BOOK REVIEW
Market Mind Games, by Denise Schull. McGraw-Hill, 2012.
“Beating Wall Street” has long been a juggernaut
that is only enhanced today when business media
bandy about the millionaires and billionaires from
Facebook, Apple, Twitter, Microsoft, and GoPro. But
in this era of elephantine computer program trading, complex algorithms, arcane financial instruments
(e.g., derivatives), nanosecond-like trade execution, and
Ponzi scheme traders (e.g., Bernie Madoff)—all with ecumenical applicability—making money via buying and
selling stocks, bonds, and commodities can be a Gordian knot or an insuperable obstacle for many. Indeed,
achieving “trading nirvana” can be likened to searching for the Holy Grail or El Dorado or being an Indiana
Jones setting off on another adventure.
Despite the difficulties contemporary traders face,
they can indeed surmount the barriers and be successful in their endeavors—and Denise Schull in Market
Mind Games shows them how. Schull—an erstwhile
professional trader qua consultant and speaker with an
MA in psychology from the University of Chicago—has
crafted an instructive “how-to” Baedeker for traders.
Her leitmotif is for individuals to eschew numbers,
statistics, charts, and financial fundamentals and embrace “a radical psychology of investing, trading, and
risk.” She promulgates that trading entails use of
feelings/emotions, cognitions, and behaviors (à la the
“whole” person—mind, body, and spirit—and akin to
consumer behavior’s cognitive, conative, and affective
decision-making components). Her cynosure throughout the book, though, is on feelings.
Just as a brand name should reflect a product’s intrinsic qualities, Schull’s creative book title and sections (parts) and chapter titles are redolent of their
content (which will become evident). For example, Part
1 is titled “Perception or Reality: What Makes Markets
Tick?” This exordium leads Schull to propound her beliefs about the mechanics of the market and how she
perceives them to verily function. The chapter “Numbers Look You in the Eye and Lie” reveals how statistics
and probabilities have little to do with the future: “Reality points to a very big gap between where the numbers
leave off and exceptional performance [trading results]
begins!” She cogently avers that numbers do inform the
trader about something relevant but do not provide the
whole picture. As such, auguring the future accurately
is not possible. In “Mis-Remembering the Caveats of the
Early Quants,” Schull provides further evidence for not
allowing numbers to be one’s polestar. Indeed, she notes
that the highly numerate founder of portfolio diversification theory (Nobel Laureate Harry Markowitz) even
promulgated that one’s beliefs (as well as observations
and experiences) about the future performance of financial instruments will keenly influence the final portfolio
decision. In essence, beliefs trump numbers.
The chapter titled “Seeing What We Want but Missing the Obvious” reaffirms the import of beliefs and
then expatiates on the significant role emotions play in
our lives—even in investing! Schull emphatically proposes, “We can’t actually . . . make decisions, if we lack
feeling and emotion.” She concludes this chapter by
reminding the reader that people cannot predict the
future with certitude, that numbers (e.g., statistics,
probabilities) are only somewhat useful, and that investment decisions are made based on one’s beliefs and
ultimately judgment—for which emotions are requisite.
Part 2, “Getting the Right Glasses for Better Market Vision,” entails providing new and different armaments for traders to use in making better investment
decisions. In the chapter “Do You Need to be a Psychic to Deal with Uncertainty?” Schull espouses that
individuals must try to prophesy what other traders’
perceptions of the future will likely be (e.g., vis-à-vis
a security’s price—à la price is a perception). And in
justifying this supposition, she again inveighs against
unrelenting use of numbers by asserting that they are
merely “clues” but not answers—as they are subject to
interpretation (or perhaps manipulation?). She then describes how one can get into the minds of other traders
to predict their perceptions.
The chapter “Ambient, Circumstantial, and Contingent Reality” focuses on how an individual’s awareness
or determination of his/her context can have a marked
impact on decisions. One’s context most likely will augment uncertainty in trading, thus making the best of
trading plans irrelevant and their use impolitic. As
Schull states, “ . . . resolve to know your contexts—all
of them.”
In “Perception’s Labyrinth,” discussion initially centers on the provenance of contexts—which is both internal and external to oneself. Schull then returns to the
topic of beliefs—which she proposes are both cognitive
and emotional based—and how they influence and circumscribe one’s perceived contexts. She argues, “[I]f we
aren’t perceiving things, we are unconscious . . . [and] a
bit worse off.”
