1 00:00:02,200 --> 00:00:06,800 Speaker 1: This is Masters in Business with Barry Ridholts on Boomberg Radio. 2 00:00:07,760 --> 00:00:11,320 Speaker 1: This week on the podcast, I have Dr Brett Steambarger. 3 00:00:11,440 --> 00:00:16,320 Speaker 1: He is a clinical psychologist and a professional trading coach 4 00:00:16,800 --> 00:00:20,240 Speaker 1: who has worked with the likes of Paul Tutor Jones 5 00:00:20,280 --> 00:00:24,159 Speaker 1: and Tutor Investments and a number of other firms that 6 00:00:24,239 --> 00:00:28,080 Speaker 1: are both storied and legendary. You know, this is one 7 00:00:28,120 --> 00:00:32,319 Speaker 1: of those conversations where I know the person virtually. I've 8 00:00:32,360 --> 00:00:36,640 Speaker 1: been reading him for many, many years. We've swapped emails 9 00:00:37,040 --> 00:00:39,360 Speaker 1: over the years, but it was the first time we 10 00:00:39,520 --> 00:00:43,239 Speaker 1: actually met and had a conversation, and I found it 11 00:00:43,479 --> 00:00:49,479 Speaker 1: really quite fascinating. It the idea of performance coaching turns 12 00:00:49,479 --> 00:00:52,160 Speaker 1: out to be somewhat different than you than you might 13 00:00:52,680 --> 00:00:57,120 Speaker 1: have imagined. It's certainly different than is depicted and shows 14 00:00:57,240 --> 00:01:00,640 Speaker 1: like Billions and and all the drama all the rest 15 00:01:00,640 --> 00:01:04,760 Speaker 1: of that sort of stuff just isn't realistic. As he 16 00:01:04,840 --> 00:01:08,639 Speaker 1: describes in the conversation, it's a lot of basic block 17 00:01:08,720 --> 00:01:12,880 Speaker 1: and tackling and a lot of work on on fundamentals. 18 00:01:13,000 --> 00:01:18,200 Speaker 1: Enhancing the positive minimizing the negative probably doesn't make for 19 00:01:18,400 --> 00:01:23,000 Speaker 1: a fascinating uh television show, but the proof is in 20 00:01:23,040 --> 00:01:26,360 Speaker 1: the pudding and the firms that hire him show an 21 00:01:26,400 --> 00:01:30,600 Speaker 1: actual improvement not only in the process and the satisfaction 22 00:01:30,760 --> 00:01:33,880 Speaker 1: level of traders, but ultimately in their P and L 23 00:01:33,959 --> 00:01:39,120 Speaker 1: and that that seems to be the bottom line. What 24 00:01:39,200 --> 00:01:42,960 Speaker 1: he does works uh for firms that have humans who 25 00:01:43,080 --> 00:01:48,080 Speaker 1: have discretion over deploying capital. So if you are an investor, 26 00:01:48,080 --> 00:01:53,040 Speaker 1: a trader, or someone who's just interested in human psychology, 27 00:01:53,080 --> 00:01:57,320 Speaker 1: I think you will find this to be an interesting conversation. So, 28 00:01:57,520 --> 00:02:01,240 Speaker 1: with no further ado, uh, my interview with Dr Brett 29 00:02:01,240 --> 00:02:07,360 Speaker 1: steam Barger. This is Masters in Business with Barry Ridholts 30 00:02:07,480 --> 00:02:10,200 Speaker 1: on Bloomberg Radio. This week on the show, we have 31 00:02:10,440 --> 00:02:14,480 Speaker 1: Dr Brett steam Barger. He is a clinical psychologist and 32 00:02:14,560 --> 00:02:17,520 Speaker 1: a trading coach, and he has worked with such storied 33 00:02:17,560 --> 00:02:23,120 Speaker 1: firms as Kingstree Trading and Tutor Investments. Dr Brett stein Barger, 34 00:02:23,320 --> 00:02:26,519 Speaker 1: Welcome to Bloomberg. Thanks for having me, Barry. So, you 35 00:02:26,880 --> 00:02:30,720 Speaker 1: have a really interesting background. You graduate with a b a. 36 00:02:31,000 --> 00:02:33,919 Speaker 1: In psychology from Duke and seventy six, You get your 37 00:02:33,919 --> 00:02:38,239 Speaker 1: pH d from the University of Kansas two and then 38 00:02:38,280 --> 00:02:42,560 Speaker 1: you begin what looks like a pretty typical academic career 39 00:02:43,200 --> 00:02:48,800 Speaker 1: in clinical psychology New York City, Courtland, Cornell, Syracuse, and 40 00:02:48,800 --> 00:02:51,560 Speaker 1: then all of a sudden you end up at a 41 00:02:51,639 --> 00:02:56,959 Speaker 1: trading shop. How did how did that shift come about? Yeah? It, actually, Barry, 42 00:02:57,000 --> 00:03:01,320 Speaker 1: looks more like a radical shift than it was in reality. 43 00:03:01,360 --> 00:03:06,320 Speaker 1: I began trading myself in the late nineteen seventies while 44 00:03:06,360 --> 00:03:09,280 Speaker 1: I was in graduate school, and so it was a 45 00:03:09,360 --> 00:03:13,280 Speaker 1: parallel interest to the psychology and it helped keep me 46 00:03:13,320 --> 00:03:18,880 Speaker 1: afloat as a poor, starving graduate student. And I maintained 47 00:03:18,880 --> 00:03:22,680 Speaker 1: that interest throughout my training and throughout my early career 48 00:03:22,760 --> 00:03:26,919 Speaker 1: as a psychologist. So what was the event that led 49 00:03:27,000 --> 00:03:31,160 Speaker 1: you to start coaching traders. Well, up to that point, 50 00:03:31,400 --> 00:03:35,800 Speaker 1: I had been doing counseling with college students at Cornell 51 00:03:36,440 --> 00:03:40,960 Speaker 1: and with medical students and residence at SUNNI Upstate in Syracuse. 52 00:03:41,600 --> 00:03:46,680 Speaker 1: So my main area of focus was working with very bright, 53 00:03:47,360 --> 00:03:53,520 Speaker 1: very motivated students, professionals under who are under pressure and 54 00:03:53,640 --> 00:03:59,440 Speaker 1: helping them perform to their maximum. When I started interacting 55 00:03:59,520 --> 00:04:03,520 Speaker 1: with trade leaders, I noticed similar dynamics to the medical 56 00:04:03,560 --> 00:04:05,920 Speaker 1: students and residents that I worked with. Not not a 57 00:04:05,960 --> 00:04:09,320 Speaker 1: big leap that it was psychologically in terms of working 58 00:04:09,320 --> 00:04:11,480 Speaker 1: with them as a psychologist. It was not a leap 59 00:04:11,560 --> 00:04:15,280 Speaker 1: at all the same exact techniques that were helpful. Let's 60 00:04:15,280 --> 00:04:19,520 Speaker 1: say to a surgical resident who's working eighteen hour days 61 00:04:19,680 --> 00:04:23,080 Speaker 1: and working under pressure, not different than working with a 62 00:04:23,120 --> 00:04:26,440 Speaker 1: portfolio manager, let's say at a macro hedge fund. So 63 00:04:27,000 --> 00:04:30,000 Speaker 1: let's um, let's talk about some of the errors that 64 00:04:30,160 --> 00:04:34,120 Speaker 1: traders make that are fixable coachable. I don't even know 65 00:04:34,200 --> 00:04:36,839 Speaker 1: what what's the right phrase to do that? What? What 66 00:04:36,920 --> 00:04:42,160 Speaker 1: are the typical problems that you see amongst traders, Well, 67 00:04:42,200 --> 00:04:43,800 Speaker 1: there are quite a few, and some of them are 68 00:04:43,839 --> 00:04:47,360 Speaker 1: trading problems and some of them are psychological problems. One 69 00:04:47,400 --> 00:04:50,120 Speaker 1: of the things I emphasize with the traders and the 70 00:04:50,200 --> 00:04:54,279 Speaker 1: portfolio managers I work with is keeping score, keeping score 71 00:04:54,360 --> 00:04:57,080 Speaker 1: of what they do well, keeping score of what they 72 00:04:57,080 --> 00:05:00,440 Speaker 1: do that needs improvement, so that they are always learning 73 00:05:00,560 --> 00:05:04,760 Speaker 1: from their experience, always recognizing the mistakes they can correct. 74 00:05:05,360 --> 00:05:09,200 Speaker 1: One of the greatest big picture mistakes that traders can 75 00:05:09,240 --> 00:05:14,560 Speaker 1: make is the failure to adapt to changing markets. They 76 00:05:14,600 --> 00:05:18,560 Speaker 1: hope that they have an edge, probabilistic edge in the markets. 77 00:05:18,800 --> 00:05:22,520 Speaker 1: They hope that that edge will last in perpetuity, and 78 00:05:22,560 --> 00:05:26,720 Speaker 1: in fact, markets change, and just like any business, what 79 00:05:26,760 --> 00:05:30,040 Speaker 1: worked at one time can become obsolete at another and 80 00:05:30,400 --> 00:05:33,919 Speaker 1: failing to innovate is one of the greatest problems. Failing 81 00:05:33,960 --> 00:05:40,839 Speaker 1: to innovate. Just describe how individual traders innovate. They innovate 82 00:05:41,240 --> 00:05:47,679 Speaker 1: by tracking patterns in markets, tracking what moves markets, and 83 00:05:47,960 --> 00:05:52,360 Speaker 1: developing new and different ways of monitoring that and taking 84 00:05:52,400 --> 00:05:56,000 Speaker 1: advantage of that. So, for instance, an example would be 85 00:05:56,680 --> 00:06:02,800 Speaker 1: as computers, as algorith big trading systems became more dominant 86 00:06:03,240 --> 00:06:08,280 Speaker 1: in the marketplace, we found more traders, both short term 87 00:06:08,279 --> 00:06:13,679 Speaker 1: traders and portfolio managers employing some quantitative techniques to help 88 00:06:13,760 --> 00:06:16,760 Speaker 1: them understand some of the forces that we're moving markets. 89 00:06:17,120 --> 00:06:21,000 Speaker 1: That's an evolution, that's adaptation. So let's talk about when 90 00:06:21,040 --> 00:06:24,880 Speaker 1: you shifted, Um, is it fair to call at full 91 00:06:24,920 --> 00:06:28,480 Speaker 1: time as a trader coach? Was it two thousand four 92 00:06:29,040 --> 00:06:32,520 Speaker 1: Kingstreet Trading, who for people may not be familiar with them, 93 00:06:32,560 --> 00:06:35,560 Speaker 1: at one point in time they were of all the 94 00:06:35,600 --> 00:06:40,240 Speaker 1: futures trading at the Chicago Mark. They recruit you, Um, yes, 95 00:06:40,320 --> 00:06:42,800 Speaker 1: to be the head of trader development. Is that that's right? 96 00:06:42,880 --> 00:06:45,680 Speaker 1: That's right. So I had written my first book, The 97 00:06:45,720 --> 00:06:49,279 Speaker 1: Psychology of Trading, and one of their traders had discovered 98 00:06:49,320 --> 00:06:52,320 Speaker 1: the book and convinced the owner of the firm to 99 00:06:52,360 --> 00:06:54,960 Speaker 1: bring me in to work with the traders. That went 100 00:06:55,080 --> 00:06:57,839 Speaker 1: very well, and they hired me on a full time basis. 101 00:06:58,040 --> 00:07:00,840 Speaker 1: I left the Ivory Tower and went full time to 102 00:07:00,960 --> 00:07:04,000 Speaker 1: working at a crazy trading firm in Chicago with people 103 00:07:04,040 --> 00:07:06,960 Speaker 1: I loved. So I would imagine a lot of people 104 00:07:06,960 --> 00:07:09,400 Speaker 1: who are listening to this might be familiar with the 105 00:07:09,440 --> 00:07:13,880 Speaker 1: idea of a trading coach from the showtime show Billions. 106 00:07:14,400 --> 00:07:16,800 Speaker 1: Have you seen it? Does it doesn't ring true? Or 107 00:07:16,840 --> 00:07:21,640 Speaker 1: is it just a Hollywood dramatization of that sort of relationship. 108 00:07:21,680 --> 00:07:24,400 Speaker 1: I can tell you that there's a lot less drama 109 00:07:24,480 --> 00:07:28,320 Speaker 1: in my work, and I don't think the nuts and 110 00:07:28,360 --> 00:07:31,120 Speaker 1: bolts of my work would make it into TV drama. 111 00:07:31,520 --> 00:07:37,160 Speaker 1: A lot of the improvements that traders make are nuances 112 00:07:36,880 --> 00:07:39,880 Speaker 1: that it's the block crement, yeah, incremental, it's the blocking 113 00:07:39,920 --> 00:07:43,280 Speaker 1: and tackling, so to speak, learning to do things better, 114 00:07:43,360 --> 00:07:48,240 Speaker 1: identifying mistakes made, where to and how to best execute 115 00:07:48,240 --> 00:07:53,680 Speaker 1: a trade, how to wait evidence in, deciding upon an 116 00:07:53,720 --> 00:07:56,880 Speaker 1: idea to invest in. Those are the kind of nuances 117 00:07:57,000 --> 00:07:59,480 Speaker 1: that end up making a big difference in performance, but 118 00:07:59,520 --> 00:08:02,680 Speaker 1: are not particularly traumatic to work on. You hinted something 119 00:08:02,720 --> 00:08:05,280 Speaker 1: that I had that raises another question in my mind. 120 00:08:05,600 --> 00:08:09,440 Speaker 1: When you evaluate how well you're doing, is it just 121 00:08:09,600 --> 00:08:12,720 Speaker 1: a function of the trader's P and L or are 122 00:08:12,760 --> 00:08:16,800 Speaker 1: you looking at process more than outcome? Great question, and 123 00:08:17,280 --> 00:08:20,400 Speaker 1: you have to look at both. You know, at one level, 124 00:08:20,400 --> 00:08:23,400 Speaker 1: what a affirm hires me. We have to look at 125 00:08:23,560 --> 00:08:28,080 Speaker 1: do the traders make use of the resource? That's one level. 