Brett N. Steenbarger, Ph.D. has been actively involved in the financial markets since the late 1970s. He has served as Director of Trader Development for Kingstree Trading, LLC in Chicago and currently consults with a number of professional trading organizations. He is also Clinical Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. A clinical psychologist and active trader, writer, and researcher for the past 20 years, Brett is the author of Enhancing Trader Performance (Wiley, 2006); The Psychology of Trading (Wiley; 2003); and numerous articles on trading psychology for print and online financial publications.
What I love most about trading is that it exercises the brain and the will. It involves ongoing analysis and problem solving, and it requires the steady development of performance-based skills. I'm sure serious players of chess and poker enjoy similar benefits. Talk to any successful athlete and you'll find someone who has cultivated themselves, not just their bodies.
There are times, however, when trading becomes a vehicle for destroying mind and soul. You won't hear brokerage firms, trading publications, or seminar producers talking much about this problem, because their common aim is to keep the public trading and buying trading-related products. But, as someone who has worked with many independent traders and traders at firms, I've seen this problem far too often: trading becomes an addictive activity.
How do you cope with the risk and uncertainty that are built into markets, and are you coping effectively? In this and my next article, I will be tackling these important questions.
The topic of coping actually begins with the notion of stress. Stress is a characteristic set of physiological, cognitive, and emotional responses to threat. Generally, these responses speed up such bodily functions as heart rate, galvanic skin response, muscle tension, and rate of respiration. For this reason, the stress response has sometimes been called the "flight or fight" reaction. In the face of threat, our bodies prepare us for action: either to attack the source of danger or to run from it
In a recent blog post, I suggested that coaching for traders could be valuable if properly structured. But is it possible for traders to coach themselves for success? Can the process of expertise development be self-generated?
There is actually a fair amount of research on this topic. The general conclusion of this work, which I review in my upcoming book, is that the importance of mentoring to performance success is specific to each performance field. Team sports, for instance, universally rely upon coaching for expertise development. It is impossible, for instance, for an individual to become proficient at a game such as ice hockey without having a team to practice with.
I recently accompanied my father to a real estate sale in the southern part of Florida. That market for homes and condos had been among the hottest in the country. When we looked at the number of properties on the market at present, however, and the (paltry) number that were selling, we could see that most million-dollar units would have to be priced $200,000 or more below their recent, peak values. Nonetheless, sellers, for the most part, were keeping their asking prices fixed, despite the clear reality that they were generating no traffic and certainly no offers. Quite simply, they were slow to update their perceptions in a changing reality.
Forex trading involves substantial risk of loss and is not suitable for all investors. Read full disclosure