The Process and the Practice
The mind has exactly the same power as the hands;
not merely to grasp the world, but to change it.
You are reading this book because you want to coach yourself to
greater success in the financial markets. But what is coaching?
At the root of all coaching efforts is change. When you are your own
trading coach, you are trying to effect changes in your thoughts, your feelings,
and your behavior. Most of all, you are trying to change how you trade:
how you identify and act upon patterns of risk and reward, supply and
There is a rich literature regarding change, grounded in extensive psychological
research and practice. If you understand how change occurs,
you are better positioned to act as your own change agent. In this chapter,
we will explore the research and practice of change and how you
can best make use of its sometimes-surprising conclusions. Coaching is
about making change happen, not just letting it happen. It's about making
the commitment to being a change agent in your own life, your own
First, however, let's learn about the process and practice of change.
LESSON 1: DRAW ON EMOTION
TO BECOME A CHANGE AGENT
For some of us, the status quo is not enough. We experience glimpses into
the person we're capable of being; we yearn to be more than we are in life's
That yearning starts with the notion of change. We desire changes in
our lives. We adapt-we grow-by making the right kinds of changes. All
too often, however, we feel stuck. We're doing the same things, making the
same mistakes again and again. Do we wait for life to change us, or do we
become agents of our own life changes?
The easy part is initiating a change process. The real challenge is sustaining
change. How many times does an alcoholic take the initial steps
toward sobriety, only to relapse? How often do we start diets and exercise
programs, only to return to our slothful ways? If we focus on starting a
change process, we leave ourselves unprepared for the next crucial steps:
keeping the flame of change burning bright.
The flaw with most popular writings and practices in psychology and
coaching is that they are designed to initiate change. These writings and
practices leave people feeling good-until it becomes apparent that different
efforts are needed to sustain change. Successful coaching doesn't just
catalyze change: it turns change efforts into habit patterns that become second
nature. The key to successful coaching is turning change into routine;
making new behaviors become second nature.
That's where emotion comes in.
For years I had attempted-unsuccessfully-to sustain a weight loss
program. Then, in the year 2000, I was diagnosed with Type II diabetes.
My diet had to change; I needed to lose weight. If I didn't, I realized with
crystal clarity, I could lose my health and let my wife and children down.
Literally that same day I began a dietary regimen that continues to this day.
My weight dropped 40 pounds (I shed the pounds so quickly that friends
were concerned that I had a wasting illness) and I regained control of my
What was the catalyst for the change? Years of telling myself to eat
differently, exercise more, and lose weight produced absolutely no results.
A single emotional experience of the necessity for change, however, made
all the difference. I didn't just think I needed to change: I knew it with every
fiber of my being. I felt it.
So it is with traders.
Perhaps you've told yourself that you need to follow your rules, that
you need to trade smaller, or that you should avoid trading during certain
market conditions or times of day. Still you make the same mistakes, lose
money, and build frustration. Like my initial efforts at weight loss, your
attempts at change fail because they lack emotional force.
Research into the process of successful versus unsuccessful therapy
finds that emotional experience-not talk-powers change. No one ever
felt valuable and lovable by standing in front of a mirror and reciting self-enhancing
statements. The experience of a meaningful romantic relationship,
however, yields the deepest of affirmations. Yes, you can tell yourself
you're competent, but experiencing success in the face of challenge
provides a lasting sense of efficacy. Pleasure, pain: nature hardwires us
to internalize emotional experience so that we can pursue what enhances
life and avoid what harms us. That ability to internalize our most powerful
emotional experiences helps us to sustain the changes we initiate.
Are you going to work on yourself as a trader today? Are you going
to use today as an opportunity to learn and develop yourself, regardless
of the day's profitability? If so, you'll need a goal for the day. What
are you going to work on: Building a strength? Correcting a weakness?
Repeating something you did well yesterday? Avoiding one of yesterday's
An important first step is to set the goal. We cannot succeed as change
agents if we don't perceive a clear path from the person we are to the person
we wish to become. A valuable second step is to write down the goal
or talk out loud into a recorder. This step helps cement desired changes in
your mind. But will the pursuit of your goal truly possess emotional force?
Will it transform you from one who thinks about change to one who truly
becomes a change agent?
