Brett N. Steenbarger The Psychology of Trading: Tools and Techniques for Minding the Markets

Content:

  1. about the author Brett N. Steenbarger;
  2. review “The Psychology of Trading. Decision Tools and Techniques”;
  3. trading psychology tips and quotes;
  4. deals tips and quotes;
  5. conclusion.

About the author Brett N. Steenbarger

Brett N. Steenbarger – professional psychotherapist and private trader. He is an authoritative author in the field of trading psychology. I wrote more than 20 articles and several books on this subject. His works are constantly published on various resources, including ForbesIn his work, Brett N. Steenbarger argues that knowing yourself is as important as knowing the market. The most popular books “The Psychology of Trading. Decision Tools and Techniques”and “The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist”. Both work with the same idea, but filed at different angles. In the first, we observe and learn from other people’s stories and mistakes. The second describes brain traps and how to use a person’s personality when trading on the stock exchange.
In my opinion, the first book is preferable. Knowing how something works, it does not give an understanding of how to apply this knowledge on yourself, especially with such a complex structure as the brain.

Review “The Psychology of Trading. Decision Tools and Techniques”

Brett N. Steenbarger The Psychology of Trading Tools and Techniques for Minding the Markets

This book is unique and truly the best of what is written on the psychology of trading. The author tells real stories of people with various problems. Being a professional doctor, explains each situation and shows solutions. Speculators on the stock exchange are faced with similar psychological situations.

The author indicates that mood can be used as an additional indicator of the market. The main thing is to learn to read it correctly. When experiencing fear or euphoria, then most likely other market participants feel similar emotions.

Another feature of the work is the ability to move away from the problem, look at it from the side. Brett Steenbarger calls it “trading from the couch”. When a person is relaxed and can make the right decision without relying on emotional feelings. In the book, Brett Steenbarger demonstrates that analyzing and solving your psychological problems in a relaxed state is much easier. For relaxation, it is recommended to use various techniques, including meditation.

Tells the experiments of Frederick Schiffer with the perception of information by the left and right hemispheres. Explains the difference in information processing in decision making by each of the hemispheres.

All stories are aimed at developing the professional qualities of an exchange speculator. At the end of each of them, Brett Steenbarger summarizes, draws conclusions. The author offers practical methods that allow everyone to change the internal emotional world and in the future to independently cope with psychological difficulties.
Using the methods of emotional self-knowledge described in the book, traders will be able not only to get to know themselves better, but also to reconsider the approach to life in general, which will have a beneficial effect on different aspects of life, including trade.

I recommend this book to all professions. The book does not have a clear strategy for trading or other magical lessons. She talks about the behavioral patterns that we have learned in various situations and use everywhere indiscriminately. And how does this affect decision-making in trade and in life in general. It will help those who already know enough about the markets, and still do not trade stably, but rush from one extreme to another.

Trading psychology tips and quotes

1. Problems are behaviors that are learned on an emotional level and now live on their own. At the first steps in trading mistakes are made that cause strong feelings. If conclusions cannot be drawn from these emotions, then such situations will be cyclical.

2. For a detailed study of yourself, it is worth considering the α and θ rhythms of the brain. People in terms of biology are the same, do not ignore scientific achievements in other fields to achieve success.

3. The source of personal change is a strong unusual experience, not a well-meaning “positive thinking”. Experience is the result of actions, not thoughts of them.

4. Inability to take profits and limit the loss of the most difficult emotional deals. They can lead to problematic behaviors.

The Psychology of Trading Dr. Brett Steenbarger QUOTES

5. Injury is the most effective and efficient mechanism for change. This is important to understand in order to rebuild yourself from incorrectly working models.

6. If a normal emotional reaction to the market were profitable, then every average trader would become indecently rich. Learn to manage emotions to become profitable.

7. Effort is money paid for self-development. Professionals earn money on the stock exchange, and in order to become money they need to constantly develop themselves.

8. Exercise “Trading teacher”. When opening a position, describe the reasons for opening, how to escort correctly, when and why to close, as if explaining this to a person who wants to learn how to trade.

9. Successful transactions are usually born from immersion in the trading process. Bad trades result from immersion in potential trading outcomes.

The Psychology of Trading Dr. Brett Steenbarger QUOTES

10. It is useful to realize the idea that everyone is individual with his own style and manners in life, therefore, everyone differs in trade. Brett Steenbarger showed that each trader must determine his specialization. It’s not a matter of whether you can become a good trader, but of whether you can find a suitable type of trading. Unfortunately, many do not allow themselves to develop highly effective strategies. In search of quick enrichment, jumping from one trading method to another. Learn to use many trading methods, but do not achieve mastery in any.

11. Most people tend to avoid risk when it comes to profit (Allais paradox), but take unnecessary risks when faced with losses.

Deals tips and quotes

1. Unable to cope with the risk, we will weaken our efforts to achieve goals and we will not be able to achieve success that otherwise could belong to us – both as traders and as people. Once you learn how to manage risk, the results will not be long in coming.

2. In order to succeed in trading, get used to losing. It seems more than strange and contrary to common sense. But think about the following: if you consider each transaction as a hypothesis of market direction « I predict that under the condition X, Y, Z, the market will make A on timeframe B ». Then each transaction should naturally close in the stop loss when the hypothesis is not confirmed.

3. Supplement the trading journal with a column, feelings (mood) when opening a transaction. In order to track in which emotional mode you are most effectively trading.

4. Close the deal if the price has not changed, and the discovered opportunity has disappeared.

Conclusion

Great book on the psychology of trading. Instructive stories and methods of dealing with negative behavioral patterns, using modern scientific evidence. The author recommends focusing on how to trade better, rather than focusing on failures. Anyone who looks at thousands of situations on charts will gain implicit knowledge, like a small child learning a language. At some point, the accumulated knowledge will give an understanding of the market. The main thing is not to rush from one strategy to another, to limit risks and protect capital in order to grow a professional trader.
In conclusion, I’ll add: do not think that after reading the book you will immediately become a successful trader and psychologist for yourself. To do this, you need to read not only this work, but also many others. For relaxation from introspection, I recommend reading “When Genius Failed“.

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