Traders often tend to ignore trading psychology books as a tool in carving out a successful path that shall lead to one’s trading goals. Of course, to learn fundamental analysis, trading knowledge, as well as practice, is important in stock market trading. In fact, there are also some pretty good stock market courses you can enroll in.
But why not enhance one’s mindset that fits the challenges of everyday trading? And one can do just that by studying some trading psychology books.
Simply put, Trading psychology is nothing but the state of mind and emotional well-being that helps in making adequate and swift trading decisions regardless of the pressure or market behavior.
And in achieving this sense of trading judgment and the mental-emotional balance one should rely on resources such as trading psychology books.
Top 5 Trading Psychology Books
More than 80% of traders find themselves failing and leaving stock market trading forever. Some think they don’t have enough experience to compete and continue, some blame it on bad market times.
But scientifically speaking, most traders lose it because of the lack of temperament and stability of the human mind. And even to learn stock market you need dedicated and focusses study alongside good practice.
It is often difficult to convince traders about the substantive effect trading psychological knowledge and exercises have on the success of trading. Therefore in this article, we have pointed out some of the best resources on Trading psychology.
Following is the list of the Top 5 Trading psychology books. This list of the best trading psychology books has books from authors of various continents and diverse academic backgrounds.
Alternately, many of these titles will also come under best stock market books.
Most of these books are focused on giving out problem-solving tricks and steady-effective solutions on building an efficient trading mental framework to emerge profitable under all market conditions.
Trading in the Zone: Master the Market with Confidence, Discipline, and a Winning Attitude-Mark Douglas
About the Book:
Why do all traders tend to avoid the “burden” of making trading decisions? Why rely heavily on the advisory of friends brokers or market influencers? Is it because people aren’t sure whether their trading decisions are coming out of whim, emotion, or analysis?
Such interesting questions and their clear-cut answers are what make this book, “Trading in the Zone” a bestseller among the trading community across the globe. This book constantly asks relevant and crucial questions about why most new traders fail big time and then never turn back towards trading.
The author doesn’t straight away jump into the trading part of human life, instead, the book tries to establish the motives behind choosing to trade and then elaborating on how different individuals with varied mindsets will react to the trading success or failure?
The book goes on about how some individuals foray into stock market trading thinking they can get easily successful the same way they have throughout their lifetime, whether in the job or academics. But since this is a tricky field that demands a mindset that is rarely dependent on a person’s existing skills, hence they feel disillusioned with trading.
The author also takes into consideration the addiction part of the money and how gambling psychology is somewhat related to trading psychology. The book is set on defining the ideal traits of an efficient trader, that is, a trader that trades without fear but never irresponsibly.
The title of the book has the phrase “the Zone”. And the author explains this zone as a state of mind of a trader who has been reckless in trading, which led to heavy losses and is now excessively fearful of trading again. In this zone, the trader can psychologically lose the battle of trading forever or can get creative about what to do next.
And that’s where the knowledge disseminated in this book will kick in.
Traders, who are ready for an expert-level study on trading psychology and best practices should give this book a good read, as soon as possible.
About the Author:
Mark Douglas is a name that still goes around in all trading circles across the global market, even after more than 7 years of his unfortunate demise. Mark Douglas was an experienced author and pioneer of trading psychology.
His shot to fame was the book- “Trading in the Zone”. Those who read this book often proudly proclaimed that they became a better trader only after studying this seminal work on trading psychology.
His books were the outcome of his long experience helping and training traders. These years of hard work helped him gain insights into the complex trading mindset and the characteristics that define a trader’s behavior and decision-making skill sets.
His abilities and observational instincts made him one of the most read authors of trading psychology. Following is a quote by Mark Douglas which gives an insight into his capabilities as a first-class researcher and teacher:
“If there is such a thing as a secret to the nature of trading, this is it: At the very core of one’s ability 1) to trade without fear or overconfidence, 2) perceive what the market is offering from its perspective, 3) stay completely focused in the “now moment opportunity flow,” and 4) spontaneously enter the ‘zone,’ it is a strong virtually unshakeable belief in an uncertain outcome with an edge in your favor”.
The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust – John H. Coates
About the Book:
Several books in the market will talk about psychology in general and trading psychology in particular. But rarely does a book bridge the gap between the biological aspect of trading with the psychological aspect.
This particular trading psychology book:” The hour between dog and wolf” reveals to its readers how the biological factors emote the psychological build of an individual and how these revelations can help figure out the key to a successful stock market career.
In this book, the author uses various imaginary circumstances and traders stuck in those drastic market circumstances. Then the book explains how these crucial circumstances have affected the physiology of these traders and how those changes will get converted into emotions of pessimism and irrationality.
By putting forth these imaginary problem situations the book tried to theorize the biological and psychological transformations in an investor or trader that shall define their stock market decisions, especially the risk-taking appetite.
The author’s theories as explained in this book are based on deep research in the field of mind-body interdependency in trading behavioral sciences. And this book precisely helps to evolve a trader from a “dog-like” attitude into a more confident Wolf in the trading world.
