QUESTION – Thank you for taking the time to participate in the Q & A session. Before we start in detail. Would you like to share with everyone who may not know, who you are, what you do, where you live, work and your experience in the trading community. (including any Trading Coaching Services, you might offer to institutions or individual retail traders)
Steven Goldstein: My name is Steven Goldstein I work as a performance coach specializing with traders and investment professionals. I work specifically on the mindset, behavioural and emotional aspects of risk performance, what is termed ‘The Inner game’. The philosophy is that by addressing a trader’s ‘Inner Game aspects’ they can far more effectively and productively execute their ‘Outer Game’.
Though I live and I work in London my clients come from across the world and from all market types and asset classes. My clients include private and retail traders’, buy-side institutional traders and Portfolio Managers from hedge funds and asset management firms, plus sell-side traders from banks, energy and commodity firms.
I have been working as a coach for 10 years now. Prior to that I worked for almost 25 years as an investment bank trader in the rates and FX space. I worked in market-making and proprietary trading roles for banks such as Credit Suisse, Commerce bank and American Express Bank.
QUESTION – What personal or professional failure/setback have you experienced in your life or professional career that has set you up for later success?
Steven Goldstein: I am going to speak quite generally about this.
Many traders experience setbacks and failures which blindside them and leaves them with a feeling of ‘none of this makes sense’. Often, they try to rationalize these feelings, which just leads to further confusion. Herein lies the crux of the matter, we think we can explain the complexity that exists in Financial Markets and reduce it down to a few simple factors. You cannot, and if you never move past that. you are always going to struggle mentally and emotionally as a trader. As a trader, to become successful, at some point you have to learn to let go of that need to explain and judge every outcome, ’letting-go’ of that can become very empowering.
When I think of my trading career, it was in two phases. The second phase was far more productive and was after I learned to ‘let-go’. Perhaps some of the failures of the first half of my career played a part in leading me to this. What also helped was coaching I had in the year 2000. This was to be a major catalyst for self-exploration, new perspectives, and a new energy which I took into the second half of my career.
After this coaching my trading steadily improved, the years 2001 to 2009 were to be the most successful of my career by far.
QUESTION – What role model did you have earlier in life? And do you currently have anyone you would consider a mentor?
Steven Goldstein: I am not sure I had a role model earlier in my life.
In the early/mid-1980s when I started it was pretty much sink or swim. The rates and FX markets had opened only through the early 1980s, and there were relatively few people around me in the banks I worked at who had the experience. We were dealing new products which no one knew much about. My opportunity came when the head of trading at the bank I worked said to me, Steve there are these new products called Forward Rate Agreements and Interest Rate Swaps, if you can work out how they work, you can trade them. – It seems a little insane now, but that is how it was.
I guess if I look back now my trading career, I wish I did have a mentor. I see many successful traders these days who benefited from a guiding hand early in their career.
Nowadays I do have several mentors but there are people from the world of coaching. I have supervisors that help me as a coach, I regularly attend training programs and courses which teach me about certain models and approaches which I then use to help my clients.
QUESTION- How would you describe what makes a successful Trader – keeping in mind that it has been reported that 90% of traders fail.
Steven Goldstein: Interesting you say that 90% of traders fail. – I believe the number is significantly higher.
A few years ago, a group of academics from University of California looked at 15 years’ worth of data of traders from a sample size of over 400,000 traders. They found the success rate in any one year among this group was about 20%. however, it was not the same 20% every year. The actual proportion of traders able to achieve sustainable success was close to 1%. Whilst those that made significant excess profits was much smaller at close to 1/8th to 1/4 of 1%.
One can compare this to sport, where only a small fraction of those who decide to pursue a career in a particular sport ever makes a successful career out of it, with a much smaller fraction become super successful.
So, what makes a successful trader. Often the difference is mental and emotional skills, at least as much as technical skill, and possibly much more so.
I believe there are several key factors which I have identified as common among the really successful traders and investment professionals I have worked with over the years
But there is one other important point to make. Whilst only a small percentage will ever be able to hold down a long-term career in trading, I think everyone has the ability and potential to succeed.
The first factor is Self-awareness at a level which is incredibly rare to achieve combined with a humbleness that allows you to divorce yourself from your ego and see your real self.
Very few traders have this or allow themselves to develop this.
I’m going to layout an example: Several years ago, I was asked by a large US investment bank to work with their trading businesses in Hong Kong. I started working with a small group of traders who had volunteered for the coaching.