126 00:08:28,120 --> 00:08:31,280 Speaker 1: Are are they satisfied with it? Do they feel they've 127 00:08:31,320 --> 00:08:37,040 Speaker 1: benefited from it? So satisfaction is one criterion. The second 128 00:08:37,040 --> 00:08:40,840 Speaker 1: criterion is a process one. Are they actually doing something 129 00:08:41,040 --> 00:08:44,680 Speaker 1: different as a result of the meetings? And then the 130 00:08:44,760 --> 00:08:49,080 Speaker 1: third criterion would be the profitability. Does doing something different 131 00:08:49,120 --> 00:08:54,960 Speaker 1: translate into better overall performance? I'm very Rihults. You're listening 132 00:08:55,000 --> 00:08:58,840 Speaker 1: to Masters in Business on Bloomberg Radio. My special guest 133 00:08:58,880 --> 00:09:03,280 Speaker 1: today is Dr Steam Barger. He is a clinical psychologist 134 00:09:03,800 --> 00:09:07,680 Speaker 1: and professional trading coach. Let's talk a little bit about 135 00:09:07,920 --> 00:09:12,160 Speaker 1: the process of coaching traders and investors. Where does that 136 00:09:12,240 --> 00:09:17,480 Speaker 1: process begin. The process begins with self observation, and this 137 00:09:17,600 --> 00:09:20,920 Speaker 1: is true of any psychological change. We have to become 138 00:09:21,080 --> 00:09:25,520 Speaker 1: aware of our patterns before we can make changes in 139 00:09:25,559 --> 00:09:30,800 Speaker 1: those patterns. So typically, I will observe a trader and 140 00:09:30,880 --> 00:09:32,800 Speaker 1: what they're doing. I will have I will give them 141 00:09:32,840 --> 00:09:37,280 Speaker 1: exercises to help them with self observation, and will begin 142 00:09:37,400 --> 00:09:42,000 Speaker 1: to observe patterns and what they do, some successful patterns, 143 00:09:42,080 --> 00:09:44,720 Speaker 1: some patterns that get them into trouble. What what's what 144 00:09:44,760 --> 00:09:48,680 Speaker 1: do these exercises look like? That sounds interesting? Well, the 145 00:09:48,720 --> 00:09:52,760 Speaker 1: most basic exercise that people associate with coaching of traders 146 00:09:52,760 --> 00:09:56,600 Speaker 1: would be keeping a journal, so people, day in day out, 147 00:09:56,840 --> 00:10:00,000 Speaker 1: will track the decisions they make and how they made them, 148 00:10:00,000 --> 00:10:02,640 Speaker 1: why they made them, and the success of those decisions. 149 00:10:02,960 --> 00:10:05,480 Speaker 1: They may track certain things in their personal life as 150 00:10:05,520 --> 00:10:08,120 Speaker 1: far as their mood, their energy level, and so forth, 151 00:10:08,679 --> 00:10:11,520 Speaker 1: and we start to look at the patterns that appear 152 00:10:12,360 --> 00:10:16,079 Speaker 1: in the journal entries. So, what are some of the 153 00:10:16,760 --> 00:10:20,080 Speaker 1: bad habits you see that traders engage in. Some of 154 00:10:20,120 --> 00:10:24,280 Speaker 1: the bad habits that traders engage in is are an 155 00:10:24,280 --> 00:10:28,360 Speaker 1: inability to turn it off, so to speak. Explain that 156 00:10:28,360 --> 00:10:31,280 Speaker 1: a little bit, Yes, so they take the problems home 157 00:10:31,320 --> 00:10:35,200 Speaker 1: with them. They really don't get a chance or give 158 00:10:35,240 --> 00:10:40,439 Speaker 1: themselves a chance to renew themselves. And they justify that 159 00:10:40,520 --> 00:10:43,200 Speaker 1: by saying they're so devoted to their trading and so 160 00:10:43,280 --> 00:10:45,920 Speaker 1: devoted to markets when in fact they're in the process 161 00:10:45,920 --> 00:10:48,480 Speaker 1: of burning themselves out. Sometimes you have to take one 162 00:10:48,480 --> 00:10:51,560 Speaker 1: step back to go two steps forward. Well, take a 163 00:10:51,600 --> 00:10:54,960 Speaker 1: step back, but also a lateral step. What the psychological 164 00:10:55,000 --> 00:10:59,280 Speaker 1: research tells us is that people perform best when they 165 00:10:59,360 --> 00:11:03,760 Speaker 1: have a healthy amount of positive emotional experience of their lives. 166 00:11:04,400 --> 00:11:08,120 Speaker 1: And that experience could come from relationships, it could come 167 00:11:08,280 --> 00:11:13,640 Speaker 1: from deeply meaningful activities, it could come from physical exercise. 168 00:11:14,200 --> 00:11:19,520 Speaker 1: And so what people become overly immersed in trading, they 169 00:11:19,600 --> 00:11:23,720 Speaker 1: often shut off some of these other positive avenues and 170 00:11:23,800 --> 00:11:25,960 Speaker 1: that's part of what helps burn them out. What what 171 00:11:26,080 --> 00:11:30,520 Speaker 1: about work satisfaction? What happens when a person's work satisfaction falls. 172 00:11:30,600 --> 00:11:34,040 Speaker 1: Do they find themselves in a downward spiral that becomes 173 00:11:34,160 --> 00:11:37,440 Speaker 1: challenging to break? They can, And that kind of downward 174 00:11:37,480 --> 00:11:42,040 Speaker 1: spiral can become a slump, and many traders are familiar 175 00:11:42,120 --> 00:11:48,440 Speaker 1: with that phenomenon. When people draw down in their trading, 176 00:11:48,520 --> 00:11:52,200 Speaker 1: as happens to all of us, it's important to have 177 00:11:52,520 --> 00:11:57,960 Speaker 1: other areas of positive focus. So, for instance, one of 178 00:11:58,000 --> 00:12:01,160 Speaker 1: the things I work with the raiders on if they 179 00:12:01,200 --> 00:12:03,760 Speaker 1: work within a team, is how they can build their 180 00:12:03,800 --> 00:12:07,439 Speaker 1: team processes and how they can be more successful, more productive. 181 00:12:07,440 --> 00:12:11,959 Speaker 1: As a team, we work on refining their trading processes 182 00:12:12,000 --> 00:12:15,480 Speaker 1: and learning from the draw downs so that they always 183 00:12:15,600 --> 00:12:19,679 Speaker 1: feel as though they're moving themselves forward, even when their 184 00:12:19,679 --> 00:12:22,680 Speaker 1: accounts aren't necessarily moving forward. So let me ask you 185 00:12:22,720 --> 00:12:26,480 Speaker 1: the opposite question. I always ran into trouble as a trader, 186 00:12:26,679 --> 00:12:29,640 Speaker 1: not when I was having trouble, but when I was 187 00:12:29,679 --> 00:12:33,079 Speaker 1: on a hot streak, when I felt whatever I touched 188 00:12:33,120 --> 00:12:36,920 Speaker 1: turned to gold, and that invariably ended badly. What do 189 00:12:36,920 --> 00:12:40,080 Speaker 1: you do when you have somebody who's just on fire 190 00:12:40,320 --> 00:12:43,360 Speaker 1: and you want to rein them in without you know, 191 00:12:43,480 --> 00:12:47,720 Speaker 1: reigning on their parade. It's very easy for confidence to 192 00:12:47,760 --> 00:12:51,280 Speaker 1: become over confidence. Let me give you an anecdote. With 193 00:12:51,320 --> 00:12:54,000 Speaker 1: several traders that I worked with a few years ago, 194 00:12:54,679 --> 00:12:59,400 Speaker 1: we took a look at their profitability as a function 195 00:12:59,440 --> 00:13:02,760 Speaker 1: of their level of risk taking, and so when they 196 00:13:02,800 --> 00:13:07,880 Speaker 1: were taking relatively little risk, they were consistently profitable. Their 197 00:13:07,960 --> 00:13:11,199 Speaker 1: hit rate on trades was very good. When they were 198 00:13:11,240 --> 00:13:14,800 Speaker 1: taking the most risk, which is when they were most confident, 199 00:13:15,000 --> 00:13:18,880 Speaker 1: they were actually losing money because their confidence had become 200 00:13:18,960 --> 00:13:24,400 Speaker 1: over confidence. So what we did we created computer arized 201 00:13:24,440 --> 00:13:28,160 Speaker 1: alerts that told people when their risk taking was getting 202 00:13:28,200 --> 00:13:32,480 Speaker 1: into the red zone as a way of monitoring possible 203 00:13:32,559 --> 00:13:35,360 Speaker 1: over confidence. What we were really saying to them is 204 00:13:35,640 --> 00:13:39,520 Speaker 1: when you're taking this amount of risk, historically, you don't 205 00:13:39,520 --> 00:13:43,640 Speaker 1: make money. So the baseball analogy is the difference between 206 00:13:43,720 --> 00:13:45,720 Speaker 1: just getting wood on the ball and getting on base 207 00:13:45,880 --> 00:13:49,520 Speaker 1: versus swinging for the fences and striking out. That's right, 208 00:13:49,600 --> 00:13:52,000 Speaker 1: that's right, fair way to look at it, and and 209 00:13:52,400 --> 00:13:55,480 Speaker 1: my goal as a coach is to make people aware 210 00:13:55,520 --> 00:13:59,720 Speaker 1: of those patterns, help them become mindful of those patterns, 211 00:13:59,720 --> 00:14:03,080 Speaker 1: not tell them how to trade. So how often are 212 00:14:03,080 --> 00:14:05,880 Speaker 1: you sitting down with traders? Is this a weekly thing, 213 00:14:05,920 --> 00:14:10,040 Speaker 1: a daily, a monthly? What what is the usual time 214 00:14:10,040 --> 00:14:12,920 Speaker 1: frame for someone like? It varies tremendously. When I've worked 215 00:14:12,960 --> 00:14:17,479 Speaker 1: full time at trading firms, then it was not unusual 216 00:14:17,679 --> 00:14:21,200 Speaker 1: for us to touch base to meet several times a week. 217 00:14:21,520 --> 00:14:25,240 Speaker 1: There are traders even now that I meet with who 218 00:14:25,280 --> 00:14:28,040 Speaker 1: will send me their journal entries on a daily basis 219 00:14:28,480 --> 00:14:32,120 Speaker 1: as a way of getting quick feedback. But others times 220 00:14:32,160 --> 00:14:36,960 Speaker 1: it's a monthly process. In some cases it's as wanted 221 00:14:37,000 --> 00:14:41,360 Speaker 1: as needed, So it really depends on the urgency that 222 00:14:41,480 --> 00:14:45,160 Speaker 1: the trader feels in terms of need for change. So 223 00:14:45,440 --> 00:14:48,600 Speaker 1: there's a related question to that, the feeling the need 224 00:14:48,920 --> 00:14:53,680 Speaker 1: for change, which is what makes somebody coachable if that's 225 00:14:53,720 --> 00:14:58,200 Speaker 1: the right word, And the corollary, are some traders just 226 00:14:58,400 --> 00:15:04,120 Speaker 1: uncoachable the coach doable? The coachability factor partly depends on 227 00:15:04,160 --> 00:15:07,960 Speaker 1: the capacity for self observation. People who would be really 228 00:15:08,040 --> 00:15:11,120 Speaker 1: uncoachable probably never seek out a coach to begin with, 229 00:15:11,840 --> 00:15:16,680 Speaker 1: But clearly if someone is more defensive than open minded 230 00:15:17,040 --> 00:15:19,640 Speaker 1: to the things that they're doing wrong, that's going to 231 00:15:19,720 --> 00:15:24,480 Speaker 1: make it a difficult situation for coaching. So I one 232 00:15:24,480 --> 00:15:27,240 Speaker 1: of the questions I had tied up, which you kind 233 00:15:27,240 --> 00:15:29,520 Speaker 1: of answered, but I have to go back to it, 234 00:15:29,600 --> 00:15:32,680 Speaker 1: is how much do you need to know about trading 235 00:15:32,920 --> 00:15:36,560 Speaker 1: to be an effective trading coach? And maybe a better way, 236 00:15:36,920 --> 00:15:39,960 Speaker 1: now that I know you've been trading for thirty plus years, 237 00:15:40,240 --> 00:15:43,320 Speaker 1: maybe the better way to ask that question is what's 238 00:15:43,360 --> 00:15:48,520 Speaker 1: the ratio between psychology and trading when you're coaching people? 239 00:15:48,760 --> 00:15:52,640 Speaker 1: It's a mixed ratio because, as I mentioned before, sometimes 240 00:15:52,680 --> 00:15:59,200 Speaker 1: trading problems create psychological frustrations, and sometimes psychological issues can 241 00:15:59,320 --> 00:16:02,960 Speaker 1: interfere with good trading decisions, and a big part of 242 00:16:02,960 --> 00:16:08,000 Speaker 1: what I do is try to tease apart the causality. 243 00:16:08,280 --> 00:16:13,120 Speaker 1: Is this a trading problem that's having psychological effects, or 244 00:16:13,240 --> 00:16:15,360 Speaker 1: is it a psychological issue that might be affecting their 245 00:16:15,520 --> 00:16:20,320 Speaker 1: entire life that's influencing their trading. It's very helpful as 246 00:16:20,360 --> 00:16:26,280 Speaker 1: a coach to have familiarity with trading, with making trading decisions. 247 00:16:26,320 --> 00:16:30,480 Speaker 1: I have long contended that my greatest credential as a 248 00:16:30,520 --> 00:16:34,280 Speaker 1: coach is not the three letters after my name. My 249 00:16:34,400 --> 00:16:37,280 Speaker 1: greatest credential as a coach is that I have made 250 00:16:37,360 --> 00:16:40,760 Speaker 1: every mistake that all of the traders I work with 251 00:16:40,880 --> 00:16:44,280 Speaker 1: have made. I'm Barry Hults. You're listening to Master's in 252 00:16:44,320 --> 00:16:49,200 Speaker 1: Business on Bloomberg Radio. My guest today is Dr Brett Steambarger. 253 00:16:49,400 --> 00:16:54,040 Speaker 1: He is a clinical psychologist and a trading coach who 254 00:16:54,080 --> 00:16:57,840 Speaker 1: graduated from the University of Kansas with a PhD. In 255 00:17:00,080 --> 00:17:03,000 Speaker 1: Let's jump right into some of the things you do 256 00:17:03,320 --> 00:17:07,239 Speaker 1: coaching traders. How does a firm go about deciding we 257 00:17:07,280 --> 00:17:09,400 Speaker 1: want to work with the trading coach. We think there's 258 00:17:09,440 --> 00:17:12,240 Speaker 1: some gains to be had from that. Often the initial 259 00:17:12,640 --> 00:17:15,840 Speaker 1: request or demand will come from the traders or the 260 00:17:15,840 --> 00:17:21,440 Speaker 1: portfolio managers themselves. Maybe they have known someone who has 261 00:17:21,480 --> 00:17:25,240 Speaker 1: worked with me, maybe they've read my trader feed blog, 262 00:17:25,359 --> 00:17:27,880 Speaker 1: or they've read one of my books, and so they 263 00:17:27,960 --> 00:17:31,160 Speaker 1: will bring it to the attention of management. Then I'll 264 00:17:31,200 --> 00:17:34,399 Speaker 1: typically go into a firm and do a talk for 265 00:17:34,440 --> 00:17:37,520 Speaker 1: the traders and talk with them about trading, talk with 266 00:17:37,560 --> 00:17:41,520 Speaker 1: them about psychology, talk about working on performance, and they 267 00:17:41,560 --> 00:17:45,000 Speaker 1: make a decision from there. So someone decides they want 268 00:17:45,000 --> 00:17:48,800 Speaker 1: to work with you, And at that point, isn't mandate? 