The secret to goal setting is providing your goals with emotional
force. If your goal is a want, you'll pursue it until the feeling of desire
subsides. If your goal is a must-have-a burning need, like my dietary
change-it becomes an organizing principle, a life focus. You won't become
a better trader because you want to be. You will only coach yourself
to success when self-improvement becomes your organizing principle: a
Try this exercise. Before you start trading, seat yourself comfortably
and enter into a nice slow rhythm of deep breathing. Imagine yourself-as
vividly as you can-starting your trading day. Watch the market move on
the screen; watch yourself tracking the market, your day's trading ideas at
your side. Then turn your goal for the day into part of your visualization:
imagine yourself performing the actions that concretely put that goal into
practice. If your goal is to control your position sizing, vividly imagine yourself
entering orders at the proper size; if your goal is to enter long positions
only after a pullback, imagine yourself patiently waiting for the pullback
and then executing the trade. As you visualize yourself realizing your goal,
recall the feeling of pride that comes from realizing one of your objectives.
Bask in the glow of living up to one of your ideals. Let yourself feel proud
of what you've accomplished.
It's important not just to have goals, but also to directly experience
yourself as capable of reaching those goals. Psychologists call that self-efficacy.
You are most likely to experience yourself as a success if you
see yourself as successful and feel the joys of success. You don't need to
imagine yourself making oodles of money; that's not realistic as a daily
goal. But you can immerse yourself in images of reaching the goals of good
trading and experience the feelings of self-control, mastery, and pride that
come from enacting the best within you.
Many traders only get to the point of self-coaching after they have experienced
harrowing losses. The reason is similar to my experience with
my diagnosis: it was the vivid fear of consequences-the intense feeling of
not wanting to ruin my life-that drove my dietary change. Similarly, after
traders lost a good deal of their capital, they never want to experience that
again. They trade well, not because they talk themselves into discipline,
but because they feel the emotional force of discipline's absence.
Contrary to the teachings of proponents of positive thinking, fear has
its uses. Many an alcoholic maintains sobriety because of the fear of
returning to the pain of drinking's consequences. Emotion sustains the
With guided imagery that you feel as well as see, you can create powerful
emotional experiences-and catalyze change-every single day. That's
when you become a change agent: one who sustains a process of transformation.
The key is adding emotional force to your goals. Your assignment
is to take those lifeless goals off the piece of paper in your journal and turn
them into vivid, powerful movies that fill your mind. Try it with one goal,
one movie in your head, before you start trading. It is not enough to set
goals; you must feel them to live them.
To each of your goals, add an or else scenario. Vividly imagine the consequences
of not sustaining your change. Relive in detail specific failure experiences that
resulted from the faulty behavior you want to change. When you add an or else
condition to your goal setting, you turn fear into motivation. The brain is wired
to respond first and foremost to danger; you will not gravitate toward the wrong
behaviors if you're emotionally connected to their danger. To this day, my diet
is firmly in place. Fear has become my friend.
LESSON 2: PSYCHOLOGICAL VISIBILITY
AND YOUR RELATIONSHIP WITH YOUR
If you are to be your own trading coach and guide your trading development,
we have to make you the best coach you can possibly be. That means
understanding what makes coaching work-and what will make it work
Research informs us that the most important ingredient in psychological
change is the quality of the relationship between the helper
and the person receiving help. Techniques are important, but ultimately
those techniques are channeled through a human relationship. Studies find
that in successful counseling, helpers are experienced as warm, caring,
and supportive. When helpers are seen as hostile or disinterested, change
processes go nowhere. There's a good reason for this: relationships possess
The magic of relationships is that they provide us with our most immediate
experiences of visibility. I recently took a phone call from a reader of
the TraderFeed blog. Many readers have provided valuable feedback about
the blog, but this caller went far beyond that. He read every single post and
then explained to me why he was drawn to the site. He put into words the
very values that have led me to publish some 1,800 posts in the space of less
than three years: the vision that, in cultivating our trading, we develop
ourselves in ways that ripple throughout our lives.
At the end of that conversation, I felt understood: I was visible to another
human being. When my mother died, I kept my composure until I approached
her gravesite; then I lost it. My two children instinctively reached
out to comfort me. It's something I would have done for another person in
that situation. At that moment, I saw a bit of myself in my children. Once
again, I was visible.
