WEBVTT - This Is What a Real-Life Wendy Rhoades Actually Does

0:00:00.160 --> 0:00:02.320
<v Speaker 1>But knowledge to work and grow your business with c

0:00:02.520 --> 0:00:06.680
<v Speaker 1>i T from transportation to healthcare to manufacturing. C i

0:00:06.760 --> 0:00:10.559
<v Speaker 1>T offers commercial lending, leasing, and treasury management services for

0:00:10.600 --> 0:00:13.480
<v Speaker 1>small and middle market businesses. Learn more at c i

0:00:13.560 --> 0:00:26.799
<v Speaker 1>T dot com put Knowledge to Work. Hello and welcome

0:00:26.840 --> 0:00:31.200
<v Speaker 1>to another episode of the Odd Lots podcast. I'm Joe

0:00:31.200 --> 0:00:34.560
<v Speaker 1>Wish and I'm Tracy Allow. Tracy, you know, it was

0:00:34.600 --> 0:00:38.280
<v Speaker 1>one of my favorite things that you've written. There's so many, Joe,

0:00:38.520 --> 0:00:41.559
<v Speaker 1>I mean, it's hard to choose because they're all my favorites.

0:00:42.159 --> 0:00:44.880
<v Speaker 1>I really liked your review of the show Billions when

0:00:44.880 --> 0:00:47.760
<v Speaker 1>it first came out, did you. I thought I thought

0:00:47.760 --> 0:00:50.160
<v Speaker 1>we were a little bit opposed on that one because

0:00:50.240 --> 0:00:53.080
<v Speaker 1>I wasn't a big fan of it. But you like it, right,

0:00:52.880 --> 0:00:55.960
<v Speaker 1>I do like the show, but it's that's irrelevant whether

0:00:56.040 --> 0:00:58.360
<v Speaker 1>we agree or disagree on the show. I thought your

0:00:58.480 --> 0:01:03.000
<v Speaker 1>review was very funny and made a lot of a

0:01:03.040 --> 0:01:08.880
<v Speaker 1>lot of good observations, such as, uh, oh, you know

0:01:09.200 --> 0:01:12.319
<v Speaker 1>some things you said about the dialogue and all that stuff.

0:01:12.520 --> 0:01:14.240
<v Speaker 1>It was it was pretty spot on. Well, the thing

0:01:14.280 --> 0:01:17.319
<v Speaker 1>that amazed me was the like, I guess the amount

0:01:17.360 --> 0:01:21.240
<v Speaker 1>of male testosterone on that show and just how like

0:01:21.600 --> 0:01:25.880
<v Speaker 1>blatantly manly some of the trading environment is. But one

0:01:25.920 --> 0:01:28.200
<v Speaker 1>of the things you did point out was some of

0:01:28.240 --> 0:01:32.640
<v Speaker 1>the attempts there were to sort of have some role reversals.

0:01:32.720 --> 0:01:35.760
<v Speaker 1>And I forget exactly who they were what you pointed out,

0:01:35.800 --> 0:01:37.840
<v Speaker 1>but there were some sort of like alpha type characters

0:01:37.880 --> 0:01:40.039
<v Speaker 1>who are women. That's sort of, you know, trying to

0:01:40.680 --> 0:01:42.960
<v Speaker 1>make it a little more interesting. And I think one

0:01:43.000 --> 0:01:46.520
<v Speaker 1>of the sort of most interesting characters on the show

0:01:46.720 --> 0:01:50.880
<v Speaker 1>is uh, Wendy Rhodes, the trading psychologist for ex Capital

0:01:51.080 --> 0:01:54.680
<v Speaker 1>right at the Hedge Fund. So she's basically employed by

0:01:54.720 --> 0:01:59.720
<v Speaker 1>the hedge fund to help the traders in various ways

0:01:59.760 --> 0:02:05.200
<v Speaker 1>yet into top psychological form. And one thing that's that's interesting,

0:02:05.320 --> 0:02:07.320
<v Speaker 1>and a lot of people might not know this is

0:02:07.360 --> 0:02:10.799
<v Speaker 1>that that role kind of actually exists in real life.

0:02:10.800 --> 0:02:13.640
<v Speaker 1>It wasn't just made up. There are people whose job

0:02:13.680 --> 0:02:18.720
<v Speaker 1>it is to help traders get in the top psychological

0:02:18.919 --> 0:02:22.160
<v Speaker 1>you know, psychological performance, right, some of whom have been

0:02:22.240 --> 0:02:24.920
<v Speaker 1>employed at large hedge funds, real life hedge funds like

0:02:25.040 --> 0:02:30.160
<v Speaker 1>Bridgewater exactly. So to cut right to the chase, we

0:02:30.200 --> 0:02:32.960
<v Speaker 1>have Wendy roads On, we don't have Wendy roads On

0:02:33.040 --> 0:02:35.760
<v Speaker 1>We don't have the actors who played Wendy Rhods, but

0:02:35.880 --> 0:02:40.040
<v Speaker 1>we do have someone who actually is kind of Wendy

0:02:40.160 --> 0:02:43.400
<v Speaker 1>Roads in real life, real life trading psychology. Real life

0:02:43.480 --> 0:02:46.600
<v Speaker 1>trading psychologist. Isn't that cool? That's even better. So so

