as a newbie to trading, i was advised on here to try to understand the psychology of trading to help me overcome some of the errors in my trading. has anyone got any recomendations for books that would be good.
Paddy
books on psychology
I purchased and read 'Trading in the Zone' after seeing several recommendations for it.
Found it a little repetitive, and he could have put into a couple of pages what he wrote in about 6 chapters!
But it definitely does what you ask for, and is a good book on the pschology of trading.
Found it a little repetitive, and he could have put into a couple of pages what he wrote in about 6 chapters!
But it definitely does what you ask for, and is a good book on the pschology of trading.
Hi
Thanks for your replies.
yes there are probably several questions that i need answering, i am very new to this and as i would love to do this full time eventually and i want to understand all aspects of trading. my biggest problem at the moment is accepting that i have made a mistake and when the odds go against me instead closing the trade and accepting a small loss, i let the trade run hoping that the odds come back in my favour (sometimes they do)i then end up making a big loss, this has run my bank down and knocked my confidence.
paddy
Thanks for your replies.
yes there are probably several questions that i need answering, i am very new to this and as i would love to do this full time eventually and i want to understand all aspects of trading. my biggest problem at the moment is accepting that i have made a mistake and when the odds go against me instead closing the trade and accepting a small loss, i let the trade run hoping that the odds come back in my favour (sometimes they do)i then end up making a big loss, this has run my bank down and knocked my confidence.
paddy
I just read the reviews on amazon too. They are about right, its a decent enough book, but could have been an awful lot shorter.
A few years ago I read a couple of books by Van K Tharp that would often get mantioned in threads like this. 'Trade your way to financial freedom' and 'financial freedom through electronic day trading'.
Again, both decent books, if not a little repetitive.
The same messages comes across,protect your bank, follow your strategy, dont overstake, be disciplined, keep calm,stick to your plan etc etc etc.
Plenty of people are willing to write at length and great detail about these aspects of trading. And they are very important too. But they only really come into play once you have an edge.
Understandably, very few people write books/blogs/on forums giving away an actual edge, they just assume you already have one!
Worth a read though, there's always something in there that gets you thinking.
A few years ago I read a couple of books by Van K Tharp that would often get mantioned in threads like this. 'Trade your way to financial freedom' and 'financial freedom through electronic day trading'.
Again, both decent books, if not a little repetitive.
The same messages comes across,protect your bank, follow your strategy, dont overstake, be disciplined, keep calm,stick to your plan etc etc etc.
Plenty of people are willing to write at length and great detail about these aspects of trading. And they are very important too. But they only really come into play once you have an edge.
Understandably, very few people write books/blogs/on forums giving away an actual edge, they just assume you already have one!
Worth a read though, there's always something in there that gets you thinking.
I went on a little trading psychology mission of my own a few months ago and found 'The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist' by Dr Brett N. Steenbarger to be the most effective book for me.
It is written in a lesson format allowing you to focus on specific areas during development as you would do in any serious profession with a dedicated curriculum. It is more skill set orientated.
I also found both Douglas' books (Trading in the Zone & The Disciplined Trader) helpful but in my opinion Steenbarger has nailed it with his third book on the topic, with plenty of cross references to his first two (but you do not really need to read all three - this one covers almost all of the material in a much more practical format).
I bought the ebook version and converted it to audio as I found I was learning faster and getting through the material quicker this way. Not a light read by any means but out of the 6 psychology books I have read it is definiteky in the top two.
If you were looking for more the chapters on psychology in 'Come into my trading room' by Dr. Alexander Elder was the other one in my top two.
Hope this helps and happy reading!
It is written in a lesson format allowing you to focus on specific areas during development as you would do in any serious profession with a dedicated curriculum. It is more skill set orientated.
I also found both Douglas' books (Trading in the Zone & The Disciplined Trader) helpful but in my opinion Steenbarger has nailed it with his third book on the topic, with plenty of cross references to his first two (but you do not really need to read all three - this one covers almost all of the material in a much more practical format).
