Top Books to help with the Trading Mindset

My Top Books to help the Forex Trading Mindset

This is an avatar image of the blog author Ash Dunbabin

Forex trading is an interesting endeavour. It does not matter if you are a Fundamental trader, a Technical trader, or a hybrid of the two, the one thing that really makes trading difficult is conquering your mind. They call it the trader’s mindset. To learn the technicals of trading is quite an easy process - although one that you should spend some time learning well. Learning things like candle shape, Elliott wave theory, ema’s, MACD divergence and the thousand or so other things you need to understand are all relatively easy. The one thing that is not easy is controlling your mind. Trading has a propensity to lull you into a false sense of security. You have one good week of a few plus one percent trades and all of a sudden your mind is showing you pictures of you driving a Lamborghini, buying a mansion and dropping wads of cash onto your laptop and putting photos of it all on Instagram like some of the other wankers around the trading game. Then snap, you get confident and lose 5% in a week and fall into a big depression. Sound familiar?


The only way to truly handle the up’s and downs of trading is to get your mind right. It is about keeping steady emotions during losing trades, and winning trades. This does not mean you turn into some robot trader and never celebrate your wins, it just means you look at the bigger picture. The what are you trying to achieve from this, the end goal.


One way to help get this mentality is to read, or listen to books. Below are some of the books that have really helped me to keep my emotions in check.


1: Think and Grow Rich - Napoleon Hill.


I would say of all the books I have ever read, this one is my all time favorite on mindset. This book is old, pre World War 2 but contains some of the best advice on mindset that is out there. It really comes down to your attitude and your persistence to achieve your goals. With this persistence and positive attitude you can set big picture goals and smaller steps to achieve the bigger goals. One part of achieving your goals is visualisation. This is not just looking at a picture of the car you want and saying I want that, it is more. It is about mentally imagining driving the car out of the dealership. The smell of the leather, the feel of the power when you accelerate. This book is absolute first class, and one that I believe should be required reading at school and I wish I was given this book 20 years ago.


2: The Values Factor - John Demartini.

The juice of this book lay in the fact that it forces you to look at your entire life and re-think everything you have been taught and believe. Throughout the book you are asked to look at your beliefs and values and understand where they come from and why they are a part of you. For example, Western society dictates that you have to work hard at school so you can get good grades so you can then get a good job, meet a nice partner, buy a huge house and have 2.3 children. Next time you are on public transport for Monday morning rush hour, take a look at the faces around you. No one looks particularly happy with a blank look on their face with the impending doom of another 40 hours of work that they would rather not be doing. What does this all boil down to, for most people the job they do is to pay for the shit they have bought that they did not really deep down want. What is more, the mortgage, car debt and credit card debt weighs a person down when all they really want to do is to do something in line with their true values. For me, it highlighted the values of Education, and freedom to do what I wanted. I realised I valued my time ten-fold over money. That does not mean I don’t need money as it is one of those necessary tools in life, but what I am now aware of is that all the programming in my head was one of society and upbringing and not one that I put there.


3: Trading in the Zone - Mark Douglas.

This one is for the trader. If you are not a stock, forex trader, or some other variation of a trader the usefulness of this book will be limited. However, it does have some good mindset stuff in it. Some of the great stuff in this book is about the fundamental rules of the market, and the idea that the market is not against you in any way. The market simply offers opportunities that you can take up, or leave. I think the greatest take away from this book for me is it forced me to analyse my trading, and ultimately take full responsibility for all my trades. This includes accepting, and being ok with taking a trade within your entry rules and the chance of that trade not working out for you.This book should be on any trader's bookshelf, and should look worn like Grandma’s bible did from all the reading.


4: The Chimp Paradox - Steve Meyers.

Not many people have to the time to do a psychology degree to work out how the mind really works in order to get greater control of it. This book achieves this in about 400 pages and is an easy read. The author explains some very complex brain chemistry matters via abstracted means. Ever had a moment on the road where someone cut you off and you went ballistic about it? Yeah, me too! What this book identifies is that the human brain is broken into 3 parts. 1: the human, 2: the chimp, and 3: the computer. The basic premise, like a chimp in the wild a chimp is four times stronger than a human. The human has an even keel, is able to think through situations and make reasonable decisions. The chimp on the other hand lives in the jungle under the laws of fight, flight or freeze. Depending on the chimp you have in your brain will dictate how you react to things. For me, my chimp is one angry mother f*$cker which means I can go from zero to batshit crazy in all of about 0.5 seconds. So how does this help trading? Well, trading is an emotional game, there is fear of missing out, fear of loss, analysis paralysis and 100 other emotions that help to make trading a difficult game. What this book does do to help is to allow you to understand where these reactions come from and to talk the chimp down. I have even managed to talk Bob down myself on occasion - Bob is the name I gave to my chimp. I highly recommend this book. It has something different to add to the three aforementioned.


If you are serious about trading, you will need to be serious about self improvement. These books might help you achieve some of that.


Good Luck traders