In the past three posts in my series on Dr. Brett Steenbarger’s The Daily Trading Coach we’ve talked about how your mental attitude can affect your success as a trader and as your own trading coach. We talked about the importance of being able to recognize both your strengths and weaknesses, but also the importance of viewing those weaknesses not as problems to be eliminated, but as opportunities to be seized.

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

In this post we’ll turn outward a bit, and look about how your environment can affect you as well. With COVID-19 spreading, and as more and more of us find ourselves home-bound, this is a particularly timely post. By the end of the post, I hope to give you some tips on how to keep your environment conducive to good trading and learning habits, even amidst the pandemic, and keep getting that 1% better each day.

Lesson 4: Change Your Environment, Change Yourself

As humans, we are incredibly adaptable. But as humans, we are also creatures of habit. Both of these traits can help us to achieve great things, but they can also hinder us. I’ll give you a brief example of each in the realm of trading.

If you are testing out a trading strategy and it isn’t working, your adaptability will allow you to quickly pivot to another strategy to test, and another, until you find a strategy that works for you. That’s the good side of adaptability. On the other hand, if you keep pivoting as soon as a system doesn’t work one or two times, maybe you’ll miss a really great system because you didn’t stick with it long enough to see that those first few trades were really just a small number in an otherwise mostly successful strategy. There’s such a thing as too much adaptability, when it happens on impulse, rather than with a solid reason.

When you do find that system, practicing it, building the habit of being able to spot it and execute is an excellent use of your brain’s ability to latch onto a pattern. But when that leads to laziness, it’s gone too far. Maybe the system stops working quite as well, but you’re still coming out ahead overall, so you don’t both experimenting with a new strategy. Then your original strategy stops working altogether, and you have no backup. This is the negative side of our lives as habitual people.

There’s a fine line between being in a groove, and being in a rut, and often we don’t see that line until we’re well past it. The further you’re dug into your routine, and the more comfortable you are, the harder it will be to bring yourself out of it.

As Dr. Brett puts it:

In familiar environments and routines, we operate on autopilot. Nothing changes.

Routine seems to be the antithesis of what we’ve been talking about in these blogs posts: how to change! We find the easy patterns, the routines we’re used to, and never deviate from them. This can make for a comfortable life, but in the markets, where everything is always in constant motion, that’s not a way to succeed. You need to be able to harness your adaptability to find, develop, and maintain an edge.

It can be easy to lose sight of how big a part your environment truly plays. The familiar places and settings — your house, your car, your office — fade into the background noise of your day-to-day, and we can ignore the bad habits they foster. In our current moment, many of us who have days jobs are being told to work from home. Because of the comfort and familiarity of the house, it can be a very dangerous place to suddenly find yourself when you need to be at your most productive. At home, it’s easy to turn on the TV, or pick up an instrument or a gaming console and accidentally let 30 minutes slip away, time you could have spent watching the markets, or studying last week’s trades, or writing a blog post…

If you have laser-like focus and don’t have this kind of issue, I’ll freely admit I’m a little jealous. I’ve not been diagnosed with ADHD, but I have found I share some mild versions of the symptoms with those who are. I have a wide range of interests and projects going on at any given time, and when I’m in the office, they’re at home, where they can’t distract me. Now, I’m looking down the barrel of working from home for at least a few weeks, and I know I need to put some serious thought into how to maintain my focus and discipline.

There have been studies done that show that knowledge is acquired and held better when you learn it in different settings over a period of time. I have put this to the test, and found it successful, in my day-to-day life. I listen to trading podcasts during my commute to work, when I’m at the gym, and, when I’m not in meetings, while I’m working in the office. The changing surroundings mean that even the same piece of information feels a little different each time, just different enough that my brain doesn’t tune it out, but is fully attentive to it. In that way, I hear the same new data 3 times, but because it feels fresh each time, I hear it more consciously each time, and internalize the lesson faster. If you’ve not tried this approach, I highly recommend giving it a try. I could sit and watch Tim Sykes’ videos at home every evening all I wanted, and learn a ton, but I found that the lessons stuck better when I also simply listened to those videos again at the gym, or in the car (notice that I said “listen to” and not “watch”. PLEASE DO NOT WATCH VIDEOS WHILE OPERATING A MOTOR VEHICLE)

Now that I’m not going to the office or the gym, how can I (or you, if you’re willing to give this a try, or have already found it useful) keep up this habit I’ve made for myself, if I’m going to be sitting in my office at home all day? I have to fight against that inertia to just go from bed, to my home office, to the kitchen, back to my office, back to the kitchen, back to bed every day. That’s a bad sort of habit to get into. Fortunately for those of us in the US, spring is approaching, which means getting up and taking a walk outside is always an option. Just, you know, not through a heavily populated area. Realizing I’d be working from home full time also gave me the motivation I needed to clear off my weight bench in the garage. Sure, just walking downstairs isn’t quite as far as going down the road to the gym, but it’s a start, and my hope is that it will prove different enough that I can maintain my work of keeping my learning environment fresh. We’re in an unprecedented situation, and we need to draw on our innate adaptability to keep going.

Of course, Dr. Brett isn’t only talking about our physical environments. Autopilot can mean a stagnation of our mental alertness as well. The brain is a muscle, and if you’re just doing the same exercise you do every day, you’re never really going to improve. Not only is it easy for us to slip into the same physical habits when our environment doesn’t change, but it’s just as easy for us to get stuck in the same mental habits and patterns. COVID-19 is keeping us house-bound, and we need to find ways to stave off cabin fever.

