From Duke Basketball Player to Market Psychologist

Welcome to The Big Saturday
Interview. This week, I am delighted to have Brett Steenbarger join me for a
candid conversation about his life as a trader, psychologist and educator. Brett
is a psychologist who has been involved with financial markets for almost 30
years. He is the author of

The Psychology of Trading: Tools and Techniques for Minding the Markets
.

The following interview of
Brett Steenbarger was conducted on September 21, 2005 by Eddie Kwong,
Editor-in-Chief of TradingMarkets.com. At the time of this interview, Hurricane
Rita was three days away from reaching Texas.

Eddie: Hi, Brett. How are
you doing?

Brett: Very
well thank you; a lot better than the market today. Looks as though fears of
another Gulf hurricane are spooking the markets.

Eddie: Are you doing some
trading today?

Brett: No,
I’ve gone to a full-time writing mode to finish a new book on the psychology of
the markets. It’s very difficult for me to be absorbed in writing and follow the
markets closely enough for short-term trading. The quality of my concentration
has a major impact on my trading performance, so I’ve learned to stand aside
when other things require my attention.

Eddie:
Yeah, I’m sure that many professional traders
step away from their screens when there are distractions. But I bet you’re still
keeping one eye on the market. What do you see going into the coming week? Got
any bias?

Brett:
This really seems to be a news-driven market, with oil and the hurricane taking
front and center stage. No big surprises there: if the weather reduces refinery
capacity further and we see new highs in oil, it’s hard to see how we’ll sustain
an uptrend. If we catch a break with the storm, I’d expect a relief rally. There
were a number of divergences at the recent market highs, as I noted on my
website. So far, however, I see
no indication that this is anything but a normal correction, similar to others
we’ve seen. The two things on the horizon that could change that are oil and
avian flu.

“…It seemed as though
basketball was my major at Duke…”

Eddie: Brett, you have an
interesting background. Tell me, are you a trader who also happens to be a
psychologist? Or are you a psychologist who happens to be a serious trader?

Brett: I’m a
psychologist first and foremost. I happen to work with traders, and I trade the
equity indexes on a short-term basis. In many ways, I view myself as an
educator, whether I’m helping people with personal problems or trading ones.

Eddie: In terms of your
trading, what’s a typical day like for you? What are you trading and what time
of the day are you usually in the markets?

Brett: My
pattern is to trade the morning hours in the ES, catch one or two moves if I
can, and then devote the rest of my day to other activities.

I once traded on a truly full-time basis and
actually was doing pretty well at it, but had to quit. I missed the other
activities—