0:02:46.639 --> 0:02:50.040
<v Speaker 1>we're gonna talk about what this job actually entails and

0:02:50.080 --> 0:02:53.160
<v Speaker 1>hopefully learn a few things about how you know, one

0:02:53.200 --> 0:02:55.639
<v Speaker 1>day when you and I Tracey launch our own hedge fund,

0:02:55.840 --> 0:02:59.800
<v Speaker 1>which will happen eventually, I'm sure how we can trade

0:03:00.080 --> 0:03:02.920
<v Speaker 1>with a top psychological performance. Do you think there's like

0:03:03.000 --> 0:03:07.320
<v Speaker 1>a Freudian or a Union interpretation of trading behavior? You better,

0:03:07.680 --> 0:03:10.840
<v Speaker 1>you better ask that question with us. Today we have

0:03:11.040 --> 0:03:14.600
<v Speaker 1>a Dr Brett Steinbarger. He's a political Associate Professor of

0:03:14.639 --> 0:03:19.840
<v Speaker 1>psychiatry and behavioral Sciences at Sunny Upstate Medical University, and

0:03:20.600 --> 0:03:24.680
<v Speaker 1>he is the author of four books on trading psychology.

0:03:25.040 --> 0:03:29.040
<v Speaker 1>He has worked at various hedge funds. He uh advises

0:03:29.080 --> 0:03:33.400
<v Speaker 1>different funds. Still today he trades index futures himself. So

0:03:33.639 --> 0:03:46.880
<v Speaker 1>perfect guest for this topic, Brett steam Barger, thank you

0:03:46.960 --> 0:03:49.680
<v Speaker 1>very much for joining us. Well, thank you for having me.

0:03:50.280 --> 0:03:52.080
<v Speaker 1>I always like to ask this in the beginning because

0:03:52.080 --> 0:03:55.960
<v Speaker 1>I'm very nervous. But was that introduction of fair characterization

0:03:56.080 --> 0:04:00.840
<v Speaker 1>that more or less you are a real life Wendy Rhodes. Well,

0:04:00.960 --> 0:04:03.240
<v Speaker 1>yes and no. I think she's a little more dramatic

0:04:03.280 --> 0:04:06.080
<v Speaker 1>and probably a little better looking than I am. But

0:04:07.560 --> 0:04:11.840
<v Speaker 1>there are some similarities. I think one of the differences,

0:04:12.280 --> 0:04:15.200
<v Speaker 1>and you were talking about this tracy in terms of

0:04:15.200 --> 0:04:19.719
<v Speaker 1>the manliness of the environment, is that it's surprising the

0:04:19.880 --> 0:04:25.960
<v Speaker 1>degree to which professional trading environments have become not so manly,

0:04:26.040 --> 0:04:34.120
<v Speaker 1>have become geeky, and we see evidence of quantification throughout

0:04:34.360 --> 0:04:38.320
<v Speaker 1>the investment world, and so working with traders is a

0:04:38.320 --> 0:04:41.800
<v Speaker 1>little bit less dramatic than working with alpha types. There

0:04:41.839 --> 0:04:46.040
<v Speaker 1>are many different types of money managers now who are

0:04:46.120 --> 0:04:50.200
<v Speaker 1>active within hedge funds and other firms. More big bang

0:04:50.240 --> 0:04:53.760
<v Speaker 1>theory than Wolf of Wall Street. Then, well put, and

0:04:53.800 --> 0:04:56.359
<v Speaker 1>of course that is actually a tension that sort of

0:04:56.400 --> 0:05:00.520
<v Speaker 1>emerges on the show as the as the firm X

0:05:00.600 --> 0:05:04.159
<v Speaker 1>Capital has to sort of adjust to a new reality

0:05:04.240 --> 0:05:08.760
<v Speaker 1>and try new strategies. In terms of the career itself,

0:05:08.800 --> 0:05:12.640
<v Speaker 1>the job Wendy was at one firm, you work for

0:05:12.680 --> 0:05:16.760
<v Speaker 1>several firms or sort of freelance and advised multiple firms,

0:05:16.880 --> 0:05:19.640
<v Speaker 1>but in terms of these sort of okay, she sat

0:05:19.680 --> 0:05:22.240
<v Speaker 1>down with traders and what looks like a very familiar

0:05:22.279 --> 0:05:26.720
<v Speaker 1>clinical therapy type session talking through them. Is that more

0:05:26.839 --> 0:05:29.200
<v Speaker 1>or less how this works? That it sort of looks

0:05:29.279 --> 0:05:32.240
<v Speaker 1>like traditional therapy to people sitting across from each other,

0:05:32.560 --> 0:05:35.599
<v Speaker 1>one person trying to dive in. Is that fairly accurate.