269 00:17:48,960 --> 00:17:51,560 Speaker 1: Is voluntary to people? How do people start filling up 270 00:17:51,600 --> 00:17:56,199 Speaker 1: your calendar? How does that work? Totally voluntary? This is 271 00:17:56,240 --> 00:18:01,200 Speaker 1: something that is available to traders, but not required of them. 272 00:18:01,240 --> 00:18:04,000 Speaker 1: What I typically find is that in the beginning there 273 00:18:04,000 --> 00:18:06,920 Speaker 1: are the early adopters, and then there are a few 274 00:18:06,960 --> 00:18:10,960 Speaker 1: tire kickers along the way, And as the results come 275 00:18:11,000 --> 00:18:14,280 Speaker 1: out and it goes well, then more people here about 276 00:18:14,320 --> 00:18:18,000 Speaker 1: it and get interested, and so the interest can grow 277 00:18:18,119 --> 00:18:22,720 Speaker 1: over time. So we talked earlier about hot and cold streaks. 278 00:18:22,720 --> 00:18:25,960 Speaker 1: But the question I have you is, Hey, sometimes you 279 00:18:26,000 --> 00:18:28,600 Speaker 1: flip a coin and you get ten tales in a row. 280 00:18:29,720 --> 00:18:33,120 Speaker 1: How challenging it is it to tell the difference between 281 00:18:33,800 --> 00:18:37,600 Speaker 1: someone whose process has some issues and someone who, hey, 282 00:18:37,640 --> 00:18:40,040 Speaker 1: sometimes you know the dice, just don't don't go your 283 00:18:40,040 --> 00:18:42,680 Speaker 1: way for a while, and eventually that will turn around 284 00:18:42,720 --> 00:18:46,879 Speaker 1: on its own. It's a very important distinction, and obviously, Mary, 285 00:18:46,920 --> 00:18:49,840 Speaker 1: it's one of the reasons why risk management is one 286 00:18:49,880 --> 00:18:54,320 Speaker 1: of the most important psychological tools for traders, because there 287 00:18:54,320 --> 00:18:58,320 Speaker 1: are going to be random streaks of losing trades and 288 00:18:58,359 --> 00:19:01,440 Speaker 1: you have to be able to survive that risk of ruin. 289 00:19:02,080 --> 00:19:04,960 Speaker 1: What we typically look at or two things when someone 290 00:19:05,119 --> 00:19:08,960 Speaker 1: has a series of losers. The first is have markets 291 00:19:09,000 --> 00:19:12,639 Speaker 1: themselves changed? Is there something different about the market that 292 00:19:12,720 --> 00:19:15,200 Speaker 1: we need to adapt to? The second is has your 293 00:19:15,200 --> 00:19:19,199 Speaker 1: process changed? Are you doing something differently than when you 294 00:19:19,280 --> 00:19:25,400 Speaker 1: were winning? And those two questions usually will help us 295 00:19:25,440 --> 00:19:28,439 Speaker 1: figure out whether we need to take adaptive action or 296 00:19:28,480 --> 00:19:33,320 Speaker 1: whether it's just bad luck. So you mentioned winning and losing, 297 00:19:33,400 --> 00:19:35,520 Speaker 1: and I'm gonna go off script a second ask you 298 00:19:35,560 --> 00:19:39,080 Speaker 1: a question that I've always been fascinated by, which is 299 00:19:39,240 --> 00:19:42,760 Speaker 1: you're looking around Wall Street and the traders that are there. 300 00:19:43,359 --> 00:19:48,080 Speaker 1: Forget the algorithms, but the actual human traders historically have 301 00:19:48,520 --> 00:19:54,199 Speaker 1: come from a um collegiate athletics background that seems to 302 00:19:54,240 --> 00:19:58,119 Speaker 1: be rifle of Wall Street any thoughts on that. I 303 00:19:58,160 --> 00:20:03,640 Speaker 1: think that's common. I I think it's far from always 304 00:20:03,680 --> 00:20:09,400 Speaker 1: the case, especially lately. People with athletic backgrounds or backgrounds 305 00:20:09,400 --> 00:20:14,480 Speaker 1: in performance fields in general tend to be competitive, tend 306 00:20:14,520 --> 00:20:18,080 Speaker 1: to be interested in winning and losing, and so it's 307 00:20:18,119 --> 00:20:23,120 Speaker 1: a natural transition in that respect to trading. Uh. That 308 00:20:23,200 --> 00:20:26,919 Speaker 1: being said, I believe that trading is a much more 309 00:20:26,960 --> 00:20:31,640 Speaker 1: analytical game now than it was let's say, twenty years ago, 310 00:20:32,359 --> 00:20:35,879 Speaker 1: and so we see people who have some of the 311 00:20:35,960 --> 00:20:42,040 Speaker 1: analytical background going into financial markets a little bit different 312 00:20:42,119 --> 00:20:46,200 Speaker 1: than when it used to be mostly the jocks. Makes sense. 313 00:20:46,560 --> 00:20:49,240 Speaker 1: Let's let's talk a little bit about ego. How important 314 00:20:49,320 --> 00:20:52,840 Speaker 1: is it to have a healthy ego and when can 315 00:20:52,880 --> 00:20:56,680 Speaker 1: that run them up. You have to have some ego 316 00:20:56,920 --> 00:21:01,520 Speaker 1: to believe that you can outperform all of these other motivated, 317 00:21:01,880 --> 00:21:06,200 Speaker 1: talented participants in the marketplace, and you have to have 318 00:21:06,280 --> 00:21:10,560 Speaker 1: an ego to be resilient to the inevitable periods of losing. 319 00:21:11,119 --> 00:21:17,800 Speaker 1: It's when the ego becomes dominant when people feel the 320 00:21:18,000 --> 00:21:22,560 Speaker 1: need to make the big calls. In a sense, it's 321 00:21:22,600 --> 00:21:28,320 Speaker 1: about them being right rather than them following what markets 322 00:21:28,320 --> 00:21:32,679 Speaker 1: are doing. That traders can run into some real problems. 323 00:21:33,600 --> 00:21:35,639 Speaker 1: That's funny you say that. A few weeks ago in 324 00:21:35,720 --> 00:21:39,600 Speaker 1: a column I referenced a Ned Davis book whose cover 325 00:21:40,000 --> 00:21:43,080 Speaker 1: I love. The title I loved, which was being right 326 00:21:43,280 --> 00:21:46,560 Speaker 1: or making money? And it's just well, you can choose 327 00:21:46,600 --> 00:21:48,399 Speaker 1: you Is it the ego or is it the P 328 00:21:48,560 --> 00:21:50,919 Speaker 1: and L that matters? Yes. The way I sometimes have 329 00:21:51,240 --> 00:21:54,520 Speaker 1: put it is that if you're engaged in a dance 330 00:21:54,880 --> 00:21:57,680 Speaker 1: with the market, you have to let the market lead. 331 00:21:58,920 --> 00:22:01,040 Speaker 1: I like that. I like that a lot. So what 332 00:22:01,359 --> 00:22:05,200 Speaker 1: is more to follow up on the athletic theme. What's 333 00:22:05,240 --> 00:22:11,920 Speaker 1: more important? Offense or defense? Well, clearly both are important. Um, 334 00:22:11,960 --> 00:22:15,200 Speaker 1: if you don't have good defense, you simply don't stay 335 00:22:15,200 --> 00:22:19,399 Speaker 1: in the game. And so what we typically find is 336 00:22:19,520 --> 00:22:24,320 Speaker 1: beginning traders often their greatest problem is overtrading, becoming too 337 00:22:24,400 --> 00:22:28,760 Speaker 1: eager and trading way too much and not managing their risk. Well, 338 00:22:28,920 --> 00:22:32,199 Speaker 1: I'm Barry Ridhults. You're listening to Masters in Business on 339 00:22:32,240 --> 00:22:36,040 Speaker 1: Bloomberg Radio. My special guest today is Dr Brett steam Barger. 340 00:22:36,119 --> 00:22:39,320 Speaker 1: He is a clinical psychologist and trading coach who has 341 00:22:39,359 --> 00:22:43,600 Speaker 1: worked with some legendary firms and traders out there. Let's 342 00:22:43,680 --> 00:22:47,800 Speaker 1: let's talk about the modern era of trading, we've seen 343 00:22:47,840 --> 00:22:53,920 Speaker 1: a number of traders replaced with effectively software. High frequency 344 00:22:53,960 --> 00:22:58,280 Speaker 1: trading has made it much more challenging. How much more 345 00:22:58,400 --> 00:23:02,280 Speaker 1: difficult is it to be a trader today then when 346 00:23:02,280 --> 00:23:05,040 Speaker 1: I began twenty five years ago, Well, when you began 347 00:23:05,080 --> 00:23:09,040 Speaker 1: over thirty years ago, it is more difficult and more 348 00:23:09,119 --> 00:23:12,320 Speaker 1: complex in a number of ways. And I'll mention too. 349 00:23:12,520 --> 00:23:15,639 Speaker 1: The first is the respect that you are talking about. 350 00:23:15,960 --> 00:23:20,840 Speaker 1: There are an increasing number of market participants, particularly algorithmic 351 00:23:21,280 --> 00:23:26,639 Speaker 1: that are making decisions upon high frequency data. What's being bought, 352 00:23:26,680 --> 00:23:30,320 Speaker 1: what's being sold each transaction, is it occurring nearer to 353 00:23:30,400 --> 00:23:33,000 Speaker 1: a bid price, nearer to an offer price, and it's 354 00:23:33,119 --> 00:23:37,680 Speaker 1: quickly aggregating all this information to tell them our buyer's dominant, 355 00:23:37,680 --> 00:23:42,120 Speaker 1: seller's dominant, and making rapid decisions. And so a lot 356 00:23:42,359 --> 00:23:47,919 Speaker 1: of the market movement is not occurring because of quote 357 00:23:47,960 --> 00:23:54,120 Speaker 1: unquote fundamental reasons. Traders of old would look at the world. 358 00:23:54,200 --> 00:23:57,200 Speaker 1: They would look at a company and its earnings and 359 00:23:57,560 --> 00:24:01,280 Speaker 1: predicate their decisions on that basis. An increasing amount of 360 00:24:01,280 --> 00:24:05,159 Speaker 1: market movement is coming from other directions. So that's the 361 00:24:05,240 --> 00:24:08,400 Speaker 1: first way in which trading is challenging in the modern era. 362 00:24:08,800 --> 00:24:11,880 Speaker 1: The second way, as you and I know, the world 363 00:24:12,400 --> 00:24:16,480 Speaker 1: is a much more global place, and it's no longer 364 00:24:16,560 --> 00:24:21,119 Speaker 1: the case that the major influences on markets occur only 365 00:24:21,200 --> 00:24:23,760 Speaker 1: during New York hours. So much is happening in Asia, 366 00:24:23,800 --> 00:24:26,960 Speaker 1: so much is happening in Europe. Headlines from over there, 367 00:24:27,040 --> 00:24:31,280 Speaker 1: events from over there, um, global economic conditions from over 368 00:24:31,320 --> 00:24:35,760 Speaker 1: there really affect how assets in the US behave, and 369 00:24:35,840 --> 00:24:39,399 Speaker 1: so that's created a complexity that traders have had to 370 00:24:39,440 --> 00:24:43,160 Speaker 1: adapt to. That's that's interesting. Let's let's talk about something 371 00:24:43,200 --> 00:24:47,320 Speaker 1: that hasn't changed, and that's human emotions. How can you 372 00:24:47,520 --> 00:24:51,960 Speaker 1: teach people to keep their emotions in check? What I 373 00:24:52,080 --> 00:24:56,760 Speaker 1: work with traders on is not simply controlling their emotions, 374 00:24:56,760 --> 00:25:02,600 Speaker 1: which is helpful, but using a emotions as information, becoming 375 00:25:03,040 --> 00:25:08,119 Speaker 1: more mindful, more aware of one's emotional reactions, because many 376 00:25:08,160 --> 00:25:14,040 Speaker 1: times there can be information in what we process emotionally. 377 00:25:14,200 --> 00:25:17,080 Speaker 1: The old joke about George Soros's back there you go, 378 00:25:17,280 --> 00:25:19,280 Speaker 1: acting up when he was in a position. As soon 379 00:25:19,320 --> 00:25:21,680 Speaker 1: as he got out of a bad position, the back 380 00:25:21,720 --> 00:25:25,200 Speaker 1: ache went away. There's information in that back ache, and 381 00:25:25,200 --> 00:25:31,160 Speaker 1: and that's true for many people. They experience emotions and 382 00:25:31,600 --> 00:25:35,240 Speaker 1: that it's information about what's happening in markets and what's 383 00:25:35,280 --> 00:25:39,239 Speaker 1: happening to your portfolio. There's one portfolio manager I work with, 384 00:25:39,280 --> 00:25:44,800 Speaker 1: for instance, who uses his emotional reactions to gauge the 385 00:25:45,040 --> 00:25:52,639 Speaker 1: likely emotional reactions of other participants, and so expand on that. 386 00:25:52,760 --> 00:25:56,680 Speaker 1: So how does how does one's own emotional reactions help 387 00:25:56,720 --> 00:25:59,760 Speaker 1: you gauge other people's emotionally? If the market sells off 388 00:25:59,800 --> 00:26:04,199 Speaker 1: and he starts to feel some panicky emotions, the first 389 00:26:04,359 --> 00:26:09,960 Speaker 1: thing he thinks about is, that's interesting, maybe other participants 390 00:26:10,000 --> 00:26:13,960 Speaker 1: in the market are feeling this kind of panic and 391 00:26:14,080 --> 00:26:17,080 Speaker 1: what does that mean? And how has that market behaved 392 00:26:17,280 --> 00:26:21,320 Speaker 1: when we've gotten into panic times. So he's aware of 393 00:26:21,359 --> 00:26:26,880 Speaker 1: his emotions, but he's not being reactive relative to those emotions. 