Trading Psych Top 5 Feedback | Articles-Psychology

The following is some good feedback I got regarding the 'Top 5 Psych Books' list provided in last weeks email... (name changed of course).Here's the list in case you missed it.

Hey Lance,

I hope that all is well. I saw that you recommended the Way of the Warrior-Trader by Richard McCall. I am surprised. I couldn't disagree with you more on this one, my friend. I have read well over 1,000 books, a lot of which are on trading, and none was as bad as this one (imho). The rest of your recommendations were good, but how about Van Tharp's Trade Your Way to Financial Freedom? That's surely one of the best. Also, The Disciplined Trader by Mark Douglas, and the classics, such as, Reminiscences of a Stock Operator and How I made $2M in the stock market. The last two provide a wealth of information on individual and collective psychology.

Anyway, I always enjoy reading your letter and usually agree with you on everything you have to say. Not this time though :-)

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Hi S,

Good to hear from you.

We'll have to agree to disagree about Richard McCall's book. You will note though that below the list I did state that this will be a book people either love or hate. Paragraph copied here:

Be aware though that while I believe the three by Steenbarger and Douglas should appeal to all traders, the book by Richard McCall will be one that traders either love or hate. If you're into Eastern philosophy and spirituality, you'll probably get incredible value out of this book. Otherwise, give it a miss - you just won't get it.

In terms of developing the right mindset I think this book is second to none. I probably have some others I like (for trading psych insights) which you wouldn't agree with either. How about "The Inner Game of Tennis" by Timothy Galway, or "Zen and the Art of Motorcycle Maintenance" by Robert Pirsig? :-)

Van Tharp - yeah, excellent book, but not for trading psych. More for an understanding of money management and overall trading business management/planning. It's probably my number one pick for these areas.

The Disciplined Trader - also excellent, but not in my top 5 (the list was only the top 5 so that I didn't have to think so hard). I'd say The Disciplined Trader would come in around No 6 or 7 for me.

Reminiscences - a great read also. It has some psych references, but I still wouldn't personally list it in my 'psych books' list.

I'm very much looking forward to Steenbarger's new book. Have you downloaded hissample chapter?

Happy trading,

Lance Beggs

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Good to hear from you though. I am actually from Eastern philosophy, having spent considerable amount of time at Zen monasteries here in the US. I think I do understand where Richard McCall is coming from, since his approach was very much Zen-like, but I thought it was so broad, so unorganized that he made the content of his book poorly relate to trading. On the other hand, psychology books such as those written by Mark Douglas, Steenbarger, or even Tharp (I will have to disagree with you on this one as well. I think Tharp's book, while mainly focuses on systems, is really eye opening, as it directly confronts people's misconceptions about trading...see quote below) discuss psychology extensively, but at the same time do offer sensible method that can readily be applied to trading.

Anyway, thank you for responding to my email, and Happy Trading,

PS. Quote from Van Tharp: "People are always looking for the "real" secrets of trading success, but their mental biases always have them looking in the wrong places and at the wrong things. Consequently, they search for magical trading systems with 75% accuracy or better or for great entry systems that they think will help them pick the right stock. Picking the right stock has nothing to do with success and neither does the accuracy of your stock picking. You might be saying, "How can you say that?" Well, practically all Market Wizards agree that the key ingredients to your success are (1) the golden rule of trading - "cut your losses short and let your profits run;" (2) position sizing or that part of your trading system that tells you how much; and (3) the discipline to do both. When you think about the golden rule of trading, it basically describes exits - how you abort losses and ride winners. When you think about position sizing™, it basically controls how much you risk on any given trade."

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Hi S,

Great quote from Van Tharp. Thanks. I think we both agree it's an excellent book and essential reading for all traders.

For me though, while Van Tharp recognizes trading psych as an essential component of success, the books focus is still on other areas. Of course, there's no doubt our trading psych will be improved through understanding the principles of risk management, money management and trade management.

Interesting to hear that you are familiar with Eastern philosophy, in fact more so than I am. I agree with you 100% that McCall's book discusses the topic with very broad, general concepts and does not provide tools or methods that are directly applicable to trading (unless you count his ACTION plan). However I found I was able to incorporate some of his ideas into my daily routine without too many problems at all. For me, the book was invaluable. Maybe the book came at just the right time for me - providing an insight that I'd been missing from other readings. I think that could explain the difference of opinion (not just from you and I, but from the Amazon comments as well where people seem to either love this one or hate it).

Speaking of cognitive biases, I wonder if you had higher expectations of this book due to your deeper understanding of Zen? Naturally then you would be disappointed when finding it dealt with very general concepts??? Dunno. Just a thought.

Given your interest in Zen and trading, have you ever thought of writing your own book? I'm a guaranteed buyer if you ever do.

Cheers,

Lance Beggs

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