Table of Contents
Introduction 1
About This Book 3
Conventions Used in This Book 4
What You Don't Need to Read 4
Foolish Assumptions 5
How This book Is Organized 5
Part 1 The Sovereign Trader 6
Part 2 Making a Successful Trade 6
Part 3 Emotional Sovereignty 6
Part 4 Making Decisions Safely 7
Part 5 Keeping Bad Behavior in Check 7
Part 6 The Parts of Ten 7
Icons Used in This Book 7
Beyond the Book 8
What's Next 8
Part 1 The Sovereign Trader 9
Chapter 1 Brain-Compatible Trading 11
Recognizing the Human Barriers to Trader Success 12
Using Neurofinance to Look Deep Inside the Trader Brain 13
Recognizing Typically Human Behavioral Patterns 14
Leveraging Neuroscientific Discoveries 16
Trading Success Factors 17
Chapter 2 Developing Mental Strength 19
Preparing the Mind 20
Searching for the holy grail 20
Seeing why a market analysis isn't sufficient 21
Doing self-analysis instead of market analysis 21
Learning from experience: Small steps, big impact 22
Avoiding Trading Stress Traps 23
Working with positive stress 23
Stress and fear of loss of control 24
Letting go of false beliefs 24
Reducing stress in a targeted manner 25
Becoming More Resilient 27
Seeing what constitutes a resilient trader 28
Starting your training regimen 29
The journey is the destination 31
Accepting emotions as a source of information 32
Part 2 Making a Successful Trade 35
Chapter 3 Developing Your Personal Trading System 37
Working with Demo Accounts 38
Practicing without risk and side effects with paper trading 39
Paper trading: A paper tiger without emotions? 41
Pattern Recognition: Where Practice Makes Perfect 42
Explicit pattern recognition: Technical analysis (and much more) 43
Intuitive pattern recognition: The sixth sense 44
Recognizing and Developing Your Trading Strengths 46
Accepting weaknesses 46
Developing your strengths 48
Developing your change competence skills 49
Processes are your shelter from the storm 50
Motivating yourself for change 51
Gauging your aptitude: Personality traits and competencies 52
Caution, autopilot: Staying flexible 60
Chapter 4 Implementing Your Trading Plans 63
Managing Your Opportunities Intelligently 64
Balancing Opportunities and Risks (Risk/Reward Ratio) 66
Resisting the Evolutionary Urge to Cash In 68
Recognizing That Fear Is a Bad Advisor 69
Gaining Emotional Distance 69
Keeping Greed in Check 71
Managing Losses: The Trader Psyche at Its Limit 74
Recognizing (and limiting) your portfolio risks 75
Surviving losing streaks 78
Setting effective stop-loss limits 79
Managing your positions actively 80
Part 3 Emotional Sovereignty 83
Chapter 5 Seeing Trading as Personality Development 85
Keeping a Trading Journal 86
Looking into the basics of journaling 86
Carrying out the technical analysis 91
Handling the psychological analysis 91
Recognizing the issues behind certain behavioral patterns 93
Replacing harmful patterns 94
Finding solutions 95
Setting up rules and establishing new habits 97
Getting to Know Your True Trader Personality 98
Examining how personalities develop 99
Finding the right market for your particular personality 100
Trading as a Team Sport: Avoiding Tunnel Vision 102
Developing creative ideas 103
Putting your cards on the table 104
Building networks 105
Chapter 6 Practicing Mental Self-Coaching 107
Benefitting from Self Hypnosis: Seeing Your Subconscious Mind as a Trading Ally 109
Investigating the various forms of self-hypnosis 110
Initiating change processes in trance states 111
Internal dialogues: Talking to yourself when trading 111
Developing positive conversations with yourself 112
Promoting self-confidence and self-esteem 115
Chapter 7 The Psychology of Coping with Losses 121
Registering the Psychological Impact of Losses 122
Developing Mental Strategies for Coping with Losing Trades 126
Letting your trading losses go up in smoke 126
Reframing your losses 127
Benefitting from the power of positive thinking 129
Building emotional defenses 134
Mastering breathing techniques 136
Chapter 8 Adopting Techniques for Coping with Stress and Anxiety 139
Harmonizing the Body with the Mind 140
Adopting a bird's-eye view 141
Anchoring: Finding a point of tranquility 142
Working with the Images in Your Mind 146
Managing mental images for trading 147
Seeing the future 148
Part 4 Making Decisions Safely 151
Chapter 9 Untangling Decision-Making's Hidden Path 153
Recognizing Systematic Perceptual Disorders 153
Tracing Selective Perceptions 154
Dealing with Gross Oversimplifications 155
Channeling Dangerous Emotions 156
Maintaining an Overview in the Face of Information Overload 157
Acknowledging the Perils of Storytelling 160
Telling Trading Stories 161
Seeing that traders are suckers for stories 161
Puffing up price fantasies with the help of company stories 161
Evaluating the role of the financial press 162