394 00:26:26,960 --> 00:26:31,040 Speaker 1: That that that's quite fascinating. Here's another example. Sometimes when 395 00:26:31,119 --> 00:26:34,840 Speaker 1: in my own trading, I'll have a series of winning trades, 396 00:26:35,119 --> 00:26:37,440 Speaker 1: the sort of the way you described when you're on fire, 397 00:26:38,320 --> 00:26:42,280 Speaker 1: and I'll have the thought I've got this figured out. 398 00:26:43,800 --> 00:26:47,600 Speaker 1: How you laugh because you know what happens? Okay, Well, 399 00:26:47,720 --> 00:26:53,040 Speaker 1: I become aware of that overconfident thought, and I realize 400 00:26:53,280 --> 00:26:58,560 Speaker 1: that that's a warning signal. So the mindfulness, the awareness 401 00:26:58,560 --> 00:27:02,640 Speaker 1: of your emotional reaction can help you trade better. It's 402 00:27:02,680 --> 00:27:04,960 Speaker 1: funny when I started on a trading desk, the head 403 00:27:05,000 --> 00:27:09,679 Speaker 1: trader who was a former Marine jungle combat instructor, so 404 00:27:09,680 --> 00:27:12,760 Speaker 1: I'm not a guy to mess around with. Occasionally, would 405 00:27:12,800 --> 00:27:17,600 Speaker 1: someone would have their ego get a little unchecked and 406 00:27:17,600 --> 00:27:20,160 Speaker 1: and his responses, Hey, you don't want to piss off 407 00:27:20,200 --> 00:27:22,880 Speaker 1: the trading gods, and it was it was a good 408 00:27:22,920 --> 00:27:25,399 Speaker 1: way to say, all right, to take it, take it 409 00:27:25,400 --> 00:27:27,160 Speaker 1: down a notch a little bit. I read a nice 410 00:27:27,920 --> 00:27:33,879 Speaker 1: quote recently that said, for proper perspective, every person should 411 00:27:33,920 --> 00:27:37,399 Speaker 1: have a dog that adores them and a cat that 412 00:27:37,520 --> 00:27:44,240 Speaker 1: ignores them. That puts confidence in humility in the right perspective. Absolutely, 413 00:27:44,320 --> 00:27:47,600 Speaker 1: so that raises a really interesting question, how do you 414 00:27:47,720 --> 00:27:52,360 Speaker 1: prevent people or repair it when it happens from learning 415 00:27:52,440 --> 00:27:56,800 Speaker 1: the wrong lesson from a positive experience or theoretically from 416 00:27:56,800 --> 00:28:00,960 Speaker 1: a negative experience. One of the things we emphasize and 417 00:28:01,040 --> 00:28:05,119 Speaker 1: working with traders is the idea of this too shall pass. 418 00:28:06,680 --> 00:28:10,919 Speaker 1: Trees don't grow to the sky and losses don't continue forever, 419 00:28:11,680 --> 00:28:17,480 Speaker 1: and so we try to approach markets with fresh eyes, 420 00:28:18,080 --> 00:28:22,600 Speaker 1: fresh thoughts from day to day, week to week. Markets 421 00:28:22,600 --> 00:28:25,359 Speaker 1: have no memory is that the thinking or well the 422 00:28:25,480 --> 00:28:31,159 Speaker 1: thinking is that a risk reward the opportunity set typically 423 00:28:31,280 --> 00:28:34,840 Speaker 1: changes over the course of time, and we want to 424 00:28:34,920 --> 00:28:40,040 Speaker 1: recalibrate ourselves with respect to that altered risk reward. So, 425 00:28:40,120 --> 00:28:42,280 Speaker 1: for instance, we're investing in a stock of the stock 426 00:28:42,360 --> 00:28:46,280 Speaker 1: moves our way, Well, it's not necessarily the same value 427 00:28:46,360 --> 00:28:48,600 Speaker 1: that it was when we first put on the position. 428 00:28:49,120 --> 00:28:52,720 Speaker 1: Is the risk reward compelling here? And now? If this 429 00:28:52,760 --> 00:28:57,760 Speaker 1: were January one and I had no position in this name, 430 00:28:58,080 --> 00:29:02,200 Speaker 1: would I be taking along position right here? That really, 431 00:29:02,360 --> 00:29:06,720 Speaker 1: those kind of questions recalibrate us so that we don't 432 00:29:06,760 --> 00:29:10,960 Speaker 1: allow the past, either the gains of the past or 433 00:29:11,120 --> 00:29:15,440 Speaker 1: the losses of the past, to unduly color our current judgment. 434 00:29:16,040 --> 00:29:20,600 Speaker 1: What about superstitions, I recall a number of I want 435 00:29:20,600 --> 00:29:25,400 Speaker 1: to spreak out the myths from the superstitions. We we 436 00:29:25,520 --> 00:29:30,080 Speaker 1: keep referencing sports, but uh, certain people would not change 437 00:29:30,120 --> 00:29:32,480 Speaker 1: their socks or wear the same hat, or you still 438 00:29:32,600 --> 00:29:35,880 Speaker 1: encounter that sort of stuff. Where have we moved past that? Now? 439 00:29:37,000 --> 00:29:41,240 Speaker 1: Every so often you definitely encounter that where people feel 440 00:29:41,240 --> 00:29:45,280 Speaker 1: it's like certain things are lucky and certain things are unlucky. Um, 441 00:29:45,320 --> 00:29:48,320 Speaker 1: but I think it's still a common practice as it 442 00:29:48,400 --> 00:29:51,280 Speaker 1: was years ago. If you come up behind a trader 443 00:29:51,320 --> 00:29:53,320 Speaker 1: who's made money and you packed them on the back 444 00:29:53,320 --> 00:29:56,080 Speaker 1: and say you're doing great, they will look at you 445 00:29:56,160 --> 00:30:00,160 Speaker 1: as if you're trying to jinx them and and get 446 00:30:00,160 --> 00:30:03,040 Speaker 1: away from me, Get away from it. So I think 447 00:30:03,040 --> 00:30:07,880 Speaker 1: that touches on some superstitions. How do you force people 448 00:30:08,120 --> 00:30:12,600 Speaker 1: to be rational and evidence based? Do you ever bump 449 00:30:12,760 --> 00:30:16,600 Speaker 1: up against the situation where the data is overwhelming but 450 00:30:16,800 --> 00:30:19,280 Speaker 1: the trader just doesn't want to pay any mind to it. 451 00:30:19,480 --> 00:30:24,280 Speaker 1: We all have blind spots, myself included, and you can't 452 00:30:24,440 --> 00:30:28,520 Speaker 1: force anyone to make a change. But what you can 453 00:30:28,760 --> 00:30:35,520 Speaker 1: do is process the information as thoroughly as possible and 454 00:30:36,040 --> 00:30:41,680 Speaker 1: encourage people to look at the information with fresh eyes 455 00:30:41,720 --> 00:30:45,600 Speaker 1: from different perspectives. So it's not an uncommon, for instance, 456 00:30:45,600 --> 00:30:49,040 Speaker 1: in a conversation with a trader, that they'll mention to 457 00:30:49,160 --> 00:30:54,360 Speaker 1: me they're along the dollar, and so I'll mention positioning 458 00:30:54,480 --> 00:30:58,960 Speaker 1: and sentiment data that suggests that lots of moody managers 459 00:30:58,960 --> 00:31:01,960 Speaker 1: are along the dollar. Out of trade, it's a crowded trade. 460 00:31:02,880 --> 00:31:05,280 Speaker 1: Do you still like it? What? What? What makes you 461 00:31:05,560 --> 00:31:09,000 Speaker 1: think that it's going to continue? Now? I'm playing Devil's 462 00:31:09,040 --> 00:31:12,120 Speaker 1: advocate as a way of getting people to look at 463 00:31:12,200 --> 00:31:16,080 Speaker 1: new information and make sure that they're making decisions for 464 00:31:16,120 --> 00:31:19,720 Speaker 1: the right reasons. I always love the argument of inversion. 465 00:31:20,200 --> 00:31:22,240 Speaker 1: Make the case for me for the other side of 466 00:31:22,280 --> 00:31:24,760 Speaker 1: the trade, because it's a two sided trade. What is 467 00:31:24,760 --> 00:31:27,520 Speaker 1: the other person thinking and what might they know that 468 00:31:27,560 --> 00:31:30,680 Speaker 1: you're unaware of or or what is what is coloring 469 00:31:30,720 --> 00:31:33,560 Speaker 1: their views that you might not have considered a great point. 470 00:31:33,760 --> 00:31:36,880 Speaker 1: I think it's very helpful to do what if scenario 471 00:31:36,960 --> 00:31:41,560 Speaker 1: planning and what if news comes out this way? What 472 00:31:41,720 --> 00:31:45,160 Speaker 1: if the stock moves against us in that way? What 473 00:31:45,240 --> 00:31:48,320 Speaker 1: would how would you respond? What would that mean to you? 474 00:31:48,720 --> 00:31:54,200 Speaker 1: What would tell you your idea is wrong? Criteria A, B, C, D. 475 00:31:55,240 --> 00:31:58,360 Speaker 1: And mapping that out in advance so that if those 476 00:31:58,400 --> 00:32:03,959 Speaker 1: things should unfold, you're prepared psychologically to take property. We've 477 00:32:04,000 --> 00:32:06,479 Speaker 1: always discussed what is the line in the sand you 478 00:32:06,560 --> 00:32:10,080 Speaker 1: have to have any time I've had a conversation with somebody, 479 00:32:10,400 --> 00:32:12,600 Speaker 1: and this tends to be true with the gold bugs 480 00:32:12,600 --> 00:32:16,120 Speaker 1: and the fed haters, and there's a whole ideology behind 481 00:32:16,200 --> 00:32:19,280 Speaker 1: the trade where you say what would make you wrong 482 00:32:19,440 --> 00:32:22,240 Speaker 1: and they say nothing. I know there's a person whose 483 00:32:22,320 --> 00:32:24,760 Speaker 1: career in trading is soon to come to an end. 484 00:32:24,920 --> 00:32:28,120 Speaker 1: That's right. If nothing can make you wrong, then you're 485 00:32:28,160 --> 00:32:31,320 Speaker 1: not basing this. Would you really want to entrust your 486 00:32:31,560 --> 00:32:35,479 Speaker 1: capital with that person? Right? For sure? And the question 487 00:32:35,600 --> 00:32:37,600 Speaker 1: that pops up every now and then, we've been talking 488 00:32:37,600 --> 00:32:41,640 Speaker 1: about process. But something that's a little related is and 489 00:32:41,760 --> 00:32:45,280 Speaker 1: you hinted it this earlier, is a routine. You mentioned 490 00:32:45,280 --> 00:32:48,040 Speaker 1: the trading diary or a trading lock. What sort of 491 00:32:48,120 --> 00:32:51,680 Speaker 1: routines are healthy for traders or investors for that matter. 492 00:32:51,880 --> 00:32:56,160 Speaker 1: One of the important routines that successful traders engaging and 493 00:32:56,520 --> 00:33:00,480 Speaker 1: are routines of preparation. When markets are open, they need 494 00:33:00,520 --> 00:33:04,680 Speaker 1: to be prepared for the different possibilities that may unfold. 495 00:33:04,840 --> 00:33:08,200 Speaker 1: We've been speaking with Dr Brett Steambarger discussing all things 496 00:33:08,440 --> 00:33:12,800 Speaker 1: coaching and psychology regarding traders. If you enjoy the conversation, 497 00:33:13,040 --> 00:33:15,600 Speaker 1: be sure and check out the podcast extras, where we 498 00:33:15,640 --> 00:33:20,360 Speaker 1: continue chatting about all such things related to trading. Check 499 00:33:20,400 --> 00:33:24,360 Speaker 1: out my daily column on Bloomberg View dot com or 500 00:33:24,440 --> 00:33:28,440 Speaker 1: follow me on Twitter at rid Halts. I'm Barry rid Halts. 501 00:33:28,480 --> 00:33:32,080 Speaker 1: You've been listening to Masters in Business on Bloomberg Radio. 502 00:33:32,320 --> 00:33:36,000 Speaker 1: Welcome to the podcast. Um Brett, thank you so much 503 00:33:36,000 --> 00:33:39,080 Speaker 1: for doing this. I have been reading you for a 504 00:33:39,200 --> 00:33:41,880 Speaker 1: long time, and you and I have been swapping emails 505 00:33:41,880 --> 00:33:43,640 Speaker 1: over the years, but this is really the first time 506 00:33:43,680 --> 00:33:46,360 Speaker 1: we've ever met. That's right, so thank thank you for 507 00:33:46,400 --> 00:33:50,400 Speaker 1: doing this. I find this stuff endlessly fascinating, and I 508 00:33:50,480 --> 00:33:55,000 Speaker 1: was taking notes, which I normally don't do, because so 509 00:33:55,040 --> 00:33:59,640 Speaker 1: many of the things you said touched on just just 510 00:33:59,760 --> 00:34:03,560 Speaker 1: jo memories from my own personal experience when I started 511 00:34:03,680 --> 00:34:05,760 Speaker 1: on a trading desk, and I just have to go 512 00:34:05,840 --> 00:34:09,880 Speaker 1: through some of them. Um, you said, one of the 513 00:34:09,960 --> 00:34:16,000 Speaker 1: portfolio managers you work with, UM monitors his own reaction 514 00:34:16,080 --> 00:34:20,680 Speaker 1: to the market in order to anticipate other people's restrections. 515 00:34:21,120 --> 00:34:23,279 Speaker 1: One of the things I started to take note of. 516 00:34:24,000 --> 00:34:27,560 Speaker 1: And you know, sometimes the patterns are evident after they 517 00:34:27,600 --> 00:34:30,880 Speaker 1: beat you over the head a hundred times. I noticed 518 00:34:31,040 --> 00:34:33,880 Speaker 1: if when I was on the cell side, if I 519 00:34:33,920 --> 00:34:36,719 Speaker 1: would bring up a stock that was wildly out of 520 00:34:36,760 --> 00:34:40,520 Speaker 1: favor and for whatever reasons, I thought was really attractive, 521 00:34:41,200 --> 00:34:44,359 Speaker 1: and the general reaction of anybody I showed the name 522 00:34:44,400 --> 00:34:48,600 Speaker 1: to was that's just, oh, what a piece of junk. 523 00:34:48,640 --> 00:34:51,720 Speaker 1: Why would I want to that is now a giant flag. 524 00:34:51,880 --> 00:34:54,440 Speaker 1: And when you you see that, right, like back in 525 00:34:54,480 --> 00:34:58,239 Speaker 1: the days when Apple was fifteen with thirteen cash, when 526 00:34:58,239 --> 00:35:00,920 Speaker 1: that new fangled iPod came out, Oh they're going out 527 00:35:00,920 --> 00:35:03,040 Speaker 1: of business. That toast. Why would I everyone to own that? 528 00:35:03,480 --> 00:35:06,880 Speaker 1: I wish I was more sensitive to what a great 529 00:35:07,040 --> 00:35:11,200 Speaker 1: contrarian indicator that that is. You are so right, Barry. 530 00:35:11,280 --> 00:35:15,560 Speaker 1: And once in a while I'll write a blog posts 531 00:35:15,680 --> 00:35:19,520 Speaker 1: or tweet something and it may have a bullush or 532 00:35:19,560 --> 00:35:24,959 Speaker 1: a bearish tinge to it, and immediately the haters come out. 533 00:35:25,800 --> 00:35:31,000 Speaker 1: And the more defensive the reaction, the more I developed 534 00:35:31,040 --> 00:35:37,399 Speaker 1: confidence in that view, because people don't get defensive if 535 00:35:37,440 --> 00:35:40,640 Speaker 1: they are secure with their view, right. It's when they're 536 00:35:40,680 --> 00:35:43,879 Speaker 1: nervous and it's starting to go against them and they 537 00:35:44,040 --> 00:35:47,560 Speaker 1: become the wishful thinking pops up. There's there's no doubt 538 00:35:47,600 --> 00:35:50,080 Speaker 1: about that. By the way, I kept coming back to 539 00:35:50,200 --> 00:35:54,760 Speaker 1: the athletes on trading desks. I have a pet theory. 