Working Through Some Issues in This Market
Eight months into 2004, the broad market is basically flat for the year. All those trading days, all the experts' talk about the best strategies and sectors, all those weekly reports of Dow points up and Dow points down have brought stocks to roughly the same spot where they started 2004.
If you're a trader -- or even an investor -- the futility of it all is enough to make you want to pull up the bedcovers and sleep a bit longer in the morning. But perhaps there is something to be gained in a period of net slop for the big indices. Maybe we should take advantage of the multimonth lull in the action to reflect on our mental approach and refine our technical methods.
Few are better at peering inside the heads of traders than Dr. Brett Steenbarger, the former New York clinical psychologist and university professor who gave up his hospital whites two years ago, first for a career as a short-term futures trader and then, shortly after, as in-house shrink for a major Chicago futures-trading firm. He published an illuminating book in 2002 called The Psychology of Trading, but says he has since learned a lot more working side by side with some of the most successful pros in the world.
His prognosis for an improvement in your approach to this eerily range-bound market?
- Learn to use your emotions, not avoid them.
- Trade the time frame that's right for your personality.
- Adapt your style and expectations to the conditions of the market.
- Distinguish between a good trade and a profitable trade.
- Avoid perfectionism.
- Develop a personal "success template."
- Focus on the process to be consistent.
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