Trading in the Zone by Mark Douglas (buy here)
This was the book that finally got me on the right footing as a trader. It was published in 2000 and I have read it every year since then, and every year I still manage to learn something. Up until reading this book I had never had a profitable trading year (wiping out three portfolios over five years). Since reading (and repeatedly rereading this book) I have never had a losing year and I pretty much put it down to what I learnt in Trading in the Zone.
As we show in this Trader: What matters infographic, trading is pretty much all about psychology and getting your head in the right place. I had learnt technical analysis, I had learn risk management (well stop loss was a late lesson for me), but I hadn’t learnt the most important part of trading – me.
The book taught me how to manage both losing and winning trades, how to think not only about the market but also how to think about my trading and to think merely in terms of probability without worrying about the money.
Most of all it taught me to stop worry about that will happen next, for the simple reason that we have no idea what’ll happen next. All that we can control is how we will respond to the unknown. That is our trading edge: the individual and how we respond.
Importantly, this is not an easy book to read. In part because Douglas is not an awesome writer, but he is an awesome thinker. There are no fun stories or anecdotes to distract your while you’re reading. It is hard work, but totally worth it.
In short this book is a must read for every trader regardless of where you are in your trading career.