An unfulfilling relationship is one in which we feel invisible. We can
feel invisible because we're misunderstood or mistreated. We feel invisible
when the things that matter most to us find no recognition among others.
I recall one particularly unfulfilling relationship with a woman. We were
on the dance floor at a club and I suddenly stopped dancing altogether. She
didn't notice at all. She was in her own world. It was a perfect metaphor for
everything I was experiencing at the time: I was there as a kind of prop, a
rationale for being on the dance floor. No one was really dancing with me.
The profound, wrenching emptiness that I felt at that time was a turning
point; never again would I settle for invisibility.
In Iggy Pop's classic song, invisibility is a kind of "Isolation." But if
there's anything worse than being isolated-crying for love-when you're
with someone, it's being isolated from yourself. We are truly lost when
we're invisible to ourselves.
All of us have values, dreams, and ideals. How often, however, are
these explicitly on our minds? To live mired in routine, day in and day
out, estranged from the things that matter most to us: that's a form of invisibility.
To compromise the things you love in the name of practicality,
to settle for second best out of fear or convenience: those, too, leave us in
isolation-from ourselves. Strange as it may seem, we spend much of our
time invisible to ourselves. The day-to-day part of us dances away, oblivious
to the other self, the one that thrives on purpose and meaning.
It's a real dilemma: How can we possibly coach ourselves to success if
the very strengths that would bring us success are invisible to us? After all,
the single best predictor of change is the quality of the helping relationship.
What, then, is our relationship to ourselves? If we are to be our own trading
coaches, the success of our efforts rests on our ability to sustain visibility
and draw on the magic of a fulfilling relationship with ourselves.
To coach ourselves successfully, we must be visible to ourselves and
sustain the vision of who we are and what we value. But how can we do
that? There's a simple strategy that can build a positive, visible relationship
with your inner trading coach: identify a single trading strength to express
as a goal for the coming day's trading.
One way I do that when I coach others (and when I work on my
own trading) is to ask traders to identify what they did best in yesterday's
trading that they want to continue today. Set a positive goal, based
on strengths, to keep you in touch with the best within you. It affirms
your competencies and keeps these visible, even during challenging market
times. Too many of our goals are negative: we declare that we won't do
X or that we'll do less of Y. Instead, frame a goal for today that says: "Here
is what I'm good at, here's what I did best yesterday, and here's how I'm
going to make use of that strength today."
In the relationship between you the trader and you the coach, the quality
of the relationship will play an important role in your development. The
best relationship is achieved when goals are linked to values and express
distinctive strengths. Relentlessly identify, repeat, and expand what
you do best-even (and especially) after the worst of trading days. Only
through repetition can we turn positive behaviors into habit patterns. When
you are in the habit of identifying and building strengths, you will then be
truly visible to you. The magic of that relationship-and the confidence it
brings-will sustain you through the most challenging times.
Review the last week's entries in your trading journal. Count the number of positive,
encouraging phrases in your writings and the number of negative, critical
ones. If the ratio of positive to negative messages is less than one, you know
you aren't sustaining a healthy relationship with your inner coach. And if you're
not keeping a journal, your coach is silent. What sort of relationship is that?
LESSON 3: MAKE FRIENDS WITH YOUR
The notion of change is a challenge and a trap. It challenges us to aspire
to more than who we are, but it can also trap us in self-division. When we
entertain the notion of change, we divide ourselves into qualities we like
and those we don't. We parcel ourselves into strengths and weaknesses,
good and bad, acceptable and unacceptable.
Once we make such a division, it is only natural to embrace the good
and avoid the bad. We dismiss our shortcomings as mistakes, bad luck, or
exceptions. That helps us identify with a partial image of ourselves and
keep our frailties from our conscious awareness. Thus banished from the
front of our minds, those frailties cannot guide our learning. We do not
sustain the motivation to grow, because we only contact the parts of ourselves
that are relatively whole.
Excerpted from "The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist" by Brett N. Steenbarger. Copyright © 0 by Brett N. Steenbarger. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. Excerpts are provided solely for the personal use of visitors to this web site.