The Best Trading Psychology Books

As time has gone on, many elements of the trading industry have become significantly more automated than ever before. Making trades using automated processes, big data, and quantitative analysis has helped make the industry become more efficient and able to increase its daily trading volumes. However, despite these changes, there are still many elements of the industry that remain overwhelmingly “human.” No matter how much change may occur, the need for understanding the human element of the trading industry will remain vital for any trader hoping to gain a competitive advantage.

In some ways, understanding trading psychology can be significantly more difficult than memorizing the formulas that traders use on a day-to-day basis. The psychology of a trader—or even the collective consciousness of traders as a whole group—is intangible and difficult to gain a firm grasp of. Fortunately, by taking the time to read these valuable books about trading psychology, you can have a firmer understanding of the industry’s intangible side and be in a much better position to succeed.

The Psychology of Trading: Tools and Techniques for Minding the Markets (Brett N. Steenbarger)

This comprehensive guide to the psychology of trading, writing by the highly regarded author Dr. Brett N. Steenbarger, will likely be useful for both beginners and those who have a much more substantial experience in the trading industry. One of the best aspects of this book is Steenbarger’s effort to include a variety of different real-world psychology cases. Drawing from these admittedly highly academic case studies, the book tries to illustrate a clear connection between emotions and trading habits without overstating any of its conclusions.

The Art of Thinking Clearly (Rolf Dobelli)

One of the reasons this book has become so popular among traders is that, though it certainly covers a very wide variety of topics, this book is delightfully easy to read. It is written with a very approachable, sometimes even humorous tone, and it is organized into 99 short chapters. Each of these chapters attempts to address a different pitfall that a trader is likely to confront and tries to suggest tangible actions that can be taken to overcome them. Another reason that this book was been so widely praised is that though it is certainly writing in a way that appeals to traders, many of these lessons can be easily applied to an individual’s everyday life.

The Investor’s Quotient (Jake Bernstein)

Tagged with the secondary title “The Psychology of Successful Investing in Commodities and Stocks”, this useful guide by Jake Bernstein immediately dives into exploring some of the most common psychological obstacles that a trader might confront. Throughout the book, Bernstein tries to illustrate how certain problems might emerge and how these problems could be overcome with a change in a given trader’s psychological mindset. Not only will this book be incredibly helpful for traders who currently feel as if they are failing—it will also be quite helpful for those who are just starting out and want to know about things they ought to avoid doing.

Investment Psychology Explained (Martin J. Pring)

One of the things that makes Martin J. Pring so appealing to those who are working on Wall Street and elsewhere in the trading industry is that he is willing to get straight to the point. Pring examines the importance of both the individual trader’s psychology as well as the psychology of the “market herd.” He also makes sure to place a specific emphasis on the fact that success is unlikely to occur overnight or with a single lucky investment. Instead, Pring focuses on helping traders find realistic ways to move forward, improve their psychological state of mind, and achieve their goals.

SWAY The Irresistible Pull of Irrational Behavior (Ori and Rom Brafman)

One of the problems that many traders find in their life is that it can be very tempting to make decisions which, at their core, they know are entirely irrational. The authors even go so far to compare holding onto sunk costs as being the same as staying in a relationship you know is not going to work out. This fairly humorous and highly relatable approach to analyzing the psychology of the average trader makes the book itself an incredibly enjoyable read. Additionally, focusing on things such as variables affecting the decision making process, sources of objective bias, and other dynamic topics makes this book one that is clearly useful for life in general.

Trading in the Zone (Mark Douglas)

Mark Douglas may be one of the most highly regarded names in the world of trading psychology. His books are simultaneously useful for those who are hoping to maintain their competitive edge as well as those who are new to the trading industry or looking to come out of a long-term slump. Douglas explores the reasons why our mind is so frequently tempted to make irrational decisions and to allow itself to be governed by greed or even fear. The book plainly attempts to suggest strategies for overcoming these irrational temptations and how to make decisions with an objectively clearer state of mind.

The New Market Wizards: Conversations with America’s Top Traders (Jack D. Schwager)

Schwager is a writer who has made quite a name for himself among those in the trading industry. In this thoroughly researched book, Schwager tries to build its ethos by going into the field and gathering interviews from those who have actually been able to succeed. Schwager makes a deliberate effort to try to interview as diverse of a group as he feasibly can and includes those working for small firms, large firms, and everything in between. He then attempts to take these interviews and help his readers draw some lasting conclusions.

Conclusion

Though you may not have the time to read all of the books mentioned above, taking just fifteen minutes per day to work through even one of them is something that can undeniably pay off. The trading industry is competitive, moves quickly, and tends to be highly unforgiving. Finding a competitive advantage through mastering trading psychology in these excellent works of writing may be what is necessary to achieve the sort of success you’ve been looking for.

 

About the Author

Nikki is an active stock market trader. She helps other traders and investors develop a winning mental game.

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