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The Psychology of Trading: Tools and Techniques for Minding the Markets Hardcover – December 23, 2002

4.2 out of 5 stars 58 customer reviews

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Editorial Reviews

From the Inside Flap

Behavior is patterned. Beginning with this premise, noted clinical psychologist and active trader Dr. Brett Steenbarger opens the therapist’s door, demonstrating how traders can identify, interrupt, and change the problem patterns that interfere with successful trading. In The Psychology of Trading, Dr. Steenbarger draws upon real-life case studies and offers hands-on techniques for emotional change to assist traders in becoming their own therapists. Themes that set The Psychology of Trading apart include:
  • "Trading from the couch" by utilizing emotions as valuable market data
  • Identifying and building solution patterns that capture hidden trading expertise
  • Techniques for assessing and trading against the emotions of market participants
  • Methods for building focus and concentration for more automatic and trustworthy trading decisions
  • Creating shifts in states of consciousness to rapidly exit anxious, impulsive, depressed, and guilty frames of mind

In an engaging manner that provides practical solutions to real trading problems, Dr. Steenbarger walks you through the most common cognitive and emotional tendencies that distort efforts at identifying and trading market patterns. He then describes specific skills derived from years of brief therapy practice to help you become an effective observer of these tendencies and gain control over them. By blending state-of-the-art research from psychology and cognitive neuroscience with detailed case studies, The Psychology of Trading provides you with the intellectual and emotional ammunition to face yourself and transform your approach to risk and reward.

From the Back Cover

"The one, only, and by far the best book synthesizing psychology and investing. In addition to providing modern, scientific knowledge about psychology, this book provides a mirror into the mind and wide breadth of knowledge of one of the leading practitioners of brief and effectual cures. Will help to cure your trading and your life."
–Victor Niederhoffer, Chief Speculator, Manchester Investments
Author, The Education of a Speculator and Practical Speculation

"How refreshing! A book that rises above the old NLP model of the 80’s and provides insights on how our relationship with the market is indeed a very personal one. Not only has Steenbarger provided some fantastic tools for the trader to transform his mindset, but he has contributed unique trading ideas as well. Brilliant!"
–Linda Raschke, President, LBRGroup, Inc.

"‘Investigate, before you invest’ was for many years the slogan of the New York Stock Exchange. I always thought a better one would be, ‘Investigate YOURSELF, before you invest.’ The Psychology of Trading should help you increase your annual investment rate of return. Mandatory reading for anyone intending to earn a livelihood through trading. "
–Yale Hirsch, The Hirsch Organization Inc., Editor, The Stock Trader’s Almanac

"This highly readable, highly educational, and highly entertaining book will teach you as much about yourself as about trading. It’s Oliver Sacks meets Mr. Market–extraordinary tales of ordinary professionals and individuals with investment disorders, and how they successfully overcame them. It is a must-read both for private investors who have been shell-shocked in the bear market and want to learn how to start again, as well as for pros who seek an extra edge from extra inner knowledge. Steenbarger’s personal voyage into the mind of the market is destined to become a classic."
–Jon Markman, Managing Editor, CNBC on MSN Money
Author, Online Investing and Swing Trading

"Dr. Steenbarger’s fascinating, highly readable blend of practical insights from his dual careers as a brilliant psychologist and trader will benefit every investor; knowing oneself is as important as knowing the market."
–Laurel Kenner, CNBC.com Columnist, Author, Practical Speculation


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Product Details

  • Hardcover: 330 pages
  • Publisher: Wiley; 1 edition (December 23, 2002)
  • Language: English
  • ISBN-10: 0471267619
  • ISBN-13: 978-0471267614
  • Product Dimensions: 6.4 x 1.2 x 9.1 inches
  • Shipping Weight: 1.2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (58 customer reviews)
  • Amazon Best Sellers Rank: #226,071 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover
The author's M.D. counsellor-trader identity did help him making this an uncommon trading psychology book full of "highly trading relevant" counselling records from both trader and non trader patients. The catch is: if you are not interested in or equipped with an intermediate level of knowledge about psychology or counselling, I doubt very much whether you can finish reading this 300 page book till its end.

