In order to make good trading decisions, it's important to control your emotions while trading. Here are the 10 best books to improve your trading psychology.
The forex or currency market is a global market that's highly liquid and has a massive daily trading volume. There are many unique benefits of forex trading including high potential profit, high liquidity, low transaction cost, and high leverage. However, like many other investments, investing in forex is not without risk. In fact, studies found that over 50% of retail traders lose money every year. So it is clear as day that while forex trading might not be suitable for the faint-hearted and inexperienced traders.
Even though the concept of trading itself is pretty easy to understand, there are millions of small intricacies and senses involved in the process that not all traders can easily pick up. Trading is not the same with typical exams either, because there is no "one true way" to get through it and be successful. This is why education and research in forex trading are extremely crucial.
One of the keys to improve one's trading performance is to master the art of trading psychology. Every successful trader needs to have a well-trained mind so that they can control their emotions and make the right, logical decisions. If you wish to improve your emotional skill in trading, it's highly recommended to have a knowledgeable mentor to help you. In this case, reading a good trading book by a reliable author can also help you to get a better understanding of how it works.
Remember that the author themselves are traders who had likely the same emotional fears, anxiety, and mistakes under their belt in their early days. Hence, by reading their stories and thoughts, you might get a better understanding and learn from their mistakes. Even though it's nearly impossible to change your psychological state overnight, here are the best 10 books to improve your trading psychology.
1. The Disciplined Trader: Developing Winning Attitudes by Mark Douglas
The Disciplined Trader is the first book of Mark Douglas, a well-known senior trader and writer. Published in 1990, this book offers rare insight into the author's commodity trading experience. He demonstrated how most issues that we encounter as traders are actually coming from one's state of mind.
Apart from examining how the problems are formed from the psychological perspective, he also showed how to develop attitudes that could lead to trading success through probabilistic thinking. It offers easy step-by-step explanations to help you control your emotions and trading behavior. Although the writing can be somewhat repetitive at times, this book is still worth checking out.
2. Trading in the Zone: Master the Market with Confidence, Discipline, and a Winning Attitude by Mark Douglas
Despite not having formal training in psychology, Mark Douglas has successfully written Trading in the Zone , which is often seen as a classic in psychological trading. Through this book, he shared his own trading experience and aimed to transform the readers' perspective about fear in trading and how to overcome it.
Basically, he strongly believes that the trader's attitude and state of mind are what determines the trade's outcome. He claimed that instead of focusing on the information that would reinforce fear, it would be much better to focus on the information that could help traders to spot opportunities and make profits. The goal is to integrate this thinking strategy into one's mental state of mind, so they can build what he called "the winner's mindset". This book can give an impactful insight, hence it is a must-read for any trader.
3. Investment Psychology Explained: Classic Strategies to Beat the Markets by Martin J. Pring
As one of the top independent investment advisors in the world, Martin J. Pring offers a solid classic guide to conquer the market suitable for all traders and investors. He argues that in the revisionist '90s, there is no single magical path or "holy grail" that can lead to market success. Instead, he proposes that timeless values of hard work, dedication, patience, and self-discipline are vital aspects that can actually make a trader successful.
In this book, Pring breaks down the myths and delusions that often bring disasters to traders and points out the right way of thinking related to traders' emotional and psychological states. Reading Investment Psychology Explained will give you an understanding that some classical trading principles are still relevant today.
4. The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist by Brett N. Steenbarger
Dr. Steenbarger is an active trader and coach for hedge funds, proprietary trading groups, and investment banks. The Daily Trading Coach was published in 2009 and provides a guide on how to become your own trading psychologist. To get to the more practical side, you can look out for the 101 lessons in the book that give clear instructions and homework assignments that you can do daily.
It covers a range of topics relevant to trading psychology, such as how to utilize psychodynamic, cognitive, and behavioral therapy methods to change problematic attitudes to positive ones. Additionally, the book also contains insightful thoughts from 18 successful professional traders who shared their work online.
