Steenbarger, Trading Psychology 2.0

Brett N. Steenbarger is always worth reading, no matter where you are in your trading career. If you’re just beginning, he lays out the highs and lows you can expect, the work you’ll be required to do, and the commitment necessary to sustain you. If you’re stuck, he counsels you—prodding if necessary, praising if warranted (and it usually is)—with a view to getting you back on a profitable path. If you’re doing well, he cautions that this too will pass, unless you remain adaptable to changing market conditions.

Trading Psychology 2.0: From Best Practices to Best Processes (Wiley, 2015) is Steenbarger’s best book to date. In four chapters and over 400 pages he tackles adapting to change, building on strengths, cultivating creativity, and developing and integrating best practices—57 in all (think Heinz, but not just varieties, distinctly different best practices).

Steenbarger is a felicitous writer, able to blend ideas from psychological and market research with stories from the field. He is also self-reflective. He not only analyzes his own behavior; the book itself is a case study in what he advocates. He himself has adapted his way of thinking about trading to changes in the field. As he writes, “The old trading psychology emphasized planning your trades and trading your plans. The new trading psychology—Trading Psychology 2.0—stresses the changing nature of markets and the need to develop fresh plans for new contingencies. The old psychology placed a premium on controlling emotions. Trading Psychology 2.0 is about cultivating positive emotional experience through the exercise of signature talents and skills. The ideal trader, according to the old trading psychology, is a disciplined rule follower. The ideal trader V.2.0 is a creative entrepreneur, uncovering and exploiting fresh patterns and rules.” (p. 199) I personally like the new trader a lot better.

Readers of Steenbarger’s TraderFeed and Forbes blogs will recognize many of the themes in this book. But he has integrated them into a book that reads, to echo Kahneman, “fast and slow.” The reader can be turning pages at a good clip only to be hit with a passage that stops him cold and demands careful reflection. And for me, at least, there were many such passages.

I like books that keep me engrossed (and expectant) as well as books that challenge me. Trading Psychology 2.0 is a happy combination of both attributes. Kudos to Dr. Brett on a job well done. Now, as he would be the first to point out, it’s my turn.