540 00:35:54,880 --> 00:35:59,120 Speaker 1: I'd love to I'm gonna get on your couch and 541 00:35:59,160 --> 00:36:03,320 Speaker 1: you could you could psychoanalyze some of my own foibles. 542 00:36:03,400 --> 00:36:06,799 Speaker 1: But the pet theory with that has been, you know, 543 00:36:07,000 --> 00:36:11,120 Speaker 1: if you're a college athlete and you're playing Division one 544 00:36:11,239 --> 00:36:17,080 Speaker 1: or Division two or even Division three. Pick a sport, baseball, football, Um, 545 00:36:17,760 --> 00:36:22,439 Speaker 1: basketball almost doesn't matter. The skill level is high enough 546 00:36:22,600 --> 00:36:25,759 Speaker 1: that other than whoever won this year and whoever was 547 00:36:25,800 --> 00:36:29,400 Speaker 1: in the pits last year, pretty much any team on 548 00:36:29,440 --> 00:36:33,040 Speaker 1: any given Saturday can beat any other team. Um. It's 549 00:36:33,080 --> 00:36:36,440 Speaker 1: only the real powerhouses that go fourteen and one or 550 00:36:37,000 --> 00:36:40,880 Speaker 1: whatever that are that are almost unbeatable. And even them, uh, 551 00:36:40,960 --> 00:36:44,560 Speaker 1: someone eventually comes along and beats them. Uh what. I 552 00:36:44,640 --> 00:36:49,560 Speaker 1: can't help but notice that very often it's a lucky bounce, 553 00:36:50,760 --> 00:36:54,680 Speaker 1: a surprise call that went the wrong way the officiating, 554 00:36:55,080 --> 00:36:59,440 Speaker 1: where the outcome is somewhat random, and despite having a 555 00:36:59,440 --> 00:37:02,759 Speaker 1: work you off all season all week, you lose on 556 00:37:02,800 --> 00:37:04,719 Speaker 1: the weekend, and then Monday you gotta get up and 557 00:37:04,760 --> 00:37:07,919 Speaker 1: start all over again, fresh and put the loss out 558 00:37:07,920 --> 00:37:10,799 Speaker 1: of your mind and look forward. That seems to be 559 00:37:10,920 --> 00:37:17,440 Speaker 1: pretty parallel to trading, and sports have that similarity, although 560 00:37:17,480 --> 00:37:20,279 Speaker 1: I certainly could just be making something up after the fact. Well, 561 00:37:20,560 --> 00:37:27,319 Speaker 1: there are definitely random and lucky influences in any of 562 00:37:27,360 --> 00:37:32,600 Speaker 1: these endeavors. So, for instance, with trading, one trader may 563 00:37:32,760 --> 00:37:37,880 Speaker 1: hit their best ideas relatively early in the year, during January, 564 00:37:38,239 --> 00:37:42,200 Speaker 1: another trader will go through a draw down during the 565 00:37:42,239 --> 00:37:46,279 Speaker 1: first weeks of the year. The first trader, now has 566 00:37:46,360 --> 00:37:51,040 Speaker 1: banked some profits, has some cushion, feels more confident in 567 00:37:51,120 --> 00:37:54,400 Speaker 1: taking risk. Later on, the second one is afraid of 568 00:37:54,440 --> 00:37:56,560 Speaker 1: digging too deep a hole because they don't want to 569 00:37:56,600 --> 00:37:59,400 Speaker 1: be fired, so they restrain their risk taking. So that 570 00:37:59,600 --> 00:38:04,480 Speaker 1: random period of January performance ends up potentially shaping a 571 00:38:04,560 --> 00:38:07,279 Speaker 1: year's worth of performance. I had a conversation with a 572 00:38:07,280 --> 00:38:10,480 Speaker 1: friend who runs a hedge fund who had three or 573 00:38:10,520 --> 00:38:15,359 Speaker 1: four pretty mediocre years, flat years, I want to say, 574 00:38:15,440 --> 00:38:19,800 Speaker 1: July or August. Last year, he's up high, double digits, 575 00:38:19,800 --> 00:38:24,759 Speaker 1: almost triple digit returns. And I sent him, why you 576 00:38:25,000 --> 00:38:27,719 Speaker 1: still here? Why don't you close up shop? You know? 577 00:38:28,080 --> 00:38:30,719 Speaker 1: And and which, by the way, I don't know if 578 00:38:30,719 --> 00:38:32,840 Speaker 1: that would have been good advice or bad advice. His 579 00:38:32,920 --> 00:38:36,520 Speaker 1: portfolio looks very different than mine. But you're up nineties 580 00:38:36,520 --> 00:38:39,319 Speaker 1: something per cent ring the bell. Call it a year, 581 00:38:39,960 --> 00:38:42,359 Speaker 1: and and right, and and take the next four how 582 00:38:42,440 --> 00:38:44,800 Speaker 1: much more do you think you're you're gonna have to 583 00:38:45,320 --> 00:38:48,399 Speaker 1: to gain? And his thoughts were, listen, I've had these 584 00:38:48,440 --> 00:38:52,000 Speaker 1: positions on for three years. They're finally paying off. I'm not. 585 00:38:52,280 --> 00:38:55,480 Speaker 1: I have to see this to its end. And I 586 00:38:55,520 --> 00:38:58,399 Speaker 1: was kind of surprised by that. What so, So, what 587 00:38:58,440 --> 00:39:01,359 Speaker 1: would you say to somebody who's like, Nope, uh, I 588 00:39:01,480 --> 00:39:03,680 Speaker 1: died bond it last year, I'm living on it this year, 589 00:39:03,680 --> 00:39:06,239 Speaker 1: and I'm I'm going to run it out. Well. I 590 00:39:06,280 --> 00:39:10,160 Speaker 1: would applaud the staying power, that's for sure. But the 591 00:39:10,280 --> 00:39:14,080 Speaker 1: question I would ask that trader is, Okay, you're up 592 00:39:14,160 --> 00:39:18,120 Speaker 1: N how much of that N do you want to 593 00:39:18,160 --> 00:39:21,520 Speaker 1: put at risk right here, right now to make how 594 00:39:21,600 --> 00:39:25,440 Speaker 1: much more? What is the risk reward right here, right now? 595 00:39:26,040 --> 00:39:29,120 Speaker 1: And how much do you want to make sure you 596 00:39:29,239 --> 00:39:31,719 Speaker 1: go home with at the end of the year. So 597 00:39:31,920 --> 00:39:34,840 Speaker 1: I would encourage them to think of risk taking fresh, 598 00:39:35,160 --> 00:39:37,359 Speaker 1: not keeping it all on, not taking it all off, 599 00:39:37,960 --> 00:39:44,719 Speaker 1: but recalibrating that that makes perfect, perfect sense. And and 600 00:39:44,760 --> 00:39:50,440 Speaker 1: you referenced keeping Score. I'm moving some pages. You referenced 601 00:39:50,520 --> 00:39:55,919 Speaker 1: Keeping Score. I was at a sell side firm that had, um, 602 00:39:55,960 --> 00:39:57,960 Speaker 1: you know, a thousand plus employees, and I think it 603 00:39:58,000 --> 00:40:00,680 Speaker 1: was something like six or eight hundred bro ers and 604 00:40:00,760 --> 00:40:04,040 Speaker 1: I was the market strategist and I used to have 605 00:40:04,880 --> 00:40:07,879 Speaker 1: brokers come to my office and say to me constantly, 606 00:40:08,560 --> 00:40:10,600 Speaker 1: you know, I have all these winners, but I can't 607 00:40:10,600 --> 00:40:14,759 Speaker 1: figure out why my portfolios are down. Well, you know, 608 00:40:14,880 --> 00:40:17,480 Speaker 1: it's a simple spreadsheet analysis. What do you mean you 609 00:40:17,480 --> 00:40:19,640 Speaker 1: have all these winners, Well, I have X y Z, 610 00:40:19,719 --> 00:40:21,919 Speaker 1: and I have ABC, and I have one to three 611 00:40:21,920 --> 00:40:24,640 Speaker 1: And so I would get a print out of their 612 00:40:24,920 --> 00:40:29,360 Speaker 1: entire book and I would say, well, you have these winners, 613 00:40:29,400 --> 00:40:32,440 Speaker 1: but your ABC is your biggest winner, and it's your 614 00:40:32,480 --> 00:40:35,720 Speaker 1: fourteenth position. You know, X y Z is your second 615 00:40:35,719 --> 00:40:38,520 Speaker 1: biggest winner, and it's your nineteenth position. You have a 616 00:40:38,600 --> 00:40:41,920 Speaker 1: whole lot of stuff that's flat or maybe up marginally, 617 00:40:42,360 --> 00:40:44,680 Speaker 1: and look at position number two and number seven and 618 00:40:44,800 --> 00:40:48,680 Speaker 1: number nine. These are big losers. So I was always 619 00:40:48,680 --> 00:40:53,680 Speaker 1: astonished that people didn't do a And again, you know, 620 00:40:53,800 --> 00:40:56,880 Speaker 1: as a trader, you get a you get a daily 621 00:40:56,960 --> 00:40:59,520 Speaker 1: P and L. So you know exactly by the way, 622 00:40:59,520 --> 00:41:01,480 Speaker 1: when I be and it was sneaker net, you would 623 00:41:01,560 --> 00:41:06,279 Speaker 1: download your it would export the trading program to the spreadsheet. 624 00:41:06,440 --> 00:41:09,440 Speaker 1: You downloadload that to a three point five floppy and 625 00:41:09,480 --> 00:41:13,480 Speaker 1: you would have to walk it into the head traders office. 626 00:41:13,920 --> 00:41:16,880 Speaker 1: And so you can engage in fraud for three days, 627 00:41:17,160 --> 00:41:19,520 Speaker 1: but eventually the trade wouldn't clear. It would kick out. 628 00:41:19,800 --> 00:41:23,799 Speaker 1: I always thought that was like a really deeply flawed methodology, 629 00:41:23,880 --> 00:41:26,839 Speaker 1: but I think that I guess the thought process was, hey, 630 00:41:26,880 --> 00:41:30,360 Speaker 1: we have three days for you know, before the trade bounces, 631 00:41:30,360 --> 00:41:36,120 Speaker 1: how much havoc? And can anybody anybody reek um? But 632 00:41:36,360 --> 00:41:42,360 Speaker 1: that keeping score side, I'm astonished that more people don't 633 00:41:42,480 --> 00:41:46,279 Speaker 1: do that. It really is astonishing, and it's astonishing how 634 00:41:46,360 --> 00:41:50,480 Speaker 1: much can be learned by keeping score and tracking the 635 00:41:50,600 --> 00:41:55,440 Speaker 1: various elements of your trades and your decision making. But 636 00:41:55,600 --> 00:41:58,160 Speaker 1: one of the patterns I think you're referencing is that 637 00:41:58,239 --> 00:42:01,960 Speaker 1: many times people will be profitable on a majority of 638 00:42:02,000 --> 00:42:05,560 Speaker 1: their trades, but the losers go too far, and so 639 00:42:05,640 --> 00:42:09,280 Speaker 1: the average size of their losing trades becomes much larger 640 00:42:09,320 --> 00:42:12,200 Speaker 1: than the average size of the winners, and that drags 641 00:42:12,239 --> 00:42:14,759 Speaker 1: them down. So it seems like they're winning, they have 642 00:42:14,840 --> 00:42:17,239 Speaker 1: more winning trades and losing trades, but in fact the 643 00:42:17,280 --> 00:42:20,800 Speaker 1: pan l is not winning. That conversation is what led 644 00:42:20,880 --> 00:42:24,960 Speaker 1: me to the world of selective retention, selective perception, and 645 00:42:25,280 --> 00:42:29,160 Speaker 1: and just the wait, how do you not recall you 646 00:42:29,239 --> 00:42:33,359 Speaker 1: have this giant, flaming whole in your portfolio because they're 647 00:42:34,040 --> 00:42:37,560 Speaker 1: conscious or subconscious has suppressed it and they don't even 648 00:42:37,560 --> 00:42:41,040 Speaker 1: want to. It's too painful to think about amazing people 649 00:42:41,200 --> 00:42:44,359 Speaker 1: only only remember the winners. Which leads me to an 650 00:42:44,360 --> 00:42:49,879 Speaker 1: interesting question. Have you ever worked with any individuals who 651 00:42:49,920 --> 00:42:55,960 Speaker 1: were not professionals with just UH investors or or private 652 00:42:56,400 --> 00:42:59,920 Speaker 1: UH I don't want to say private traders, but family all. 653 00:43:00,040 --> 00:43:02,479 Speaker 1: It's just things like that where it's essentially a non 654 00:43:02,560 --> 00:43:06,319 Speaker 1: professional managing their own assets. How have you done much 655 00:43:06,360 --> 00:43:10,320 Speaker 1: of that? I haven't done much of that, And many 656 00:43:10,360 --> 00:43:15,040 Speaker 1: times with the non professional, the ratio of what's a 657 00:43:15,080 --> 00:43:19,200 Speaker 1: trading problem and what's the psychological problem becomes skewed, and 658 00:43:19,400 --> 00:43:23,600 Speaker 1: they make many more trading problems precisely because they're not professionals. 659 00:43:24,160 --> 00:43:28,239 Speaker 1: And so what they really need, in my view, typically 660 00:43:28,680 --> 00:43:32,560 Speaker 1: is mentoring. They need someone to teach them the ropes 661 00:43:32,600 --> 00:43:37,240 Speaker 1: about financial markets and decision making rather than a psychological coach. 662 00:43:37,440 --> 00:43:42,200 Speaker 1: That that's really interesting. I gave a presentation at this point, 663 00:43:42,200 --> 00:43:46,800 Speaker 1: it's now years ago, called Romancing Alpha and Forsaking Beta. 664 00:43:47,800 --> 00:43:51,880 Speaker 1: I won't mention the organization, but they're not. They claim 665 00:43:51,960 --> 00:43:55,480 Speaker 1: to have a huge wealthy base of clients, but they're 666 00:43:55,560 --> 00:44:00,360 Speaker 1: notoriously cheap about um about paying outsiders to come in 667 00:44:00,400 --> 00:44:03,640 Speaker 1: and present. They like they dangle. Look, here are billions 668 00:44:03,640 --> 00:44:06,879 Speaker 1: of dollars. Come give a speech, um, But was what 669 00:44:06,920 --> 00:44:11,320 Speaker 1: was fascinating was the beforehand. I did some research about 670 00:44:12,280 --> 00:44:15,680 Speaker 1: all these people with thirty million dollars minimum massets. What 671 00:44:15,760 --> 00:44:18,040 Speaker 1: are they investing in and how well have they done? 672 00:44:18,160 --> 00:44:21,160 Speaker 1: And everybody could tell me we have this much private equity, 673 00:44:21,200 --> 00:44:23,040 Speaker 1: we have this much hedge funds, we have this much 674 00:44:23,280 --> 00:44:26,520 Speaker 1: venture capital, and none of these people could give me 675 00:44:26,600 --> 00:44:31,360 Speaker 1: an actual forget audited, how have you done relative to 676 00:44:31,400 --> 00:44:34,440 Speaker 1: your benchmark? Not a single person can answer that question. 