As part of CNBC's Million Dollar Challenge, I'll be appearing on a special program Friday evening between 7 and 8 PM EST that will deal with trader/investor psychology.
It's always difficult in a matter of a few minutes to convey ideas properly, but the first priority is to convey the proper ideas.
That's where you come in!
If you have any questions about trading and trading psychology that you'd like me to forward to the producer of the show, either leave them as a comment to this blog entry or email me at the address at the end of the "About Me" section of the TraderFeed home page.
I'll select the themes/questions that are of greatest interest and pass them along for inclusion in the show. I don't know any better way to make financial television relevant than to poll real life traders and address the real challenges that we all face day in and day out.
Thanks!
Brett
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11 comments:
After watching today's sell-off, I recalled a couple of analyses that you had done on "Big Bear Days". (Jan 21 and Nov 28 2006)
Jan's post suggested the weakness-begets-weakness while Nov's post suggested a reversion-to-the-mean, or weakness-begests-(relative)strength.
I've previously suggested my skepticism regarding historical analysis and you agreed. You stated that you viewed it as a framework, much like a coach's game plan. However, the obvious question arises: When to revise the game plan.
Furthermore, I think that the possession of such a piece of analysis may subtly bias the trader so that he may not recognize or react to a changing situation in time. For instance, a trader may hold on too long in expectation of a turn-around, as happened on Monday.
This is a long-winded set-up, but here's my question: How does a trader learn to recognize and respond to a change in behavior? When such a state of cognitive dissonance arises, how does a trader learn to accept, and not repress the conflict? (I hate useng Freudian terminology!) What can a trader do to be more "in the moment". How can a trader overcome his biases re: his expectation of a day's course of events?
I know that CNBC has had a lot of 'gurus' and they all give the same trite bromides and their projections based on technical or fundamental analysis. But, in a sense, these all serve to bias the trader to expect a certain course of events and leaves him rather ill-prepared to eract to changing circumstances. I don't know if anyone has previously delved in to these aspects of sports/trading/performance psychology, (because,of course, I don't listen to CNBC - no cable). As Woodie says:
To predict is for slaves; To react is for Kings.
SO, HOW DO WE LEARN TO REACT?
:-)
I would be interested how does the Baby Boom Gen. effect the stock market. Also, housing vs stock market..
Thanks
CNBC should be happy to have someone like you and should do so more often, better than their usual idiots...
I look fwd. to seeing you.
Hi Bruce,
You're pointing to a very important challenge. It's the challenge a quarterback faces when he studies the game plans, practices the plays, and then sees a flaw in the defense at the line of scrimmage. He calls an audible and makes the big play. The ability to process information in the here and now and integrate it with broader knowledge is an important element of success in many performance fields. It's also what training is all about: seeing so many real time patterns that you develop the sense for when to go with the statistical patterns and when to recognize that this time truly is different. Thanks for the great question--
Brett
Thanks, Wall St.; I will be passing along the suggestions to the producer of the show, who will help choose what to ask of panel participants. I appreciate the interest--
Brett
Hi Yaser,
I'm one of the few trader/bloggers apparently who doesn't dislike CNBC. I've found the producers and news anchors to be very concerned with the quality of their product. They are trying to balance information with entertainment, and it's a very tough challenge. I would like to see more investigative financial journalism, but I have a hunch that the public viewership would not flock to such programming. And I suspect, after giving short answers to tough questions, any interviewee--myself included!--will sound like an idiot--
Brett
Hi Dr Brett.
Thanks for your response. I really hope that you address my question. I should note that I live in Wisconsin and that I, like many others, agonise over Brett Favre's tendency to throw interceptions. However, when I actually looked up his statistics, I found that he threw 414 touchdowns and 273 interceptions! Most commentators have focused on his interceptions (as did I). But when I actually looked at his stats, I developed a new understanding - and respect for- Brett Favre. My goal as a trader is to be able to 'shake it off' after an interception (loss) like
Brett and go on to the nbext play (trade).
Hi Bruce,
Great analogy with Brett Favre and the need for emotional resilience. Thanks!
Brett
Dr. Brett,
Thank you for sharing your insights on Trader Feed and the Weblog...
How about questioning the appropriateness of approaching trading like gambling, and how that can be negative psychologically
i.e., the fact that to succeed in this contest you must bet it all and essentially be lucky!!!
Regards,
SINGER
Hi David,
Great idea! There *is* a gambling element to such contests, and that mindset is quite contrary to the one needed to trade well. Thanks for the excellent suggestion--
Brett
Hi Dr Brett
I just thought of some other possible topics. This is along the lines of Brett Favre's emotional resilience (I'm not a psychologist and so I can't come up with neat phrases like that). We previously had a discussion in which you observed that "It's much easier to stick with a position when you have a well-thought out rationale."
So many trader's coaches talk just about reducing emotion and trading in a relaxed frame of mind. But having a trading plan and entering trades based on solid research and not on impulsively following the recommendations of others can also work to keeping you in a relaxed frame of mind.
So, here are the topics:
1. Traders need to be mentally flexible and able to react to unexpected circumstances, not biased by their expectations or predictions of what the market will (or SHOULD do).
2. Traders need to be emotionally resilient, like Brett Favre and 'forget' the last losing trade(interception).
3. Traders need to be grounded in solid fundamentals - a trading plan, research (hopefully done by himself), so that he can calmly analyze and react to changing circumstances (as your trader did in the Wednesday, March 07, 2007 post,
Resilience And The Courage Of Your Convictions.
4 Traders need to understand the sheer complexity and the amount of fierce competition in this arena. As you noted on Fri Feb 23 Trading in a performance activity which requires INTENSIVE PRACTICE, PRACTICE, PRACTICE. Too many traders are atracted the the seeming easiness with which they can pick out patterns and think that that' all it takes.
5 Finally, you've previously discussed the difficulties that impulsive or rebellious trades might encounter. It's not the market, but their own nature that sabotages them.
I might be able to think up some other topics, but I think I'll leave you alone with just these - for now.
:-)
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