Tuesday, April 28, 2009

We Gravitate Toward Our Self-Talk

I'll be doing a talk for a group of traders this afternoon. One of the topics I'll be emphasizing is that our actions naturally gravitate toward our self-talk: how we process information shapes how we will respond to situations.

The trader who engages in catastrophic thinking finds himself becoming risk-averse.

The trader who beats up on herself after a losing day loses the motivation to prepare for the next day's trade and misses a great opportunity.

The trader who is perfectionistic can't tolerate missing a move and ends up chasing highs, just as the market reverses.

The trader who thinks he can do no wrong after a series of winning days overtrades and blows through his downside loss limits the next day.

The trader who rehearses the good trade when reviewing possible scenarios for the day doesn't hesitate to put the trade on when economic data come out favorable and makes money for the morning.

In all these ways, how we think affects how we feel and how we act. Our self-talk constructs our personal reality and helps define the behavioral options open to us.

.

5 comments:

Jason said...

Dr. Steenbarger

Thank you for writing the books, the blog,and the feeds. Your writings have changed how I view trading especially on cultivating the capacity to be a good trader. I have never even heard of deliberate practice being applicable on trading.

One of the questions I have in mind after reading the first two books is that to what point do immersion in markets and enough screen time become living for trading? How much is too much?

I decided to ask the question here because it seems to me that catastrophic thinking is the extreme of contingency planning to the point that one becomes overly obsessive.

Thank you,

Jason

Pierre said...

Hi Brett,

you might find an interest my article i published regarding self-talk. for me, it all spoils down to vantage points.

can a lady break the gentleman's agreement?
http://trueaphrodite.wordpress.com/2009/04/27/the-problem-with-problems/

Aphrodite

Peter said...

Great post... is there any link or slides for your presentation available? Thanks.

Brett Steenbarger, Ph.D. said...

Hi Jason,

Great question; when trading interferes with life itself, that is clearly a problem--perhaps more of an addiction than a passion--

Brett

Brett Steenbarger, Ph.D. said...

Hi Peter,

No, sorry, most of my talks for trading firms are private affairs--

Brett