Among them with an individual I was told was the best trader in the entire firm which had some 2000 traders globally. Before I started working with him, I met his manager to get some insight on him and his needs. This trader’s manager said that as far as he was concerned this individual had no challenges. So, I asked him why he wants coaching? He said he thinks he can get a lot better.
This is the same mindset as elite athletes. They don’t like to think of themselves as good enough, they believe they can always get better: They like to use coaches to help them get there.
This attitude is known as ‘growth mindset’. A growth mindset is where you believe that with effort and hard work you can always get better, you can always increase your potential, and you make the effort to make this happen.
The opposite of this is a fixed mindset. The fixed mindset sees talent as a fixed quantity, there is little you can do to change that. You believe you are either good enough and deserve or are entitled to success, or you believe are not good enough and don’t deserve success. Either way, it’s an extremely restricting and damaging mindset where failure is bad luck, someone else’s fault, a conspiracy or some other extraneous factor. Trading seems to attract a lot of ‘Fixed Mindset’ people, or it shifts people from a Growth to a Fixed Mindset.
Some other aspects I believe make a successful trader, in no particular order, include: Developing your edge:
It’s unlikely you really have one edge but instead a series of micro-edges which combine and compound to create a much larger edge. I call it the ‘law of multiples small edges’.
It is vital you find and understand your edges then learn how to optimise and leverage them. If you are not finding, developing and leveraging your edge, then it’s highly likely you are paying for the privilege of competing with those that are.
Working congruent to personality.
It is vital to work in ways which are congruent to your personality, not in ways that conflict with it. I use athletics as an analogy. A tall wiry runner is unlikely to succeed if he opts to become a sprinter, but he is far more likely to succeed if he opts for long-distance racing.
Cultivating a Mindset for Uncertainty
I alluded to this earlier: Most people come to trading with a mindset which believes there is a formula you can crack which will give you the answers to help you succeed. Our entire education, and dominant philosophy, seeks to solve problems and always explain ‘why’ something happened. It sees the world as deterministic. That may be ok in most fields, but not in trading and investing.
Financial markets are inherently uncertain, complex, emergent and adaptive. There is always cause and effect, but it’s incredibly hard to ever know it in real time, or anything remotely resembling real-time, with any high degree of certainty.
Thinking in Emergent Probabilities
Closely linked to the above, is the ability to think in emergent and adaptive probabilities.
Sound Money Management
If you aren’t doing this, you better start. Any success without it is down to luck. And luck is not a traveling companion you can rely on.
Process over outcomes or results.
Judging yourself on results will mislead you. Many of the best traders I work with evaluate their processes more than their results.
Getting used to deferred gratification
Virtually every successful trader that I worked with has developed the ability to think in terms of deferred gratification, this it makes it possible to accept that they may not make money today, tomorrow, next week, next month or even this year, but they will succeed over-time.
I could go on, but I realize this is an interview, not a book.
QUESTION: What is the role in having a balance all around life in your day to day activities. What hobbies do you enjoy?
Steven Goldstein: Balance is vital: The mind is like a muscle; it tires and when it tires it doesn’t work well. – Your mind is your number one weapon as a trader, it needs nourishment and rest. Without it you will start to lose objectivity and your mind will function sub-optimally.
You cannot be at the screens 12-14 hours a day and expect to remain balanced in your decision-making capabilities. There has been much research on this which found that as we progress through the day, our ability to be an optimal decision-maker diminishes. And if you are sub-optimal, you are against those who are optimal, they have a major edge over you.
When I traded, I would leave the office late morning to go running. I believe that helped my trading: – The ‘law of multiples small edges’.
Many of my clients practice meditation, other choose activities which helps bring refreshment to the mind, gym workouts, running, cycling, long walks. Changing the scenery also clears the mind.
Football is my non trading hobby. I’m a huge Arsenal fan I’ve been going to Arsenal since 1970 when I was just 6 years old. I also enjoy tennis and running.
QUESTION – What advice would you give to your younger self as it relates to your personal life. What about advice for your younger trading self?
Steven Goldstein: This idea of letting go of the need to explain and judge everything: Cultivating a mindset which is geared towards uncertainty and not needing to know the answer.
Purely based on observation, I have noticed there seems to be a group of people who do come to trading with this attitude. They are people who have suffered some sort of early life trauma. My theory for this is that people who suffer early life trauma learn at a very early age that the world will not bend to their needs.
