Successful trading isn’t just about strategy—it’s about mindset. One powerful psychological tool you can use is mental contrasting —a process that helps balance optimism with pragmatism.  

In trading, mental contrasting means setting clear, ambitious goals while also anticipating challenges and planning for them. This approach keeps you focused, disciplined, and prepared for inevitable setbacks.  

Mental contrasting involves two key steps:  

1. Visualizing Success (Optimism) – Set specific, ambitious, and realistic trading goals. This could be something like: “I will grow my trading account by 20% this month” or “I will stick to my trading plan without emotional decision-making.”  

2. Identifying Roadblocks (Pragmatism) – Instead of assuming success will come easily, think about potential obstacles and plan how to handle them. Some common challenges include losing streaks, chasing trades (entering late due to FOMO), and technology breakdowns (internet outage, platform glitches). 

Warren Buffett is famous for his annual letter to shareholders. If you haven’t read one you should know that he’s a great writer and borderline humorist, well worth reading.

Since we’re near all-time highs in the stock market and the AI craze is bringing out the description “bubble” I’ll share some Buffett on that topic with you. 

Feb. 25, 2012 “Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the ‘proof’ delivered by the market, and the pool of buyers—for a time—expanded sufficiently to keep the bandwagon rolling. But bubbles blown up large enough inevitably pop. And then the old proverb is confirmed once again: ‘What the wise man does in the beginning, the fool does in the end.’”

Not being a long-term investor, I started thinking how I might apply the old prover...

In the stock market, emotions drive price movements just as much as fundamentals and technicals. One dangerous psychological trap you can fall into is the “bandwagon effect” — the tendency to follow the crowd without solid reasoning.  

This happens when a stock's price rises rapidly because more and more traders jump in, not necessarily because the company’s fundamentals have improved but because others are buying. This creates a feedback loop where rapidly rising prices attract more buyers, further pushing the stock higher—until reality kicks in, and the price collapses just as quickly.  

A classic example of the bandwagon effect are meme stocks (think GameStop in 2021). Traders see a stock soaring and rush in, fearing they’ll miss out (FOMO), only to be left holding the bag when the hype fades.  

Here’s how you can spot the bandwagon effect:  

Parabolic Price Action – Stocks that rise too fast in a short period, especially without strong news or earnings support.  

Unusual Volum...

Plenty of time is spent waiting in trading. Waiting for a setup, waiting for an economic release, waiting for a profit target. Lots of waiting. 

Here’s how to make this “downtime” productive: Get proactive. Get in the habit of asking “What if…?” questions. Answer them. In doing so you’ll be making decisions in advance and be able to act on the spot. No wondering, guessing, procrastinating or flat-out missing the trade. You’ve committed with foresight. 

Here's a simple example using our intraday trend strategy: Price is slowly moving sideways. We’re waiting for a breakout in either direction to give us a “setup.” The entry comes a bit later, after a confirmation signal. 

Now is the time to anticipate and be proactive. What is our exit plan if it triggers long? Short? Is one or the other a higher probability trade given current conditions and chart features? Is there supporting evidence, confluence, from other trading strategies that might kill OR reinforce this signal?  

Get started...

Here’s an important quote from Nassim Taleb, celebrity author of Black Swan and Antifragile, “Whether it’s Covid, vaccines, Bitcoin, or stuff about elections, we’re swayed by the anecdote. So, our world is becoming more complex, requires more statistical sophistication while social media is driving us to the most primitive way of thinking.” 

Basically, he’s saying that we can be swayed by single or random events or stories rather than robust statistical analysis, adequate numbers, and scientific rigor. 

This pertains to trading perfectly. You see a one-off winning event and are wanting to repeat it. Maybe it even happened a few times. But how robust is that analysis? Not at all. 

Before changing your plan or trading the anomaly you just saw, do some research. If you’re able to code the event in back-testing software like EasyLanguage from TradeStation, do it. If not you’ll need to scan the prior price charts by hand. 

What are you looking for? Start with a sample size of 30 events....