677 00:44:34,880 --> 00:44:39,200 Speaker 1: So that's where where the phrase romancing alpha forsaking beta 678 00:44:39,400 --> 00:44:43,399 Speaker 1: came from. If you are so busy chasing out performance 679 00:44:43,800 --> 00:44:47,480 Speaker 1: but you have no idea what your actual benchmark is, 680 00:44:49,000 --> 00:44:52,200 Speaker 1: it's astonishing. And to me, that's an individual era. I 681 00:44:52,239 --> 00:44:58,040 Speaker 1: can't imagine any institution could tolerate that sort of basic 682 00:44:58,160 --> 00:45:01,520 Speaker 1: flaw for very long and and business true. And as 683 00:45:01,600 --> 00:45:05,560 Speaker 1: you know, in the professional world of finance, we look 684 00:45:05,800 --> 00:45:10,520 Speaker 1: at risk adjusted return. How much are you making per 685 00:45:10,600 --> 00:45:14,200 Speaker 1: unit of risk that you're taking? And it says something 686 00:45:14,239 --> 00:45:19,200 Speaker 1: about professionalism when someone can't can't answer that question. Answer 687 00:45:19,280 --> 00:45:22,120 Speaker 1: the question right if if if you are unaware of 688 00:45:22,480 --> 00:45:26,080 Speaker 1: forget risk adjusted returns. If you're unaware of your relative performance, 689 00:45:26,800 --> 00:45:29,000 Speaker 1: what are you doing? And and that's before you get 690 00:45:29,000 --> 00:45:32,880 Speaker 1: into and what are you paying in fees for this 691 00:45:33,000 --> 00:45:37,840 Speaker 1: relative performance or under performance? It's really um, it's really fascinating. 692 00:45:37,880 --> 00:45:41,480 Speaker 1: So do you you reference mentoring? That's one of the 693 00:45:41,560 --> 00:45:45,799 Speaker 1: standard questions. Um, we talk talk about what why don't 694 00:45:45,840 --> 00:45:49,759 Speaker 1: we jump right into that? Did you have any early mentors, 695 00:45:50,280 --> 00:45:54,279 Speaker 1: either on the trading side or on the psychology side. Well, 696 00:45:54,480 --> 00:45:58,640 Speaker 1: definitely on the psychology side. In graduate school, give us 697 00:45:57,920 --> 00:46:03,439 Speaker 1: an uh. One of the clinical supervisors I worked with 698 00:46:03,800 --> 00:46:08,279 Speaker 1: who has since passed on was Dr Thomas Riley, and 699 00:46:08,600 --> 00:46:11,560 Speaker 1: he taught an approach that was not common at the 700 00:46:11,640 --> 00:46:15,680 Speaker 1: time but has become more so recently. That looks at 701 00:46:16,239 --> 00:46:21,880 Speaker 1: how the different approaches to psychology and psychotherapy are doing 702 00:46:22,360 --> 00:46:25,080 Speaker 1: things in common rather than being different for each other. 703 00:46:25,680 --> 00:46:27,800 Speaker 1: On the surface of what a Freudian does and what 704 00:46:27,840 --> 00:46:31,319 Speaker 1: a behaviorist does quite different, But in fact he was 705 00:46:31,360 --> 00:46:37,960 Speaker 1: looking at the common elements and helping mentor graduate students 706 00:46:38,560 --> 00:46:45,200 Speaker 1: by making the most of the common effective ingredients of psychology. 707 00:46:45,760 --> 00:46:50,879 Speaker 1: You can tell me they're still Freudians. There still are Freudians. Absolutely. 708 00:46:51,600 --> 00:46:56,680 Speaker 1: I was unaware that that's right there, there definitely are 709 00:46:57,360 --> 00:47:00,880 Speaker 1: and um, that was a big influence on me. So 710 00:47:00,920 --> 00:47:04,040 Speaker 1: in other words, fine, what what the common ground is 711 00:47:04,080 --> 00:47:08,319 Speaker 1: that works, regardless of the ideological silo it may have 712 00:47:08,360 --> 00:47:12,600 Speaker 1: come from. Yes, So, for instance, a common effective ingredient 713 00:47:12,760 --> 00:47:16,400 Speaker 1: across different approaches to therapy would be the quality of 714 00:47:16,440 --> 00:47:19,960 Speaker 1: the helping relationship. We find that what what is the 715 00:47:19,960 --> 00:47:24,359 Speaker 1: helping relationship? Helping relationship is as a psychologist, your relationship 716 00:47:24,400 --> 00:47:27,160 Speaker 1: with the client and how you engage and how you 717 00:47:27,239 --> 00:47:31,120 Speaker 1: interact with them, and whether you're using a behavioral approach 718 00:47:31,200 --> 00:47:35,320 Speaker 1: or a cognitive approach or a psychoanalytics approach, the quality 719 00:47:35,360 --> 00:47:39,360 Speaker 1: of that relationship ends up being the best predictor of outcome. 720 00:47:40,040 --> 00:47:43,359 Speaker 1: And so by focusing on those common ingredients, we can 721 00:47:43,440 --> 00:47:47,400 Speaker 1: become more effective whether we're using approach A approach, B approach, c. 722 00:47:48,320 --> 00:47:50,520 Speaker 1: So that was a big influence on me. In graduate 723 00:47:50,520 --> 00:47:54,520 Speaker 1: school of psychology. In terms of markets and trading, a 724 00:47:54,640 --> 00:47:58,320 Speaker 1: big influence on me was around the year two thousand 725 00:47:58,600 --> 00:48:03,920 Speaker 1: when I began inter acting with the UM fund manager 726 00:48:04,040 --> 00:48:09,719 Speaker 1: Victor Niederhoffer and education of a speculator there you go, yes, 727 00:48:10,200 --> 00:48:15,239 Speaker 1: and he really introduced me to a more quantitative and 728 00:48:15,280 --> 00:48:19,480 Speaker 1: scientific approach to markets. And it was as a result 729 00:48:19,960 --> 00:48:23,480 Speaker 1: of interacting with him that I began conducting my own 730 00:48:23,520 --> 00:48:29,319 Speaker 1: studies and supplementing the discretionary decision making that I had 731 00:48:29,400 --> 00:48:35,680 Speaker 1: done with more quantitative information. So what's fascinating about him 732 00:48:35,760 --> 00:48:39,799 Speaker 1: is he's a guy who who amasses a fortune and 733 00:48:39,840 --> 00:48:43,640 Speaker 1: then blows up regular every cycle, like regularly. I don't 734 00:48:43,640 --> 00:48:46,400 Speaker 1: know how he manages to do it. Um. There was 735 00:48:46,440 --> 00:48:52,040 Speaker 1: a very infamous Malcolm Gladwell column in The New Yorker 736 00:48:52,680 --> 00:48:56,560 Speaker 1: that he was the I think, I'm sure I'm missing 737 00:48:56,680 --> 00:49:02,600 Speaker 1: remembering this, but he is the um, the foil on 738 00:49:02,680 --> 00:49:05,319 Speaker 1: the other side of the trade from not seem to 739 00:49:05,400 --> 00:49:08,359 Speaker 1: lab if if if I am, I'm remembering that correctly. Yeah, 740 00:49:08,400 --> 00:49:13,040 Speaker 1: I do recall something sort yes, So two totally different styles. 741 00:49:13,239 --> 00:49:17,560 Speaker 1: One is taking very little risk other than the insurance 742 00:49:17,560 --> 00:49:22,279 Speaker 1: premium for the outside black swan performance, and the other 743 00:49:22,400 --> 00:49:26,439 Speaker 1: is capturing the rent and hoping the house doesn't burn down. UM. 744 00:49:26,520 --> 00:49:29,279 Speaker 1: So when one's losing the others, they very much a 745 00:49:29,360 --> 00:49:33,000 Speaker 1: mirror images of each other's um trades, or at least 746 00:49:33,480 --> 00:49:37,239 Speaker 1: way back when they are exactly exactly uh. And it's 747 00:49:37,239 --> 00:49:41,360 Speaker 1: a shame that he's become known for those blow ups, 748 00:49:41,600 --> 00:49:45,520 Speaker 1: but he's been wildly successful. I mean, he's a squash champion. 749 00:49:45,560 --> 00:49:49,239 Speaker 1: I believe he was a chess prodigy, and maybe he 750 00:49:49,360 --> 00:49:55,120 Speaker 1: has multiple talents. He's a renaissance sort of guy, isn't he? Yes? Yes, 751 00:49:55,160 --> 00:49:57,359 Speaker 1: And I was just going to mention that that one 752 00:49:57,400 --> 00:50:00,759 Speaker 1: of the things I learned from him was that you 753 00:50:00,800 --> 00:50:04,279 Speaker 1: can learn a lot about markets by studying areas that 754 00:50:04,320 --> 00:50:06,640 Speaker 1: have nothing to do with market. So he would look 755 00:50:06,680 --> 00:50:11,160 Speaker 1: at ecology, he would look at, you know, the world politically, 756 00:50:11,400 --> 00:50:15,400 Speaker 1: and he would be able to derive patterns and of 757 00:50:15,600 --> 00:50:18,759 Speaker 1: human behavior that he could apply to markets. And and 758 00:50:18,840 --> 00:50:22,759 Speaker 1: so it broadens my thinking in many ways that that 759 00:50:22,800 --> 00:50:25,719 Speaker 1: makes perfect sense. Um, is he still trading? Is he's 760 00:50:25,719 --> 00:50:28,920 Speaker 1: still active? I believe his own capital. I'm not familiar 761 00:50:28,960 --> 00:50:32,919 Speaker 1: with what he's doing commercially. Um. I think you're right 762 00:50:32,960 --> 00:50:35,160 Speaker 1: from from what I've heard through the grapevine, but always 763 00:50:35,200 --> 00:50:38,640 Speaker 1: been fascinated by him. I think he's one of these 764 00:50:38,640 --> 00:50:45,319 Speaker 1: guys that are just so multifaceted. I find that intriguing. Yes, Um, 765 00:50:45,360 --> 00:50:50,879 Speaker 1: all right, so we we discussed your psychology and trading. Uh, mentors, 766 00:50:51,360 --> 00:50:57,480 Speaker 1: what investors influenced your approach to trading and what investors 767 00:50:57,520 --> 00:51:01,400 Speaker 1: have impacted the way you look at the world psychologically. 768 00:51:04,080 --> 00:51:11,720 Speaker 1: Probably the greatest impact on my practice has not been 769 00:51:11,800 --> 00:51:20,040 Speaker 1: from an investor. It's been from philosophy. Um Early in 770 00:51:20,239 --> 00:51:26,080 Speaker 1: my college career, I read the novel The fountain Head 771 00:51:26,120 --> 00:51:32,240 Speaker 1: by Iron Rand, and what struck me about the novel 772 00:51:32,840 --> 00:51:39,360 Speaker 1: was the portrayal of a character as an ideal who 773 00:51:39,680 --> 00:51:45,840 Speaker 1: was doing something unique and special with integrity and making 774 00:51:45,880 --> 00:51:51,160 Speaker 1: the most of who he was. And my immediate thought 775 00:51:51,160 --> 00:51:57,240 Speaker 1: when I read that novel was what if psychology could 776 00:51:57,239 --> 00:52:02,440 Speaker 1: help people not just deal with mental illnesses and problems, 777 00:52:02,840 --> 00:52:06,879 Speaker 1: but what if psychology could help people become what they're 778 00:52:06,920 --> 00:52:15,719 Speaker 1: capable of becoming. And that influence ended up steering my 779 00:52:15,880 --> 00:52:19,840 Speaker 1: work with medical students and residents when I did counsel 780 00:52:19,920 --> 00:52:23,560 Speaker 1: with them, and then subsequently with traders and portfolio managers. 781 00:52:23,640 --> 00:52:28,120 Speaker 1: The fountain Head, well, yes, and and the not is why, 782 00:52:28,160 --> 00:52:31,200 Speaker 1: I asked, because that's the one that comes up so frequently, 783 00:52:31,200 --> 00:52:33,520 Speaker 1: and I fountain Head was yeah. The fountain Head was 784 00:52:33,560 --> 00:52:35,839 Speaker 1: the first book of hers I read it. I did 785 00:52:35,880 --> 00:52:40,600 Speaker 1: read Atlas Shrugged and others, but what really inspired me 786 00:52:40,800 --> 00:52:46,120 Speaker 1: was the portrayal of an ideal, and I sometimes refer 787 00:52:46,200 --> 00:52:49,000 Speaker 1: to my work now as therapy for the mentally well, 788 00:52:50,040 --> 00:52:55,440 Speaker 1: that I'm trying to help sense help normal people, people 789 00:52:55,560 --> 00:52:59,840 Speaker 1: like you, like me, who may not have diagnosable mental disorders, 790 00:53:00,320 --> 00:53:04,799 Speaker 1: but who are capable of becoming much more than they are. 791 00:53:05,640 --> 00:53:10,879 Speaker 1: And so that was a major influence on me. That's interesting. Yeah, 792 00:53:11,160 --> 00:53:15,120 Speaker 1: I read un Ran backwards. I started with Atlas Shrugged. 793 00:53:15,719 --> 00:53:19,080 Speaker 1: Hated it. It's like a nineties seven page speech in 794 00:53:19,120 --> 00:53:23,960 Speaker 1: the middle that's long and tedious and pedantic. And I 795 00:53:24,000 --> 00:53:26,640 Speaker 1: should have, in hindsight, if I go back in time, 796 00:53:26,960 --> 00:53:31,919 Speaker 1: I would have started with fountain Head, and maybe I'd 797 00:53:31,960 --> 00:53:35,680 Speaker 1: have a different perspective. Most of my criticism of her 798 00:53:35,760 --> 00:53:40,320 Speaker 1: is from Atlas Shrugged, and I know people love that book. 799 00:53:40,800 --> 00:53:43,880 Speaker 1: I just like, oh my god, this is Warren Peace, 800 00:53:44,160 --> 00:53:47,600 Speaker 1: only not as interesting. But but you know, I respect 801 00:53:47,680 --> 00:53:50,799 Speaker 1: people who have of a totally different take on it, 802 00:53:50,840 --> 00:53:54,600 Speaker 1: and maybe, uh maybe maybe I have to revisit it 803 00:53:54,640 --> 00:53:56,920 Speaker 1: when I have time. For eleven I believe it was 804 00:53:56,960 --> 00:54:01,359 Speaker 1: like eleven pages memories. It's a huge book. And one 805 00:54:01,360 --> 00:54:04,440 Speaker 1: of the takeaways the positive takeaways for me about that 806 00:54:04,480 --> 00:54:10,480 Speaker 1: book is outlining the philosophy in terms of the importance 807 00:54:10,520 --> 00:54:15,720 Speaker 1: of respecting objective, reality, objectivity, self reliance. I mean I 808 00:54:15,719 --> 00:54:20,440 Speaker 1: I certainly recall there's a lot of positive positive don't 809 00:54:20,440 --> 00:54:22,840 Speaker 1: wait for the government to rescue you, don't wait for 810 00:54:22,880 --> 00:54:24,799 Speaker 1: the community to save you. There are a lot of 811 00:54:24,840 --> 00:54:28,920 Speaker 1: things in there that certainly are applicable to traders. Hey, 812 00:54:28,960 --> 00:54:31,520 Speaker 1: if you're waiting for a bailout, unless you're you know, 813 00:54:31,680 --> 00:54:35,640 Speaker 1: City bank, it's coming. So so that was certainly an 814 00:54:35,680 --> 00:54:40,640 Speaker 1: interesting thing. Since since we um any other investors we 815 00:54:40,680 --> 00:54:43,239 Speaker 1: want to talk about as as being influences or we 816 00:54:43,280 --> 00:54:46,560 Speaker 1: want to jump right into the book segments of a book, 817 00:54:46,560 --> 00:54:51,359 Speaker 1: portion of art. Well, well, I'll mention one of the investors. 