I bought the ebook version and converted it to audio as I found I was learning faster and getting through the material quicker this way. Not a light read by any means but out of the 6 psychology books I have read it is definiteky in the top two.
If you were looking for more the chapters on psychology in 'Come into my trading room' by Dr. Alexander Elder was the other one in my top two.
Hope this helps and happy reading!
In the early 1970s, psychologists Daniel Kahneman (Nobel Laureate in Economics 2002) and Amos Tversky began studying the often contradictory choices we humans make when faced with alternatives framed as either wins or losses. Though they initially defined a number of heuristics (e.g., anchoring and adjustment) to account for these decisions, ultimately they settled on the concept of loss aversion (i.e. preference for avoiding losses over acquiring gains), which they outlined in Prospect Theory (1979) - psychological alternative to expected utility theory. Applied to trading, prospect theory explains the normal human behaviors of both chasing losses and abandoning profits. In the long-term, trading strategies that attempt to defy human nature are guaranteed to fail. With this constraint in mind, I would strongly recommend using a form of session trading (i.e. set daily bankroll, maximum drawdown limit, minimum target profit, maximum number of markets, trailing stop losses and take profits).
In summary, devise trading strategies that both allow for some flexibility of tactics in the short-term while minimizing the worst excesses of normal human behavior over the long-term. Work with human nature - just set reasonable limits!
In summary, devise trading strategies that both allow for some flexibility of tactics in the short-term while minimizing the worst excesses of normal human behavior over the long-term. Work with human nature - just set reasonable limits!
The Nobel Laureate Daniel Kahneman proposed the inclusion of Taleb's name among the world's top intellectuals, citing "Taleb has changed the way many people think about uncertainty, particularly in the financial markets. His book, The Black Swan, is an original and audacious analysis of the ways in which humans try to make sense of unexpected events."
if your into that stuff or think it might aid you, have a look on scott ferguson blog sport is made for betting there is a link named Trading Psychology (http://www.brettsteenbarger.com/articles.htm).
not sure if most are of any real value as they relate to financial markets. also personally i think it is probably an almost impossible uphill struggle to change the way you think, behave etc, by reading books etc. it seems to me that some kind of total personality change is what they seem to suggest you have to undertake to succeed.
to change a personality i assume would need professional help, and lots of it. also who would be willing to change into someone else, would you be comfortable doing that?
not sure if most are of any real value as they relate to financial markets. also personally i think it is probably an almost impossible uphill struggle to change the way you think, behave etc, by reading books etc. it seems to me that some kind of total personality change is what they seem to suggest you have to undertake to succeed.
to change a personality i assume would need professional help, and lots of it. also who would be willing to change into someone else, would you be comfortable doing that?
I would agree with that. Particularly the second paragraph..to75ne wrote:if your into that stuff or think it might aid you, have a look on scott ferguson blog sport is made for betting there is a link named Trading Psychology (http://www.brettsteenbarger.com/articles.htm).
not sure if most are of any real value as they relate to financial markets. also personally i think it is probably an almost impossible uphill struggle to change the way you think, behave etc, by reading books etc. it seems to me that some kind of total personality change is what they seem to suggest you have to undertake to succeed.
to change a personality i assume would need professional help, and lots of it. also who would be willing to change into someone else, would you be comfortable doing that?
Sometimes you need to experience something many times for it to become second nature. The Betangel team ran a test last year whereby they placed a bet at midday on every favourite, then greened or redded up at the off. It was surprising that the P and L for the day was almost net zero if I remember correctly.
I actually did my own tests and found the same thing (using just £2 stakes). The psychological side of me was telling me to cut my losses as I was watching the markets, but there was little to lose so I let them run (you can feel that internal battle going on!). Easy to do when you've only £2 on, but less easy when you are staking £100/£200/£300 ?
