The Best Trading Book I read in 2016
The best book I read last year was Trade Mindfully by Gary Dayton, PSY. D.. The book was published at the end of 2015. If you’ve read any of the books by the late Mark Douglas, then this book adds to that understanding of the trader mind and the psychology of trading. If you’ve been trading for any length of time, then you probably know that trading exposes our self to ourselves. We discover strengths and weaknesses. We find that trading is more about the mental game and it’s not just a matter of reading a chart correctly.
As you read Trade Mindfully, it becomes obvious that Gary understands the dilemma of trading. While we may know the right thing to do, we don’t always do it. We make some of the same mistakes over and over again and we trade from our emotions far too often. While we know we shouldn’t hang onto that losing trade, we still do, hoping things will turn out differently this time and that maybe we’ll get lucky. We can’t stand the idea of losing money on a trade and our fear of loss causes us to act in a manner that is not beneficial to our account. Our fear can cause us to trade with too much caution or with too much risk.
Overall, the book is broken into three parts: Understanding your mind, using psychology to understand that mind, and tools to maximize performance.
As the title Trade Mindfully suggests, one of the key tools for maximizing our performance is by trading in the moment and using mindfulness to keep ourselves in the moment. It’s not that we should ignore these emotions. Rather, we must accept them and learn to disallow their irrational impact upon our trade decisions.
As Dr. Dayton says, “Accepting our thoughts and feelings – even though this can be uncomfortable – can play a significant role…Rather than cutting a profitable trade prematurely because your mind and feelings are pressing you to avoid a loss, traders can overcome the disposition effect by facing their fear, holding the trade – even if just a little longer, and, in the process, being as open to their feelings and thoughts as they can, understanding that they are a natural response to the threat of loss, not something to fight, control, or get rid of” (page 175).
When we focus upon our internal state of emotions, rather than the objective reality on the chart in front of us, then our trading suffers. But saying that this is true is one thing and getting a handle on it is something else. This is where Dr. Dayton focuses upon the tool of meditation and mindfulness. If this sounds like a bunch of eastern mysticism to you, then I’d encourage you to keep an open mind. Personally, I’m been practicing meditation for nearly 20 years. I say “practicing” because it is not something one masters…at least not me, anyway. However, bringing the practice of mindfulness into the trading room was not something I had entertained much until I read this book.
Throughout the book, Dr. Dayton focuses on the importance of trading as a system of probabilities and on the trader’s need to focus on process. He says, “how we make trading decisions is more critical than what we get for results” (page 207). Now, if you’ve been focusing just on the profit and loss portion of your trading account, then this may sound crazy to you. But the idea is that focusing on the process allows us to accomplish our best trading and better profits will be the natural result of this change in focus.
I hope this review of Trade Mindfully has been helpful to you. Click here to go directly to Amazon and download a free sample of the book.
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