The Trader as PsychologistBrett N. Steenbarger, Ph.D.www.brettsteenbarger.comThis is an excerpt from The Psychology of Trading (Wiley, 2003).An important goal of this book is to help you approach trading the way a psychologist approaches his or her clients. I call this “trading from the couch,” which means learning to utilize your thoughts, feelings, impulses, and behavioral patterns as market data. Trading from the couch entails an important shift from traditional thinking. Instead of trying to overcome or eliminate your emotions, this self-aware trading calls on you to learnfrom your reactions. Your goal is to turn yourself into a finely calibrated instrument for detecting and acting on the patterns of both the trader and the trading.Note that cultivating such sensitivity does notmean simply going with your feelings in placing orders! As you will see in the coming pages, it often means the opposite: learning to use excess confidence and risk aversion as valuable contraryindicators.
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