In the last post I talked about the importance of building a positive relationship with your trading coach, but cautioned that you do not want that coach to be simply a cheerleader. I also talked about the importance of setting positive goals, focusing on continuing and improving good habits, rather than explicitly setting yourself the goal to avoid bad habits. This is an important part of effecting change in yourself: having a positive foundation to build upon.

In today’s lesson we’re going to take a look at this from the other side: being able to work with your weaknesses, since these are the areas where change will show the most overall improvement.


This post is part of a series on Brett Steenbarger's The Daily Trading Coach
View all posts in the series here.

As a reminder and a note of caution, this blog should not be considered a substitute for reading Dr. Brett Steenbarger’s book: The Daily Trading Coach. Beyond the fact that I am neither a trained psychologist (unlikely to happen) or a successful trader (yet), each lesson contains many nuggets of wisdom, and in this blog series I focus on the ones that resonate most with me as I’m reading and writing. Different parts may strike you more strongly than they do me. If you have not read it, I encourage you to click that link and buy your own copy, read along, and let me know on Twitter what resonates most strongly with you in each lesson. We can all learn not only from Dr. Brett’s words, but from how each of us reacts to them.

Lesson 3: Make Friends With Your Weakness

As I’ve said in previous posts, true self-reflection is hard. We all have our strengths, and we all have our weaknesses, and it is much easier, and more pleasant, to concentrate on our strengths. This isn’t really surprising. It’s natural and healthy to want to think of ourselves as good people, and by focusing on what we do well, what we like about ourselves, we more easily form that image.

While there’s nothing inherently wrong with this, it does limit our ability to effect lasting change. One of the issues with the prolific industry of self-help books, Dr. Brett says, is that

The motivation for much positive thinking is a denial of weakness

Think of Al Franken’s SNL character Stuart Smalley, and his affirmation: “I’m good enough, I’m smart enough, and doggone it, people like me.” While we can all accept that Franken was playing a bit of an exaggerated character, the same tone can be found in serious, published self-help books. Many of us are good enough, smart enough, and liked by people, and we should not ignore the positive side of ourselves. But in limiting our mantra to this, we ignore the parts of ourselves that maybe could use a little bit of work. By denying or ignoring our weaknesses, we can never have a complete picture of ourselves as a person, or a trader. This limits our ability to improve, and our motivation for change, because the parts of us that are “good enough” just don’t need the same sort of dedication as the less developed parts.

This ties back to the issue of visibility from the last post. While the focus of that lesson was the importance of visibility overall — helping ourselves understand and work towards our ultimate goals and strengths — we cannot ignore the flip side of that coin. We need all parts of ourselves to be visible, so that we can see not only what we are already strong at (which keeps our coaching relationship healthy, and our motivation strong), but also the areas where we need improvement (where the greatest change needs to happen).

Not only do we need to see this side of ourselves, but more than that, we need to accept it. We need to be able to love ourselves as a complete person, not just the part of ourselves that’s already “good enough”. It doesn’t pay to think of our weaknesses as bad things that need to be fixed and removed. As in the last post, this only creates a negative feedback loop to any failure to immediately improve. Instead, we need to think of our weaknesses as opportunities to learn, to grow, to change. Mental processes and habits are like muscles: if we don’t exercise them, if we don’t push them further than we have before, they won’t grow.

We need to step outside of our comfort zone and do something that scares us a little, or else we forever limit what we are able to do, and we never grow.



Let’s apply some of this to my trading from last week. I ended green on the week, but even my winning trades were sloppy. I got greedy and stayed in positions that had already hit my profit target, and as a result ended up taking much smaller gains than I would have otherwise. I set stop losses but then cancelled them because even though they were wide enough to show my plan wasn’t working out, they were still within my dollar-risk tolerance. And then if they hit my original stop loss and turned around into green trades, I also let those run past profit targets. Or I let a reversal run longer, and took a bigger loss than I should have.

It would be easy to look at my week and say “hey, I finished green, that’s great, go me!” and leave it at that, come back next week and do the same things. But that ignores the fact that almost everything else was handled poorly. I didn’t end up green on the week because of my actions, I ended up green despite how I handled my trades. Just because my sloppiness worked out this week doesn’t mean it will work out next week.

With the Coronavirus in the news, we’re in a hot sector for small biotechs, and because of that I was able to trade messy but still turn a profit because the stocks I was focusing on had larger than usual uptrends. But hot sectors end, and once they do, this sort of trading will no longer work because we won’t continue to see these outsized moves. Discipline around profit targets and stop losses has been my main weakness in trading this week.

So now that I have seen and acknowledged this part of my trader-self, what steps can I take to improve myself in this area? What can I do to ensure that next week I cut even just one loss more quickly, or take even one winning trade when it first hits my target?

The first and most important step is what I have just done: give a name to the weaknesses and sit with them, rather than push them off into a drawer somewhere else in my brain and never think about them again. Or, at least, not until I repeat these mistakes next week.

The next step is to find that one degree outside of my comfort zone, find something that makes me feel a little nervous, and get myself to do that. In this case, maybe it’s not cancelling my stop loss order, no matter how much I might think the stock is going to bounce off it and then continue in the direction I thought. Or it could be setting a trailing stop, so that once my price target gets hit, as soon as it starts to retrace, I take the profits.

As always in trading, both solutions have the potential to limit profits, if the trend does continue after the pullback. But by implementing either, or both, of those potential solutions, I force myself to to stick to the determined levels I have set, and I limit potential losses, even at the expense of smaller profits. As I’ve heard Tim Bohen say on StocksToTrade Pro many times: “I’d rather be wishing I was in, than wishing I was out.” If you exit on your stop loss and the trend turns around and goes your way, it’s disappointing, but you know you were on the right track! If you ignore your stop loss and the trend continues down, your losses just become a whole lot bigger than you planned.

If I get stopped out and the trend reverses, I might have missed out on profits, but I stuck to my rules. Having your rules and following them is the true necessity for becoming a consistently profitable trader, not that every day or week is green, regardless of how it happened. Recognizing that I broke my rules multiple times this week isn’t a good feeling. But by sitting with that feeling and thinking about why I feel it, and how much I don’t want to feel it again, I stand a much better chance of truly learning and improving. If I just ignore this feeling because I made money this week, all I do it set myself up to repeat these mistakes, and next time I might not get lucky and turn a profit.

I don’t want to be lucky. I want to be consistent. And that means constantly working on self-improvement, aiming for that 1% better each day.