The Best Trading Psychology Books of All-Time // Ep. 36

In This Episode

• Why Walter has learned more from “pop psychology” books
• Look for themes rather than specific titles
• Free video screen capture software for journaling trades
• Trading Sex and Dying by Juel Anderson
• Martin Seligman
• Trade With Passion and Purpose by Mark Whistler

Our Favorite Trading Psychology Books

Everyone looks for trading books that have trading systems in them. But the type of trading books that are the most useful are books on trading psychology.

…in our opinion, of course.

I've given away most of my trading books that dealt with systems and I've kept most of my books on psychology. They are much more useful.

So take a peek into our trading libraries and find out which trading psychology books we recommend the most, out of the hundreds of books that we have collectively read.

Read the Transcript:

Hugh: Hi, Walter. What are your favorites or most influential Trading Psychology books?

Walter: Trading Psychology books. I actually find that pop psychology to be more useful, to be completely honest. I mean, the Mark Douglas one is pretty good. I would say that for me personally, when I went through Psychology, so I did a lot of Psychology. I was surrounded by Psychologists. My mom was a Psychiatric Nurse. I always had a Psychiatrist or Psychologist around because she worked with them. She worked in a nut house. 

I would go in there and see these crazy people. I always knew they were different. It’s really kind of interesting. When I went to school and did undergraduate and then later on a PhD and Master’s and all that in Psychology, you actually get specialized. The most that you learn in terms of breadth, is in undergraduate and then as you get further on, any PhD, you learn a lot about a really precise thing you know.

What I found interesting though about that area of doing that and working with the Academics and things like that is how like certain ideas are just kind of relegated to like, this is not real science. There are certain topics, you are not allowed to study. In a lot of ways, I found some of those to be the most interesting.

Hugh: Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.

At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.

So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.

Walter: For example, there was a guy in my school and I know it is a long-winded way but I’m eventually going to get this. So there’s a guy in my University that he studied UFO abductees. Nobody was allowed, I never saw him. He was a Professor; he was tenured. He’d been there for decades. 

I even walked by his office one-time. It was on the level but there’s like multiple levels and I was on the bottom level, the lab that I worked in. I never really went up to different levels but one-time I walked by and go, “Holy crap! This guy is at this University and I forgot”. 

He was like a well-known interviewer of people who have been abducted by UFO and their experiences. I thought that it was really an interesting thing to study. I always listened to those shows, those late night talk shows because somebody already talked about this stuff. I was kind of interested in that.

Yet, whenever his name came up with just one surprise I can remember. My mentor would just blow it up like, “Poof! He’s a loonie-bean. He is a crazy guy” and it is so weird and that is just how it is in Science. 

Certain ideas like another one would be I think, in Anthropology they say like there’s only one theory about how people came into North America, over the land bridge from Russia and come down. So anything earlier than that, it can’t be. They actually wouldn’t dig to a certain depth. After they dug up a certain depth in archaeological sites, they wouldn’t go any farther because they knew there wasn’t down there which is crazy.

Now we all have evidence like Gobeklitepe in Turkey which like this city structure. It isn’t supposed to exist when the people were in the bronze age. They were not supposed to have cities. There's actually a lot of evidence in North America, in South america and Central America too.

This is a long-winded way of saying what I found in trading psychology to become like for me, not that meaty but I found in typical pop psychology. I found that to be more useful for me. For example, there’s a guy named Martin Seligman. He’s written a lot about, he’s considered to be the guy who created positive psychology.

Which again in some circles, it’s kind of accepted but it wasn’t something that I learned through going for a PhD. I never had any chapters of readings really on positive psychology. It was not really a thing. It was not until I got out of it and I realized that this guy had written all of these books.

There are his disciples in Australia who created schools based on his teachings. He has all these guys; he’s getting really old now you know. I saw him. He came to Australia and you get to listen to him and ask him questions after his lectures but his stuff is really cool because for traders, resilience and that is also something that he talks a lot about. Resilience is the really important thing because we quit. 

We quit trading systems; we quit trading. We give up on things during losing streaks and so that ability to bounce back I think is the best predictor of trading success. Like you for example, are a very resilient trader. I know this because I’ve known you for years and I know the process that you’ve gone through. I believe that, that is why you’ve been able to make it as a trader. 

I know other traders who do not trade anymore. The reason why I think it is not because they could not do it but it’s because they’ve gotten to a certain point and they did not have the resilience; they just kind of gave up. They never allowed themselves to make those extra couples of steps to where they would have actually made it.

So for me, the biggest thing is if I’ve to guess, one thing if someone asks me, “Which one should I go to?”  Just read all books on resilience like Martin Seligman. Get into that stuff and that is really going to help you. If you use those tools. There’s a lot more, it is not just Martin Seligman. 

There’s a lot of his disciples. People who’ve taken up the baton and they’re doing really good research in the area. A lot of them have written books too. Look up positive psychology. Look up resilience; those are the things that I think can help. There are great trading psychology books out there like the Mark Douglas one. 