While we can’t predict the future exactly we can approximate the future. Take price action for example. Price is either: 

1. Trending and volatile.

2. Trending and quiet.

3. Range-bound and volatile.

4. Range-bound and quiet. 

A complete trade plan would include different strategies that are in harmony with each of these market conditions. With that, you can align your working strategy with the current market conditions.

Knowing the present condition is easy, the challenge becomes which condition is next and when will it change? 

Technical indicators are helpful. Yes, most are lagging and we’re always looking for leading information but used skillfully indicators can help build your case for timing the change in market conditions. 

Bollinger Bands are a fabulous indicator for this purpose. They clearly display trends and volatility, the key data points to consider. 

In reading his book, Bollinger on Bollinger Bands, I found a pearl of trading wisdom that stuck with me, and I u...

A critical component to our trade plan is the review process. Let’s face it, we’ll never improve at anything unless we know what to change. The other key benefit to a comprehensive review process is how it increases our confidence in our strategies. 

Review starts with documentation. You’ll capture several data points for every trade the strategy teed up regardless of whether you took the trade or not. 

Here’s the data we capture for our futures day-trading team. 

1. Date, Day of week, Catalyst(s) (news, earnings, etc.).

2. Overnight range, Expected day session range. 

3. Inside/Outside day, daily pivots, hourly trend, daily trend.

4. Average True Range, day session range, ATR targets up/down, supply/demand levels, volume profile levels. 

5. Trade data: taken or not?, time in, time out, entry price, stop loss, target(s), risk/reward, Maximum Favorable and Adverse Excursion, result. (Note: if you use other technical indicators like RSI, moving averages, etc., their values would b...

As a 25-year trading veteran, I’ve seen plenty of winning and losing streaks, and I know how dangerous they can be—especially for less experienced traders. Here’s what I’ve learned over the years to help manage the streaks. 

On Winning Streaks: 

1. Stay humble. The market is always waiting to humble traders who get overconfident.

2. Lock in profits. Consider scaling out of trades instead of holding full positions too long.

3. Take a step back. If you’ve had a great run, consider reducing risk or taking a break to clear your head.

On Losing Streaks:

1. Cut back on trading. Reduce position size and frequency until you regain confidence.

2. Analyze your trades. Review what went wrong—was it the market, or your behavior?

3. Recenter yourself. Walk away if you’re frustrated or switch to simulation mode.

4. Stick to proven strategies. Don’t jump from one strategy to another just because of a few losses.

5. Accept that losing is part of the game. Every trader loses. The key is to lo...

To survive and thrive in trading managing risk is critical. The basic component in your risk management plan is the stop loss (how much you are willing to lose on each trade). Before determining the stop method you’ll use, make sure the dollar amount of the loss truly fits your personal risk tolerance. 

There are many types of stop loss methods including:

1. Fixed dollar amount

2. Maximum Adverse Excursion 

3. Volatility

4. Moving Average

5. Time

6. Opposing entry signal

7. Percent Retracement

Just like your choice in style of trading, your stop loss method needs to resonate with your personality. You must trust, even like it. 

Given that markets change in volatility constantly the volatility stop is an excellent choice. This method will adjust the distance from entry to stop based on present time volatility. One simple formula uses a multiple of the Average True Range. This method will tighten the stop when the market is calmer and widen the stop when the market is volatile....

Legendary golf coach Harvey Penick wrote in his best-selling Little Red Book that you could build a solid game of golf around one club, the 7-iron. If Harvey were coaching you he would say “Simplify. Focus. Pick one club and master it.”

While that’s a sound plan to get started it won’t win you any tournaments. 

The same goes for successful trading. Focusing on one strategy or style of trading until you’ve mastered it is a great start. But market conditions change, and strategies get hot and cold. You’re best served by having the skill to trade effectively in varied conditions. 

Is the market trending or range-bound? Is the market volatile or quiet? Pick your “club!” 

Once you master your first strategy make sure the next one is complementary not competitive. Make sure it addresses different market conditions and allows you to trade in different timeframes. Have trend, reversal, day, and swing trading versions. 

Our trading teams focus on multiple strategies for day trading futures...