- Avoid the urge to be perfect. Many traders look back over a week or month and see trades they feel they "should" have done, or positions they "should" have pursued more aggressively. Steenbarger finds that this attitude can be damaging. "You are psychologically translating a modest success into a frustrating failure," he says. Traders don't develop confidence by finding fault. Fault-finding often leads to the dangerous step of "revenge trades," in which you try to make up for a perceived past failure by pushing the next trade twice as hard, regardless of merit. Good traders accept missed trades and underleveraged trades as a natural part of the lifelong learning process.
- Develop self-knowledge by creating a "success template." Steenbarger says his trader-patients always want to talk about their losers rather than their winners. He recommends they develop a "solutions focus" by dwelling on their winners while still acknowledging their losers. To start this process yourself, write down the one thing you did best each day in the market and which you want to repeat tomorrow. Likewise, write down the biggest mistake you made each day, and wish to avoid tomorrow. If you keep up this simple two-entry diary and review it regularly, you will be on the path to achieving self-knowledge and developing the ability to observe and change your behavior. "Change starts slowly, but then it gets momentum and starts turning faster and faster," the psychologist says.
- Collaborate with a colleague or mentor. It's useful to work with someone who can help you build self-awareness -- not in a didactic, teaching environment like a classroom, but in a collegial atmosphere. It could be two traders in the same office or someone on the phone or over instant messaging with whom you can exchange ideas with goodwill and honesty. Talk about what worked and didn't work each day or week, and probe each other's comments without bravado or self-flagellation -- as if you're in a group-therapy session.
Each trader is different, of course. If you can explain in two sentences or less a simple, consistent strategy that works for you, email me at