Quote from “The Psychology Of Trading” | Steenbarger

From Amazon.com (pg 48):

Many traders attempt to predict the market and look for prices to follow. Great traders understand the market’s language and follow along…you can best apprehend the market’s messages by attending to your own volatility.

There is a myth among beginning…traders that consummate professionals check their emotions at the door and operate under strict logic and reason. Is it possible to shut off your feelings in such a manner? Would this even be desirable?

…A number of studies have investigated individuals with brain lesions who display what would seem to be a trader’s dream: Their reasoning mind remains intact, even as their capacity for feeling is blunted. The result is not a superrational, intelligent being, such as Mr. Spock from the old Star Trek series. …

Why is this? It appears that feelings are one’s guide to the value and the meaning of events. …

…the successful trader feels the markets, but does not become lost in those feelings. Emotions are information, no less than a wide-range bar on a chart. Indeed, a strong emotion can be thought of as a personal volatility breakout. Just as an experienced trader becomes exquisitely sensitive to the patterns emerging from the tape, traders who know themselves will attend to their own patterns. ….the real market you’re trading is the market called Self.

Don’t ignore your emotions. Observe them. Use them as trading filters and trading signals:

The more giddy you are with success, the more likely you are to do something wrong—perhaps an ill-adivised entry, or perhaps staying in a trade too long.

The more you feel dejected and unworthy, the more likely you are to miss a trade you should have taken.

The more you disbelieve what you see the market doing, the more likely you are to trade counter-trend when you shouldn’t, or stay in a trade when you should immediately exit at the market, or to fail to enter a trade you should be entering.

So be aware of your emotions, have trading rules that determine what you will do in response to those emotions, and then do what the rules say, not what your emotions would have you do.

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One Response to “Quote from “The Psychology Of Trading” | Steenbarger”

  1. Here is a link…

    I love this blog and everything about it. I have been reading it for awhile but have yet to say hello. well…Hello!…

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