Do you want to take advantage of trader psychology, create an emotionless trading system, and
improve your own trading discipline?
Well these 3 books are going to exactly that for you
I’ve created many videos in the past talking about risk management, trader psychology and
preaching that chasing chat room alerts, is probably setting your learning curve back
many many years.
But who am I to talk about psychology, risk and discipline?
I don’t even have a lamborghini.
And according to most of the day trading marketing out there, i'm not a real trader, until I
have a few of those.
So I must direct your attention to these eye opening books that have helped my own trading
drastically over the years, and they are, Trade the trader by Quint Tatro, Trading in
the zone by Mark Douglas, and Atomic Habits by James Clear.
I’ll be summarizing the key takeaways from these books and explain to you how these books
helped me with understanding trader psychology, controlling my emotions in trading, and building
good trading discipline.
So if that sounds good to you, make sure to smash that like button and lets get started.
Trade the trader is written by Quint Tatro.
He is a hedge fund manager and president of his own investment firm in Kentucky.
In the book Quint is constantly reminding us that when you’re trading stocks, you
are not just trading the companies like Tesla or Apple, you are really trading against traders
and algos on the other side, and those people’s singular focus, is to take your money from
your account.
Right?
Somebody has to lose money in the stock market, in order for you to profit from it.
And i do agree with him 100% that the reason most day traders fail, is because they do
not have a firm understanding of that concept.
Most beginner traders out there spend a huge amount of time and money trying to learn strategies,
chart patterns and looking for that secret indicator that will allow you to top tick
and bottom tick.
When in reality, we should be learning to trade the other traders who are trading against
you.
Remember, chart patterns you see on your broker platforms are just a visual representation
showing people’s psychological decisions to buy or sell.
Thats where we see the big buyers, big sellers, and the bag holders are on the daily chart.
Quint Tatro sums up this concept really well by comparing stock trading to playing chess,
which i hope its not 100% true because um, I dont play chess.
But I HEARD, from a friend, in chess, you are not really playing the pawns in front
of you, you are playing the player on the other side.
Same as poker, you need to know the habit and gestures of the other player, and understand
exactly when they are triggered.
In this book Quint Tatro explains the process of understanding the “other side of the
trade” and how to outsmart the crowd in every single step.
From picking the right stocks to trade, to getting in and out of the stock at the psychological
“trigger points”, which are the price levels when you know the other side of the
trade is in pain, and trying to get out.
If you’ve seen my past videos such as penny stock gap up long strategy or how to short
penny stocks, I explained the importance of knowing when the other traders are in pain,
if you’re long biased, you want to get in to the stock when you see the shorts are in
pain and getting squeezed out.
And vice versa, if you want to short on the second day gap up, you short into the overnight
longs profit taking, and the pre market and market open chasers bailing out of a failed
break out.
And thats exactly what Quint Tatro is talking about, you want to trade against the crowd,
especially when that crowd, is dumb money.
Recognizing the difference between smart money and dumb money is another key takeaway Quint
talks about in the book.
And that is especially true, when you’re trading small cap penny stocks.
The reality is that most penny stocks are highly dilutive and manipulative by insiders
and market makers.
And it's easy for them to do so because these stocks have market caps of under $100 million,
and some even as small as $20 million.
And thats the dumb money that these people on the inside are trying to move.
Dumb Money from unsuspecting investors, tens of thousands of newsletter and chat room subscriptions.
If you want to know more about how these penny stock companies dilute and sell to their investors,
check out these two videos.
Besides the psychology behind trading the trader and the dumb money, the biggest takeaway
from Quin in this book, is to smash the like button if you havent done so already.
Seriously he wrote it in the book, liking this video by humbled trader is how he got
those lambo money.
Besides trading the trader and the dumb money, Quint also talks about setting trading plans,
and the art of taking profits and taking losses.
And most importantly he talks about learning beyond just the basics of technical analysis,
and overcrowded chart patterns.
Instead, we should learn to take advantage of the failure of those basic chart patterns.
There’s just so much insight in this book.
I highly recommend it.
And this book was a huge inspiration for my trader psychology video and understanding
market cycles, if you’ve seen those videos and want a even deeper study of trader psychology,
Trade the Trader by Quint Tatro is a must read.
You can check out the book in links down below.
Now the second book I want to talk about is Trading in the Zone by Mark Douglas, which
I listened to on Audible.
Mark douglas is an expert in trading psychology and have coached hedge fund traders world
wide on controlling the mental side of trading from the inside.
In this book he aims to help you achieve achieve consistency and understanding a successful
traders mindset, which is what he describes as the Zone.
Just like a professional athlete, great traders are not born, they are made.
They are trained by following a strict mental and physical discipline and practice the same
set of routine for years if not decades.
Thats when they’ve truly reached the zone.
