This book is really special. It is not only a book purely about trading. The author quoted lots of daily real life examples instead of focus only on trading matters. After all, psychology applies to all sorts of matters in life. Trading is only part of our part time job... bearing the same weight as being a father, a son, a teacher and whatever roles we play throughout our entire life. Leading our life remains our main job...
On top of this, the problems highlighted throughout the book are so real that I truly believe he wrote what he did in real life with traders. Amazingly, few of my puzzles resolved by reading this book. In fact, those puzzles had disturbed my mind all the time before this.
On the four topics discussed, I think the author did so well by highlighted the necessary psychology process to be not only a good trader, but a healthy trader too. I personally benefited a lot especially on "building on strength". From there, I finally realized that I lost a bit of passionate that I build on since day one. In fact, those passionate are so important to build myself towards a better trader, as well as a better person. Right now, I regain what I lost thanks to this book!
However, I am not 100% agreed with the author in all topics. For instance, I do not quite align with this thinking: "When market becomes crowded and price becomes choppy, the style may become shorter-term and opportunistic. When positioning has cleared out and new development are on the horizon, the trading may become longer term and more thematic." This statement alone is too "predictive" to reactive trader like me. After so many years, I still think I am not smart enough to predict any possible outcome. As such, I always distance myself from making projections. To me, dumb player like me are better when react to situation.
Secondly, the author actually suggests to social more within traders: "We can think of networking as a group based solution focused intervention. Imagine a group of talented traders, each sharing best practices." I did this since day one. Ended up, those who wanted to share are not the real experts. Those who willing to share are looking to dig other peoples' stuff instead of sharing. So, to use networking as a group based solution is not really my cup of tea. Perhaps, I had not met the right person...I think the author agreed with my view to certain extends: "When you experience a degree of success in markets, suddenly you find yourself with people wanting to be your friends. They are painfully one sided - all taking, not giving. This is particularly problematic if you're active in social media. Without filters, it's easy to become swamped with unfruitful and unfulfilling correspondence... We can proactively create our environments to maximize experiences of well-being... If you aspire to be all that you can be, you cannot be all things to all people and engage equally in all things. Find the people and activities that inspire you and bring out the best in you and filter the rest."
Overall, this is still one of the best books behind "The Psychology of Trading". Although I may not agree 100%, but I still rate highly this book. As such, I have no hesitation to rate this book at 10/10. This is another excellent book by the author and I will definitely reread this book again in the future. Last but not least, there are plenty of great quotes from this book as below (which I think every trader needs to read it again and again):
When we are focused on the problems and overwhelmed by them, we typically fail to appreciate the fact that there are numerous occasions in which the problems don't play out. It's what we are doing when problems don't occur that can point the way out.
Successful market participants rarely excel in both slow and fast thinking, but they almost excel in one or the other. In a purely cognitive sense, they play to their strengths.
There is something to be learned from every trade outcome - good or bad. No trade is a complete loss if it can be a learning experiences. An additional benefit to the embracing of loss: It turns trade review into a habit, and that in turn makes adaption a continuous routine. Flexibility had become our routine.
Discipline is great for doing more of what works. When the status quo no longer works, however, adaptability becomes the new discipline.
Indeed, by emphasizing a victim mindset - bad things happen to me - such thinking systematically dis-empowers a trader. If you are the victim of bad luck, bad markets, and bad trading, how can you become the author of your own turnaround story? One of the habit patterns most important to cultivate as a trader is the ability to lose in a way that gives you energy, rather than robs you of initiative.
At times, I've also had traders voice their thinking into recorder and then listen to themselves rant. As a listener, the traders can see that what they are saying is not helpful, which helps halt the process. It is not enough, however, to halt the negative thinking. We need positive habit patterns that shift negative thinking into constructive actions.
Perfectionism drains energy. It does not inspire performance; it turns inspired performance into something "not good enough". The idea of small wins means that your focus should not be on perfection., but an improvement.
The traders I've known who have sustained long-term success have always been driven by something beyond immediate excitement and profitability. Very often, those drivers have reflected core strengths and interests that provide energy, even when markets are not paying out.
Successful trading has to fit into your life, not the reverse. We don't have to have all of our needs met through our trading, but we cannot allow our trading to frustrate our most fundamental needs and strengths.
I've often joked that many talented traders are "worriers" and "warriors"; they take risk, but keep themselves clear of overconfidence biases by continually preparing for adverse outcomes. Negative emotional experience can be very useful in managing trading risks.
Happiness is a habit, not a random emotional event befalling us. Pay particular attention to the activities before, after. and during your trading day that energize your performance. We are least likely to fall into bad habits and behave impulsively if we are operating at a high level of energy and well-being.
It is not enough to master stress; we must sustain life passion if we're to energize our trading. Had our work been problem-focused - analyzing past conflicts, tracking his self-defeating behaviors and thoughts - we would have never re-insulated his house. He had to rediscover his happiness before he could rediscover his trading.
While most of us are not mired in depression and burnout, we also do not experience passionate interest and love for life on a regular basis. Most of daily experience is spent in routine, which is efficient in the short run but de-energizing in the long run. We bring our energy leaks to the trade station, falling short in our trading.
When we derive energy, affection, happiness and satisfaction from activities outside the markets, we don't have to overtrade markets to manufacture good feelings. Many times, the answer to our market problems is cultivating the positives from our nontrading lives.
Our connections to others are powerful buffer to trading stress.
Gratitude leads us to become better at retrieving positive information, because it naturally turns our attention to positive aspects of life.
It is often when we feel best about our trading that we fall prey to overconfidence biases, confirmation biases, and illusions of control. Without mindfulness, we are just likely to be swayed by positive emotions as negative ones.
The result of incubation is a kind of "aha!" experience. Perhaps because we have been open minded mode during the incubation period, creative insight feels as though it comes to us; we do not make it happen.
Experience does not necessarily lead to expertise; we don't necessary trade better if we trade more. The successful one spend more time generating trading ideas than in actual trading.
Creativity is not a talent that one is either born or without. Rather, creativity occurs at the intersection of focused immersion in field; deep experience and expertise in that field; and the cognitive flexibility to perceive one's field from different perspectives. Creativity follows passion.
Traders at prop firms and hedge funds can handle losing money reasonably well when others around them are also struggling with performance. If they are losing money while others are minting coin, however, the situation becomes intolerable.
Many trading problems - and emotional problems related to trading - are a function of one person needing to do too many things to run a trading business well.
A common mistake trades make is to respond to difficulties in markets by working harder, spending more time on trading, and hoping that sheer effort will arrest their drawdowns. If, however, we double down on activities that are not providing us with positives, we can quickly become overwhelmed. That means we work smarter, not harder.
We can't win the game if we can't stay in the game.
Market uncertainty is like weather in that there will always be people speculating. Unless there is a drastic occurrence you have to be optimistic and know that rainy days are followed by sunshine. Always.
You have to have confidence in the few, essential components of your success to lean on those exclusively. Too often, when we seek the crutches of things to add to our strategies, it's because we lack confidence in those strategies.
The flush times will be followed by lean times and the lean times can become prosperous once more. That can't happen, however, if you don't save the money from the flush times to finance the times of relearning and adaption. Too often, once-successful traders become former traders because they can't finance their new learning curves.
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