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The Wiley Trading series features books by traders who have survived the market's ever changing temperament and have prospered-some by reinventing systems, others by getting back to basics. Whether a novice trader, professional or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.
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Copyright © 2015 by Brett Steenbarger. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data
Steenbarger, Brett N.
Trading psychology 2.0: from best practices to best processes / Brett N Steenbarger, Ph.D.
pages cm. – (Wiley trading series)
Includes index.
ISBN 978-1-118-93681-8 (hardback) – ISBN 978-1-118-93683-2 (ePDF) —
ISBN 978-1-118-93682-5 (epub)
1. Stocks – Psychological aspects. 2. Speculation – Psychological aspects.
3. Investments – Psychological aspects. I. Title.
HG6041.S762 2015
332.6401'9 – dc23
2015016663
Cover Design: Wiley
Cover Images: Business growth graph © iStock.com/Violka08; Black Chess King and lying
Pawns on board © iStock.com/Dominik Pabis
Successful efforts to master markets lead us down paths of self-mastery. This book is one guide to those paths.
Market participants have traditionally defined self-mastery as discipline– controlling the emotions that all too often distort information processing and trigger impulsive behavior. To be sure, discipline is required for any great undertaking, whether it is pursuing an Olympic medal, a business startup, or a medical breakthrough. But discipline, while necessary for success, is never sufficient. Discipline does not substitute for skill, talent, and insight. Strict, disciplined adherence to mediocre plans can only lock in mediocre results. If it were otherwise, there would be no losing automated trading systems.
I've followed and traded markets since the late 1970s. During the past decade, I have served as a full-time performance coach at two trading firms – Kingstree Trading in Chicago and Tudor Investment Corp. in Greenwich, Connecticut – and worked with many other trading organizations on a consultative basis. Through the TraderFeed blog and three prior trading books, I've had the honor of interacting with thousands of traders around the world. If there's one thing this whirlwind of experience has taught me, it's that there is far more to market mastery than controlling emotions and impulses. Sustained success requires the cultivation of a host of positive performance elements: creativity, productivity, adaptation to change, and psychological well-being. The good news is that recent research in psychology and related fields has profoundly deepened our understanding of these contributors to human performance. The bad news is that most of us in the money management world, immersed in the day-to-day challenges of keeping up with news flows and market movements, have little opportunity to sift through and apply this knowledge. As a consequence, we tend to work hard, but not smart. From the organization of our daily routines to our reviews of performance, we rarely optimize learning, independent thought, and productivity.
