Trading Psychology 2.0

Trading Psychology 2.0 is a comprehensive guide to applying the science of psychology to the art of trading. Veteran trading psychologist and bestselling author Brett Steenbarger offers critical advice and proven techniques to help interested traders better understand the markets, with practical takeaways that can be implemented immediately.

I find the book deeply insightful, eye-opening and a great source of fresh ideas. Here are Five interesting quotes from the book:

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.

Edge is not enough in financial markets; as any tech entrepreneur can attest, competitive advantages are perishable commodities. Those who sustain success continually renew themselves, uncovering fresh sources of competitive advantage. That requires processes for assessing and challenging our most basic assumptions and practices. It takes a good trader to create success, a great one to recreate it. Nothing is quite as difficult — and rewarding — as letting go of what once worked, returning to the humble status of student, and arising phoenix-like from performance ashes.

How much time do we typically waste as traders, staring unthinkingly at screens, chatting with people who offer little insight, and reading low-priority/ information-poor emails and reports? The successful traders invariably are workhorses, not showhorses: They get their hands dirty rooting through data and make active use of well-cultivated information networks. This productivity is readily apparent on a day-to-day, week-to-week basis: The greats simply get more done than their colleagues. They organize their time and prioritize their activities so that they are both efficient (get a lot done per unit of time) and effective (get the right things done).

Skilled traders I have worked with have similarly been different traders in different markets. Will they express their views through currency markets or fixed income? Will they hold for a longer-term move or tactically take profits to benefit from market chop? The good traders find multiple ways to win. How different that is from the newbie whose decision making is limited to a few mechanical chart “setups”!

Small win is a small mirror. It reflects a winning image to us. Accumulate enough small wins and that winning image starts to become familiar. We internalize that which we experience repeatedly. That’s one of the reasons positive emotional experience is important. Good traders are particularly adaptive and have made small wins a habit pattern. They undertake many new challenges and regularly define meaningful, doable goals. They set themselves up for success. Positivity becomes a habit, a lifestyle, making the whole issue of discipline moot.