0:05:36.920 --> 0:05:39.960
<v Speaker 1>That's a portion of the role. In other words, I'll

0:05:40.040 --> 0:05:43.080
<v Speaker 1>have one to one meetings with people about their trading

0:05:43.160 --> 0:05:47.479
<v Speaker 1>and about the challenges that they're facing in their trading,

0:05:48.040 --> 0:05:51.479
<v Speaker 1>and so that will look a little more counseling and

0:05:51.560 --> 0:05:58.960
<v Speaker 1>therapy like. Unlike traditional therapy, where you're working on ongoing problems,

0:05:59.480 --> 0:06:04.560
<v Speaker 1>many times, the work of a psychologist in a hedge

0:06:04.560 --> 0:06:07.680
<v Speaker 1>fund or trading firm is more like a coach where

0:06:07.680 --> 0:06:12.680
<v Speaker 1>you're building on strengths. So the dialogue is going to

0:06:12.720 --> 0:06:17.320
<v Speaker 1>be different than in a traditional therapy way. But in addition,

0:06:17.560 --> 0:06:21.680
<v Speaker 1>the psychologist is often on the trading floor and is

0:06:21.720 --> 0:06:24.440
<v Speaker 1>talking to people in real time about what's going on.

0:06:25.320 --> 0:06:27.720
<v Speaker 1>So Brett I wanted to ask what exactly is the

0:06:27.760 --> 0:06:30.479
<v Speaker 1>goal that companies have when they bring you in to

0:06:30.720 --> 0:06:34.080
<v Speaker 1>do this, and how much guidance do you get from

0:06:34.080 --> 0:06:36.200
<v Speaker 1>the people that hire you do they come to you

0:06:36.240 --> 0:06:38.400
<v Speaker 1>and say like, oh, well this trader is good at this,

0:06:38.520 --> 0:06:41.839
<v Speaker 1>but he's had some difficulties with that, and do you

0:06:41.960 --> 0:06:46.880
<v Speaker 1>kind of help them achieve the company's goals? Yes, good question.

0:06:47.320 --> 0:06:51.680
<v Speaker 1>So what will happen is it? I'll work with trading

0:06:51.720 --> 0:06:56.240
<v Speaker 1>firms really in two roles. The first is the Wendy

0:06:56.320 --> 0:07:00.440
<v Speaker 1>Rhodes performance coach kind of role. The other roles a

0:07:00.440 --> 0:07:04.800
<v Speaker 1>little bit different. Where As a psychologist, I help firms

0:07:04.880 --> 0:07:10.600
<v Speaker 1>with their recruitment processes, assessing, evaluating, and bringing on the

0:07:10.720 --> 0:07:14.360
<v Speaker 1>right kinds of people that would fit within their teams

0:07:14.400 --> 0:07:18.720
<v Speaker 1>and with their environments for optimal performance. So that's a

0:07:18.760 --> 0:07:23.040
<v Speaker 1>little bit again different from a therapy like role you

0:07:23.120 --> 0:07:26.200
<v Speaker 1>talked about in the beginning. The sort of changing nature

0:07:26.400 --> 0:07:29.960
<v Speaker 1>of the investment firm. Uh, we're you know, the world

0:07:30.000 --> 0:07:33.240
<v Speaker 1>of billions characterized by a lot of the sort of

0:07:33.280 --> 0:07:37.280
<v Speaker 1>cliche alpha male type characters. As you put it, many

0:07:37.320 --> 0:07:40.880
<v Speaker 1>of these firms are undergoing dramatic changes. The whole industry

0:07:40.960 --> 0:07:45.760
<v Speaker 1>is undergoing dramatic changes to more quantification stuff like that.

0:07:46.080 --> 0:07:49.280
<v Speaker 1>How does that affect their needs for someone like you,

0:07:49.400 --> 0:07:52.640
<v Speaker 1>and how does that affect what you can bring to

0:07:52.760 --> 0:07:56.960
<v Speaker 1>the table? Again, good question, and that gets it at

0:07:57.080 --> 0:08:03.080
<v Speaker 1>something that you're asking us earlier. Sometimes it'll be the

0:08:03.600 --> 0:08:06.679
<v Speaker 1>firm itself, the management that will come to me and say,

0:08:06.760 --> 0:08:10.440
<v Speaker 1>can you help us accomplish X y Z? Can you

0:08:10.520 --> 0:08:14.920
<v Speaker 1>help us build out more effective teams? Can you help

0:08:15.080 --> 0:08:19.880
<v Speaker 1>this trader who's having difficulties? And other times the need,

0:08:19.960 --> 0:08:22.239
<v Speaker 1>and I say most of the time is coming from

0:08:22.280 --> 0:08:28.480
<v Speaker 1>the money manager themselves, saying I could use help with X.

0:08:28.760 --> 0:08:31.880
<v Speaker 1>I'm doing well trading in this market. I would like

0:08:32.000 --> 0:08:36.520
<v Speaker 1>to start to broaden out and trade other markets successfully.

0:08:36.559 --> 0:08:40.040
<v Speaker 1>I'm in a draw down. My confidence is waning. I

0:08:40.160 --> 0:08:43.480
<v Speaker 1>need some help with my confidence. So many times it

0:08:43.520 --> 0:08:48.480
<v Speaker 1>will come from the performer him or herself. One of

0:08:48.520 --> 0:08:52.360
<v Speaker 1>the things in the show Billions. And I know eventually

0:08:52.400 --> 0:08:55.440
<v Speaker 1>we can get past referencing Billions, but I keep mentioning

0:08:55.480 --> 0:08:57.160
<v Speaker 1>you just because you know, it's a frame of reference

0:08:57.200 --> 0:09:03.840
<v Speaker 1>for people um internal tension. So a trader might be

0:09:04.120 --> 0:09:08.760
<v Speaker 1>frustrated with how they're being treated by you know, Bobby