818 00:54:51,800 --> 00:54:56,520 Speaker 1: I have worked for a number of years at Tutor 819 00:54:56,880 --> 00:55:02,640 Speaker 1: Investment for Tutor Jones, Yes, who founded the firm famous 820 00:55:02,680 --> 00:55:07,120 Speaker 1: for calling the seven crash and trading. There's a video 821 00:55:07,200 --> 00:55:09,920 Speaker 1: somewhere out there of him. Actually I don't recall if 822 00:55:09,960 --> 00:55:14,640 Speaker 1: it was the day of Black Monday, it was basically 823 00:55:14,800 --> 00:55:17,560 Speaker 1: him all right, this has gone far enough, let's start 824 00:55:17,560 --> 00:55:19,839 Speaker 1: buying him here. And I think people look at him 825 00:55:19,880 --> 00:55:22,480 Speaker 1: like he has two heads with that, but really really 826 00:55:22,520 --> 00:55:26,759 Speaker 1: interesting guy, really interesting background, and he certainly has evolved 827 00:55:26,800 --> 00:55:29,839 Speaker 1: over that time period. But has been an inspiration for 828 00:55:29,880 --> 00:55:33,160 Speaker 1: many traders. But one of the things he said to 829 00:55:33,280 --> 00:55:37,000 Speaker 1: me early on during my time at Tutor that really 830 00:55:37,160 --> 00:55:42,799 Speaker 1: resonated was if it's not in your calendar, it's not 831 00:55:42,960 --> 00:55:49,280 Speaker 1: part of your process, meaning meaning meaning that if something 832 00:55:49,480 --> 00:55:53,080 Speaker 1: truly is part of your process and what you do, 833 00:55:53,920 --> 00:55:58,440 Speaker 1: then it has a place in your calendar, in your life, 834 00:55:58,520 --> 00:56:03,479 Speaker 1: in your daily skin. Yes, that our processes, when they're 835 00:56:03,520 --> 00:56:07,840 Speaker 1: developed to the fullest, really are positive habit patterns. There 836 00:56:07,880 --> 00:56:13,040 Speaker 1: are things we do repeatedly in the same way with fidelity, 837 00:56:13,160 --> 00:56:17,600 Speaker 1: and so by putting something in the calendar, you're cementing 838 00:56:17,600 --> 00:56:22,120 Speaker 1: it as part of your process. And that resonated with 839 00:56:22,160 --> 00:56:25,560 Speaker 1: me because many times people have good intentions, they set 840 00:56:25,560 --> 00:56:28,719 Speaker 1: a goal, they write in their journal New Year's resolution, yes, 841 00:56:28,880 --> 00:56:32,960 Speaker 1: but they never get down to the specifics of implementing 842 00:56:33,000 --> 00:56:36,359 Speaker 1: it on a day to day basis. And so that 843 00:56:36,560 --> 00:56:39,480 Speaker 1: was a piece of advice and a perspective that I've 844 00:56:39,520 --> 00:56:42,399 Speaker 1: found very helpful at working with traders. So so let's 845 00:56:42,440 --> 00:56:45,279 Speaker 1: talk about books a little bit. You mentioned on Rand's 846 00:56:45,480 --> 00:56:49,000 Speaker 1: fountain Head as a book that positively influenced you. What 847 00:56:49,120 --> 00:56:53,680 Speaker 1: other books do you enjoy, be them fiction, nonfiction, market 848 00:56:53,719 --> 00:56:58,920 Speaker 1: related or or anything else. Well, certainly, like many traders, 849 00:56:59,320 --> 00:57:04,800 Speaker 1: I've found UH influence and inspiration from Jack Schweger's Market 850 00:57:04,840 --> 00:57:08,279 Speaker 1: Wizard's Books. First first book I was ever given as 851 00:57:08,320 --> 00:57:11,279 Speaker 1: a trader, and I reread it every five years. YEA, 852 00:57:11,520 --> 00:57:15,400 Speaker 1: love it, love it. And what it really cemented for 853 00:57:15,520 --> 00:57:19,880 Speaker 1: me was that there was no one formula for success. 854 00:57:20,640 --> 00:57:26,440 Speaker 1: That many of these very successful traders were successful because 855 00:57:26,480 --> 00:57:31,200 Speaker 1: they had unique, distinctive skills and they found a way 856 00:57:31,640 --> 00:57:36,640 Speaker 1: to implement those skills in financial markets. And so that 857 00:57:36,800 --> 00:57:41,960 Speaker 1: led me to a strengths based approach where I tried 858 00:57:42,000 --> 00:57:45,600 Speaker 1: to figure out what are the trader's greatest strengths and 859 00:57:45,640 --> 00:57:48,320 Speaker 1: how could they make the greatest use of those strengths 860 00:57:48,640 --> 00:57:52,160 Speaker 1: in the trading they're doing. Interesting? What what else? Tell me? 861 00:57:52,200 --> 00:57:57,240 Speaker 1: What else? You've really enjoyed reading UH books in general 862 00:57:57,440 --> 00:58:02,120 Speaker 1: in the field of what's called positive psychology, and of course, 863 00:58:02,160 --> 00:58:07,280 Speaker 1: the the first researcher, the first writer who started all 864 00:58:07,320 --> 00:58:13,280 Speaker 1: that was Abraham Maslow, whose sty of Needs studied what 865 00:58:14,080 --> 00:58:19,400 Speaker 1: he called self actualization. But in recent i'd say in 866 00:58:19,440 --> 00:58:24,760 Speaker 1: the last ten fifteen years particularly, there's been an emphasis 867 00:58:24,920 --> 00:58:31,080 Speaker 1: on studying mental health, on studying the positive aspects of 868 00:58:31,240 --> 00:58:39,280 Speaker 1: human behavior and performance understanding strengths, and there have been 869 00:58:39,440 --> 00:58:45,440 Speaker 1: some very thought provoking pieces of research that have been 870 00:58:45,480 --> 00:58:52,680 Speaker 1: conducted under this rubric of positive psychology. Martin Seligman is 871 00:58:52,680 --> 00:58:57,760 Speaker 1: a key resort, key researcher in that area who has 872 00:58:57,920 --> 00:59:03,760 Speaker 1: looked at strength and how those impact physical health, how 873 00:59:03,800 --> 00:59:08,360 Speaker 1: those impact emotional well being. Uh So, those are some 874 00:59:08,480 --> 00:59:13,480 Speaker 1: of the directions that I've found from recent reading. Has 875 00:59:13,520 --> 00:59:15,600 Speaker 1: Seligman put out a book or is it most as 876 00:59:15,600 --> 00:59:18,280 Speaker 1: a number of them? Yes, he give us the one 877 00:59:18,320 --> 00:59:22,600 Speaker 1: that you think people might find accessible. Um, I would 878 00:59:22,640 --> 00:59:27,440 Speaker 1: say there is probably the most accessible is there's a 879 00:59:27,480 --> 00:59:32,480 Speaker 1: website on positive psychology and if you google positive psychology 880 00:59:32,480 --> 00:59:37,120 Speaker 1: you'll find it and it summarizes his works in addition 881 00:59:37,200 --> 00:59:42,120 Speaker 1: to the works of other psychology researchers, and that's a 882 00:59:42,200 --> 00:59:46,240 Speaker 1: great way of finding an introduction to the field. Any 883 00:59:46,280 --> 00:59:47,960 Speaker 1: of the books you want to mention before we move 884 00:59:48,000 --> 00:59:52,360 Speaker 1: on to the to the next few questions, No, I 885 00:59:52,360 --> 00:59:55,880 Speaker 1: think I'm ready for the next question. Um. So, since 886 00:59:55,920 --> 01:00:01,840 Speaker 1: you've joined the industry as a trading coach, what what's changed? 887 01:00:01,920 --> 01:00:06,240 Speaker 1: What do you think of the most significant changes? Um? 888 01:00:06,280 --> 01:00:10,040 Speaker 1: Since you became a coach, one of the biggest changes, 889 01:00:10,400 --> 01:00:16,160 Speaker 1: particularly in the hedge fund world, has been altered risk 890 01:00:16,440 --> 01:00:20,640 Speaker 1: tolerance among investors in the post two thousand eight world, 891 01:00:20,760 --> 01:00:25,000 Speaker 1: meaning decreased risk, much decreased risk tolerance. If you read 892 01:00:25,040 --> 01:00:27,960 Speaker 1: the market Wizard's books, it was not unusual for people 893 01:00:28,040 --> 01:00:31,320 Speaker 1: to have double digit losses and then they have double 894 01:00:31,360 --> 01:00:36,080 Speaker 1: digit and triple digit returns. No One, no one, no 895 01:00:36,120 --> 01:00:40,240 Speaker 1: one talks in those terms anymore. The focus is much 896 01:00:40,240 --> 01:00:44,200 Speaker 1: more on risk adjusted returns than absolute returns. And if 897 01:00:44,240 --> 01:00:47,680 Speaker 1: someone is risking only a few percent and can make 898 01:00:48,240 --> 01:00:53,120 Speaker 1: five to ten percent, they're happy with that, particularly in 899 01:00:53,120 --> 01:00:57,200 Speaker 1: a zero interest rate world. So the demands of investors 900 01:00:57,200 --> 01:01:03,000 Speaker 1: have changed, and that has altered the risk mandates for traders, 901 01:01:03,520 --> 01:01:07,440 Speaker 1: and that has affected coaching because it's no longer about 902 01:01:07,560 --> 01:01:10,200 Speaker 1: making as much as you can. It's as much as 903 01:01:10,360 --> 01:01:12,240 Speaker 1: as you were saying before, it's as much about the 904 01:01:12,280 --> 01:01:15,919 Speaker 1: defense as the offense. That that that's really uh, that's 905 01:01:15,920 --> 01:01:19,320 Speaker 1: really quite interesting. I I have a friend, a different 906 01:01:19,320 --> 01:01:24,720 Speaker 1: friends from the one who was you know, up um, 907 01:01:24,840 --> 01:01:31,200 Speaker 1: who every time he gets a major clients redemption or 908 01:01:31,240 --> 01:01:34,160 Speaker 1: a series of inquiries and questions, and you know, like 909 01:01:34,200 --> 01:01:37,520 Speaker 1: a lot of hedge funds, they're gated. He says, typically 910 01:01:37,680 --> 01:01:41,160 Speaker 1: when a position I've had on that has been making 911 01:01:41,200 --> 01:01:44,360 Speaker 1: money or has been losing money, Um, but is still 912 01:01:44,400 --> 01:01:48,840 Speaker 1: sound when there's like a crescendo of redemption, he says. 913 01:01:49,280 --> 01:01:52,800 Speaker 1: Back to the response from other people, he goes, invariably, 914 01:01:53,640 --> 01:01:56,080 Speaker 1: that's the nature of the trade and it's all upside 915 01:01:56,080 --> 01:02:00,000 Speaker 1: from there, he goes, I've had redemptions every few years. 916 01:02:00,160 --> 01:02:03,240 Speaker 1: Is I'll hit a streak like this and I'll send 917 01:02:03,280 --> 01:02:05,720 Speaker 1: money back. And so my answer is always questioned him, 918 01:02:05,760 --> 01:02:07,640 Speaker 1: is always, well do you let them know, hey, by 919 01:02:07,640 --> 01:02:10,400 Speaker 1: the way, you missed an extra note. Once they redeem 920 01:02:10,640 --> 01:02:14,520 Speaker 1: they're gone and there's no reason for me to rub um, 921 01:02:14,680 --> 01:02:16,960 Speaker 1: you know, add insult to injury. Not only did they 922 01:02:17,000 --> 01:02:20,120 Speaker 1: not make money, but they missed the upside. That's right, 923 01:02:20,440 --> 01:02:24,640 Speaker 1: that that's pretty fascinating. UM. So we talked about the changes, 924 01:02:24,760 --> 01:02:27,360 Speaker 1: the risk of justed changes. What do you see as 925 01:02:27,400 --> 01:02:31,600 Speaker 1: the next shifts that are coming along. I think the 926 01:02:31,680 --> 01:02:36,520 Speaker 1: next shifts are going to be a continuation of what 927 01:02:36,560 --> 01:02:45,760 Speaker 1: we've seen recently in UH longer term investing investing through 928 01:02:46,720 --> 01:02:53,280 Speaker 1: UH maximizing returns from different factors as opposed to active 929 01:02:53,480 --> 01:02:57,600 Speaker 1: timing of markets. So you're talking more factor investing in 930 01:02:57,640 --> 01:03:04,200 Speaker 1: smart beta than management as opposed to the active trading. 931 01:03:04,240 --> 01:03:07,040 Speaker 1: I think there will always be a niche for active 932 01:03:07,040 --> 01:03:10,960 Speaker 1: traders and for people who are talented at active trading. 