The book goes deeper into the chemical composition of the human body and the emotional changes it undergoes when a trader or investor is put to deal with intense market conditions such as the big market crash of 2008. The author has also explained to the reader how it was this wrong trading psychology that has led to such a big market crash.
In one of the chapters, the author tries to make sense of situations post a drastic economical debacle. The author concludes big destabilizing situations often leave an everlasting effect on a trader’s mind and body and the extent of the effects will vary depending on the gender and age of a given trader.
One of the trading behavioral models that the author has explained in this book is the “winner effect”, in which the winning traders ie, the one’s who made profit even in high-risk market circumstances, show an increased level of hormonal changes that prompt them to further take a risk, while the losers show a decreased levels of these hormones and hence makes them behave in a more timid and controlled manner, where they often avoid making profits out of the falling market.
Another major aspect that makes this book unique is its observational study of women traders in the world of the stock market. This book claims, with the backing of acute data and analysis, that women are far better at managing risk-reward decision making. One of the fundamental observations made in this book is that often women traders spend more time in risk factorization compared to men.
And therefore, this proves to be one of the reasons why women are better at making crucial reading decisions that involve a fair amount of risk in them.
Hence, this book isn’t about random advisory on trading psychology but rather a decent, extensive study of the trading mind and the trading body.
About the Author:
The author of this book, Mr. John Coates started as a trader on Wall Street but soon turned towards the field of neuroscience, pursuing his higher studies at Cambridge University and even there proved his mettle.
The fact that Mr. John Coates worked for several years in financial fields, serving big industry names such as Goldman Sachs or Deutsche Bank. These experiences have helped him in building his knowledge wealth in trading psychology.
This book “The Hour between Dog and Wolf”, is based on his working experiences among large numbers of traders, wherein his observations proved to be advantageous in his coming up with such books.
The best part about his writing, in general, is that John Coates never makes randomized claims anywhere anytime. His writings are almost always deeply scientific and based on citations from renowned authors and researchers in the field of financial sciences.
The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist – Brett N. Steenbarger
About the Book:
Hiring a personal trading coach or clinical psychologist is not feasible for traders who are into the stock market to put their hard-earned savings. Such traders can’t afford a big-name psychologist to guide them through their everyday trading journey.
And for such traders, this book is really important. As the name of the book suggests, the objective of the text is to provide the reader with a personal Trading Psychologist. And the best part is that the jargon used by the author is very simple, easy to understand, and rarely complex.
Traders regardless of their experience will find this book highly relevant as a self-help guide solving various day-to-day trading obstacles. And all the 101 solutions are deeply rooted in the psychology of a trader’s mind.
Not only this, if you are looking for the stock market strategy book then this book can end your search. This book isn’t just filled with strategies only. In fact, along with valuable strategies, there are also multiple examples and exercises for stock market traders to strengthen their mental abilities that help while trading in the long run.
Therefore, there’s no doubt that this book is an absolute must for traders that want affordable yet world-class solutions to their trading worries, most of which are psychology-related.
However, there has been certain feedback by readers of this book, and one is highly relevant. It is that this book gives out too many strategies but none of them is explained in depth.
Nevertheless, this book is still relevant for those who want to try out every psychological trick or exercise in the book. And such traders will find this book highly engaging and worth buying.
About the Author:
Brett N. Steenbarger is a bestselling author of numerous Trading Psychology books such as “The Psychology of Trading”, “Trading Psychology 2.0”. Apart from being an excellent author, Brett has also served as psychologist-cum-coach for various portfolio managers and investors/traders over the years.
His experience with training various traders for improvement on trading skills and refinement in psychological makeup has come in handy in the completion of many of his bestsellers.
Bret’s strong background in Trading Psychology can also be traced to his academic qualifications. Brett holds a graduation degree from Duke University and afterward, also received a Doctorate in Clinical Psychology from Kansas University.
Currently, Brett is a Professor of Psychiatry and Behavioral Sciences at the State University of New York. Brett also regularly updates the trading world with his ideas through the blog “TraderFeed”.
The Mental Game of Trading: A System for Solving Problems with Greed, Fear, Anger, Confidence, and Discipline – Jared Tendler
About the Book:
Often trading psychology books are less practical and more distant from a regular trader’s everyday struggles and situations. And hence, these books lead to the perception that reading trading psychology books would be as difficult as solving trading troubles.
But the book “The Mental Game of Trading” is once such a title that has been a breath of fresh air. The book isn’t filled with some consultative knowledge on the dos and don’ts, that can help trade with more success. Instead this book handover its readers a systemic approach towards winning the Mental trade battle.
But what are these systemic approaches that this book offers in enhancing one’s mental trading game? There are several, but let’s take the example of the Inch-worm concept. In this peculiar concept, the author puts forth the idea of improving one’s best skills as well as the worst ones.
So just how an inchworm moves towards its destination by taking its front part of the body forwards, similarly, a trader should work more on his forward taking best skills so that his A-game gets a big push.
Now the rear part of an inchworm is a metaphor of the backward skills of a trader, where they lack heavily. So, an inchworm can’t move towards its destination successfully if it doesn’t also work on its rear body movement. Similarly, a trader must also simultaneously work on their poor performing skills and with this, they can move closer to their trading goals.