0:09:08.800 --> 0:09:13.120
<v Speaker 1>excel Rod or colleague, or they feel uh, someone else's

0:09:13.160 --> 0:09:17.040
<v Speaker 1>disrespecting them and that influences their psychology. Do things like

0:09:17.080 --> 0:09:20.679
<v Speaker 1>that come up once in a while, it's it's actually

0:09:20.760 --> 0:09:24.480
<v Speaker 1>pretty rare. At least of the firms where I work,

0:09:24.840 --> 0:09:32.000
<v Speaker 1>the management is pretty sophisticated as far as um people

0:09:32.000 --> 0:09:35.680
<v Speaker 1>and people's skills, and so I don't encounter huge amounts

0:09:35.720 --> 0:09:39.080
<v Speaker 1>of frustration. Once in a while, within teams and within

0:09:39.120 --> 0:09:41.720
<v Speaker 1>a firm, there will be some conflicts, and yes, I

0:09:41.800 --> 0:09:46.200
<v Speaker 1>do help people manage those conflicts in a constructive way,

0:09:46.559 --> 0:09:49.040
<v Speaker 1>just like one would do, let's say, in couples counseling.

0:09:49.800 --> 0:09:55.920
<v Speaker 1>But I'd say that's the exception. I think the larger

0:09:56.000 --> 0:10:00.280
<v Speaker 1>issues are the more common issues that money managers face

0:10:01.760 --> 0:10:07.240
<v Speaker 1>when they want to trade in a certain way, but

0:10:07.400 --> 0:10:12.760
<v Speaker 1>the risk management guidelines of the firm um rain them in,

0:10:13.080 --> 0:10:15.480
<v Speaker 1>and so there's a conflict between how they would like

0:10:15.520 --> 0:10:18.080
<v Speaker 1>to manage money and how the firm would like them

0:10:18.080 --> 0:10:21.520
<v Speaker 1>to manage money. I'd love to be a fly on

0:10:21.559 --> 0:10:26.160
<v Speaker 1>the wall for group therapy sessions at like Bridgewater to

0:10:26.440 --> 0:10:29.720
<v Speaker 1>all right, we are going to take a short break.

0:10:33.040 --> 0:10:35.199
<v Speaker 1>But knowledge to work and grow your business with c

0:10:35.400 --> 0:10:39.559
<v Speaker 1>i T from transportation to healthcare to manufacturing. C i

0:10:39.640 --> 0:10:43.400
<v Speaker 1>T offers commercial lending, leasing, and treasury management services for

0:10:43.480 --> 0:10:46.360
<v Speaker 1>small and middle market businesses. Learn more at c i

0:10:46.440 --> 0:10:55.000
<v Speaker 1>T dot com. Put knowledge to work and we're back, Brett,

0:10:55.200 --> 0:10:58.840
<v Speaker 1>I'm wondering, I'd love to just drill down before we

0:10:58.880 --> 0:11:01.640
<v Speaker 1>move on to other things, in to the exact problems

0:11:01.640 --> 0:11:04.160
<v Speaker 1>that traders tend to have, Like, I know you mentioned

0:11:04.400 --> 0:11:08.560
<v Speaker 1>confidence as one of them. So give us some more

0:11:08.559 --> 0:11:11.800
<v Speaker 1>examples of the issues trader as my encounter and how

0:11:12.160 --> 0:11:17.880
<v Speaker 1>you might encourage them to rectify those problems. Yeah. So,

0:11:17.960 --> 0:11:22.240
<v Speaker 1>I would say there are three major classes of need

0:11:22.880 --> 0:11:27.800
<v Speaker 1>that bring a money manager to a performance coach like myself.

0:11:28.360 --> 0:11:33.040
<v Speaker 1>The first is if they're having difficulties with performance because

0:11:33.280 --> 0:11:38.200
<v Speaker 1>of their trading and investing. Something is going wrong with

0:11:38.360 --> 0:11:44.480
<v Speaker 1>how they are managing capital. Sometimes it's because markets have

0:11:44.600 --> 0:11:51.080
<v Speaker 1>changed and the trader has not adapted very well. Sometimes

0:11:51.200 --> 0:11:57.240
<v Speaker 1>it's because emotional factors, frustrations or maybe over confidence. Maybe

0:11:57.280 --> 0:12:00.440
<v Speaker 1>they've gone on a run and so out of over confidence,

0:12:00.480 --> 0:12:04.880
<v Speaker 1>they're making some impulsive decisions, suboptimal decisions that are now

0:12:05.000 --> 0:12:10.600
<v Speaker 1>causing them to lose money. So those are all situations

0:12:10.760 --> 0:12:15.600
<v Speaker 1>in which performance is hurting and the money manager will

0:12:15.640 --> 0:12:19.360
<v Speaker 1>reach out to a coach. How do you differentiate though,

0:12:19.440 --> 0:12:23.240
<v Speaker 1>between someone just being a bad trader and putting on

0:12:23.360 --> 0:12:27.520
<v Speaker 1>bad trades and their performance being affected by emotional or

0:12:27.520 --> 0:12:32.280
<v Speaker 1>psychological issues A good question, yes, uh, And that is

0:12:32.679 --> 0:12:35.120
<v Speaker 1>more of an issue if you're working at a firm

