I just finished reading Brett Steenbarger’s book

And can honestly say that it was hands down the best book on trading psychology that I have ever read. In fact, when I was about half way through the book I couldn’t I went on ahead and placed an order with Amazon for his most recent book:

I’ve taken pages worth of notes and will be sharing some of the highlights of what I took from the book in upcoming posts. But I wanted to go ahead and share with you now one messsage that I really took to heart. Basically, it is the message that we all have multiple personalities to some extent that crop up during different times of the day, trade, etc; Depending on a lifetime worth of learning & habituation. Thus:

We usually like to think that we ARE one way or another. We are kind, intelligent, in control, yadda yadda yadda. And we are…at least some of the time. We also like to think that we ARE NOT ignorant, impulsive, closed minded, fearful. However, we all experience bouts of such feelings at one time or another in our lives/trading and we will usually rationalize it away saying something like “That’s not like me”…and we’d be right.

That most likely very well isn’t who you are in total, but it is a sub-personality that exists, often completely unnoticed & unchallenged, within the grander composite that makes up what we think of as our self. And when it rears its ugly head, it usually doesn’t leave much room for any of the other parts of you that we typically like to associate ourselves with. These different parts, personalities, whatever you want to call them, each have their distinct characteristics, triggers, & real estate within your brain.

So while we may have entered a trade in a perfectly healthy mindset, little are we aware that there is a timebomb up ahead in the market that’s going to hit one of our triggers for Angry-Impulsive-Gambler Trader. Once the transition is complete, when that switch flips, the resulting trades have the potential to be devastating to our trading accounts.

That’s the bad news. The good news is that none of these transitions happen in a vacuum. The bodily changes themselves that accompany these mood shifts (heart pounding, hands sweating, intrusive thoughts racing) are not necessarily bad as they are likely occuring in concurrence with significant market events (breakouts or turning points). If used properly, we can learn to use our own emotional & physical reactions much as we would a broader market sentiment indicator (ie: Do the oposite of what the general public is doing, & fade the extremes).

The other good news is that with the proper equipment we can learn to identify these sensations as they occur, take what useful information may be conveyed in them, and shift or remain in a more productive trading mindset.

Enter the Biofeedback Machine. After reading Brett’s book I found myself in the market to purchase some sort of biofeedback machine as I have long since noticed that my losses tend to clump together indicating a loss of emotional control. After doing some research and speaking with Brett, I found out that there are basically 2 major types of feeback machines out there. Ones that track your heartrate & ones that track the conductance (sweat) in your fingers.

From there I was able to start doing some comparisons of different products that are out on the market.

Freeze Framer 2.0 markets its product specifically for traders and looks like a rather comprehensive program for measuring one’s heartrate. Its the most expensive of the ones I found weighing in at around $300

ThoughtStream is an interesting product focusing exclusively on the Galvonic Skin Response (finger sweat) arena. Like Freeze Framer, it comes with games and tutorials to help guide you through the process of becoming more in control of your phsyical responses to stress. It comes in as the cheapest at $129.

The problem I ran accross was that I wanted both Heartrate & GSR monitoring. Enter Journey to Wild Divine. If you can get past the name & dig a little deeper, it seems to be a great compromise.

It was originally designed to help meditators to become more in control of their physical responses. It is designed as a computer game whereby you have to master varying degrees of heartrate & skin response levels in order to control the game. But apparently you can also just hook up to the machine outside of the game and have it output your GSR & Heartrate readings.

Its listed on the Wild Divine website for $160, but if you Click Here or the picture below, you can get it from Amazon for $148.

The only downside I saw with Wild Divine is that apparently you need to purchase a separate

Graphing Program

from their website if you want to be able to track the detailed stats of your progress over time, but even with that cost ($40), it is still cheaper than getting the Freeze Framer & ThoughtStream separately.

I went on ahead and ordered the Hardware & Game from Amazon yesterday. Once it comes in, I’ll then see whether or not the additional graphing software will be necessary. I’ll let you know what I think of it once it arrives. But I have a feeling that this will likely be the most useful stock market indicator I have ever purchased.

I came accross this eBook this morning and found it to be incredibly insightful. The link is:

http://www.the-way-to-trade.com/fitness.pdf

It is one of the best free resources on trading psychology that I have read in a quite some time covering issues from why we fail to cut our losses & let our winners run to how we can use relaxation & visualization to help us uncover the master trader inside. It is something that Tiger Woods does before every match and has done since he was 14 years old. Yet I’ve yet to actually meet another trader in person that applies these simple & powerful techniques.