T P 2.0 RADING SYCHOLOGY Founded in 1807, John Wiley & Sons is the oldest independent publishing companyintheUnitedStates.WithofficesinNorthAmerica,Europe,Australia andAsia,Wileyisgloballycommittedtodevelopingandmarketingprintand electronicproductsandservicesforourcustomers’professionalandpersonal knowledgeandunderstanding. The Wiley Trading series features books by traders who have survived the market’s ever changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional or somewhere in-between, these books will provide the adviceandstrategiesneededtoprospertodayandwellintothefuture. Formoreonthisseries,visitourwebsiteatwww.WileyTrading.com. T RADING P 2.0 SYCHOLOGY From Best Practices to Best Processes Brett N. Steenbarger, PhD Copyright(cid:2)c 2015byBrettSteenbarger.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,or otherwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyright Act,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthrough paymentoftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222 RosewoodDrive,Danvers,MA01923,(978)750-8400,fax(978)646-8600,orontheWebat www.copyright.com.RequeststothePublisherforpermissionshouldbeaddressedtothe PermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030, (201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permissions. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreatedor extendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategiescontained hereinmaynotbesuitableforyoursituation.Youshouldconsultwithaprofessionalwhere appropriate.Neitherthepublishernorauthorshallbeliableforanylossofprofitoranyother commercialdamages,includingbutnotlimitedtospecial,incidental,consequential,orother damages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outsidethe UnitedStatesat(317)572-3993orfax(317)572-4002. Wileypublishesinavarietyofprintandelectronicformatsandbyprint-on-demand.Some materialincludedwithstandardprintversionsofthisbookmaynotbeincludedine-booksorin print-on-demand.IfthisbookreferstomediasuchasaCDorDVDthatisnotincludedinthe versionyoupurchased,youmaydownloadthismaterialathttp://booksupport.wiley.com.For moreinformationaboutWileyproducts,visitwww.wiley.com. LibraryofCongressCataloging-in-PublicationData Steenbarger,BrettN. Tradingpsychology2.0:frombestpracticestobestprocesses/BrettNSteenbarger,Ph.D. pagescm.—(Wileytradingseries) Includesindex. ISBN978-1-118-93681-8(hardback)—ISBN978-1-118-93683-2(ePDF)— ISBN978-1-118-93682-5(epub) 1. Stocks—Psychologicalaspects.2. Speculation—Psychologicalaspects. 3. Investments—Psychologicalaspects. I. Title. HG6041.S7622015 332.6401′9—dc23 2015016663 CoverDesign:Wiley CoverImages:Businessgrowthgraph(cid:2)ciStock.com/Violka08;BlackChessKingandlying Pawnsonboard(cid:2)ciStock.com/DominikPabis PrintedintheUnitedStatesofAmerica 10 9 8 7 6 5 4 3 2 1 EPIGRAPH If you don’t have time to do it right, when will you have time to doitover? JohnWooden v CONTENTS Preface ix Introduction xiii Prelude xvii vii CHAPTER1 BestProcess#1:AdaptingtoChange 1 CHAPTER2 BestProcess#2:Buildingon Strengths 95 CHAPTER3 BestProcess#3:Cultivating Creativity 199 CHAPTER4 BestProcess#4:Developingand IntegratingBestPractices 277 Conclusion:FromBestPracticestoBestProcesses 411 Postscript 415 References 417 AbouttheAuthor 423 Index 425