The 4 Key Trader Psychology Books All Traders Need to Read

By NinjaTrader Team

If you’ve ever found yourself in a trade wondering what to do next, it’s highly likely that your emotions are in full play, and if you don’t have them under control, you’re likely to make some poor trading decisions. 

There is a wide body of research and study around trader psychology, along with a number of useful books that can help traders understand the emotional factors that can affect the decision-making process, as well as better understand themselves and their interactions with the markets. 

Here are four popular and comprehensive books on the subject of trader psychology that all traders need to read:

On a recent NinjaTrader “See the Futures” livestream event, Dr. Gary Dayton, author of Trade Mindfully, discussed overcoming the psychological emotions and obstacles to long-term trading success. One of the key concepts covered in his book is mindfulness – a state of mind rooted in Eastern culture for its capacity to reduce stress and increase clarity of mind ¬– both useful qualities for traders looking to help reduce or eliminate emotional decision-making and the poor results that often follow. 

In this book, Dr. Dayton also discusses the importance of High Value Trading Actions (HVAs): specific actions that are under a trader's control. With this guide, trading professionals will be able to form solid strategies based on a combination of these ideas and practices that can help traders achieve a higher level of consistency and performance. 

Trading psychology readings to help any futures trader

Mark Douglas’s book Trading in the Zone explores the underlying emotional reasons for a lack of consistency in traders and how they can overcome deep-rooted mental behaviors that can undermine their trading. The approach here is to look beyond the results of any single trade, to accept the inherent risk and that a losing trade is a fundamental reality of trading. 

This book offers many takeaways that can help traders:

  • Gain a deeper understanding of the psychological and emotional factors that can impact their trading performance and how to manage them effectively 
  • Provide valuable insights into the importance of discipline and risk management in achieving long-term trading success
  • Avoid these errors and make more informed and profitable trading decisions 

Mark Douglas has a number of highly acclaimed, must-read books on trading, and has been a trader coach for more than 40 years.

Emotional patterns in futures trading

The third book in this list, The Psychology of Trading by Dr. Brett Steenbarger, helps traders identify emotional problem patterns that interfere with successful consistent trading. Traders need to be able to recognize their emotional state and change problematic behaviors that interfere with decision-making.  In addition, traders must develop skills for better concentration and focus in order to more reliably respond to stressful trading situations. 

One of the many benefits of reading this book is to gain a better understanding of how our thoughts and emotions can influence trading decisions, sometimes leading to irrational or impulsive behavior. By learning how to recognize and manage these psychological factors, traders can improve their performance and make more profitable decisions. Dr. Steenbarger also stresses the importance of setting clear goals and maintaining focus on those goals. Dr. Steenbarger is a professor of psychiatry and coaches professional bank, hedge fund and proprietary traders.

Trading psychology from a scientific angle

Finally, Dr. Jason Williams’s The Mental Edge in Trading, takes a more scientific approach to trader psychology. Based on interviews and testing of highly successful professional traders, this book helps traders determine those emotions that dominate their decision-making process, and then provides methods that can be employed to help adapt behavior to better handle difficult trading circumstances and conditions. 

The advantage of this book is gaining a better understanding of the importance of mental preparation and developing a winning mindset. 

Williams emphasizes the need for traders to cultivate a positive attitude, build resilience and confidence, and develop effective habits and routines that can help them stay focused and disciplined even during challenging times. 

Another valuable takeaway from the book is the emphasis on developing emotional intelligence and self-awareness. Through exercises and practical tips, readers can learn how to identify and manage their emotions, as well as the emotions of others, which can help in making informed trading decisions. Dr. Williams is trained psychiatrist and the son of legendary trader and author Larry Williams.

As a trader, as in any profession, it is important to be aware of the role that psychology and behavior can play in your success or failure. The trading market is a dynamic and ever-changing environment, and your ability to adapt and respond to it will be heavily influenced by your emotional state. These books and others can help you gain insight into the importance of trader psychology, and how to manage your emotions to improve your performance.

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