To let you have a better grasp of my "worry" mentioned above, I would like to quote something from the last or conclusion chapter, which the author regarded them as the 11 major themes explored in his book.

1. Behavior is patterned.
2. Your trading patterns reflect your emotion patterns.
3. Change begins with self observation
4. Problem patterns tend to be anchored to particular states. (When you enter a particular state thru emotional, physical, or cognitive activity, you tend to activate the behavioral patterns associated with that state.)
5. Our normal states of mind, which define most of our daily experience, lie within a restricted range of our possibilities. (Your immersion in daily routine keeps you locked in routine mind states)
6. Most trading occurs in a limited range of states, trapping traders in problem patterns. (Traders tend to place greater emphasis on the data they process than on the ways in which they process those data.)
7. People in general, and traders specifically, enact solutions as well as problem patterns.
8. Eliminating emotions is not necessarily the secret to improving trading. (Traders can utilize positive emotional experiences to identify constructive solution patterns and to create an anchoring of new, positive patterns.)
9. Success in the markets often comes from doing what doesnt come naturally.
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Format: Hardcover Verified Purchase
I am a full-time, intensely dedicated trader. I can say that many individual paragraphs in this book contain more useful information, advice, and insight than the TOTAL of all other books I've read on trading. First: the author is SMART, VERY experienced with trading, and the perfect combination of an original thinker and a well-informed intellectual in his field. He has an obvious gift for psychology and therapy, and a real hook for trading. Although the book is literally overflowing with all sorts of gems, the center of it, and the brightest gem of all surrounds the concept of "brief therapy." Through 10 or so excellent therapy stories he shows us several ways to "get outside ourselves" and observe what we're really up to; and then how to cleverly "shift" who we are to more productive patterns. He does all this both within and beyond the particulars of trading. This book can help you achieve a clarity directly appropriate to trading in DAYS, that without it--and if you were quite perceptive!--would have seemed like a lifetime's work. I can't recommend this book highly enough; and I've never written a review and don't plan to write another--AND, I'm kicking myself because I'd really prefer that other traders DIDN'T read it!
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The Psychology of Trading is one of those books where you will make a lot of discoveries about yourself and about your life, if you are paying attention, that all tie into trading.

Steebarger is a psychologist specializing in "brief therapy" and also an active trader. The book has chapters that discuss an in-depth story of a patient, and draw lessons from that story about life, cognition, and trading.

It is an awesome book. I have read Douglas and I have Ari Kiev's book which I will read one of these days, but I can't see how it can top Steenbarger's.

Steenbarger says that we have many personalities, and he shows you how you can identify which personality is doing what, and trigger the "Observer" in you, a part of you that is watching and that can see the truth of what you are doing and why you are doing it. This isn't as Zen as it sounds. And Steenbarger has technique after technique in each chapter, so it isn't a bunch of generalizations and observations.

The first technique (which I have done for some months now and read that Larry Connors and Linda Raschke also do and you probably do too) is to keep a detailed trading journal with your thoughts, feelings, what is happening, why you are taking a trade, etc.

The second technique is to excercise in the morning (he does stretching and some calisthenics) and then talk out loud and explain each of your trading plans. Something about talking out loud and explaining your plans lets your brain process differently and he says you can identify what is really good, find holes and see potential traps or things you haven't thought through.

I am on the fourth chapter and I just love this book.
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If one rates books of this nature based on the number and frequency of exciting thoughts and ideas they produce in the reader's mind, The Psychology of Trading has to be near the top of the heap. Through examples and anecdotes, the author brings to light important topics in way which combines the personal with the professional.

A favorite mantra of traders is that one must be disciplined to have a chance at success in the markets. This is all well and good, but it's oftentimes easier said than done. Dr. Steenbarger's book takes the reader beneath the surface to explore reasons why discipline breaks down - why traders who know exactly what they are supposed to be doing, still fail to do it.

Unlike some other books, in this one the author does not just pour out a list of all the things that traders can do wrong, and the various mental issues which come in to play. He actually takes a proactive approach, one which helps the reader see that there are things which can be done to overcome one's difficulties. The reader is not left to feel like their emotions are a bad thing, but rather helped to see that they can be put to good use, not just in trading, but in life as well.
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