In writing The Daily Trading Coach:  101 Lessons for Becoming Your Own Trading Psychologist it was the author’s stated intention to “. . . give you the tools to become your own coach, so that you can guide your own professional and personal growth.”  And, I would have to say that I think he did a quite good job of that.  The tools for just about any situation are in there.

Will they all fit psychological trading challenge of yours or mine?  Probably not all, because that simply is not possible, but he does provide enough general principles and specific recommendations for personal exploration and action that it will at least be a good starting point.

If nothing else, it would be worth reading the book just to understand Dr. Steenbarger’s observation that if you were going to set up a learning situation in a laboratory specifically to make an animal anxious and ineffective, it would look much like the stimulus-reward relationships that occur in the financial markets.  Of course, his suggested “work-arounds” for the markets’ “crazy-making” rewards, punishments, apparent patterns, unpredictablility, changeability, and chaos are invaluable for those who travel these waters.  But, still, sometimes it is helpful just to get some validation that, yes, this is a strange place indeed.

Who is the book for?

The book is appropriate for anyone who is involved with the financial markets, whether personally or professionally.

It was written by a psychologist who has consulted to trading firms and coached active traders for many years as well as trading himself.  His examples and language reflect this experience, as they should.

Given that, if you view yourself as an investor, rather than a trader, you may conclude that this book is not for you.  From my perspective,  this would be a mistake since whether we buy something with the idea of holding it for a minute, a day, or a decade, our intention is to eventually sell it for more than we paid for it.  We are all traders.  It is just our time frames that differ.

What’s in it?

The book consists of 10 chapters, each with 10 lessons, with lesson #101 being in the conclusion.  They are

1.   Change: The Process and the Practice

2.   Stress and Distress: Creative Coping for Traders

3.   Psychological Well-Being: Enhancing Trading Experience

4.   Steps Toward Self-Improvement: The Coaching Process

5.   Breaking Old Patterns:  Psychodynamic Frameworks for Self-Coaching

6.   Remapping the Mind:  Cognitive Approaches to Self-Coaching

7.   Learning New Action Patterns: Behavioral Approaches to Self-Coaching

8.   Coaching Your Trading Business

9.   Lessons from Trading Professionals:  Resources and Perspectives on Self-Coaching

10.  Looking for the Edge: Finding Historical Pattern in Markets

What might be a challenge in getting the most out of it?

Probably, first on the list would be that there is so much information in this book that it can feel overwhelming.  True, the author says up front that it is not necessary, nor is it intended, to sit down and read it straight through.  Rather, it can be used as a reference book, working on whatever chapter and lesson seems to apply to you at the moment.  ( Obviously, you can’t do this if you are going to write a book review, so perhaps my view is a bit skewed in this regard. )

The book often seems to have been written for mental health professionals or at least someone who is familiar with the lingo of psychology, therapy, and coaching.  This is not a huge limitation, but sometimes if the reader is not at all familiar with a concept or term, a quick trip to Wikipedia or some other source could be a good idea.

And, finally, when it comes to approaches to dealing with problems that come up, the ones that he describes are not the only ways or necessarily the best ways to go for each individual.  This is one of those places where I do think Dr. Steenbarger has done an excellent job at getting the reader started, even where it may not provide a complete solution.

Overall Opinion?

This is an excellent book that accomplishes most of what it set out to do.  The most basic challenge to the self-coach, even armed with a resource like The Daily Trading Coach, is to set the goals and stick with the program.  What else is new?

Disclosure: The publisher of this book provided me with a copy to read for doing this review.  I did read the whole book, but did not do the exercises.

Tags: book review, Brett Steenbarger, The Daily Trading Coach, trading coach, trading psychology

Here’s another article that is positive on the Sunhealthcare/Sabra spinoff posted at the Motley Fool website, that might be helpful and might not.

It has been said that the purpose of thinking is to be able to stop thinking and I have found that there are few better ways to keep stopped thinking from sneaking back than finding someone who agrees with my decision.

How do you know when careful research is slipping over into self-cheerleading?  I for one have never been certain.  If you have a tendency to never want to stop taking in data, then you you might want to watch out.

This is one of those cases where Gerald Loeb’s admonition to always have reason and a confirming move in price is probably a good idea.

