SMB Futures Private Session

Merritt BlackFutures, General Comments

I recently had a wonderful session with a group of developing futures traders and Dr. Brett Steenbarger. (His blog is a must-bookmark at if you’ve been living in a cave and haven’t bookmarked it already!) We like to combine aspects of coaching and mentoring together whenever possible.

After some opening comments regarding the current low volatility environment and the challenges and tweaks that come with it, we opened the floor for individualized attention with the mentees.

Here are a few of the takeaways, as paraphrased by me:


Q: I’m running into a barrier where I have a great morning session, then find myself turning very risk averse and passing on quality trades. I have the feeling of not wanting to “mess up” my good morning session.

A: Have seen many traders managing P/L as a way of managing their own psychology. When markets are more active and volatile, we can get shy as a way of protecting our psychological well being so to speak. Level emotional people often don’t want drama, or drama in P/L. Answer may not be to “press”, but to trade it aggressively in a sustainable fashion. Have a good morning, then consciously decide how much of that do you want to risk to potentially make more the rest of the day.


Q: Developing patience for A+ setups?

A: Not a fan of A, B, C setups. Can fall into overconfidence bias. Size trades reasonably consistent. Simply: is this a trade I have studied and know provides edge? Some mental prep can help – athletes use visualization. Ex: Knowing exactly what you need to see in order for your great edge to be present. First and foremost must understand the trade, the variables present for it – then can visualize passing on opportunities that do not meet the criteria.

Another idea – recently asked traders how many trades they were taking on average, and the response was around 10. Ok, let’s limit that to 4 now and see what effect that has on your “patience”. Simply adding process to aide in a desired outcome.


Q: I want to stretch my limits more. I’m a perfectionist and very risk averse. I’m hedging my trades too much and it’s very costly to my bottom line.

A: Make the hedging as rules based as possible. Much less mental resources will be tied up. Ex: using VIX to define when to hedge vs not. Was once told, if you’re not having x drawdown, with your sharpe ratio, you’re not taking enough risk.


Q: My nature is to fight the market – leads to overtrading. Finds it tough to get in after the turn has already been made, feels missing out on ideal R:R. 

A: In regard to “fighting”, volume is a great filter for whether it may be a good condition to fight or a real breakout with legs is more likely. So you could be fighting in poor conditions for a mean reversion play. Quite simply, you can really let the market show you a first lower high for example and still find plenty of R:R. Gives you something to identify rather than just fight fight fight every high/low.


Q: I have a hard time taking breaks. I know I should step away at times, but can’t.

A: Habit pattern is key. Also don’t equate “hard work” with not taking a break. Your job is to be there for your best defined opportunities and the best time of the day you perform. Quality vs quantity. Time away from the desk may be thought of as an actual investment in your trading.

Humans have limitations. In time we breakdown willpower, focus, discipline, etc. You may want to even consider multiple “days” of trading within one day. You can even separate out your P/L max drawdowns and such among these various days/sessions you create.


Q: Confidence swings. When it’s low I take quick profits. When it’s too high, I take less quality trades and overtrade.

A: Reframe the issue entirely. This is a probabilistic edge game. Confidence comes from knowing this edge. To the degree which you are focused on self, you take away focus from the market. Focus on probabilities – take trades with edge and focus on the market. Use strings of wins and losses to give info on the need to continually adapt to the market itself.


Q: I want to get more aggressive during my strings of wins.

A: Disagree – just size up consistently with your good returns. Another way entirely of being more aggressive is to add a non-correlated strategy with its own edge. You don’t know if you’ve had a string of 6 wins that the 7 will be a great winner or a loser. Keep consistency the focus, and size up your overall trading with success.


*No relevant positions