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Trading Life

12 quotes from Denise Shull’s Market Mind Games

Denise Shull is a trader and performance coach who wrote Market Mind Games in 2012. In the book, she uses neuroeconomics and psychodynamic psychology to provide traders and investors with a variety of mindset tools to gain an edge in the markets.

Here are our 12 favourite quotes from Market Mind Games:

Traders demand certainty in the markets, where none exists. To be a successful trader means to embrace this uncertainty.

“We greatly prefer to know what exactly our odds are. We feel more confident and less anxious when we know or think we know our exact chances. (This is) known as the “ambiguity aversion…”

Emotions are important in trading decisions.

“Not only are emotions not something to be shunned, dismissed, or overridden, but we need them for meaning, we need them for vision, and we use them for essentially everything…. We can’t actually apply math or logic, let alone do other analyses, make judgments, or decisions, if we lack feeling and emotion.”

Human feelings, such as fear, can be used to make good trading decisions. Here is an example Denise Shull gives in the book:

“On the day of the Flash Crash in May 2010, certain traders used not their models but their brains, their memories, and their pattern recognition skills to immediately decide to shut down their automatic trading systems. They judged something to be awry. They didn’t know what; but in effect, their lack of confidence or what could also be called that dreaded word “fear” served as their best risk manager.”

So much trading advice talks about controlling our emotions, or not having emotions at all. Denise Skull argues that no decisions can be made without emotions, and it’s really important to feel those emotions.

“Knowing, not controlling, your emotions, can be your secret weapon”

Trading plans are essential, but there also has to be a flexibility in their use.

“The mistake too many people make, it seems, is either not having the plan in the first place or once they do, treating it as immutable law.”

The markets change all the time, and traders need to be able to adapt quickly to these different phases.

“Markets can have what these days is called multiple or dissociative personality disorder, and a trader has to be ready to recognise a new personality within a very short period of time.”

Here is an interesting take on seeing the data or “numbers” of any given market as a language:

“The numbers of markets are a language – symbols for meaning – they aren’t absolute; and the real game is learning to read this language.”

We are a hugely important piece in our trading success.

“We tend to think our market asset is limited to our cash capital. We also tend to think only of our intellectual capacities as the avenue to an edge. In both cases, we omit a key factor in our success—our total mental or psychological capital.”

What does Denise Shull mean by “psychological capital”?

“Think of “psych cap” as the sum total of your physical, mental, and emotional energy available to you at any one time. Like prices, it constantly varies.”

Here’s an explanation of the subtle difference between going against the crowd, joining the crowd, and joining the crowd just before the crowd knows what it’s about to do.

“Everyone spends all their time searching for what everyone else doesn’t know, when a lot more money can be made searching for what others are about to know.”

Why do traders sometimes feel bad after a winning trade?

“One of the ironies of trading is that winners almost always make you feel bad – either you didn’t stay in long enough or you got out too soon.”

And lastly, here’s a reminder that we have to find what works for us and become specialists in whatever market or strategy suits our personalities the best.

“The markets have many personalities and what works with one doesn’t work with the other. It can take a lifetime to get good at them all or give up on the ones that just don’t suit your internal rhythm.”
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