0:12:35.240 --> 0:12:40.000
<v Speaker 1>that employs beginning traders. At the funds where I work,

0:12:40.800 --> 0:12:45.640
<v Speaker 1>the minimum portfolio size is hundreds of billions of dollars

0:12:45.720 --> 0:12:49.880
<v Speaker 1>and you need a multi year successful track record just

0:12:49.960 --> 0:12:53.640
<v Speaker 1>to get the job. So the issue of them just

0:12:53.760 --> 0:12:56.000
<v Speaker 1>being a bad trader and not knowing what they're doing

0:12:56.760 --> 0:12:58.920
<v Speaker 1>is less of an issue than if you were working,

0:12:59.000 --> 0:13:01.600
<v Speaker 1>let's say, at a proprietor harry trading firm where someone

0:13:01.920 --> 0:13:05.040
<v Speaker 1>could be trading for the first time ever. So you

0:13:05.080 --> 0:13:08.800
<v Speaker 1>do have to differentiate in that latter situation when it's

0:13:08.840 --> 0:13:12.200
<v Speaker 1>a matter of skill or lack of skill, and when

0:13:12.240 --> 0:13:17.520
<v Speaker 1>it's a matter of just situational emotions getting in a way. However,

0:13:17.640 --> 0:13:21.079
<v Speaker 1>what I'm also bringing up is there's a third possibility,

0:13:21.120 --> 0:13:27.040
<v Speaker 1>which is that markets themselves have changed, and that as

0:13:27.080 --> 0:13:31.680
<v Speaker 1>a result of different volatility, different trend to shift in

0:13:31.720 --> 0:13:36.800
<v Speaker 1>the market now creates situations where what worked or what

0:13:37.080 --> 0:13:40.160
<v Speaker 1>used to work in the market now is not working,

0:13:40.679 --> 0:13:44.120
<v Speaker 1>and that leads to frustrations, and that leads to drawdowns.

0:13:45.080 --> 0:13:51.760
<v Speaker 1>So sometimes emotional issues trigger trading problems, but sometimes changes

0:13:51.880 --> 0:13:57.280
<v Speaker 1>in markets can trigger emotional Let's some talk about let's

0:13:57.280 --> 0:14:00.160
<v Speaker 1>get into some specifics. So imagine Tracy and I are

0:14:00.160 --> 0:14:03.840
<v Speaker 1>going to launch our hedge fund one day odd Lots Capital,

0:14:03.840 --> 0:14:06.400
<v Speaker 1>which is actually a pretty good name, which is pretty

0:14:06.400 --> 0:14:11.880
<v Speaker 1>good name for our hedge fund. Um. Let's imagine we

0:14:11.880 --> 0:14:13.800
<v Speaker 1>already we already know we're pretty good. I don't know

0:14:13.800 --> 0:14:16.079
<v Speaker 1>how we would establish a track record, but obviously it

0:14:16.120 --> 0:14:19.560
<v Speaker 1>would be pretty good. We're sort of abstracting that a way,

0:14:19.600 --> 0:14:21.960
<v Speaker 1>but we're in a bit of a rut. What are

0:14:22.160 --> 0:14:24.560
<v Speaker 1>you know, let's talk about what can Tracy and I?

0:14:24.680 --> 0:14:28.160
<v Speaker 1>How would you start to figure out how we'd get

0:14:28.200 --> 0:14:31.480
<v Speaker 1>into peak performance? How what are the things that you

0:14:31.480 --> 0:14:34.480
<v Speaker 1>would start to look for, the techniques that we could

0:14:34.560 --> 0:14:38.520
<v Speaker 1>use to get into a good mental state. Well, let

0:14:38.560 --> 0:14:41.320
<v Speaker 1>me step back. It's a great question, and let me

0:14:41.360 --> 0:14:45.240
<v Speaker 1>step back and mention. Something I've done at several trading

0:14:45.280 --> 0:14:50.560
<v Speaker 1>firms to help with their peak performance is to conduct

0:14:50.640 --> 0:14:57.120
<v Speaker 1>research projects where we intensively study their peak performers. So

0:14:57.200 --> 0:15:03.040
<v Speaker 1>we take a look and investigate the personality factors, the

0:15:03.160 --> 0:15:10.400
<v Speaker 1>skill factors, and the cognitive strengths that differentiate their best

0:15:10.440 --> 0:15:15.720
<v Speaker 1>traders from average traders. And so we look at what

0:15:15.840 --> 0:15:19.640
<v Speaker 1>makes for success in that particular fund or in that

0:15:19.680 --> 0:15:24.760
<v Speaker 1>particular firm, and that then can inform the types of

0:15:24.880 --> 0:15:27.960
<v Speaker 1>qualities you want to coach for, but also the kind

0:15:28.000 --> 0:15:32.480
<v Speaker 1>of qualities you would look for in your recruitment processes.

