There are many areas of life where technical skill is not enough to succeed. Having a clear head, courage, not panicking and being able to balance a willingness to take risks with the wisdom of when to hold back are all mental skills that can separate the very best from the merely good.
Examples of this abound. In sport, for instance, the top players all have great skills, whether it is superb hand-eye co-ordination, fast feet, or a big punch. Yet sports psychology is a critical area of enabling individuals to maximise their talents, think clearly and hold their nerves under pressure.
Forex Trading might not take place in front of crowds of thousands of cheering fans or millions watching on TV, but there is still a lot at stake, especially in the financial aspect.
For any trader looking to make the most of their prop funding, the likelihood of doing so successfully is, just like in sport, as dependent on the right psychological approach as it is on your technical skills.
Why Psychological Skills Matter
Many basic skills have been widely acknowledged as highly important for Forex traders. These include dealing with emotions by not being controlled by fear and anxiety, or, conversely, overconfidence. A level head will help you avoid getting carried away with greed, while avoiding impulsive trading through fear of missing out can prevent losses.
On other occasions, it can be about some basic psychological thinking, whether it is avoiding confirmation bias (which can mislead you into errors) or making bad decisions due to stress and tiredness.
All this may be sensible advice, but how can you capture these mental skills and develop the aptitude you need to ensure you keep your head in the heat of trading?
The answer may be found in doing some extensive reading on how to master the psychological side of Forex trading. The good news is that there are some excellent, highly recommended books out there.
A Top Ten Of Books To Consider
For example, Tradeciety has listed a top ten of books on this topic. Some of them will be very instructive, while others are challenging.
The latter case includes its top-rated book, Every Loser Wins, by Tom Hougaard. It focuses not on succeeding, but on how to handle failure and learn from it, ensuring that next time you can succeed because you have understood why you failed.
Some books delve deep into expert psychological knowledge. Neuropsychology may sound like it’s just for boffins, but Market Mind Games by Denise Shull provides an analysis of the cognitive and emotional processes that shape decision-making. By enabling traders to recognise these and not be controlled by them, the book helps improve decision-making.
For a combination of these themes, number three on the Tradeciety list may be useful. The Daily Trading Coach by Dr Brett Steenbarger is about self-improvement, whether learning to handle stress better or learn from mistakes. This is useful for those who want to make every trading day an occasion when they can get better at it.
Dr Steenbarger also wrote Radical Renewal, which addresses other issues like mental health and adaptability.
Handling emotions is one thing, but Trading in the Zone by Mark Douglas discusses how traders can achieve a mindset that strips out emotional factors and deals with probability and managing risk. He also wrote the Disciplined Trader, which has similar themes.
Books That Appear In Multiple Recommended Lists
The Tradeciety list, produced in December 2023, is far from the only one out there, which means those seeking psychology books to help them trade better can find more recommendations in other lists.
However, sometimes the best move is to see which books and authors appear in multiple lists, as this adds credibility to their work.
For example, How To Trade produced a list of seven recommended books in February this year. Both Mark Douglas’ books were on it, as was the Daily Trading Coach and another Steenbarger book, The Psychology of Trading. That might just suggest you may do well to read anything by Steenbarger. Denise Shull’s Market Mind Games are also on this list.
There are plenty of other overlaps with different lists, too. Market Mind Games is also in the Trading Education top ten, alongside Steenbarger’s The Psychology of Trading and Douglas’s Trading in the Zone.
Of course, none of these lists are exhaustive, but when the same authors and works continually pop up on recommended lists, this does offer some very strong hints on where to start.
Quite apart from which books you choose to read, the very act of doing so can have a psychological benefit, as you will never feel the despair or isolation on a tough trading day when you know that you can read something later that will help you to do better tomorrow.