Trading Psychology 2.0

Trading Psychology 2.0

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- From Best Practices to Best Processes -

Brett N. Steenbarger, PhD

1. Stocks—Psychological aspects.  2. Speculation—Psychological aspects.  3. Investments—Psychological aspects.

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Book Details
 451 p
 File Size 
 2,338 KB
 File Type
 PDF format
 978-1-118-93681-8 (hardback) 
 978-1-118-93682-5 (epub)
 978-1-118-93683-2 (ePDF)
 2015 by Brett Steenbarger  

About the Author
Brett N. Steenbarger, PhD, is a Clinical Associate Professor of Psychiatry
and Behavioral Sciences at SUNY Upstate Medical University in
Syracuse, New York. He has worked since 2004 as a performance coach
for proprietary trading firms, investment banks, and hedge funds. The
author of three previous books on trading psychology and the popular
TraderFeed blog, Dr. Steenbarger has written over 50 peer-reviewed
journal articles, book chapters, and books on the topic of short-term
approaches to behavior change. He also writes a blog for Forbes that covers
the field of positive psychology as it relates to peak performance.

It is March 5, 2015, nearly four months since Mia Bella and I sat together
as I constructed a new way of charting. Price remains on the y-axis,
but the x-axis represents events—not time. The simplest example of
looking at markets through event time rather than chronological time is
point-and-figure charting. In a P&F chart, it is price movement that is the
event: You create a new bar every time the market moves by a certain
But there are many potential events that can anchor the x-axis. Price
change is an event, as is relative price change. Volume traded is an event;
so are upticks and downticks and trades transacted. Once we free ourselves
from the clock and define time in event terms, fresh relationships
become clear.
The stock market does not spend the same amount of days, months,
and years rising and falling. Those who watch the market know that it
typically falls quickly and rises more gradually. Suppose, however, we
measure time in terms of price movement or transacted volume. Rises
and declines begin to show more similarity in duration. Cycles appear
with greater regularity.
When Mia came home after having been rescued from the high-kill
shelter in Kentucky, she spent a good amount of time exploring. She
learned that standing on her back legs and placing her front paws on
a door would open the door. So now, if I’m in a room with the door
partially closed, Mia simply stands, opens it, and walks in. She explores,
she tries things, and she learns. We as traders are not so different. On
my to-do list is a new measure of implied volatility that removes the
impact of realized volatility; a new measure of sentiment that combines
readings from equity and index options; and a revised way of looking
at the buying activity and selling activity of separate groups of market
participants. Some will pan out, others won’t. All I know is that if we
explore enough places and look at enough things, eventually we’ll be like
Mia and figure out how to open doors.

Table of Contents
Preface ix
Introduction xiii
Prelude xvii

CHAPTER 1 Best Process #1: Adapting to Change 1

CHAPTER 2 Best Process #2: Building on Strengths 95

CHAPTER 3 Best Process #3: Cultivating Creativity 199

CHAPTER 4 Best Process #4: Developing and Integrating Best Practices 277

Conclusion: From Best Practices to Best Processes 411

Postscript 415
References 417
About the Author 423
Index 425

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If you don’t have time to do it right, when will you have time to do it over?
John Wooden