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Brett Steenbarger

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78

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2017-01-13

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2017-01-13

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1

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1. “Is coming from other directions. So that's the first way in which trading is challenging in the modern era. The second way, as you and I know, the world is a much more global place. And it's no longer the case that the major influences on markets occur only during New York hours. So much is happening in Asia. So much is happening in Europe. Headlines from over there, events from over there, global economic conditions from over there really affect how assets in the US behave. And so that's created a complexity that traders have had to adapt to.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “It is more difficult and more complex in a number of ways. And I'll mention too. The first is the respect that you are talking about. There are an increasing number of market participants, particularly algorithmic, that are making decisions upon high-frequency data, what's being bought, what's being sold. Each transaction is it occurring nearer to a bid price, nearer to an offer price, and it's quickly aggregating all this information to tell them, our buyer's dominant, seller's dominant, and making rapid decisions. And so a lot of the market movement is not occurring because of quote-unquote fundamental reasons. Traders of old would look at the world. They would look at a company and its earnings and predicate their decisions on that basis. An increasing amount of market movement.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Clearly, both are important. If you don't have good defense, you simply don't stay in the game. And so what we typically find is beginning traders often, their greatest problem is over trading, becoming too eager and trading way too much and not managing their risk well”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “You have to have some ego to believe that you can outperform all of these other motivated, talented participants in the marketplace. And you have to have an ego to be resilient to the inevitable periods of losing. It's when the ego becomes dominant. When people feel the need to make the big calls, that in a sense it's about them being right rather than them following what markets are doing that traders could run into some real problems.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “I think that's common. I think it's far from always the case, especially lately. People with athletic backgrounds or backgrounds in performance fields in general tend to be competitive. Tend to be interested in winning and losing. And so it's a natural transition in that respect to trading. That being said, I believe that trading is a much more analytical game now than it was, let's say, 20 years ago. And so we see people who have some of the analytical background going into financial markets a little bit different than when it used to be mostly the jocks.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “It's a very important distinction. And obviously, Barry, it's one of the reasons why risk management is one of the most important psychological tools for traders, because there are going to be random streaks of losing trades, and you have to be able to survive that risk of ruin. What we typically look at are two things when someone has a series of losers. The first is have markets themselves changed? Is there something different about the market that we need to adapt to? The second is, has your process changed? Are you doing something differently than when you were winning? Those two questions usually will help us figure out whether we need to take adaptive action or whether it's just bad luck.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Totally voluntary. This is something that is available to traders but not required of them. What I typically find is that in the beginning there are the early adopters and then there are a few tire kickers along the way. And as the results come out and it goes well, then more people hear about it and get interested. And so the interest can grow over time.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “Often the initial request or demand will come from the traders or the portfolio managers themselves. Maybe they have known someone who has worked with me. Maybe they've read my trader feed blog or they've read one of my books. And so they will bring it to the attention of management. Then I'll typically go in to a firm and do a talk for the traders and talk with them about trading, talk with them about psychology, talk about working on performance. And they make a decision from there.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “It's a mixed ratio because, as I mentioned before, sometimes trading problems create psychological frustrations and sometimes psychological issues can interfere with good trading decisions. And a big part of what I do is try to tease apart the causality. Is this a trading problem that's having psychological effects or is it a psychological issue that might be affecting their entire life that's influencing their trading? It's very helpful as a coach to have familiarity with trading, with making trading decisions. I have long contended that my greatest credential as a coach is not the three letters after my name. My greatest credential as a coach is that I have made every mistake that all of the traders I work with have made.”