There are other ones related to trading like Trend Following. Where it’s kind of like pick yourself up and go. Do it again sort of thing because a lot of trend followers have to go through with that. What I found personally for me, just applying those lessons from mainstream pop psychology has been more helpful. What about you?

Hugh: For me, it was a little bit out of the trading room I guess. One of the big ones was, the original titled book was Poker, Sex and Dying. David Caplan bought it and renamed it to Trading, Sex and Dying but the original writer Juel Anderson was a poker player. He worked at a phone dating service and he worked at a I think it was a morgue. So that is where his title came from, the Poker, Sex and Dying.

He said that based on those experiences, he got a lot of insights into human nature. How people act especially at the poker table. How certain personality types would respond to certain types of stimulus. He kind of read them just based on the category that he thought that they'd fallen into, which is really interesting.

When I started reading about the micro file in that book, I realized, “Okay, that’s me.” I guess, before that I was thinking that these things about me were wrong or they were bad or something that I had to change. Once I read that book, I realized that is just how my personality is. I could go forward from there and not be guilty about it.

That was one book. Another book, the Mark Douglas “Trading in the Zone”. Another one is, I forgot what it was but it’s just basically a psychology book. I will put in the show notes. I forgot what it is, it just slipped my mind.

Walter: Yes, we’ll put it in the show notes.

Hugh: Those were the three but I’d be interested from a psychology standpoint, besides the resilience part, what do you think is the most lacking in most trading psychology books in terms of, like you say pop psychology versus trading psychology?

Walter: Actually what you have just said because I think you really nailed it. Basically what you said is, what we call in Psychology is self-awareness. What you were talking about was like you were trying to map yourself on to what you are reading in the book. I think that self-awareness would be one of those really important skills. I don’t see these a lot going on on most trading books. 

So most trading books, eighty-five percent of it is devoted to systems, entries and exits. The other ten percent might be a chapter on Psychology or something like that and then maybe another five percent on risk or something like that. That’s usually what it is, that’s typically when you pick up a book, that is what you are going to find in most cases. If it is a normal trading book. It is not just devoted to psychology obviously.

What you were talking about is being self-aware. Now, how can you be self-aware? Why is that important? In trading, if you do not know because I guess, the reason why I say this is because if you are self-aware then you also have what is called high interpersonal intelligence. You can kind of read people and stuff like that. 

If you are a door to door salesman or something like that or a car salesman you can kind of read people. You’ll get used to figuring out if someone is thinking you are BSing them or whatever. Do you know what I mean? I always find that fascinating. Sort of an introvert, I’m always fascinated to like if I’m at a party or a get together and there’s a lot of people, I’m always like thinking what is that person thinking. What is going on to their lives that they’re not talking about stuff like that.

In fact, I remember the last time I had a job which was a long time ago. I’m basically unemployable but I had a job. I remember my Manager was saying to me like, “You’re very aware of your body language and stuff” like when people are in a meeting, what I would always do, and he was right. What I would always do is, I’d always like shift and stuff so that they’d know that I was listening to them.

They talked about it in NLP and all that about facing someone. So if you want to be self-aware, why do you want to do it? It is because you become aware of the mistakes you’re making and number two is, if you are not self-aware, you can’t figure what is going on. What is going on with my trading? Why is it not working?

There are things that you can do. You can become more mindful. Mindfulness is something that sort of meditation, it’s really a buzzword right now. Nowadays, this idea of  being mindful. You can read up about mindfulness. You can also write it down in a journal. Like an emotional journal or like a diary sort of thing about your trading and your experiences. Not sort of “I enter the Euro here. I sold here” not like that. More of a stream of consciousness sort of thing.

You can also write down your dreams and there are ways that you can, like when people say, “I don’t dream. I can’t remember my dreams”. You can work on that too. I posted some stuff on my blog about that. I’ll put the links in there if you want to check that out.

Those are some tools, those are three things right there that you can become more mindful. You need to be more mindful as a trader because if you are not aware of what is going on with you, how are you going to fix it? You need to know: This is not an issue for me. This is not a strength; this is a weakness. How am I going to attack this? How am I going to make it better?

Typically, if I am watching something on YouTube from a trading guru or more like lectures, I do watch some lectures on Futures like from futures traders and stock traders. I do find those sort of interesting. The forex stuff, they’re not really, I don’t find really useful.

What’s interesting is they will usually say something like this, “You’ve got to do this, this and this. You’ve got to fit my pattern.” I am not a big fan of that. What I think you needed to do is one, to become resilient and two, become self-aware. If you cannot do that other people can; having a trading accountability partner can help you.

A trading accountability partner can help you because every week, you talk to this person and say, “ Look, this is what I did.” They can say, “Why did you do this?” If you have those blind spots. Those sorts of things if you’re not really a self-aware person. That is what I would do.

