Market Mind Games: A Radical Psychology of Investing, Trading and Risk by Denise Shull explains how to navigate the shifting relationships among reason, analysis, emotion and intuition to build “psychological capital”, which capitalideasonline posted . First an Capital Ideas Online excerpt followed by a little on the book
Market Mind Games – Fractals, Freud and Finance
In a wonderful book, “Market Mind Games”, the author, Denise Shull, connects the dots between psychoanalysis, fractal geometry and markets. See full Fractals, Freud and Finance via Capital Ideas Online.
“Benoit Mandelbrot, a French mathematician who taught at Yale and worked in IBM’s premier think tank, the Watson Research Center, discovered and codified the world of fractal geometry. Euclidean geometry deals in finite smooth lines and shapes like lines, triangles, and circles. Fractal geometry by contrast focuses on the rough and seemingly messy shapes of nature, such as lightning, mountaintops, and coastlines, that often infinitely repeat. Prior to Mandelbrot’s research, such shapes couldn’t be accurately modeled by any mathematical formula.
Today, for example, the film industry sometimes uses Mandelbrot math to create realistic-looking coastlines from a computer program versus film shot from a helicopter or drawn from satellite photos. Even more to our topic, fractal geometry makes sense of the data of price movement. It can reproduce number series that appear virtually identical to the real price series as reflected on market charts. As most of us know, prices are anything but random. Early on, Mandelbrot noticed that clusters of large moves occur within relatively brief periods of time.
The Key Idea in Fractal Thinking
A simple pattern repeated over and over forms the core idea of fractal geometry. The pattern might be turned or twisted backwards upon itself, but the original distinct element remains. Take our picture of the Roman cauliflower. Can you see how the small nodes actually look like the one big node or, conversely, how the whole head looks essentially the same as each of the smaller nodules?
Likewise, at the very same time, while clearly the eye can see the virtually exact same pattern repeated in different sizes – a sort of natural small, medium, and large – we can also see that each repetition fails to be as 100% precise as if we had glued a handful of three-dimensional triangles together. In other words, while clearly an elemental pattern repeats itself, it does so in an obvious albeit rough way.
Full article via Capital Ideas Online
Market Mind Games: A Radical Psychology of Investing, Trading and Risk explains how to navigate the shifting relationships among reason, analysis, emotion and intuition to build “psychological capital” – and manage it with the same care as monetary capital to make decisions calmly and rationally during the heat of trading.
Market Mind Games – Description
What if the mystery of market crashes stems from a simple but total misunderstanding of our own minds? Could everything we think we know about ourselves—intelligence and rationality versus emotion and irrationality—be wildly off the mark? Simply put: yes.
With these words, Denise Shull introduces her radical—and supremely rational— approach to risk. Her vision stems from the indisputable fact that human beings can’t make any decision at all without emotion and that emotion gets the first—and last—word when it comes to our perceptions and judgments.
Shull should know. She started out managing major accounts for IBM and then chose to research unconscious emotional patterns instead of getting her MBA. Next she became a trader and trading desk manager while continuing to study biopsychology.
We are all taught that sidelining our emotions is the best way to make good decisions— Shull declares the converse: emotions inform us. Attempting to control them actually increases the risks we take. Shull advocates treating feelings as data, and she convincingly argues that doing so eradicates the baffling question that repeats itself in our heads after making a poor investing decision: “What was I thinking?”
Through a series of “lectures,” Shull logically but engagingly connects emotions, beliefs, and context to our innate reaction to uncertainty and risk (yes, the two are different). In Market Mind Games, she merges more than 20 years of studying risk decisions into a single, astoundingly effective strategy.
A reasonable approach to emotion is the best and only way to win the investing game. The methods Shull details in Market Mind Games shake the foundation of conventional market and decision psychology. And, most important, they work.
Market Mind Games – Review
“If you are trying to solve the unsolvable, stop. Read this first and you will learn that the surest path to success will be to start with yourself; solve that conundrum and challenges like understanding how you do and should react to markets will come to be solvable.”
—Marvin Zonis, Professor Emeritus, Booth School of Business, The University of Chicago
“When it comes to fast-moving global financial markets, professional investors strive to evaluate complex economic conditions from data analysis, economic reasoning, and professional judgment. This is what is taught in business schools. Denise Shull demonstrates how investment decision making is also determined by unconscious emotions and perceptions. Market Mind Games: A Radical Psychology of Investing, Trading and Risk is a fascinating book that proposes a new and unexpected hypothesis about the factors that drive financial decision-making.”
—A.G. Malliaris, Professor of Economics and Finance, Loyola University Chicago
“Denise Shull’s gem of a book is long overdue. . . .[Market Mind Games: A Radical Psychology of Investing, Trading and Risk] has made the ability to analyze and overcome our unconscious biases and prejudices available to everyone.”
—Dr. Donald T. Wargo, Department of Economics, Temple University
“Market Mind Games: A Radical Psychology of Investing, Trading and Risk is iconoclastic to say the very least! Pay attention to the last word in the subtitle: risk. This book will change your perspective on how to approach and think about the markets and your life!”
—Michael J. Levas, Founder, Senior Managing Principal, and Director of Trading, Olympian Capital Management, LLC
“Denise changes the way you look at yourself and investing. Her insights and methods are necessary to succeed in the markets, period.”
—Jared Levy, Portfolio Manager and author of Your Options Handbook
“Market Mind Games: A Radical Psychology of Investing, Trading and Risk offers a new school of trading psychology. Truly an important work that needs to be on the bookshelf of every serious market participant.”
—Mike Bellafiore, author of One Good Trade
“Masterful explanation of not only why emotionless trading is a myth, but how we can take advantage of our natural wiring to gain an edge.”
—Derek Hernquist, Chief Investment Officer, Integrative Capital, LLC
“Shull details ways to learn how you ‘feel’ before you ‘act’ so that your buy, sell, or hold decisions become more successful.”
—E. Bernstein, OPUS Trading
“A must-read for those who want to make their livelihood as a professional investor, trader, or algorithmic trading developer.”
—Larry Tabb, founder and CEO, Tabb Group
“Denise Shull enlightens the reader how to effectively unlock one’s psychological capital and translate that awareness into clear and concise investment decisions.”
—Grant Mashek, Managing Member, Palm Equity, LLC
“Shull’s book is not only a great read but lays out an entirely more effective approach to thinking about any decision that involves the unknown—market related or not.”
—Leslie Shaw, Ph.D., Behavioral Economics, and trained psychoanalyst