I must admit though; contrary to a lot of advice on here about cutting you losses, I dont do so as often, particularly if the second and third favorites are being supported/layed in a way which suggests that the odds on my selection will drift back to where I want them to be. This one aspect can make a fundamental difference to your P&L.
I run mainly automated systems and there are many many times when I want to intervene and take the profit or correct the loss, but I have learned to just let it do its own thing as over the course of the month I know the P&L will be positive.
Regards
Peter
PS I read trading the zone (Agree with others comments above in that it could be condensed. However in my experience there were some real nuggets in there (literally just the odd paragraph that makes you think)...
Also part way through "The Black swan"...just got past the first quarter of the book, which I found a little of a slog; but it seems to be getting more interesting..!
Hey Paddy one word of advice I would give you if you intend to buy an ebook to convert to audio, make sure it is not DRM protected. This basically means the material is locked to be viewed only with a specific reader - which you are not permitted to convert to any other format, or even copy and paste the text elsewhere (everything is locked). Although I appreciate why this protection is in place, I also found it rather ridiculous that I was not permitted to use the book I just paid for in the way I wanted! There is a way to crack the protection which I had to figure out and wasted an hour on but hopefully this can be avoided if you clarify before purchase that it is not DRM locked.
Thought I'd mention it as it could save you a real headache
Thought I'd mention it as it could save you a real headache
Interesting. I totally agree that to change personality traits would take a huge amount of work, and phychologists say that in many cases we subconsciouly block ourselves from making the neccesary steps to change (essentially as a self-protection mechanism to stop us moving up higher than we currently are which was 'useful' in days gone by when we lived in small tribes and violence was rife and you could be killed for acting above your perceived 'rank'.)to75ne wrote:if your into that stuff or think it might aid you, have a look on scott ferguson blog sport is made for betting there is a link named Trading Psychology (http://www.brettsteenbarger.com/articles.htm).
not sure if most are of any real value as they relate to financial markets. also personally i think it is probably an almost impossible uphill struggle to change the way you think, behave etc, by reading books etc. it seems to me that some kind of total personality change is what they seem to suggest you have to undertake to succeed.
to change a personality i assume would need professional help, and lots of it. also who would be willing to change into someone else, would you be comfortable doing that?
However all is not lost, I think that a great deal of trading effectively (or doing any task to a high standard) requires you to step out of your own way, so that your 'personality' isn't really getting involved and you're purely focused on the task at hand. With something like trading where you are looking at a potential profit / loss, it's so easy for people's egos to get pricked when they start seeing red or thinking too much about how much they may win or lose, and this only gets in the way of how they respond to whats happening on screen.
In eastern philosophy they have a concept where they distinguish between what is known as the 'thinking mind' and the 'working mind'. The thinking mind (basically the ego) is always thinking about how much money it wants to make, what would be the consequences if I lose 5 ticks here, what is wrong with these damn markets today, why am I so crap at this lol etc. The working mind purely focuses on the job at hand... is this trend likely to continue, whats the best time to get out, am I going to get my order filled here etc. Personally my best trading happens when I'm purely focused on whats happening on the screen and am not remotely thinking about how much money I'm making or how well I'm doing (or not!). At the end of the day I get a nice surprise when I check my P+L. In any activity self forgetfulness is key to success, but obviously its not an easy state to achieve. The more success you have the better your mindset will be, and the better mindset will lead to more success. If you're relatively new to this then your best bet is to do everything you can to ensure that you just dont lose on races (or at least more than the odd tick or two), so be selective about when you enter and be happy to take scratch trades etc.
Winston Churchill had a horse he was expecting to win the Derby with, but it didn't win. When he was asked what happened, he said "I made a mistake. Before the race I talked to the horse and I said,'You win this race and for the rest of your life you won't have to work anymore. You'll have the company of the best females and you'll have nothing to worry about.' That was the mistake. The horse didn't have its mind on the job!" So when you think of the possible consequences, good or bad, the working mind gets interrupted