When you’re trading in the zone, buy and sell executions should be just like a muscle
reflex, an unemotional process in which you are just systematically trading your plan
you’ve already prepared before you bought into a stock.
Mark Douglas stresses the importance of trading systematically, and leaving your emotional
responses outside the door.
My biggest takeaway from Trading in the zone, is managing my trading emotions, especially
fear.
Fear is the biggest cause of hesitation in trading.
It's the fear of the unknown.
What if this support line fails to hold, what if the preparation and homework I had done
on this stock was wrong?
Fear can overtake all rationality, I get so frustrated at myself when I hesitate due to
fear.
This happens sometimes even when i see a set up forming that I know I’ve traded thousands
of times in the past and can give me a high probability of success rate.
And that psychological fear can come from maybe you took a loss the day before, or maybe
you didnt do enough planning before the trade.
Fear can cause us to get in the trade too soon or too late, because you’re scared
of either missing out, or being wrong.
Secondly Fear can cause us to cut our winners too short, because we’re scared of the stock
changing direction soon, thats how sometimes we stop out of a position too soon only to
see the trade we’re no longer in, turn into a big win.
But perhaps the biggest damage fear can cause, is for you to turn a small loss into a HUGE
loss.
Mark Douglas preaches that when you are trading with the fear of losing that money, that leads
you to hold on to your position and not stopping out when the stock has hit your stop.
And that holding and hoping mentality, is what leads you to a big loss.
This exact concept is basically what I talked about in my risk management strategy video,
you need find a max risk amount you are very comfortable with losing if you’re wrong.
Maybe thats $100, or a $1000, whichever is suitable for your account.
Mark tells us in the book that you cannot let your fear, or all other emotions, drive
your decision making to buy or sell in day trading.
He says we need to take responsibility for whatever happens.
The market isn’t responsible for your wins and losses, the market merely provides you
opportunities, and its your own responsibility to partake only in specific trades you like,
and to manage your own risk when in the trade.
The market doesn’t owe you anything.
So that basically means, if you are right on a trade, great, you worked hard to make
that profit, hopefully its a lot bigger than your initial risk.
And on the other hand, if your trade fails and you took the planned loss, you traded
your plan and took responsibility and that's totally fine,
BUT if you do not respect your own stop and gave into fear and let that loss become 2,
3 times bigger than your max risk, its not the market’s fault, its not your chat room
or DVD’ gurus’ fault either, and you definitely cant blame your favorite youtuber who is making
free day trading videos for you to watch right now either.
Trading in the zone really changed how I look at risk management.
Rather than trading to avoid risk, the book taught me that I should accept that risk,
and choose the set ups that is worthy of said possible risk, and execute my plan with no
emotions.
If you are struggling with trading emotions I highly recommend this book.
The next book, Atomic Habits, is not a trading book, but it is a book that helped me so much
with my own trading discipline.
James Clear teaches you how to create positive habits that last.
And to succeed in trading you must have consistent good trading habits, from drawing support
and resistance and preparation before jumping in, to doing your own research and wait for
confirmation, or even just waking up early at least an hour to two hours before the market
opens.
Don't be that person who just wake up 10 minutes before the open and expect to follow some
chat room alerts to make millions.
I used to be that person actually.
Atomic Habits gives you many key points to building a positive trading discipline that
lasts.
The first one is building a reward and punishment system for yourself.
So when you do a good habit that you wish to have, such as stopping out according to
plan, you are rewarded.
Vice versa, when you make a mistake you know you shouldn't do, such as chasing breakout,
there are negative consequences for it.
Personally, my past reward for doing a good trading habits, was that I get to watch an
episode of Game of Thrones because I loved that show, until the last season because that
was a disaster, and my form of punishment for making a critical mistake, was that I
had to run 10 extra minutes when im doing my workout routine.
And man I hate running.
But this was an extremely helpful exercise because this allows you to associate bad behavior
with negative consequences, and good behaviors with positive outcomes.
James clear offer many more tips on creating routine, such as habit stacking, adding your
habit goals to your list slowly one by one, and also very importantly, journaling your
progress.
Recording all your trades in a journal is absolutely crucial.
It allows you to see your own progress over the course of a few months or a few years.
And from that data is where you’ll find trading set ups and strategies you are good
at and should focus on, and the other kinds of trades where you are terrible at and should
avoid all together.
You can download a trading journal and risk calculator for free when you sign up to my
mailing list below.
You can also check out all the books I've talked about today in the links below, those
are Amazon affiliate links, if you purchase anything with those links I’ll get a small,
like very very small percentage commissions.
It’s all going to my lambo fund of course.
You can also listen to books on Audible, and sign up for a 30 day free trial.
If you guys have any more trading book suggestions, let me know down below because Im looking
for more books to read as well.
If you find this video helpful, please drop me a like and subscribe.