A good strategy is critical to trading success, but even the best strategy is no match for poor trading psychology. Humans naturally have many bad or less than fully rational habits, and traders are no exception. If you’re not aware of your own tendencies and how they impact your trading, you’ll have a hard time finding success in the market.
Thankfully, traders, psychologists, neurologists, and behavioral coaches have all developed psychological strategies that traders can use. We’ll take a closer look at 8 of the best trading psychology books you can read to improve your mental approach to trading.
Best Trading Psychology Books
Market Wizards: Interviews with Top Traders by Jack D. Schwager
Schwager didn’t set out to write a trading psychology book when he interviewed traders like Paul Tudor Jones, Ed Seykota, and Tom Baldwin. But readers will find that the world’s best traders spend a lot of time thinking about market psychology.
In fact, a lot of Market Wizards isn’t about the specific strategies that these traders used to beat the market. It’s about the psychological guardrails and mental attitudes they brought to trading every day. In addition, Schwager does an excellent job of offering actionable recommendations for everyday traders based on the advice of his interviewees.
Trading in the Zone by Mark Douglas
Trading in the Zone is one of the most classic books written on the topic of trading psychology. Lessons in this book are based on author Mark Douglas’s own experiences as a trader and trading coach, plus interviews with other top traders. The key takeaway? Your attitude towards trading matters just as much as your strategy.
Douglas covers a lot of ground in this book, offering concrete ways for traders to think about risk and critically evaluate their own bad habits. It also takes a look at emotion – the demon of many traders – and sets out approaches that traders can use to check their emotions at the door when trading.
Sway: The Irresistible Pull of Irrational Behavior by Ori and Rom Brafman
Sway offers a truly fascinating look into human psychology and our tendency to do things that, on their face, don’t make all that much sense. This isn’t a book about the stock market or trading specifically, but any trader can benefit from the insights it offers about our irrational tendencies.
In particular, Sway explores two tendencies that can strongly influence traders. The first is loss aversion, the human tendency to avoid perceived losses – potentially by incurring more losses in the process. The second is diagnosis bias, or our over-reliance on our initial analysis or sentiment even after a situation changes.
Market Mind Games by Denise Shull
Denise Shull is a neuroscientist and trader with a unique take on market psychology. Instead of locking out emotion when trading, she says, traders need to harness their emotions to help them make better decisions. From that simple premise, the book dives into strategies traders can use to tackle uncertainty and escape the psychological traps that often lead to losses.
Shull is a skilled writer who does a great job breaking down complex topics in neuroscience and psychology. The book is packed with examples and actionable strategies, and offers a somewhat different perspective than you’ll find in books like Market Wizards or Trading in the Zone.
Flow: The Psychology of Optimal Experience by Mihaly Csikszentmihalyi
Flow is another psychology book that’s not specific to trading, but offers mental strategies that traders can use to their advantage. This book is all about getting into the zone and developing a flow, which leads to a more positive attitude and better experiences.
According to Csikszentmihalyi, flow doesn’t have to be left to chance. He explains ways that traders can ensure they get into a flow every day, including by changing up their routines frequently. Csikszentmihalyi’s reasoning isn’t always the easiest to follow, but there’s a lot that traders can learn from this book.
The Investor’s Quotient by Jake Bernstein
The Investor’s Quotient is one of the most comprehensive books on trading psychology, written by an experienced trader and market analyst. In this guide, Bernstein starts from first principles – why psychology matters in trading. He then covers everything from how to build routines to how to develop a trading strategy that suits your psychology to how to create behavioral rules for your trading.
This is an extremely well-written book that’s easy to follow. Many of the concepts won’t seem groundbreaking to traders who have spent time thinking about how to control their emotions when trading, but Bernstein’s actionable strategies make this book very worthwhile.
High Performance Trading by Steve Ward
Reading High Performance Trading is a little like having a trading coach whispering into your ear. Ward has been a performance coach for financiers, professional athletes, and business executives, and this book brings together the lessons he’s learned for traders.
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Part of what makes this book great is that it’s incredibly actionable. Each chapter focuses on a specific strategy that traders can use to approach their computer each day with a positive attitude and to make better decisions while trading. Ward also offers strategies for evaluating your performance so you can continue to improve over time.
The Daily Trading Coach by Brett N. Steenbarger
The Daily Trading Coach is another highly actionable book that’s packed with 101 strategies for improving your trading mentality. It covers a lot of ground, so there’s something for every trader. New traders will learn how to develop effective strategies for keeping their emotions out of trading, while veteran traders can find solutions to the mental challenges that have been holding them back.
Helpfully, you can also use this book like a psychology encyclopedia after you’ve read through it once. Each lesson follows a standardized format that starts with a challenge, then offers an approach for overcoming that challenge, and finishes with suggestions for how to get started with that approach.
Conclusion: Best Trading Psychology Books
Having the right mental approaches to trading is just as important as coming to the market with a solid strategy. With these 8 trading psychology books, you can take your mental game to the next level and learn how to make the best possible decisions when trading.