Tags: sabra, sbra, spinoff, sun healthcare, sunhd

Verizon’s (VZ) upcoming stock spin-off of Frontier, its landlines unit, is getting typical responses to the spin-off stock (dump it!) which can provide an opportunity for followers of spin-offs, but does it always?  Surely there are times when the contrarian idea that if everyone is doing, there must be money to be made by playing it in the other direction, is just plain wrong.

Still, even if they are exactly right given that their actions are predictable, is there an advantage to be gained from the odds that their correct actions are likely to be overdone?

Just asking.

Sounds like there may be a short term opportunity for the nimble.  What do you think?  How would you trade it?

7/2/2010  Oops!  Belated disclosure:  I got an electronic confirmation from an IRA that I rarely look at informing me that I have received shares in Frontier Communications as a result of the spin-off from Verizon which I had forgotten I owned.   For the record, I intend to keep the Frontier and may add to the position after other people who got notified that they now own a landline company that they never wanted sell it.

Tags: Frontier, spin-off stock, stock spin-off, Verizon, VZ

Motorola, MOT, has been going to do a stock spin-off of its cell phone business for a long time.  Just do an internet search on  Motorola spin off and you’ll get an idea of how many sources have written about this.  Sometimes it’s the “money losing cellphone unit” and sometimes it isn’t money losing in the stories, but it has always sounded at least a bit questionable from a shareholder perspective.  Sure, Motorola may be stronger without its cellphone business, but if I own MOT now and they split it apart giving me both pieces, the deal is a wash.

But that’s all different now.   According to Daily Finance author Dawn Kawamota, it is going to be structured so that the deal makes sense from both sides.

Sounds OK.  Fortunately for me and you, these things play out at what could be described at a grand pace.  Stock spin-offs are not for those with a short attention span, (at least if you have a good system of electronic alerts set up to wake you at opportune moments.)

There will be plenty of press releases, news articles, and SEC filings before you have to decide what you may want to do.

It could be a great opportunity for all involved . . . or not.  We’ll see.

Tags: MOT, Motorola, stock spin-off, stock spin-off investing

I recently came across an excellent article on how to invest by Rohit Chauhan. While it is quite basic on many points, the way he puts it all together was very helpful to me.

I especially appreciated his conclusion -

“So… what’s the catch ? The catch is — us! A lot of investors like to get all excited and thrilled, when investing in the market. They want to chase the hottest stock, so that they can boast about it to their friends. At the same time, they ignore the gems lying right in front on them.  Investing is simple, but not easy. ”

I love it!  . . . . . “What’s the catch?  The catch is –us!”   Reminds me of that old comic strip quote from Pogo – “We have met the enemy and they are us.”

I agree.  The catch is us.  So it follows that that is where our attention should be.

(Oh, and by the way, he is writing about the Indian market, so you don’t have to get distracted by his examples unless you have access to that market.  At least for me, that helped me not be looking for specific stocks or other distractions from his message.)

Tags: how to invest, investing article

It has been about a year since we looked at Brinks Home Security Holdings, ticker CFL.    At that time it had been around for about 90 days and had its price had gone pretty much sideways.  How’s it doing now?

Well, the above chart from Yahoo Finance that shows CFL compared to the parent company, Brinks,  BCO pretty much tells the story for this one so far.

The two charts underscore the importance of – -

• knowing when you will decide that a trade isn’t doing what you’d expected going and then sticking to it, in the case of BCO
• and,  following your plan when things aren’t happening quite as quickly as you had hoped, in the case of CFL

Whether you had picked the parent or the spin-off stock, it is likely that some emotional self-management would have been called for in order to exhibit the kind of trade discipline that make for a long term ascending equity curve.

Now some including the Motley Fool are suggesting that it is time for the parent to shine.  For the sake of those who held onto BCO after the stock spin-off of the home security business, let’s hope they are right.

Tags: BCO, Brinks Co., Brinks Home Security, CFL, emotional self-management, spin-off stock, stock spin-off, trading discipline

Entergy’s (ETR) spin-off of nuclear power plants looks to be dead in the water according to a recent article from Reuters after the New York Public Services Commission rejected their most recent plan.

No one knows what the ETR board will decide to do next of course, but at some point managers as well as investors need to say . . . “Next!”  .  .  . and move on.

Stock spin-offs can make grand theater as this attempt illustrates, but entertainment should be,  at best,  a very very minor reason that you put attention on any stock or group of stocks.