0:15:34.960 --> 0:15:37.720
<v Speaker 1>So um, in your research, I know it varies firm

0:15:37.760 --> 0:15:40.680
<v Speaker 1>to firm, but are there some general characteristics that seem

0:15:40.760 --> 0:15:45.920
<v Speaker 1>to make a strong trader. There are definitely some personality

0:15:46.000 --> 0:15:51.760
<v Speaker 1>and cognitive factors that seem to go along with good trading,

0:15:52.320 --> 0:15:55.440
<v Speaker 1>and it does seem as though different kinds of trading

0:15:56.200 --> 0:16:02.960
<v Speaker 1>call upon different skill sets. So, for example, among day

0:16:02.960 --> 0:16:08.280
<v Speaker 1>traders who are trading actively throughout the day, one of

0:16:08.320 --> 0:16:14.320
<v Speaker 1>the most important things to look for is both fast thinking,

0:16:14.480 --> 0:16:19.440
<v Speaker 1>fast processing of information and parallel processing of information, the

0:16:19.480 --> 0:16:23.440
<v Speaker 1>ability to look at and process many things at one time.

0:16:24.920 --> 0:16:28.840
<v Speaker 1>Much of what they are doing amounts to pattern recognition,

0:16:29.640 --> 0:16:32.960
<v Speaker 1>and so they need to be able to rapidly process

0:16:33.000 --> 0:16:38.200
<v Speaker 1>information to detect patterns. That's extremely different. Let's say from

0:16:38.320 --> 0:16:44.000
<v Speaker 1>a macro hedge fund investor who is doing deep dives

0:16:44.080 --> 0:16:47.880
<v Speaker 1>into macro economic statistics to figure out where there is

0:16:47.960 --> 0:16:52.400
<v Speaker 1>greater strength and lesser strength in global economies and then

0:16:52.720 --> 0:16:57.400
<v Speaker 1>formulating investment ideas on that basis, that's deeper thinking, not

0:16:57.600 --> 0:17:02.120
<v Speaker 1>fast thinking, and so in the setting, the deep thinking

0:17:02.600 --> 0:17:05.800
<v Speaker 1>is a big part of the investment success. That what

0:17:05.840 --> 0:17:08.680
<v Speaker 1>you said about day traders actually makes me realize something

0:17:08.800 --> 0:17:11.320
<v Speaker 1>years ago, after I graduated college, I actually applied for

0:17:11.359 --> 0:17:15.280
<v Speaker 1>a job at a proprietary trading firm. Uh. And one

0:17:15.359 --> 0:17:17.720
<v Speaker 1>of the things they had me do during the interview

0:17:18.280 --> 0:17:21.640
<v Speaker 1>was play a video game, but then on another screen.

0:17:21.920 --> 0:17:24.199
<v Speaker 1>While playing the video game, I had to occasionally, like

0:17:24.240 --> 0:17:26.760
<v Speaker 1>answer a trivia question that had nothing to do with

0:17:26.800 --> 0:17:29.320
<v Speaker 1>the video game. And so it's a combination of could

0:17:29.320 --> 0:17:32.119
<v Speaker 1>I focus on X, but also be aware that X

0:17:32.240 --> 0:17:36.000
<v Speaker 1>or why was going on at the same time. Um So,

0:17:36.119 --> 0:17:38.159
<v Speaker 1>now I realized what they were going for, So thank you.

0:17:38.240 --> 0:17:42.000
<v Speaker 1>I've always been that was That sounds like a pretty

0:17:42.160 --> 0:17:47.080
<v Speaker 1>interesting screening going for fast thinking and parallel processing. We'll

0:17:47.200 --> 0:17:50.639
<v Speaker 1>use that for our recruitment. Yeah, exactly. I also had

0:17:50.680 --> 0:17:54.440
<v Speaker 1>to play ping Pong against the CEO during that interview. Well,

0:17:54.920 --> 0:17:57.679
<v Speaker 1>that's testing your social skills to see if you let

0:17:57.800 --> 0:18:00.600
<v Speaker 1>him win. All right, we just have a couple of

0:18:00.640 --> 0:18:03.560
<v Speaker 1>minutes here left, but I want to get some really

0:18:03.600 --> 0:18:08.760
<v Speaker 1>general things. So you've written some books about trading. So

0:18:08.800 --> 0:18:11.520
<v Speaker 1>obviously a reader of those books you don't know like

0:18:11.600 --> 0:18:15.080
<v Speaker 1>exactly the situation the reader is in. What are two

0:18:15.200 --> 0:18:17.639
<v Speaker 1>or three basic pieces of advice you could give to

0:18:17.680 --> 0:18:21.480
<v Speaker 1>a prospective trader that they could use to reset themselves

0:18:21.560 --> 0:18:26.119
<v Speaker 1>and get them uh in a good uh good psychological state. Well,

0:18:26.200 --> 0:18:29.560
<v Speaker 1>you know. Per my most recent book, The Trading Psychology

0:18:29.600 --> 0:18:33.480
<v Speaker 1>two point oh, I make the point the trading psychology

0:18:33.520 --> 0:18:38.000
<v Speaker 1>is about much more than just solving emotional problems and

0:18:38.119 --> 0:18:45.840
<v Speaker 1>challenges right now, that the greatest challenge facing traders, investors,

0:18:45.880 --> 0:18:50.600
<v Speaker 1>investment firms is the correlation among the performers. People are

0:18:50.680 --> 0:18:53.240
<v Speaker 1>looking at the same things, putting on the same trades,

0:18:53.359 --> 0:19:00.000
<v Speaker 1>developing the same investment ideas. That correlation doesn't allow trade

0:19:00.040 --> 0:19:04.240
<v Speaker 1>leader or trading firm to truly stand out. They become