5. The Psychology of Trading: Tools and Techniques for Minding the Markets by Brett N. Steenbarger
The Psychology of Trading is another top-rated book by Dr. Brett Steenbarger. The book focuses on the mental aspect of trading, providing insightful information about the most common cognitive and emotional tendencies that could hinder one's interpretation when reading and analyzing market patterns.
From his years of experience, Dr. Steenbarger demonstrated how traders could develop a skill to identify those tendencies and gain control over them. He drew upon real-life case studies and provided easy techniques to assist traders in becoming their own trading coaches. If you like this book, you might want to check out Dr. Steenbarger's latest release, Trading Psychology 2.0: From Best Practices to Best Processes.
6. 12 Habitudes of Highly Successful Traders by Ruth Barrons Roosevelt
This book unravels all the habits that unsuccessful traders refuse to accept. As a successful futures trader and international psychological trading coach, Ruth Roosevelt provided complete guidance on how to recognize emotions and then use them to resolve conflicts by developing certain habits. She believes that these habits can help you identify your strengths and weaknesses as well as give practical resolutions that you can apply in your day-to-day trades.
So if you're looking for a short, easy-to-read book about psychology trading, this one is for you. In addition, you can check out Ruth's first book on trading psychology, Exceptional Trading: The Mind Game to get a better understanding of the matter.
7. High Performance Trading: 35 Practical Strategies and Techniques to Enhance Your Trading Psychology and Performance by Steve Ward
High Performance Trading offers helpful tips to fix the readers' psychology in small realistic steps. Based on the author's personal experiences as well as advice from expert traders, this book offers a practical guide relevant to traders with any style and level of expertise. In total, there are 35 steps to follow, which are spread across 3 sections: preparation, execution, and evaluation. By encouraging the readers to take it easy and deal with one issue at a time, High Performance Trading can be highly practical compared to other books.
See Also: 4 Forex Trading Styles in a Nutshell
8. The Way of the Warrior-Trader: The Financial Risk-Taker's Guide to Samurai Courage, Confidence and Discipline by Richard McCall
Richard McCall believes that trading can be perceived as an ongoing battle between traders because it's mainly about getting the best position first, seize the profits, and move on to the next battle. Therefore, The Way of the Warrior-Trader provides a six-step action trading plan based on the samurai code to explain how to overcome the deep-seated psychological barriers to successful trading. It aims to integrate the classic samurai principles with modern trading and show the readers how to apply the centuries-old methods in today's market.
9. The 21 Irrefutable Truths of Trading: A Trader's Guide to Developing a Mind to Win by John Hayden
The Irrefutable Truths of Trading mainly talks about the importance of trading psychology. It demonstrates that in order to be successful, traders must hold on to this belief and develop the state of mind necessary to win the trade. Through this book, John Hayden tries to remind us all that we are the ones responsible for our performance, not the market. To improve trading performance, the book demonstrates ways to acknowledge your strengths and weaknesses, and how to use them to your advantage.
10. Trading in the Zone: Maximizing Performance with Focus and Discipline by Ari Kiev
This book mainly talks about how to overcome emotional challenges like fear, anxiety, and over-ambition that can prevent you from winning the trade. By using psychiatric tools, Dr. Kiev provided step-by-step instructions on how to overcome those internal obstacles and enter the zone, where you will generate profit, and stay in it for as long as possible. He explored the ways of controlling one's emotions while trading and become more focused on the trade. In addition, there are several sample case studies provided to reveal how traders deal with the market and their emotions.
Being a successful trader is far from easy. Among the various factors that can make you win the trades, psychology is perhaps the most significant. As a trader, it's important to understand that the outcome of your trade depends heavily on your choices. And to make good choices, you need to have a clear and rational mind. By reading books about psychology trading, you will hopefully be able to understand your emotional state better and soon learn how to control it. Once you master this, it would be much easier to eliminate negative thoughts and emotions while trading, which is incredibly useful to improve your trading performance.
Are you still hungry for more knowledge on how to improve your trading psychology? Find more books on trading psychology and other trading-related topics here.