The Daily Trading Coach – 101 Lessons for Becoming Your Own Trading Psychologist

My reading book for this coming week – The Daily Trading Coach

Preview of the book:

Every trader is an entrepreneur. And just as a new business must capitalize upon the strengths of its founders, a career in the markets crucially hinges upon the assets—personal and monetary—of the trader. As an active trader and a coach of traders in hedge funds, proprietary trading groups, and investment bank settings, author Brett Steenbarger has helped others see the personal assets they have possessed all along: those that can pay a lifetime of dividends. In The Daily Trading Coach, he provides the tools to help you prioritize both your trading goals and your life—and become your own trading psychologist.

There are 101 lessons in The Daily Trading Coach, each averaging several pages in length. Each lesson follows the same general format: identifying an everyday challenge that traders face, an approach to meeting that challenge, and a specific suggestion for implementing that approach. The lessons cover a range of topics relevant to trading psychology and trading performance, including detailed instruction for utilizing psychodynamic, cognitive, and behavioral brief therapy methods to change problematic behavior patterns and instill new, positive ones. The chapters are independent of one another, so that you can read them in order or you can use the Table of Contents or Index to read, each day, the lesson that most applies to your current trading. In addition, the book includes insightful self-coaching perspectives from eighteen successful trading professionals who share their work online.

While the aim of the book is to help you become your own trading coach, its broader purpose is to help you coach yourself through life. The challenges and uncertainties you face in trading—the pursuit of rewards in the face of risks—are just as present in careers and relationships as in markets. The Daily Trading Coach provides a road map, and a practical set of insights and tools, for discovering and implementing the best within you.

Useful quotes from this book:

  • Poor trading practice, poor execution, poor risk management and poor trade management, is responsible for much emotional distress. Trading affects our psychology as much as psychology affects our trading.
  • Identify your greatest fears and face them as directly as possible, so that you find out they are not as powerful as they seemed.”-Brett N. Steenbarger.
  • We are all afraid of things and this is a good solution to over coming our fears, because our fears are never as bad as they seem. We make them out to be horrible, but when we finally face our fears we discover that they aren’t so bad.
  • Getting rid of our fears one by one, will make us a stronger people and will allow us to strengthen others.
  • Thinking positively or negatively about performance outcomes will interfere with process of performing. When you focus on the doing, the outcomes take care of themselves.

Can investors and traders take active measures to reduce their vulnerability to misattribution and overconfidence?”

Dr. Steenbarger thinks they can, and so he offers three simple resolutions.

  • Resolution No. 1: Treat Investing Like A Business

“A person who fails to plan his entry into a business field might as well plan to fail,” writes Steenbarger. “Investing is no difference”

  • Resolution No. 2: Be Rule Driven

“Trading is a high-performance activity,” writes Steenbarger. “Like other high performance domains, trading requires considerable mental effort.

Risk Management There is risk in doing and not doing everything in life. Risk is unavoidable, and we can’t get around it. People tend to think that investing or trading is a very risky thing to do. This statement reeks of an absolute bias and contains an assumption. First of all, risk is not absolute; it is relative to the individual undertaking the activity. Second, it assumes that in order to make above-average profits, you must expose yourself to bigger risks.

A competent investor or trader most probably won’t find investing or trading to be a risky thing to do. An experienced pilot wouldn’t find flying a plane to be particularly risky, whereas someone without a pilot’s license would think so. While there is always some inherent risk involved, the magnitude of risk is relative to a person’s knowledge, understanding, experience and competence.

Someone new to trading will think that trading is a very risky way of making money, and that is true – but to him. He doesn’t yet have a comprehensive understanding of how the markets work, how to get into high probability trades, how to manage his own emotions, and trading would definitely be very risky for someone like that to take the plunge without proper learning and experience.

As for taking big risks in order to make big profits, that may not necessarily the case when it comes to trading or investing. You can reduce risk by aiming for high probability trades or actively manage risk by monitoring and closing out your open positions if it seems that the market is not going your way. You can even completely avoid risk if there seems to be no good trades. There is risk in everything you do – whether you walk home, drive or date a stranger. It is OK to take risks. Have a risk-minimizing system in place so that you can come out profitable in the long-term.

  • Resolution No. 3: Play Good Defense

As mentioned above, Steenbarger believes that too many traders become overconfident by exaggerating their own abilities based on a few relatively small successes.

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