6 Trading Psychology Books to Improve Market Strategies

Trading is as much about psychology as it is about developing a solid strategy. Without the mental strength to stick to a plan, the best strategy in the world won't do any good. Good traders not only evolve and master a strategy, but they also become more aware of their own traits (such as discipline and patience) and grow them, which allows them to be more effective in implementing their strategies.

A variety of books can help traders take steps toward grasping how psychology works in investing.

Trading in the Zone

Written by Mark Douglas, this is a must-read for anyone who is struggling to attain consistency in the market. The author provides a roadmap for overcoming many trading issues. 

This book talks about the short-cuts that people often seek, being swayed by fear or greed, and letting something distract you from your goals. These challenges often cause traders to act irrationally, even when they know better. The book explains why and how these issues occur and how to approach them to keep them from happening, in simple terms.

If you'd like to learn about the psychology of trading, you should first work to understand trading practices, techniques, and lingo before reading this book, so you can fully grasp the topics inside.

"The Disciplined Trader" is another popular trading book by the same author.

Reminiscences of a Stock Operator

Classic books can maintain their relevance over several generations. First published in 1923, this book by Edwin Lefèvre is based on legendary trader Jesse Livermore. Combining rich storytelling with a deep insight into what it takes to trade successfully (and actions that can ruin a trader), you can read the book over and over again. Each time you read it, you'll find new insights as you build knowledge of the subjects.

This book has something for all traders. Even if you're already seeing positive results or not trading well, you can learn something new. If you're just starting your trading journey, this book should be on your "must-read" list. In it, you'll follow the trading career of a life-long trader, whose experiences might just be the insight you need to help you through the struggles you are facing or have yet to see.

Sway: The Irresistible Pull of Irrational Behaviour

Written by Ori and Rom Brafman, Sway is a rare page-turner in the non-fiction genre. 

The authors tackle problems many traders are aware of yet seem powerless to prevent. They include why it can be so hard to get out of a losing trade—even delving into why people stay in bad relationships.

The book explores issues of which traders are often unaware. The authors dive into how danger and risk affect the decision-making process and how the two relate when facing the risks of the markets.

The material also talks about concepts like diagnostic bias—an inability to see beyond an initial hypothesis despite evidence to the contrary. They also discuss the chameleon effect—a person's habit of taking on traits assigned to them. All of these quirks can have a large impact on traders.

The research and stories in this book can also teach the reader about hidden motivators that drive decision-making. In turn, these may help you make more informed decisions as a trader.

The Art of Thinking Clearly

Written by Rolf Dobelli, this book presents its content in a concise manner across 99 chapters, each only two to three pages long. The chapters provide examples of psychological pitfalls that anyone—not just traders—can fall into. 

With 99 pitfalls discussed in the book to be aware of, many readers will learn something about choices that can stifle their development and growth. Some of the chapters include:

• "How to Relieve People of Their Millions"
• "Murder Your Darlings"
• "Don't Take News Anchors Seriously"
• "Why Watching and Waiting Is Torture"

Market Wizards

Reading the Market Wizards book series by Jack Schwager is well worth the time invested. Each book uses an interview format with top traders. This makes them very informative and provides you with angles on how each trader invests in markets. You'll also read about the trials and troubles each trader overcomes.

Engaging and informative, these books contain something for everyone. From strategy tips to clearing hurdles, these are timeless books that you can 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

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

The common problems that most traders have faced are revealed, followed by tactics and strategies to deal with those issues.

Frequently Asked Questions (FAQs)

How do you improve your trading psychology?

Aside from reading books like the ones listed here, you can improve your trading psychology through discipline and self-awareness. Journaling and inner dialogue can help you track your thinking and ensure you stick to your trading plan.

What are the best books on the stock market?

Some of the best books on the stock market include Benjamin Graham's The Intelligent Investor, Matthew Kratter's A Beginner's Guide to the Stock Market, and William O'Neil's How to Make Money in Stocks.

What are the best books on options trading?

Some of the best books on options trading include Frank Richmond's Options Trading Crash Course, Brian Overby's The Options Playbook, and Lawrence McMillan's Options as a Strategic Investment.