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Trading Psychology 2.0: From Best Practices to Best Processes by Brett N. Steenbarger

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Introduction

There is a valuable tradition in academic scholarship called the literature review. A literature review is a survey of published research on a given topic, with an eye toward identifying what is known and what remains to be investigated. A good literature review is selective—covering the most important, methodologically sound studies—and it is integrative, highlighting areas of consensus and debate within a research field. Without such efforts, science would generate far more data than understanding. At its best, the literature review is a bridge between observation and explanation. If undertaken properly, it illuminates existing research directions and inspires new ones.

Although the exercise that inspired this book was a performance review and not a literature review, the aim was similar. I identified approximately a dozen of the very best traders I had worked with intimately over a decade of coaching and asked myself what made them tick. On the surface, they were quite different. Some were daytraders in the electronic futures markets; others were portfolio managers in currency and fixed income markets. A few were highly quantitative; others drew on pattern recognition in a purely discretionary manner. Some were outgoing, some introverted; some were highly emotional and passionate about winning and losing; others were relatively calm, cool performers.

When I looked at what these traders did, all I found was variety. When I examined how they did what they did, however—the ...

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