0:19:04.280 --> 0:19:07.080
<v Speaker 1>part of the herd and it hurts their performance. And

0:19:07.200 --> 0:19:10.560
<v Speaker 1>so what we see in trading psychology is that the

0:19:10.600 --> 0:19:18.720
<v Speaker 1>best performers are cultivating creativity. They are developing ways of

0:19:18.800 --> 0:19:24.600
<v Speaker 1>looking at markets in unique fashion so that they see

0:19:24.680 --> 0:19:27.879
<v Speaker 1>things that other people don't see. They see opportunities that

0:19:27.920 --> 0:19:32.760
<v Speaker 1>others don't detect, and that gives them some uniqueness to

0:19:32.880 --> 0:19:37.679
<v Speaker 1>their returns. That ends up being very, very very important

0:19:38.280 --> 0:19:41.399
<v Speaker 1>now because they have to look for unique opportunities in

0:19:41.480 --> 0:19:46.240
<v Speaker 1>different markets, different time frames. What we see is that

0:19:46.480 --> 0:19:52.000
<v Speaker 1>individual traders increasingly are building out teams. They are hiring

0:19:52.280 --> 0:19:54.879
<v Speaker 1>junior people to work with them who have some of

0:19:54.880 --> 0:19:58.520
<v Speaker 1>the skill sets and perspectives and expertise that they might lack,

0:20:00.040 --> 0:20:05.200
<v Speaker 1>And so increasingly the good money managers are called upon

0:20:05.560 --> 0:20:09.240
<v Speaker 1>to become good people managers, and that never used to

0:20:09.280 --> 0:20:15.000
<v Speaker 1>happen before. So trading psychology has expanded. It's about enhancing creativity,

0:20:15.240 --> 0:20:19.320
<v Speaker 1>it's about enhancing leadership and people's skills, not just about

0:20:19.320 --> 0:20:22.840
<v Speaker 1>controlling your emotions. But if I could just um play

0:20:22.920 --> 0:20:25.480
<v Speaker 1>Devil's advocate for one moment, you know, you mentioned the

0:20:25.520 --> 0:20:29.000
<v Speaker 1>way that markets have evolved and changed over the years,

0:20:29.040 --> 0:20:31.439
<v Speaker 1>and it does seem like the emphasis now is on

0:20:31.560 --> 0:20:36.720
<v Speaker 1>quantitative trading, it's on systematic trading. So you know, how

0:20:36.800 --> 0:20:41.320
<v Speaker 1>much does getting the psychology or someone's personality right actually

0:20:41.440 --> 0:20:45.880
<v Speaker 1>matter when it comes to performance anymore. It's a great question.

0:20:45.960 --> 0:20:49.240
<v Speaker 1>And I work with some quantitative firms and so it's

0:20:49.280 --> 0:20:52.840
<v Speaker 1>been very interesting for me to see the differences in

0:20:52.880 --> 0:20:57.560
<v Speaker 1>how psychology is employed at one firm versus another. When

0:20:57.600 --> 0:21:02.359
<v Speaker 1>a firm is more quantity, it is than a huge

0:21:02.480 --> 0:21:05.240
<v Speaker 1>part of their work is research and development. They are

0:21:05.280 --> 0:21:09.520
<v Speaker 1>really R and D firms. They are constantly researching, developing

0:21:09.520 --> 0:21:14.280
<v Speaker 1>new ideas, almost like a pharmaceutical firm. And so work

0:21:14.400 --> 0:21:19.560
<v Speaker 1>with them on enhancing their creative processes. Helping them work

0:21:19.600 --> 0:21:24.480
<v Speaker 1>more effectively as a team becomes important, rather than working

0:21:24.520 --> 0:21:27.560
<v Speaker 1>with them because they're becoming frustrated because the first two

0:21:27.560 --> 0:21:31.919
<v Speaker 1>trades they placed in the morning didn't work out. Fascinating stuff. Uh.

0:21:32.160 --> 0:21:35.840
<v Speaker 1>Dr Bret Steenbarger a real life trading coach and a

0:21:35.920 --> 0:21:41.080
<v Speaker 1>professor of psychiatry and behavioral sciences, the author of four books.

0:21:41.119 --> 0:21:43.920
<v Speaker 1>Thank you so much, really appreciate you coming on. Now.

0:21:43.960 --> 0:21:46.159
<v Speaker 1>I want to download all your books to my Kindle

0:21:46.320 --> 0:21:48.440
<v Speaker 1>and read them and so I know what I'm gonna

0:21:48.480 --> 0:21:51.760
<v Speaker 1>do this weekend. Well good, and now I want to

0:21:51.800 --> 0:21:54.280
<v Speaker 1>invest in the Odd Lots hedge fund. This is great,

0:21:54.800 --> 0:21:58.000
<v Speaker 1>that perfect synergy. Thank you, thank you so much for

0:21:58.040 --> 0:22:00.040
<v Speaker 1>coming on. Thank you. Okay, thanks a lot, and I I

0:22:00.080 --> 0:22:12.840
<v Speaker 1>appreciate it so Tracy, I'm pretty excited about our hedge

0:22:12.880 --> 0:22:15.880
<v Speaker 1>find No, seriously, we always joke about like different things

0:22:15.920 --> 0:22:17.879
<v Speaker 1>we're gonna do. We're gonna go play to go to

0:22:17.880 --> 0:22:20.639
<v Speaker 1>a casino and teach you play poker. We're gonna go.