I’ve talked a bit above about what you can do to, in a limited way, shake up your physical environment. But more important is going to be keeping your mental environment clear, and free from dulling routines.

Dr. Brett provides four “routine-busting activities” in his lesson. These are some simple ideas that apply to trading but also to your overall mental health at all times, but especially when confronted with such a unique situation as the one we currently find ourselves in. Two of the activities especially speak to me in this moment, so I will focus on them. I will touch on the other two, but, as I’ve said before, this blog is not meant as a replacement for reading Dr. Brett’s own words. You should buy your own copy of his book, read along, and let me know on Twitter whether different parts of his lessons speak to you more urgently than they do to me. I’d love to hear from you.

Seek out divergent views

If you have a trading system that’s been working for you, that’s fantastic. But there’s no guarantee it’s going to keep working for you. This is true in the markets at all times, but especially now as we’ve seen unprecedented moves in just a few short weeks. Maybe you don’t need to reverse course completely, but if you haven’t been trying to learn from traders who trade and think differently than you do, you might miss learning about a potential new strategy.

I’ve always been a numbers and puzzles sort of guy, so I’ve found myself drawn towards technical analysis and algorithmic trading. But I know that when a podcast episode comes up with a fundamentals trader, I need to make sure I listen to it, because it’s important for me to understand how that person thinks. Maybe they’ll say something that makes me question the assumptions I’ve made about how I’m approaching technical analysis. Or maybe I’ll be able to hold my approach up against theirs and feel that I’m still on the right path. Either way, without allowing a fresh perspective to affect my thinking, I’ll stop moving forward in a psychological groove, and find myself stuck in a psychological rut, without anything new to help me shake things up.

This also applies even beyond trading. All of us are having a different reaction to COVID-19. Maybe you’re panicking, maybe you don’t believe it’s a big deal, maybe you’re sad because you can’t see your parents and risk infecting them. However you’re feeling, it’s easy to get wrapped up in your head and believe that your way is the correct way. Time will tell, but in the meantime, listen to what people who disagree with you are saying. If you’re panicking, maybe it will calm your anxiety. If you’ve been laughing at people you think are overreacting, maybe it’ll give you a bit of empathy for the way they’re feeling.

Take the Break

I’m privileged enough to work for a company that offers a generous vacation policy, and actively encourages its employees to use it. Their reasoning is that it’s easy to get stuck at work, get mired down in the routine, stop being excited about doing the same thing over and over every day. So they try to get us to take vacation, so that we can flip a reset switch and come back refreshed and refocused on our work. By shaking up your psychological environment (and maybe your physical one as well, though not likely currently) you can clear your head and, when you get back to work, take a look at whatever was giving you trouble before you took vacation from a new angle. Often that’s all it takes to find the solution. Focusing too intensely on anything leads to repetitive thought processes, that mental rut that won’t get us any closer to a solution or breakthrough. It can feel counter-intuitive at times, but it really is the walking away for a little while that gets us closer to the solution.

I realized this in myself last week. I was staring at charts, at scanners, and nothing was making sense. I’m a new trader in a sort of market traders far, far more experienced than me had never seen, but I still felt like I was missing something, or doing something wrong. I was tempted to just keep pushing through, convinced that if I stared a little harder things would fall into place. And, even a few months ago, I might have done that. But I was able to realize that it wasn’t going to help me. If this market environment was confusing, or even scary, to the traders I look up to and respect, then it’s not a failing on my part if I, with three months of study under my belt, can’t figure out what’s going on. It’s almost foolish to think that I could. That change of perspective allowed me to step back and realize that if I was feeling so lost, I needed to step back even further and let my brain reset. And it worked. I took the rest of that day off from staring at charts, and was able to dive back in the next day refreshed. I was just as confused, but I was able to approach that confusion with curiosity, not frustration.


The other two suggestions Dr. Brett gives are “Examine the Big Picture” and “Examine Related Views”. These are both about looking beyond the specific instruments you’re trading and seeing how the market as a whole is behaving. Nothing happens in a vacuum in the market, and it’s possible that an emerging pattern in a different asset class or instrument than the one you’re trading can shed some light on your instrument of choice. To me, it also means seeing how other traders are reacting. As has been said many times by many people, human psychology, not logic, moves the markets. It’s easy, especially when you’re in a trade, to only focus on how you are trading, but you are not moving the market on your own. By seeing how other traders are reacting, you can see more clearly where your trade or strategy fits into the bigger picture. For me, as I wrote above, this meant seeing that experienced traders were almost as confused as I was, which meant that there was no way I would be able to find an edge that day, which meant, to borrow a quote from Jesse Livermore, it was “a time to go fishing.” Seeing that bigger picture made it clear to me it would not be productive for me to keep banging my head against the market, but that if I stepped back and let my brain reset, I’d be in much better shape for the next day.

It’s easy, and it’s comforting to stick to what’s familiar. But if we always do that, we miss opportunity after opportunity, and the change we are trying to cause in ourselves will never come. We need to step a little outside of our comfort zones to jump start our next adaptation. More often than not, it’s in how we respond and adapt to new situations, like a global pandemic, that we find our 1% better.