One of the rare gems emerging from trading as a profession is getting to know yourself better. Trading repeatedly reveals your inner decisions and forces you to confront who you really are. What really makes you tick on the inside? Dealing with all your psychology and how you interact with the market is the real journey.
The late Mark Douglas, author of Trading in the Zone, listed five characteristics of a profitable market mindset for traders. Number one is anything can happen. Getting comfortable with that alone can be exciting and frightening. When you trade, what’s inside of you will surface by natural daily market movements. Your perceptions of opportunities, loss, fear, greed, objectivity, or illusion are front and center and all on display.
Many traders feel that trading is a zero-sum game. Specifically, if I make money, someone else must be losing money. While it is true that someone is on the other side of your trade, it’s not the whole story. Whoever is losing money or gaining money on the trade is also gaining mental clarity on how to lose or win in the markets. If they use that information wisely, they may be gaining clarity on how to personally trade better in the future. How much is that worth?
Stephen D. HertoIt’s not you against the markets or other traders.
It’s you against you.
Using and analyzing that information to your benefit is what getting better at trading is all about. Part of my trading education has been an attempt to consistently be aware of my perceptions of the market and my inner psychology. Listening to audio books by other traders has been invaluable. Some of my favorite mental clarity trading books include the following:
- How I Made $2,000,000 in the Stock Market by Nicolas Darvas (a classic in the dos and don’ts of trading)
- Mastering the Trade, Third Edition: Proven Techniques for Profiting From Intraday and Swing Trading Setups by John Carter (a well-written, in-the-trenches book offering trading advice from a current professional trader)
- The Little Book of Market Wizards: Lessons from the Greatest Traders by Jack D. Schwager (a summary of the trading mindset from the best traders in a three-decade market wizard series)
- Reminiscences of a Stock Operator by Edwin Lefèvre (classic lessons from one of the greatest traders of all time, Jesse Livermore)
- The Daily Trading Coach by Brett N. Steenbarger (the subtitle says it all: 101 lessons for becoming your own trading psychologist)
- Mastering Trading Psychology by Andrew Aziz and Mike Baehr (geared toward day traders but helpful for all types of traders)
- Trading in the Zone by Mark Douglas (an absolute must for all traders)
- What I learned Losing a Million Dollars by Jim Paul (some of the best lessons are in our losses)
Continual improvement is one of the joys of life. Growing better as a trader forces self-reflection. Use your trading history as a guide along with some of the authors’ experiences above to forge ahead. That is where the profits are!
Enuf said.