With market liquidity set to wind down towards the end of the year, you might want to consider taking a break from trading soon.
If you’re looking to use this time to work on your trading psychology, I’ve rounded up some of my favorite self-improvement books that are relevant to building a good trading mindset.
Note that this list covers a more general scope of non-fiction books that might also be helpful in other aspects of life outside of good ol’ trading classics like Market Wizards, Trading in the Zone, or my personal favorite, The Daily Trading Coach.
1. Sway: The Irresistible Pull of Irrational Behavior
First up is a surprising page-turner in this genre written by Ori and Rom Brafman. Sway explores issues that people are aware of but seem unable to avoid or powerless to get out of.
The book discusses concepts like diagnostic bias, which is the inability to see beyond an initial hypothesis despite evidence to the contrary, and the chameleon effect, which is a person’s habit of taking on traits assigned to them.
Traders can be vulnerable to these particular psychological pitfalls which tend to strongly affect the decision-making process. Apart from that, the research and anecdotes in the book also delve into hidden motivators related to danger and risk, both of which are regular parts of the trading world.
2. The Art of Thinking Clearly
This book by Rolf Dobelli is an easy read that can be digested in short tidbits covering two to three pages of 99 thinking errors that just about anyone can be prone to.
Some of the most notable chapters include Why Watching and Waiting is Torture, How to Relieve People of Millions, and Don’t Take News Anchors Seriously.
The Art of Thinking Clearly also covers a wider range of typical biases and cognitive errors that traders should be aware of, such as availability bias or giving weight to information that is more readily available, hindsight bias or believing that we knew an event was going to happen all along, and outcome bias or judging the quality of a plan based on the result rather than the decision-making process itself.
3. Think Again: The Power of Knowing What You Don’t Know
Written by organizational psychology professor Adam Grant, this is also one of my top references when it comes to developing self-awareness as a trader.
After all, it helps to be on top of one’s emotions – be it negative or positive – in order to make more objective trading decisions.
Think Again focuses on the importance of questioning and rethinking, not just our own notions, but also those presented to us by others like an authority figure or news sources.
The book also stresses the importance of having a growth mindset that explores opportunities to learn something new, even if this involves our core beliefs being proven wrong and broken down.
4. High Performance Habits
Need help upping your good trading habits game?
This book by one of the world’s highest-paid performance coaches Brendon Burchard is a helpful guide in building science-backed and evidence-based systems that can transform you into a more productive and goal-oriented person.
Based on the author’s research on high performers across 190 different countries, the secrets to their success can be narrowed down to six common core traits: seeking clarity, generating energy, raising necessity, increasing productivity, developing influence, and demonstrating courage.
These actionable steps can be key in turning your to-do lists and regular trading tasks into more intentional habits that could translate into consistency and profitability.
5. The Emotion Code
Last but certainly not least is this gem by holistic physician Dr. Bradley Nelson that explores the inner workings of the subconscious mind.
While it might be a wee bit too metaphysical for some, The Emotion Code can be your own personal private therapist on your bookshelf (or e-book reader), as it contains simple exercises that can help explore past traumas that may be interfering with your trading decisions or life in general.
In attempting to unlock and understand these “trapped energies” that may be interfering with your mental state, the author aims to bring clarity to how you think.
This way, you can be more critical of initial negative reactions instead of letting these dictate your overall behavior. Sounds useful for dealing with market surprises and trading losses, right?
Any other psychology or self-improvement books you’d like to add to this reading list?
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