I guess the point here is that you want to somehow develop a mindset for uncertainty as early as possible. That is a mindset which does not seek certainty but embraces uncertainty, not knowing, and where failure is an inevitable.
Related to this, but worth emphasizing, is ‘letting go’ of ‘worrying what others will think of me’. I see this time and time again; it never ends well. I was very affected by this in my early trading years, and whilst it motivated me at times, it also stifled me, particularly in relation to risk.
QUESTION – What good & bad advice do you hear often in life, as well as in trading?
Steven Goldstein: There’s plenty of well-meaning advice, much of it is particular to the person giving it, but it may not be true for the person receiving it.
As a coach, paradoxically I rarely give advice. My coaching approach is non-directive. The philosophy is that if you give the person the answer, it’s your solution not theirs. Instead you work with them, using various techniques to help them find their answers. This is far more empowering and resources them to grow and to manage when you are not around.
If I was working as an ‘Outer game’ coach, where direction and instruction is more pertinent, then it may be different.
Some advice I do like however would be:
Plan your trades: It’s unusual or unlikely that markets will go to plan, but it will still give you a road map.
Always practice robust ‘Money Management’. If you don’t you are setting yourself up to fail.
Keep a journal: People are unaware how powerful a journal can be as a growth tool. Its equivalent to doing the hard yards in sport. – Its tedious, boring, time-consuming, but the results will benefit you in the long run if maintained and used effectively.
QUESTION – Outside of your own (which you can still list below) …. What are your favourite books to read and why?
Steven Goldstein: When trading, I read the Market Wizards series about every 2 or 3 years. I also read ‘Reminiscences of a Stock Operator’ which I think every trader should read that at some point.
Other great books on trading include the Mark Douglas’s books, ‘The Way of the Turtle’ by Curtis Faith, ‘Market Mind Games’ by Denise Shull, ‘The Hour Between Dog and Wolf’ which goes more into the neuroscience behind trading. There was a brilliant book last year by Daniel Crosby called ‘The Behavorial Investor’ which though more focused more on investing than trading, the lessons within it are outstanding. There is also a terrific book I loved by hedge fund manager Garth Friesen about his journey into trading called ‘Bite the Ass off a Bear’.
One book which is under-read in my opinion is the ‘Psychology of Trading’ by Brett Steenbarger. This is a deep book, which may challenge some people looking for a lighter read, but it is outstanding.
There are also many non-trading books which can have a hugely positive influence on traders. Top on my list is a book by Stamford psychologist Carol Dreck called ‘Mindset’. I would urge every trader to read this, keep it near their trading desk, then re-read it again at some point. ‘Thinking Fast and Slow’ by Daniel Kahneman is brilliant. Also ‘The 7 habits of Highly Effective People’ and ‘The Power of Now’ by Eckhardt Tolle, which is more spiritual book and tackles the issue of Ego.
Another excellent, yet little heard of book, is ‘Risk Intelligence: How to Live with Uncertainty’ by Dylan Evans.
QUESTION – When you have lost your MOJO or focus, what do you do to get back on track?
Steven Goldstein: Step away, step back, take a break, make space, try not even to reflect for a little, maybe do something different, play sport, watch something on TV, remove yourself from the environment.
You need to get closure on whatever has happened. In 2007 I had an experience which felt like the end of the world. I did that process and came back stronger than ever.
A couple of years go an oil trading client who got himself in a dreadful period of drawdown, compounded by the fact that the market was doing exactly what he hoped for. In a two-month period he surrendered 6 months of P&L equivalent to about $500k. He took a break for a couple of days, didn’t enter the office, put up shelves at home, took the kids to school. He didn’t even look at the market. – We then had a coaching session to discuss the situation and help him get closure. He went back in on Monday with fresh eyes, a clear mind, and a renewed perspective. Over the next 3 months he made $3mio, more than twice what he had ever made in an entire year in 15 years of trading.
QUESTION – If you could have a big billboard with your favorite saying or message on it, what would it be.
‘It’s not the mountain you conquer’ it’s yourself’, by Sir Edmund Hillary
Thank you for taking the time for our readers to get to know you. How can our readers contact you on social media?
Steven Goldstein: Best way to contact me is via my business email firstname.lastname@example.org or email@example.com
I can be followed on social media through
Also checkout out the AlphaMind Podcast series where myself and market veteran Mark Randall discuss and explore the Mindset of Trading. Go to alpha-mind.net or check out AlphaMind on itunes