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.