The best thing about this book is that, since the author has a history of helping with psychological coaching, hence most of the methods enumerated in this book are tried, tested and triumphant.
The book’s end goal is to make traders aware of where they lack mental performance while trading. And once this get’s out there, the book also immediately offers practical solutions that are remedial to these erroneous trading decisions. But of course, the point is to practice the solutions offered regularly.
Mind you, this book does not take the age-old method of controlling or just managing one’s psychological approach to trading. This book is only and only about solving the trading psychology problems once and for all.
For those traders, who have been continuously on their toes to get better at trading, have read tons of technical analysis books on the stock market, have joined courses to learn the key concepts of trading, yet aren’t able to avoid big mistakes, will find this book reformative.
This book also features testimonial accounts of traders from various markets in the world, who have used the methodologies stated by the author and with that, efficiently tackled their shortcomings in stock market trading. Such real-world examples in a way prove the effectiveness of this book and its methods.
About the Author:
Jared Tendler has a resume that speaks volumes of his merit in the field of psychology. Moreover, he has experience of almost two decades in psychoanalysis, utilizing these precious years in psychological skill training of traders and various world sports personalities.
Jared Tendler expertise lies in making meaning out of the implications of mental struggle or mental games that are always a part of sports events as well as the stock market arena. With a Master’s degree in Counselling Psychology, Jared Tendler’s approach has helped professional poker champions as well as prominent financial investors.
His clientele is spread across 45 countries and it is this experience he has used in coming up with books such as “The Mental Game of Trading”. And as expected, his writing is a straightforward problem-solver for traders all over the globe.
With a sense of balancing out the theoretical and practical approaches to mental games especially in pressure situations, Jared Tendler’s writings will help all those who lose their fights just because of the mental strength factor.
Trading Psychology: The Bible for Traders – Anirudh Sethi
About the Book:
This book has the distinction of being the only one in this list of trading psychology books that have been authored by an Indian-origin trader. But this book is also relevant for those who are not just the Indian stock market.
On the contrary, this book also discusses trading in the Forex market and the corresponding mental conditioning required.
The book begins with the emphasis that the basis of success or failure in stock market trading is intensively dependent on the Human psyche. Further, the book will explain to the reader the facets of human psychology that one needs to take note of, which in the long run define how one trades or responds to a given market condition or challenge.
The fact that risk-reward management is what most of the new traders find themselves failing at, the chapters in this book cover in detail, how the trading psychology is always an indicator of a trader’s actions, whether reckless or controlled.
The book further takes into account the fundamental emotions of the human mind such as fear, anger, happiness and then how these emotions can alter the way a trader might behave while making important trading decisions. For example, how the emotion of greed can sometimes be beneficial while at other times being highly unprofitable.
But it’s not just the problem explanations that this book is all about. On the contrary, this book is a good self-help guide that gives insights to the reader/trader into their minds and behavioral signs. These aspects of the book come in handy in practicing measures of control over the human mind to the effect of building a strong Trading psyche.
And a big part of this training of the human mind that this book aims at, is about practicing one psychological skill and methods learned daily while trading. And even for these practice sessions, this book helps the reader in providing a step-by-step guide on how to practice using paper trading.
The book aims to get the point across that, to be successful or to mitigate risk in stock market trading one doesn’t need some otherworldly powers, but simply understand one’s mind and then work on cultivating profitable and actionable mental habits to trade.
And the book is instrumental in proving the point that success is a psychological state of mind that gets converted into confident behavioral actions, and therefore are essential to all forms of trading, whether the Forex market or commodities segment.
About the Author:
Today, it may seem that there are numerous options to read when it comes to gaining knowledge about technical understanding of the stock market. But such was not the case 30 years back when a very few traders such as Anirudh Sethi were writing about stock market trading technical analysis.
But the fact that Anirudh Sethi’s first love has always been human psychology, proved to be a game-changing element in his getting established as an author with expertise in stock market psychology.
His expertise was recognized by various daily newspaper publications and hence was offered to write stock market subject domain editorial columns. His stock market analysis was widely read and he kept authoring these columns till 2007. And, then he took a break.
Since, learning is not an age thing, just like trading, Anirudh Sethi, later in his career, completed his PhD in Human Psychology from a reputed university. And with this new confidence, he started working on his book “Trading Psychology: The Bible for Traders” and once this book was available in the market, it went wildfire as it was rare for an Indian author to write a Trading psychology book.
Conclusion
Trading psychology books can prove to be the real boon for all those traders who have tried everything, from reading every trading knowledge book to taking up courses for training in stock market trading.
Often trading psychology books are the missing piece on the puzzle of figuring out what is the things that are making a trader lose most of the time.
Hence, this list of best trading psychology books is worthy of spending precious hours upon. And a careful study of these books will help rebuild confidence among traders who have given up on stock market dreams.
And if you need to go into other complex topics then you can read some best books on derivatives trading or subscribe to some futures and options courses.
Before investing capital, invest your time in learning Stock Market.
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