0:22:20.720 --> 0:22:24.320
<v Speaker 1>He tried catfish in Louisiana, and you know, we can

0:22:24.400 --> 0:22:26.720
<v Speaker 1>achieve all those things in one go. We start a

0:22:26.800 --> 0:22:30.159
<v Speaker 1>hedge fund in Louisiana where we have fried catfish for

0:22:30.280 --> 0:22:33.919
<v Speaker 1>lunch and we test our potential employees by playing poker

0:22:34.000 --> 0:22:38.600
<v Speaker 1>with them. Is perfect. No, But I did really enjoy

0:22:38.880 --> 0:22:41.720
<v Speaker 1>that conversation. One. I just it's cool to like hear

0:22:41.760 --> 0:22:44.159
<v Speaker 1>about what that job is in real life. And I

0:22:44.200 --> 0:22:49.399
<v Speaker 1>really thought that was interesting, this idea. There's more to psychology,

0:22:49.480 --> 0:22:52.919
<v Speaker 1>uh than just sort of emotional state, that perspective that

0:22:53.000 --> 0:22:55.760
<v Speaker 1>it's one of the sort of ways you bring value

0:22:55.760 --> 0:22:57.880
<v Speaker 1>to a firm or anything. Is not just falling into

0:22:57.920 --> 0:23:00.800
<v Speaker 1>a groove and not just doing what everyone else does.

0:23:01.080 --> 0:23:04.440
<v Speaker 1>And we as we know from humans being social animals,

0:23:04.520 --> 0:23:06.720
<v Speaker 1>that's actually a really hard thing to avoid. Yeah, and

0:23:06.760 --> 0:23:09.959
<v Speaker 1>it's like, I guess it's fairly obvious, but it seems

0:23:10.040 --> 0:23:12.399
<v Speaker 1>it's interesting to me that one of the factors that

0:23:12.400 --> 0:23:16.680
<v Speaker 1>can affect performances loss of confidence. And then I imagine Brett,

0:23:16.760 --> 0:23:20.199
<v Speaker 1>you know, in a room with someone going yeah, you're okay,

0:23:20.280 --> 0:23:22.920
<v Speaker 1>you can do this well. It's also it's when someone

0:23:23.000 --> 0:23:26.560
<v Speaker 1>loses confidence, and I've seen that happen in different realms

0:23:26.560 --> 0:23:30.840
<v Speaker 1>and life, and it's a really hard thing to because

0:23:30.920 --> 0:23:34.600
<v Speaker 1>the skill hasn't changed well. And it's also because it's

0:23:34.600 --> 0:23:37.640
<v Speaker 1>like it's kind of like telling someone who's to relax.

0:23:37.840 --> 0:23:40.040
<v Speaker 1>You know, if someone's really anxious and you tell them

0:23:40.080 --> 0:23:44.159
<v Speaker 1>to relax, it accomplishes the exact opposite. And so if

0:23:44.160 --> 0:23:46.680
<v Speaker 1>someone loses confidence and the next thing you know, they're

0:23:46.680 --> 0:23:49.960
<v Speaker 1>in a room, it's that's like it could be very

0:23:50.000 --> 0:23:52.040
<v Speaker 1>hard to snap out of that. Yeah, and then you

0:23:52.040 --> 0:23:55.080
<v Speaker 1>have the opposite problem of overconfidence, which I'm pretty sure

0:23:55.119 --> 0:23:56.960
<v Speaker 1>is what a lot of the characters on Billions seem

0:23:57.040 --> 0:23:59.320
<v Speaker 1>to suffer from. Yeah, I think that's I think that's

0:23:59.359 --> 0:24:01.480
<v Speaker 1>well put. All right, should we leave it there? Let's

0:24:01.520 --> 0:24:05.520
<v Speaker 1>leave it there. This has been another episode of The

0:24:05.560 --> 0:24:09.560
<v Speaker 1>Odd Lots Podcast. I'm Joe Wisenthal and I'm Tracy Alloway.

0:24:09.640 --> 0:24:12.280
<v Speaker 1>You can follow me on Twitter at Tracy Alloway, and

0:24:12.280 --> 0:24:14.800
<v Speaker 1>you can follow me on Twitter at the Stalwarts. You

0:24:14.800 --> 0:24:18.600
<v Speaker 1>can also follow our guest Bred Steenbarger on Twitter at

0:24:18.760 --> 0:24:24.280
<v Speaker 1>steen bab and our producer Sarah Patterson at Sarah pat two. Teas.

0:24:24.560 --> 0:24:36.440
<v Speaker 1>Thanks for listening, but knowledge to work and grow your

0:24:36.480 --> 0:24:41.000
<v Speaker 1>business with c i T. From transportation to healthcare to manufacturing.

0:24:41.200 --> 0:24:44.600
<v Speaker 1>C i T offers commercial lending, leasing, and treasury management

0:24:44.640 --> 0:24:48.000
<v Speaker 1>services for small and middle market businesses. Learn more at

0:24:48.000 --> 0:24:50.480
<v Speaker 1>c i T dot com put knowledge to work