Trading accountability partner, mindfulness/meditation and also journaling, those are three things that you can do to kind of up that because I think you are right. That is basically just what you just said. I think that is really a big one for traders. Again, I don’t see this in terms of trading psychology. I do not see this as a thing that’s talked about. 

It’s like resilience. It's kind of a thing. They usually will say things like, “Just do this, this and this. Follow this path.” They do not say like, “Discover who you are.”  A lot of these traders who get these platforms, they’re very self-assured because of their experiences in trading and the money that they’ve made so they get blinded by the fact that they kind of think that this is the way. You needed to do what I did.

You do not get a lot of people saying, “I did it this way but you could probably do it this way.” You get a lot of dogmatic blah, blah, blah. They might be a perfect fit for you. It could be just like, you can go to a shoe store and you can pull a shoe off the shelf and that’s your size but a lot of times it is not going to fit. So it is not a good match in my opinion.

Hugh: I think the bottom line is that those people aren’t necessarily being dishonest or whatever but they just are not very good teachers. I think there’s a huge difference between being able to do the thing and teach the thing. Some people are good at both; some people are or most people are just good at one of these.

Walter: Yeah, that’s true. Part of that is because when you get really good at something and you don’t know what you are doing; you’re not aware. Think about when you first started driving. When I first started driving, I remember I was in the car with my friend and he’s older than me. He’s about ten years older than me.

He’s actually a really well-known actor. He’s always covered up in a costume. You wouldn't know him but he’s in a lot of movies and stuff. He was in Silver Surfer and he was the Silver Surfer. He was in all these different movies.

So I had to be permanent, I had to ask someone who has a full license in a car. I will never forget I was driving with him and he’s like, “Hey man, can we change the radio station?” I’m like, “No man! I’m driving.” I can’t change the station; I’m concentrating on driving. Think about that, it is the same with trading or any skill. 

When you first learn it, it takes so much of your mental energy; it has to be focused on that. As you get good at it, it’s so automatic. It’s not even part of your awareness. It’s so hard to even bring it to your awareness what you’re doing when you’re driving, when you’ve been driving for thirty years. It’s just not possible. It’s really hard to bring that in.

So I don’t blame people for that. I guess, part of being self-aware and mindful, that is how you know what you are doing. You really have to almost like to get really deliberate. For me one thing that really helped me and this could help people even if you are not sharing these videos with anyone.

You can download a free video recording software. I’ll put a link down there for you. You can make videos when you take your trades and maybe when you get out of your trades. Even if no one sees them except you. Just walking through the trades and talking about this is why I’m taking this trade, this is what I am going to do. If it does this, I’m going to do A or I’m going to do B. You are mapping out just having that record so you can go back and look into why did I do that.

Eliminating that hindsight bias because you can just see that is all the information that I have when I took the trade. I didn’t have this future information. Just having those sorts of things where you actually speaking out loud and talking about your trade, that is super useful for people to open up, “Woah! That is a blind spot for me”. That is something I didn’t realize I was doing that but now, I can see it. That is another thing you can do too. This is actually a good Episode.

Hugh: We are getting into it on this one.

Walter: Yeah, this is a good one. Hopefully with all these things we’ve talked about people can use them.

Hugh: Definitely. Real quick before we end, the book was called Trade With Passion and Purpose by Mark Whistler. So just that we have a reminder for the show notes.

Walter: Yeah, I heard about that guy. I went to a husband and wife trading team in Portugal and they’re like, “Dude, we just had Mark Whistler here.” I would’ve stayed with them for a couple of days if I know who he was. 

I was at the FXStreet Conference in Barcelona and they said, “Hey, come over” and I said, “I can only come for a couple of days because I had to go to a wedding.” And they were like, “Who’s wedding was it?” I said, “It’s mine.” They go. “Oh, okay.” I had to go to Tahiti. I have to go from Barcelona all the way back to Tahiti for my wedding.

They were saying that Mark was there and I heard about this guy. I didn’t really know much about him until they were telling me and they said, “Yeah he’s a really cool guy.” So I am going to check that out too. 

Thanks for that because I never really heard of him until they told me about him and they said he’s really a cool guy. They are like, we always try to get all these traders to stay at our place and it was really a nice place too. It was kind of like a Bed and breakfast right across from the beach and it’s beautiful. 

Hugh: Cool. He’s written a few books. I’ve read a couple of them and they’re really good, kind of like underground authors that I don’t think too many people mention.

Walter: I think you are right but I am going to check it out. Thanks for that.

Hugh: Awesome. Thanks, Walter.

Walter: See you.

Hugh: All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.

SHOW NOTES:

Mark Douglas: Trading in the Zone

Martin Seligman: Learned Optimism: How to Change Your Mind and Your Life 

Juel Anderson:  Trading, Sex and Dying 

Mark Whistler: Trade With Passion and Purpose 

Walter’s Blogs: https://fxjake.com/blog/2017/07/05/the-forgotten-traders-tool-your-dreams-can-help-your-trading-part-1-of-3/ 

Free Trading Tools: Free video screen capture software

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