Interview with Dr Brett Steenbarger

Brett N. Steenbarger, Ph.D. is a trader, author and trading coach who has been actively involved in the financial markets since the late 1970s.

Brett has an interest in using historical patterns in markets to find a trading edge and has created a number of unique measures of market trend, momentum, and institutional activity designed to aid short-term traders. These measures–and the trading strategies derived from them–have been chronicled daily in his TraderFeed blog. He is also a regular contributor to Forbes.

He is the author of a number of popular trading performance books, including The Psychology of Trading, Enhancing Trader Performance, The Daily Trading Coach and his new book Trading Psychology 2.0, which is due for release late Sept 2015.

Continuing with his interest in performance enhancement among traders, he also consults for hedge funds, investment banks and proprietary trading groups.

In this episode we discuss creativity, static thinking and why it’s important to have unique ideas for trading success. We also cover tips to increasing our creativity, why traditional trading rules need to be updated, the challenges of daytrading and how to overcome them.

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Successful traders look at markets in unique ways

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Topics discussed

Three important components of successful traders
Why the traditional rules of trading need to be updated
Why traders get stuck in static thinking and need to be more like entreprenuers
The two different types of trading brains and how understand which we are can improve our results
How creativity can be used in the strategy research process
Why we come up with ideas at seemingly random times and how that can be harnessed to improve our trading
The two stages of creativity and how traders are hurting their performance by neglecting the second stage
How just immersing ourselves in the market without stepping back can be harming our performance
Improving creativity through lifestyle
Why unstructured free time away from the markets can improve your trading
Techniques to turn creativity into a habit
How Brett identified his strengths and used those to dictate his trading style
The challenges of daytrading and how to approach them
Analysing successful trades to improve performance
Why we need to have something more important in your life than trading

PLUS listener questions on:

Applications of diffusion indices
Formalising edges and the impact of market regimes on edge performance
How traders can follow their rules about stops and targets
The psychological differences between systematic and discretionary trading
The validity of Acceptance Commitment Therapy (ACT) in trading
Handling drawdowns and turning it into a constructive experience
How to move from retail trader to full-time/pro

Resources mentioned in this episode

Brett can be followed on Twitter (@steenbab), on his blog traderfeed.blogspot.com or on Forbes
Bretts books (Note: Trading Psychology 2.0 is being released late Sept 2015):

Brett’s favourite book is ‘The Fountainhead’ – Ayn Rand

Video: Improving Trading Performance

Quotes

Creativity can be learned

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It’s often during unstructured free time that we come up with our insights

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Traders often work hard but they don’t work smart

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Personality is probably more predictive of trading style than trading success

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It’s important to have something in your life more important than trading

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Top tips from this episode

Here are few of my favourite takeaways from the chat with Brett:

It’s important to see the markets through unique lenses – through Bretts work coaching other traders he’s identified that successful traders look at markets in unique ways, they have a unique perspective that comes out of asking different questions and therefore finding different answers to generate unique sorts of edge. Creativity plays a big part in this process.
The importance of down-time – I’m sure we all realise that we need to take time away from the markets to reset but I never realised our brain needs time to synthesize all the information we’ve collected about the market and it’s often during unstructured free time that we come up with our insights. Creativity is a process of analysing the individual pieces in detail and then stepping back to see the bigger picture, if we never step back then we’re really missing out on a huge piece of potential.
Creativity can be learned and Brett provided a number of techniques to increasing creativity. As Brett mentioned, he has a new book called Trading Psychology 2.0 being released late Sept/early Oct 2015, that book also has a number of other techniques to increasing creativity so I recommend you check that out once it’s available, it’s a great book.