6 Trading Psychology Books Every Trader Must Read

Do your trading a favor, and read these market psychology books

Most successful traders will agree that trading is as much about psychology as it is about a good strategy. Without the mental fortitude to stick to a strategy, the best strategy in the world won't do much good. Successful traders not only master a strategy, they master their own psychology, developing traits (such as discipline and patience) which allows them to implement their strategies.

These books will help traders master their psychology.

Trading in the Zone

trading in the zone

Written by Mark Douglas, this is a must read for anyone who is struggling to gain consistency in the market. Mark provides a road map for overcoming many trading issues. 

The mind is a tricky place; it always tries to find short-cuts, is easily swayed by fear and greed, is distractable and often causes us to act irrationally even when we know better. In simple language Mr. Douglas explains why and how this happens, and what to do about it.

While it is a trading book, the book doesn't provide strategies on how to trade. It's recommended you have some trading experience before reading it, so you can fully grasp the topics covered.

The Disciplined Trader is another popular book by Market Douglas. 

Reminiscences of a Stock Operator

reminiscences of a stock operator

Written by Edwin Lefevre, in 1923, this book is based on legendary trader Jesse Livermore. Combining rich story telling with a deep insight into what it takes to trade successfully (and what can ruin a trader), this book can be read over and over again, offering insight each time.

No matter if you are doing well, doing poorly, or just starting your trading journey, this book has something for everyone. This book follows the trading career of a life-long trader, providing insight into struggles you may have faced already, or have yet to encounter.

SWAY The Irresistible Pull of Irrational Behaviour

SWAY the irresistible pull of irrational behaviour

By Ori Brafman and Rom Brafman, SWAY is a rare "page-turner" in the non-fiction space. 

This book tackles problems we are aware of--yet seem powerless to prevent--such as why it is so hard to get out of a losing trade, or why we stay in relationships even though we know it is not right for us. 

The book also looks at issues we're often unaware of. Like how danger affects our decision making process...and there is always danger present in the financial markets!

What about the Diagnostic Bias or the Chameleon Effect?  These are an inability to see beyond our first hypothesis despite evidence to the contrary, and taking on traits which are assigned to us. All these psychological quirks have a big affect on traders.

Through fascinating research and anecdotes you'll learn some of the hidden motivators that drive decision making, which in turn may help you make more informed decisions as a trader.

The Art of Thinking Clearly

the art of thinking clearly

Written by Rolf Dobelli, this is a great book that you'll reference over and over again. The book is concisely written, with 99 chapters, each only two to three pages long. Each chapter provides examples of psychological pitfalls everyone, not just traders, can fall into. 

With 99 pitfalls to be aware of (and there are more out there) it's likely everyone will learn something from this book. A few clever chapters include:

  • How to Relieve People of Their Millions
  • Murder Your Darlings
  • Don't Take News Anchors Seriously
  • Why Watching and Waiting Is Torture [every trader must read this].

With 95 more lessons on what is subconsciously driving you, you'll certainly find a few things to work on. 

Market Wizards

The New Market Wizards book cover

Reading the Market Wizards book series by Jack Schwager is well worth the time investment. Each book is composed of interviews with top traders. The interview format is very informative, because you hear how each trader trades the markets, and the trials and tribulations they have overcome.

Engaging and informative, these books contain something for everyone. From strategy tips to overcoming hurdles, these are timeless books that can be read over and over again. 

The series is composed of Market Wizards, The New Market Wizards, Hedge Fund Market Wizards and The Little Book of Market Wizards.

The Investor's Quotient

the investor's quotient book cover

Easy to read yet packed with powerful information, Jake Bernstein provides a thorough guide on why so many traders fail....because of their psychology.

Common problems are revealed, which most traders will have already encountered, and then tactics and strategies are provided for overcoming these issues. 

Final Word on Trading Psychology Books

trading psychology books every trader should read

Most new traders spend loads of time reading strategy books, listening to news and reading articles about the market they want to trade. Learning a few strategies and knowing how a market functions is important, but this alone won't improve your trading. Ask a successful trader what the key to their success is, and most often the answer will have something to do with psychology. 

Do yourself a favor, and invest in a few psychology books that will aid your trading. You'll be happy you did. As you progress you will see that psychology is the key to successful trading.