   2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “The coachability factor partly depends on the capacity for self-observation. People who would be really uncoachable probably never seek out a coach to begin with. But clearly, if someone is more defensive than open-minded to the things that they're doing wrong, that's going to make it a difficult situation for coaching.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “It varies tremendously when I've worked full time at trading firms, then it was not unusual for us to touch base to meet several times a week. There are traders even now.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “And my goal as a coach is to make people aware of those patterns, help them become mindful of those patterns, not tell them how to trade.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “It's very easy for confidence to become overconfidence. Let me give you an anecdote with several traders that I worked with a few years ago. We took a look at their profitability as a function of their level of risk-taking. And so when they were taking relatively little risk, they were consistently profitable. Their hit rate on trades was very good when they were taking the most risk, which was when they were most confident, they were actually losing money because their confidence had become overconfidence. So what we did, we created computerized alerts that told people when their risk-taking was getting into the red zone. As a way of monitoring possible overconfidence. What we were really saying to them is, when you're taking this amount of risk historically, you don't make money.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “They can. And that kind of downward spiral can become a slum. And many traders are familiar with that phenomenon. When people draw down in their trading, as happens to all of us, it's important to have other areas of positive focus. So for instance, one of the things I work with the traders on, if they work within a team, is how they can build their team processes and how they can be more successful, more productive as a team. We work on refining their trading processes and learning from the drawdowns so that they always feel as though they're moving themselves forward even when their accounts aren't necessarily moving forward.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Well, take a step back, but also a lateral step. What the psychological research tells us is that people perform best when they have a healthy amount of positive emotional experience of their lives. That experience could come from relationships, it could come from deeply meaningful activities, it could come from physical exercise. And so what people become overly immersed in trading, they often shut off some of these other positive avenues, and that's part of what helps burn them out”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “Yeah, so they take the problems home with them. They really don't get a chance or give themselves a chance to renew themselves. And they justify that by saying they're so devoted to their trading and so devoted to markets, when in fact they're in the process of burning themselves out.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “Well, the most basic exercise that people associate with coaching of traders would be keeping a journal. So people day in, day out will track the decisions they make and how they made them, why they made them, and the success of those decisions. They may track certain things in their personal life as far as their mood, their energy level, and so forth. And we start to look at the patterns that appear in the journal entries.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “The process begins with self observation, and this is true of any psychological change, we have to become aware of our patterns before we can make changes in those patterns. So typically I will observe a trader in what they're doing. I will give them exercises to help them with self-observation. And we'll begin to observe patterns in what they do. Some successful patterns, some patterns that get them into trouble.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “Great question. And you have to look at both. At one level, when a firm hires me, we have to look at do the traders make use of the resource? One level are they satisfied with it? Do they feel they've benefited from it? So satisfaction is one criterion. The second criterion is a process one. Are they actually doing something different as a result of the meetings? And then the third criterion would be the profitability. Does doing something different translate into better overall performance?”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “I can tell you that there is a lot less drama in my work. And I don't think the nuts and bolts of my work would make it into TV drama. A lot of the improvements that traders make are nuances. It's the block. Incremental? Yeah, incremental. It's the blocking and tackling, so to speak, learning to do things better, identifying mistakes made, where to and how to best execute a trade, how to wait evidence in deciding upon an idea to invest in. Those are the kind of nuances that end up making a big difference in performance, but are not particularly dramatic to work on.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Right I had written my first book, The Psychology of Trading. One of their traders had discovered the book and convinced the owner of the firm to bring me in to work.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “They innovate by tracking patterns in markets, tracking what moves markets, and developing new and different ways of monitoring that and taking advantage of that. So, for instance, an example would be as computers, as algorithmic trading systems became more dominant in the marketplace, we found more traders, both short-term traders and portfolio managers, employing some quantitative techniques to help them understand some of the forces that were moving markets. That's an evolution. That's an adaptation.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Well, there are quite a few, and some of them are trading problems, and some of them are psychological problems. One of the things I emphasize with the traders and the portfolio managers I work with is keeping score. Score of what they do well, keeping score of what they do that needs improvement so that they are always learning from their scene, always recognizing the mistakes they can correct. One of the greatest big picture mistakes that traders can make is the failure to adapt, to changing markets. They hope that they have an edge, a probabilistic edge in the markets. They hope that that edge will last in perpetuity. And in fact, markets change. And just like any business, what worked at one time can become obsolete at another. And failing to innovate is one of the greatest problems.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Psychologically, in terms of working with them as a psychologist, it was not a leap at all. The same exact techniques that were helpful, let's say, to a surgical resident who's working 18 hour days and working under pressure, not different than working with a portfolio manager, let's say at a macro hedge fund.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Upstate in Syracuse. So, my main area of focus was working with very bright, very motivated students, professionals who are under pressure and helping them perform to their maximum. When I started interacting with traders, I noticed similar dynamics to the medical students and residents that I worked with.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Well, up to that point, I had been doing counseling with college students at Cornell and with medical students and residents.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “Was a parallel interest to the psychology, and it helped keep me afloat as a poor starving graduate student. And I maintain that interest throughout my training and throughout my early career as a psychologist.”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “Yeah, it actually, Barry, looks more like a radical shift than it was in reality. I began trading myself in the late 1970s while”

    2017-01-13 · Masters in Business · Interview With Brett Steenbarger: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source