett Steenbarger
1) Over the
years, what psychological challenge among traders has become less common, and
what new issues are emerging right now ?
In the past, a major psychological challenge for developing traders was learning markets on their own. That can be an overwhelming task. There are now many online communities and resources for learning trading. The new challenge is figuring out which of these resources fits best with one's talents and interests. There are many valuable educational resources for new traders, and there are ones that are not so valuable. Finding the right resources is important for trader development.
2) Many
Chinese traders are highly technical, how can they integrate emotional self-awareness
without compromising analytical rigor ?
I work with many quantitative traders who perform rigorous research on markets. Their self-awareness is directed toward improving their creativity, so that they can perceive new patterns and opportunities in markets. Working on their creativity actually helps their rigor.
3) Do you
see cultural patterns, for example...
I work with hedge fund managers in the U.S., Europe/UK, and Asia. If
I had to generalize, I would say that the U.S. traders are more aggressive in
their risk taking; less balanced in their portfolio construction. Money
managers outside the U.S. are more attuned to global trends in finance; U.S.
traders are often very U.S.-focused--and that can be a limitation to their
portfolio balance.
4) You have
written a lot about positive psychology, can you share how this approach has
transformed a trader’s performance ?
Positive psychology encourages us to focus on our strengths and what we do
well. Many traders focus on their mistakes and never identify and build
their best practices. Successful trading leverages pre-existing talents
and skills that we bring to markets.
5) Discretionary
traders today face automation pressure, How can they evolve without losing the edge ?
Automation has been an important part of financial markets for quite a
while. I think that advanced pattern recognition from AI will make the
automation more difficult to compete with. Many traders succeed by participating
in markets that are too small for the large institutions, such as small cap
stocks.
6) You have
often compared trading with performance in surgery or sports
, what’s one lesson from those fields that traders tend
to overlook ?
Traders often overlook the need to spend
many years building skills with mentoring/coaching to reach high levels of
performance. Developing traders often look to markets for quick income,
rather than for mastery.
7) From your
hedge fund and retail work, what psychological traits separate top
institutional performers from retail traders ?
Professional traders are not dealing with
emotional issues like going on tilt, chasing bad trades, etc. Many of
their challenges involve working in teams and getting the most from their
teamwork. Most of the problems that retail traders have are due to the
fact that they have not gone through a proper learning curve.
8) From your
experience, what’s the most overlooked internal shift a trader needs to make to
go from being inconsistent to consistently profitable ?
The largest internal shift is becoming process-focused rather than outcome-focused. The trader who is inconsistent has not yet mapped out their best practices and turned those into repeatable trading processes.
9) You have
coached traders across the full spectrum, what patterns have you noticed in how
consistently profitable traders respond to set backs or losses compared to
those who stay stuck?
The best traders view losses and setbacks
as opportunities for learning. Either markets have changed, or they have
done something different in trading those markets. Either way, there are
valuable lessons to be learned from losses. That’s why risk management is
so important, so that we can survive the inevitable drawdowns.
10) I know
you are working on a new book, without giving too much away ,
what’s the theme you’re most excited about ?
In the new book, <Positive Trading
Psychology>, I describe real life lessons that trading mentors teach their students.
I also cover an exciting area of development: the use of brainwave
feedback to improve focus and build creativity and discipline.
11) What’s
something traders should ask you more often , but
usually don’t ?
What do I do well and how can I do more of it?