933 01:03:11,720 --> 01:03:17,280 Speaker 1: But as you alluded earlier, it's difficult to justify the 934 01:03:17,320 --> 01:03:22,760 Speaker 1: fees when the performance is not exceeding the average performance 935 01:03:23,080 --> 01:03:27,120 Speaker 1: of the more passive asset management approaches. So you keep 936 01:03:27,160 --> 01:03:30,520 Speaker 1: referencing the algorithmic side of it, and software is eating 937 01:03:30,560 --> 01:03:35,240 Speaker 1: the world? Are our traders are endangered species? Is Are 938 01:03:35,280 --> 01:03:37,480 Speaker 1: we going to ever get to a point where it's 939 01:03:37,520 --> 01:03:40,120 Speaker 1: just computers trading or or is there always going to 940 01:03:40,200 --> 01:03:44,080 Speaker 1: be a slot for for humans exercising judgment to try 941 01:03:44,080 --> 01:03:47,720 Speaker 1: and figure out a way to to capture some profits. Yes, 942 01:03:47,800 --> 01:03:52,480 Speaker 1: and I think already we've seen, particularly with respect to 943 01:03:52,560 --> 01:03:56,640 Speaker 1: market making, that the lions share of that business has 944 01:03:56,720 --> 01:04:01,120 Speaker 1: gone to the machines. They're simply able to process more 945 01:04:01,120 --> 01:04:06,400 Speaker 1: information quit more quickly than human participants. Now, as we 946 01:04:06,520 --> 01:04:09,600 Speaker 1: widen the time frame and we go from higher frequency 947 01:04:09,640 --> 01:04:15,880 Speaker 1: trading to investment, then I believe there will continue to 948 01:04:15,920 --> 01:04:21,720 Speaker 1: be a role for human judgment algorithmic trading. At the 949 01:04:21,800 --> 01:04:26,800 Speaker 1: root of it is science. It is studying the historical 950 01:04:26,920 --> 01:04:32,960 Speaker 1: patterns and financial markets that recur and profiting when those 951 01:04:33,480 --> 01:04:38,920 Speaker 1: occur in in the present. At certain junctures, the future 952 01:04:39,600 --> 01:04:44,520 Speaker 1: becomes unlike what it's been in the past, and the algorithms, 953 01:04:44,920 --> 01:04:48,520 Speaker 1: by definition, only know the past and the patterns from 954 01:04:48,560 --> 01:04:51,440 Speaker 1: the past. I think there is a role for human 955 01:04:51,520 --> 01:04:59,080 Speaker 1: judgment in determining when a unique future is occurring, but 956 01:05:00,560 --> 01:05:03,840 Speaker 1: I do believe that's becoming a more specialized world and 957 01:05:03,840 --> 01:05:07,640 Speaker 1: and the issue is machine learning. Theoretically, these machines can 958 01:05:07,840 --> 01:05:13,480 Speaker 1: identify when when the market structure or the conditions change, 959 01:05:13,680 --> 01:05:16,840 Speaker 1: that's right. What I'm finding is that many of the 960 01:05:16,880 --> 01:05:23,640 Speaker 1: most successful discretionary portfolio managers are ones that have quantitative 961 01:05:23,840 --> 01:05:27,800 Speaker 1: aspects to what they do. So it's not all machine 962 01:05:27,840 --> 01:05:33,160 Speaker 1: and it's not all subjective judgment. It's using the machine 963 01:05:33,680 --> 01:05:39,360 Speaker 1: for enhanced information and then making better decisions based on 964 01:05:39,800 --> 01:05:43,440 Speaker 1: the information provided by the machine. My analogy for that 965 01:05:43,480 --> 01:05:46,600 Speaker 1: would be a fighter pilot who has all sorts of 966 01:05:46,640 --> 01:05:51,240 Speaker 1: computerized equipment on board and is able to gauge very 967 01:05:51,360 --> 01:05:55,880 Speaker 1: quickly weather conditions and where the enemy is located. But 968 01:05:55,960 --> 01:05:58,160 Speaker 1: at the end of the day, it's the pilot who 969 01:05:58,240 --> 01:06:02,360 Speaker 1: ends up making a decision about attacking not attacking. So 970 01:06:02,760 --> 01:06:08,000 Speaker 1: what do you do to keep mentally fit as a 971 01:06:08,040 --> 01:06:11,320 Speaker 1: traitor and as a psychology what do you do outside 972 01:06:11,320 --> 01:06:14,480 Speaker 1: of the office for relaxation. How do you you referenced 973 01:06:14,520 --> 01:06:18,479 Speaker 1: earlier the balance that's needed. How do you personally make 974 01:06:18,520 --> 01:06:25,000 Speaker 1: sure that, uh, you don't become overly um either burnt 975 01:06:25,080 --> 01:06:28,959 Speaker 1: out or overexposed to anyone aspect of your job. Well, 976 01:06:29,160 --> 01:06:31,320 Speaker 1: And to get back to what I was mentioning earlier, 977 01:06:31,320 --> 01:06:36,000 Speaker 1: in terms of the psychological research on positive emotional experience, uh, 978 01:06:36,120 --> 01:06:42,360 Speaker 1: those four areas of positive experience. Happiness doing things that 979 01:06:42,440 --> 01:06:47,040 Speaker 1: you have fun with, Satisfaction doing things that are deeply 980 01:06:47,120 --> 01:06:52,520 Speaker 1: meaningful to you, Energy doing things that are stimulating, maybe intellectually, 981 01:06:52,560 --> 01:06:56,680 Speaker 1: maybe physically. And affection doing things that bring you closer 982 01:06:56,720 --> 01:07:01,480 Speaker 1: to the people that matter. Give me those four again, Happiness, happy, satisfaction, energy, 983 01:07:01,640 --> 01:07:07,640 Speaker 1: and affection, and those are the four big drivers of 984 01:07:07,760 --> 01:07:11,880 Speaker 1: positive emotional experience. And so I want to be firing 985 01:07:11,920 --> 01:07:14,959 Speaker 1: on all those cylinders every week out of the year. 986 01:07:15,200 --> 01:07:16,960 Speaker 1: And I want the traders I work with to be 987 01:07:17,000 --> 01:07:20,240 Speaker 1: firing on those cylinders, to be doing some activities that 988 01:07:20,280 --> 01:07:23,000 Speaker 1: bring them happiness, to be doing some activities that bring 989 01:07:23,040 --> 01:07:26,720 Speaker 1: them fulfillment, to do some energizing activities, to do some 990 01:07:26,760 --> 01:07:30,360 Speaker 1: activities that bring them closer to people that they want 991 01:07:30,400 --> 01:07:33,960 Speaker 1: to be close to, and that keeps people fresh, It 992 01:07:34,080 --> 01:07:38,440 Speaker 1: keeps them alive and energized, even when the profits aren't coming. 993 01:07:39,400 --> 01:07:42,840 Speaker 1: I'm gonna go off script from my my usual ten 994 01:07:42,960 --> 01:07:46,760 Speaker 1: favorite questions to to bring something up. The past year, 995 01:07:46,920 --> 01:07:52,360 Speaker 1: I've read a million articles about meditation and traders meditation 996 01:07:52,480 --> 01:07:55,200 Speaker 1: on Wall Street. How much of that is hype and 997 01:07:55,280 --> 01:07:57,160 Speaker 1: how much of that is is real? Do you do 998 01:07:57,200 --> 01:08:01,600 Speaker 1: you see a lot of traders meditating. Yes, you do, Yes, 999 01:08:01,880 --> 01:08:04,680 Speaker 1: you and you find it valuable. Yeah, I've seen it 1000 01:08:05,400 --> 01:08:08,760 Speaker 1: be very helpful to traders. And the way in which 1001 01:08:08,800 --> 01:08:15,400 Speaker 1: it's helpful is that it induces a state of calm focus. 1002 01:08:16,600 --> 01:08:22,960 Speaker 1: So it's a way of gaining self control, and in 1003 01:08:23,040 --> 01:08:28,320 Speaker 1: a meditative state, people are able, for instance, to mentally 1004 01:08:28,479 --> 01:08:35,719 Speaker 1: rehearse different what if scenarios to prepare for the day ahead. 1005 01:08:36,760 --> 01:08:40,640 Speaker 1: When you've meditated day after day, week after week, you 1006 01:08:40,720 --> 01:08:43,720 Speaker 1: become very good at those skills. And so during the 1007 01:08:43,760 --> 01:08:47,639 Speaker 1: trading day you can take some deep breaths, get yourself 1008 01:08:47,760 --> 01:08:51,559 Speaker 1: very centered, very focused, and it helps with making more 1009 01:08:51,760 --> 01:08:57,599 Speaker 1: dispassionate decisions. I reference the jungle combat instructor I worked with. 1010 01:08:57,640 --> 01:09:00,720 Speaker 1: There was another former Army range year I worked with. 1011 01:09:01,040 --> 01:09:03,360 Speaker 1: And one of the things I found fascinating because I 1012 01:09:03,680 --> 01:09:06,280 Speaker 1: was always curious, Hey, tell us about some missions, tell 1013 01:09:06,320 --> 01:09:08,679 Speaker 1: us what I was always fascinated about the prep work 1014 01:09:08,720 --> 01:09:11,360 Speaker 1: they did. And one of the things that I learned 1015 01:09:11,439 --> 01:09:16,720 Speaker 1: from them was it wasn't just UM, what's planned, B, 1016 01:09:16,880 --> 01:09:19,200 Speaker 1: what's plans? CE, what's planned D? There was there was 1017 01:09:19,240 --> 01:09:25,200 Speaker 1: always that. It was the process of envisioning your emotional 1018 01:09:25,240 --> 01:09:29,080 Speaker 1: response to when things go wrong. What happens when we 1019 01:09:29,080 --> 01:09:32,000 Speaker 1: were going through the door A, but the egress is blocked, 1020 01:09:32,600 --> 01:09:34,960 Speaker 1: Not just what does my plan be to get out? 1021 01:09:35,360 --> 01:09:37,800 Speaker 1: But how am I going to feel about that? If 1022 01:09:37,800 --> 01:09:41,559 Speaker 1: you can anticipate your emotional response, you can manage it 1023 01:09:41,600 --> 01:09:44,479 Speaker 1: when it actually comes. I thought that was fascinating. And 1024 01:09:44,760 --> 01:09:49,080 Speaker 1: the meditation is sounds somewhat similar to it's a tool 1025 01:09:49,160 --> 01:09:53,080 Speaker 1: for mindfulness to be more self aware, and so it 1026 01:09:53,120 --> 01:09:56,640 Speaker 1: can be very helpful for traitors in that respect. Interesting 1027 01:09:56,720 --> 01:10:00,400 Speaker 1: and and now we're down to our two favored questions. 1028 01:10:00,439 --> 01:10:03,400 Speaker 1: So if if some millennial came to you and said, 1029 01:10:03,800 --> 01:10:07,639 Speaker 1: I'm interested in a career as a trading coach or 1030 01:10:08,040 --> 01:10:11,360 Speaker 1: as a psychologist. What sort of advice would you would 1031 01:10:11,360 --> 01:10:14,200 Speaker 1: you give them? Well, Uh, if they were interested in 1032 01:10:14,400 --> 01:10:17,600 Speaker 1: working as a performance coach, whether it's with traders or 1033 01:10:17,640 --> 01:10:20,720 Speaker 1: other performance professionals, I would encourage them to get the 1034 01:10:20,800 --> 01:10:25,200 Speaker 1: best grounding in psychology possible and start with that and 1035 01:10:25,240 --> 01:10:29,080 Speaker 1: then apply to the populations of interest. And I would 1036 01:10:29,160 --> 01:10:33,280 Speaker 1: encourage them, in particular to to develop a grounding in 1037 01:10:33,360 --> 01:10:37,599 Speaker 1: that positive psychology that I referenced earlier and the research 1038 01:10:37,800 --> 01:10:42,959 Speaker 1: there and as well as traditional approaches to psychology. And 1039 01:10:42,960 --> 01:10:46,160 Speaker 1: and our final question, um, what is it I'm gonna 1040 01:10:46,200 --> 01:10:49,680 Speaker 1: say that again, And our final question, what is it 1041 01:10:49,720 --> 01:10:53,519 Speaker 1: that you know about performance coaching today you wish you 1042 01:10:53,600 --> 01:10:58,759 Speaker 1: knew when you began all those years ago. Probably the 1043 01:10:58,840 --> 01:11:05,160 Speaker 1: greatest le uson that I've learned is that performance is 1044 01:11:05,439 --> 01:11:09,920 Speaker 1: every bit as much a function of maximizing your strengths 1045 01:11:10,760 --> 01:11:15,320 Speaker 1: as addressing your weaknesses. And there certainly is a role 1046 01:11:15,439 --> 01:11:20,000 Speaker 1: for correcting our weaknesses, for identifying what we do wrong 1047 01:11:20,120 --> 01:11:23,120 Speaker 1: and and learning from that. But at the end of 1048 01:11:23,160 --> 01:11:27,000 Speaker 1: the day, what makes people distinctive are their strengths, what 1049 01:11:27,080 --> 01:11:32,120 Speaker 1: they do superlatively well. And it's surprising how people are 1050 01:11:32,360 --> 01:11:37,559 Speaker 1: often unaware of their greatest strengths and they don't tap 1051 01:11:37,640 --> 01:11:42,240 Speaker 1: those regularly in their personal lives or in their decision 1052 01:11:42,280 --> 01:11:48,439 Speaker 1: making in financial markets. And so by focusing on who 1053 01:11:48,520 --> 01:11:53,000 Speaker 1: this person is and what they're really good at, it 1054 01:11:53,080 --> 01:11:58,600 Speaker 1: allows me to help them leverage those talents in their 1055 01:11:58,600 --> 01:12:03,200 Speaker 1: financial decision making. Brett, this has been really quite fascinating. 1056 01:12:03,280 --> 01:12:06,040 Speaker 1: I know it's a subject that people don't get to 1057 01:12:06,160 --> 01:12:09,720 Speaker 1: hear about a lot, and I suspect people are really 1058 01:12:09,760 --> 01:12:13,120 Speaker 1: gonna enjoy listening to this. And for those of you, 1059 01:12:13,520 --> 01:12:16,120 Speaker 1: for those of you who are still with us here 1060 01:12:16,160 --> 01:12:19,160 Speaker 1: at the end, UM, be sure and check out the 1061 01:12:19,200 --> 01:12:22,240 Speaker 1: rest of the other hundred plus podcasts we've done over 1062 01:12:22,280 --> 01:12:24,519 Speaker 1: the past few years. Look up an Inch or down 1063 01:12:24,520 --> 01:12:27,320 Speaker 1: in Inch on Apple iTunes and you'll see all the 1064 01:12:27,400 --> 01:12:30,720 Speaker 1: rest of the conversations we've had. Uh, be sure and 1065 01:12:30,840 --> 01:12:34,840 Speaker 1: check out Dr steam Barger's blog at trader feed dot 1066 01:12:34,880 --> 01:12:38,479 Speaker 1: blogspot dot com. Is that UM, I would be remiss 1067 01:12:38,479 --> 01:12:40,799 Speaker 1: if I did not thank Michael bat Nick, our ahead 1068 01:12:40,880 --> 01:12:45,519 Speaker 1: of research, Taylor rigs are booker, and Charlie Volmer, our producer. 1069 01:12:46,479 --> 01:12:48,760 Speaker 1: Be we love your I forgot to say this during 1070 01:12:48,760 --> 01:12:52,040 Speaker 1: the broadcast portion, so I'll say it now. We love 1071 01:12:52,080 --> 01:12:55,720 Speaker 1: your comments, feedback and email. Be sure and write to 1072 01:12:55,840 --> 01:13:01,080 Speaker 1: us at m IB podcast at Bloomberg dot net. I'm 1073 01:13:01,160 --> 01:13:04,960 Speaker 1: Barry Ridolts. You've been listening to Masters in Business on 1074 01:13:05,040 --> 01:13:06,000 Speaker 1: Bloomberg Radio