Chapter 10 Using Evolutionary Rules of Thumb 165
Leveraging Mental Shortcuts When Under Pressure 166
Fashioning the World You Want, Not the World That Is 167
Practicing Humility Instead of Indulging in "I Told You So" 169
Escaping the Dissonance Trap 170
Chapter 11 Finding the Right Basis for Decision-Making in Trading 171
Seeing Why Investors Hold On to Losing Shares and Sell Winning Shares Too Early 172
Dealing with the momentum effect 173
Deploying the averaging down strategy 174
Throwing good money after bad 175
Plumbing the Secrets of Success 177
When Fear of Loss Makes You Lose Your Mind 179
Looking at prospect theory and loss aversion 179
Preventing losses: A closer look at the trader brain 180
Dealing with your mental accountant 181
When ancient instincts gain the upper hand 182
Time does not heal all wounds 182
Part 5 Keeping Bad Behavior in Check 185
Chapter 12 Avoiding the Obvious Mistakes 187
Putting Reference Points in Perspective 187
Synchronizing Risk Tolerance 189
Factoring in the framing effect 190
Correctly assessing probabilities 191
Managing when images from the past catch up with you 192
Ambiguity aversion: Believing that you can't change the habits of a lifetime 194
Overcoming home bias 195
The endowment effect: Basing decisions not on what you have but rather on what you can get 196
Status quo bias: Not letting "what is" determine "what will be" 197
Chapter 13 Dealing with the Stock Exchange's Collective Misbehavior 199
Living the Stone Age Life 199
Seeing humans as social beings 200
Recognizing that it's all in your head 201
Following the trend 202
Knowing when herd behavior is actually rational 203
Caution: Contagion Ahead! 205
FOMO: The great fear of missing out 207
TINA: There is no alternative 208
Dealing with Information Overload 209
Serious or not? Separating the wheat from the chaff 209
Facing the tabloid syndrome 210
Fighting the contagion of recurring messages 210
Discovering Slowness 212
Living with conservatism 212
Gauging the profit announcement drift 212
Turning the tables and taking advantage of your opportunities 213
Chapter 14 Getting a Better Grip on Your Trading Ego 215
Dismantling the Myth of Learning from Your Mistakes 215
The Illusion of Control: Not Having the Handle on Things You Think You Have 217
Thinking That the World Dances to Your Tune 218
Distinguishing between ability and luck 218
Taking on the humble trader role 219
Living with Hindsight Bias 219
Examining the specifics of hindsight bias 220
Dealing properly with past trading errors 221
Reining in Overconfidence Bias 221
Handling Optimism Bias 222
Chapter 15 Fear: Your Constant Trading Companion 225
Reckoning with the Dominance of Emotions 226
Recognizing How Your Trading Fears Affect You 228
Discarding beliefs that stand in your way 229
Dealing with defensive reactions caused by fear 229
Developing strategies for crisis situations 230
Avoiding self-fulfilling prophecies 231
Finding Your Way Out of the Fear Trap 231
Reducing stress through physical activity 232
Putting your fears in the proper context 234
Practicing self-reflection and facing your fears 235
Correctly assessing consequences 236
Thinking in terms of success 237
Creating a sense of community 238
The Fear of Feeling Regret 239
Knowing what to do when facing regret 239
Obeying before the fact 240
Seeing why traders prefer to do nothing 241
Part 6 The Parts of Ten 243
Chapter 16 Ten Psychological Traps to Avoid When Trading 245
Dismissing Demo Accounts Out of Hand 245
Insisting On Flying by the Seat of Your Pants 246
Letting Your Ego Rule the Roost 246
Believing That Goals Are for Wimps 247
Attempting to Bat 1000 247
Indulging in Revenge Trading 248
Overtrading 248
Doubling Down to Recover Losing Trades 248
Failing the Marshmallow Test 249
Being (Unnecessarily) Contrarian 250
Chapter 17 Ten Success Secrets of Mentally Superior Traders 251
Gaining the Right Inner Attitude to Trading 251
Adopting a Process-Oriented Trading Approach 252
Prioritizing the Protection of the Capital in Your Trading Account 252
Carrying Out the Necessary Mental Loss Management 253
Exercising Mental Opportunity Management 253
Staying Humble 253
Taking Responsibility 254
Keeping a Trading Journal 254
Finding Your Personal Trading Style 254
Maintaining the Balance between Cognition and Emotion 255
Chapter 18 Ten Guiding Principles for the Perfect Trading Day 257
Planning Out the Technical Aspects of the Day 259
Planning for Unexpected Scenarios 259
Managing Risks Beforehand 260
Filtering Relevant Information 260
Being Mentally Prepared 261
Keeping Your Parameters in Mind 262
Managing Ongoing Trades Professionally 262
Controlling Your Emotions in Advance 263
Evaluating Your Trading Day 264
Learning from Your Mistakes and Developing Further 265
Index 267
