Success in Forex trading not only requires a good grasp of fundamental principles and best strategies, but it also needs a healthy mindset and a consistent willingness to learn — this is where trading psychology comes in.
Trading psychology is the study of the emotional aspects that affect traders when they make decisions on the Forex market. Controlling your emotions and acknowledging how it affects your position in the market improves your performance as a trader. You develop better decision-making skills and improve immediate responses to events and circumstances. Therefore, trading psychology is essential to your trading strategy. Failing to recognise this is one reason so many people fail to make it into a profitable career.
‘The daily trading coach’ and ‘Trading psychology 2.0’
These two books are from Brett N. Steenbarger, whose experience in financial markets spans 50 years. He is currently a consultant for traders in several organizations and was the former director of trading development for Kingstree Trading LLC.
The daily trading coach (2009) is an engaging set of lessons written as coaching interventions that include practices to improve a trader’s psychological approach. On the other hand, Trading psychology 2.0: from best practices to best processes (2015), is a comprehensive guide to the applications and concepts in trading psychology, complete with real-world tips.
Steenbarger believes that every trader should treat trading, not as a dash or a sprint towards a finish line, but a long marathon. He emphasised the importance of pacing and confidence in setting yourself up for success. He encourages the reader to acknowledge their emotions as an observer would: understanding that they are perfectly fine as long as it does not take over risk management. Both books are a must-read for anyone aiming to succeed in the Forex market.
Gary Dayton, the author of this 2014 book, has been a trader and a trading mentor since 1999. Also a psychologist, he espouses the “mindfulness approach” in trading psychology. It refers to the quality of the consciousness or awareness often encountered with practices like meditation.
In Trade mindfully, Dayton outlines some steps to help overcome problems in trading brought about by bad psychology. Although he wrote about futures and the stock market, you can use his beliefs and suggestions even in Forex trading since they are fundamentally the same.
‘The disciplined trader’ and ‘Trading in the zone’
Author Mark Douglas has been coaching traders since the early 1980s through these books and his seminars and programs on trading psychology. Though he’s passed on, his name is a staple on every trader’s shelf even to this day.
The disciplined trader (1990) challenges fundamental assumptions about the Forex market, examines the issues in constantly maintaining equity, and presents the kind of mindset that limits traders. By showing how people fail in the market, Douglas guides the reader to practical conclusions on how to change their perspectives. Trading in the zone (2000), is relevant to anyone who wants to achieve or maintain success in forex trading. It is similar to the former because it shows what causes traders to make decisions that steer them away from profiting consistently.
Make intelligent and informed decisions
As with any other worthwhile endeavour, the best way to stay on top of Forex trading is to keep learning. Learning to put good psychology to good use can also help you succeed in your trading career. These books are all great reads. Read them, learn from them, and profit from them.
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