An obvious part of trading discipline is keeping your attention focussed on what you are doing, but deciding when it is time to direct your attention elsewhere and doing that quickly and completely is just as important . . . and much harder for most people to master.

Tags: Entergy, ETR, focus, New York Public Service Commission, nuclear power, stock spin-off

In a recent article about Hospira, HSP, a 2004 spin-off stock,  the Lake County News-Sun illustrates one of the most direct pathways for a successful trade in a spin-off.

“At least two-thirds of my clients, most of them Abbott retirees, divested their Hospira holdings because Hospira was a new company and they were not certain about it,” said Roch Tranel, president of Tranel Financial Group, a financial planning firm based in Libertyville which has many Abbott retirees as clients.  His clients wanted to stick with Abbott, ABT, the parent company.

They didn’t want the new company’s stock, so they sold it.  And, while they were doing that, with all of its risks, uncertainties, high hopes, and positive potential,  the  new company started its life from our perspective as an excellent candidate for a long position.

20/20 hindsight shows us again that this turned out well.

Of course we don’t have 20/20 foresight, so entering one of these trades when lots of other people are heading for the exits can be a pretty stressful thing to do.

The right side of any chart is simply too empty to evoke feelings of calm.  Managing whatever your own particular level and style of that kind of discomfort is, is as important as finding the right stock to buy and figuring out a high percentage time to get in.   If you were born with a naturally cool head and keen eye for threading your way through uncertainty, count yourself  very lucky.  Most of need some form of trading stress management routine to keep us calm and clear-eyed enough to “pull the trigger” when the time is right.

Tags: Hospira, HSP, spin-off stock, stock spin-off, Value Investing

Trading and investing successfully is all about how you manage the inherent stresses in your trading plan. And, yes, every trading plan has its own stress signature.

It depends on such factors as the time frame, the number of pieces of information you must consider, the sizes of your positions, and other things.  Together they describe the outside components of your mind-body experience.

Your own personal style, abilities, beliefs, and skills make up the inner portion of the experience.  Some of these are under your control.  Some probably are not.

If you are going to be successful, the pieces have to fit together. Wishing you had the attributes of a day trader when you don’t or a long term investor when you don’t or a person who does all their own research when you hate wading through piles of data, and on and on, are sure fire prescriptions for not only mediocre results, but most likely some level of misery to boot.

Without getting any more touchy-feely than you’re comfortable with, you can take an inventory of what you bring, what you want, what you need, and match it to an approach for trading/investing that has the best chance for success and for being as low stress as fits you.

Tags: investing, stress, stress management, trading

Dr. Pepper Snapple, DPS,  emerged in its present form as a stock spin-off in May of 2008.  

It has been noted that spin-off stocks often make their best moves in their second year.  This could be taken to suggest that during its first year a spin-off stock is likely to be a good value.

Looking at its chart with 20/20 hindsight, Dr. Pepper Snapple is a spin-off stock that could have been viewed as undervalued to varying degrees during most of its first year.

I believe it is Preston James, a guy who does workshops on trading stocks that have pre-announced higher earnings ahead, who recounts a story in which a man said to him “all I need to know is when to get in and when to get out.”  The story apparently gets a pretty consistent laugh, and yet . . . .  this is it, isn’t it?  When do we get in?  When do we get out?  DPS spent all of its first year lower in price than it is today near the end of its second year.  When “should” you have gotten in?  And when should you get out?

Given that the one thing we know about when this train leaves the station and when it gets to its destination is that it tends to happen when the largest number of riders aren’t prepared, what do we do?  Not really a cute or funny question when it’s your money.

In a general sense, this is a personal, psychological challenge related to how you deal with uncertainty and that is another whole topic.  In its most specific sense, it a challenge of looking for clues, tendencies, correlations, averages; your standard fuzzy types of stuff.

The “second year” observation may have something in it.  Any observations?   thoughts?   ideas?

From Yahoo Finance:  ”Dr Pepper Snapple Group, Inc. operates as a brand owner, manufacturer, and distributor of non-alcoholic beverages in the United States, Canada, Mexico, and the Caribbean. It offers flavored carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs), including ready-to-drink teas, juices, juice drinks, and mixers.”

Tags: DPS, fear, greed, investing, psychology, psykchological, spin-off stock, Value Investing