I picked up a copy of The Psychology of Trading after meeting Brett Steenbarger and following his blog for a while. You might remember that I interviewed him on this blog a while back after I read a few of his articles via TraderMike‘s link feed.
Brett’s book is chock full of great advice for trading. I won’t tell you that it is a quick read because it’s certainly not. I’m only partway through and am enjoying it, although I find myself alternating between this book and a couple other trading books. Brett has an interesting style of drawing parallels between stories of actual patients from his Psychiatry practice and the emotions of trading.
One section that struck me is called Using Emotion to Make the Contrary Move which talks about using emotions rather than ignoring them. He states that many traders have come to him wanting to rid themselves of emotion and fear. Ridding yourself of emotions during trading (namely fear) would be like placing a piece of electrical tape across your check engine light when it comes on, he says.
From the book on page 67:
I cannot make the point strongly enough: Successful traders do not eliminate emotions. Indeed, they experience emotions fully, so fully that they become consciously aware of what they’re feeling. At that point, however, they don’t become lost in their emotional state. Instead, the adopt the vantage point of the Observer, standing apart from the feelings and making sense of them.
This struck me as a point to ponder since we’re told by so many to rid ourselves of emotions during trading. It reminded me of this article I came across yesterday titled Self-Control is the Key to Success. It’s not directly related to trading but, like so many lessons we learn in life, it can be applied to trading.
If anyone else has read Brett’s book, I’d be interested to hear your comments. I’m also eagerly anticipating his upcoming book Enhancing Trader Performance scheduled for release this fall.