Schull expounds in “The Ironic Holy Grail of Risk”
that every decision is feeling (emotion) based. As such,
one’s emotional context—of which he/she should be
cognizant—plays a major role in dealing with risk uncertainty. Indeed, traders should not essay to pinion
their emotions but use them when trading. Cogently,
Schull opines, “As you begin to think about how to
Psychology & Marketing, Vol. 32(11): 1115–1116 (November 2015)
View this article online at wileyonlinelibrary.com/journal/mar
© 2015 Wiley Periodicals, Inc. DOI: 10.1002/mar.20850
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know, analyze, and capitalize on . . . feelings context,
think first in terms of managing risk by reducing unnecessary trades. As you become more and more comfortable with using awareness of all that you are feeling—
on a physical as well as an emotional level—you will
find that you make fewer poor decisions.”
In “Mental Capital and Psychological Leverage” (in
Part 3—“Don’t be a Vulcan”), Schull introduces the concept of “psychological capital.” This construct consists
of the “physical, mental, and emotional energy” one has
at his/her disposal at a given time (recall “mind, body,
and spirit”). An acute level of psychological capital is
requisite for successful trading. A paucity of energy in
any of the three components of psychological capital is
a clarion call for trading restraint.
“Mark-to-Market Emotions = Risk Management”
describes emotions as a source of data that traders
should employ in managing risk. Rather than suppressing one’s emotions (feelings), knowing oneself and
the attendant feelings will likely foster fewer “messes”
(mistakes in trading). Schull offers a three-step approach about how to do this (per her literal words):
(1) Anticipate—the feelings will be there, (2) Notice—
resolve to become aware, and (3) Name—begin to name
the different combination of feelings. As a psychotherapist would, Schull asserts, “Feel what you feel . . . get
used to admitting to yourself . . . what you are feeling.”
The chapter “Regret Therapy—‘Greed’ Misleads” revolves around issues pertaining to fear and cupidity—
two often intertwined terms (witness the “fear and
greed” meter on the CNN Money web site). Uncertainty
leads traders to make poor decisions (e.g., purchasing
a stock on impulse). Also, individuals often fear “missing out” on a “hot” stock. Such fear can ultimately lead
them to regret their decision—getting out of a particular investment too early or too late—and thus fostering
their “feeling lousy.” To deal with this issue, one needs
to “anticipate” and “feel” the regret of his/her actions.
After all, nothing can be done after the decision has
been made. Ah, avarice can be so discomfiting!
“Fractal Geometry in Your Market Mind” essentially discusses how people’s unconscious can influence
their perceptions and judgments. Using Freud’s work
in “transference” (i.e., using in the present, or future,
what one has observed or learned in the past). Basically, Schull is dispensing (but compendiously) what
many psychotherapists and 12-Step groups promulgate
regarding family of origin issues. An individual tends
to repeat behavioral patterns that he/she saw or experienced in childhood: “I lost a ton of money today. But I’m
merely following [unconsciously] what my mother said
I would do—‘if you’re not careful, my son, you will lose
all your money and not be able to support a family.’” In
other words, parents can possibly be culpable for one’s
poor investment decisions!
The “Quarterbacking a Portfolio” and “Getting Back
in the Game” chapters essentially summarize the critical points Schull introduced earlier. At the end of the
former chapter, she boils “the basic plan down to a cheat
sheet”: (1) “develop physical energy” (recall psychological capital), (2) “read other people,” and (3) “know yourself and how you feel.” In the latter chapter, Schull
reinforces how to use the key psychological principles
that she adroitly addressed throughout the book.
Although Schull has crafted an interesting, wellwritten, alternative approach to trading, there are two
aspects of the book that may be a bit nettlesome to some
readers. First, in the beginning of the book she introduces four fictional characters to assist in telling her
story. She casts the four as participants in one of her
ongoing trading workshops. As such, their “story” is interspersed in separate chapters throughout the book.
For some readers, this “storytelling” effort may serve
as an intrusion, a distraction, and a reduction in lucidity. The second potentially problematic area pertains
to Schull’s overuse (at times) of technical nomenclature
(terms derived from the author and from the psychology
discipline). Admittedly, she uses the terms to provide
ample support for her general thesis. Some readers,
though, may view the argot to be obtrusive, thus reducing clarity of exposition. Notwithstanding the foregoing, Denise Schull should get plaudits for parlaying
her trading background and academic training to craft
an invaluable guidebook about how to be a successful
trader.
Reviewed by Alan J. Dubinsky,
Midwestern State University and Purdue University
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Psychology & Marketing
BOOK REVIEW
DOI: 10.1002/mar