Psychology of trading: how to overcome yourself and achieve success (Part 5)

Behavioral finance

While bias in trading is a quality of the individual trader, behavioral finance is a science that studies the collective and irrational behavior of traders, driven, among other things, by their emotions.

Behavioral finance (or behavioral economics, economic psychology) studies such concepts as:

• Herd behavior;
• Mental accounting;
• Self-attribution.

One of the authorities of behavioral finance is considered the psychologist Daniel Kahneman, who with his colleague Amos Tversky compared cognitive models of risk-taking with economic models of rational behavior.

In 2002 Daniel Kahneman received the Nobel Prize in Economics "for his application of the psychological methodology to economic science.

His 2011 book Think Slow, Decide Fast became an international bestseller. The information from it is not easy to understand, there is no specific analysis of the life of a trader, but the book will certainly be useful.

What to read on the psychology of trading.

Let us continue the theme of bestsellers by recommending authors who are directly related to trading and psychology.

Brett Steenbarger
Director of Trader Development at Tudor Investment Corp. A psychologist with a Ph.D., he has been coaching and recruiting traders and portfolio managers for hedge funds since 2004. He is the author of several books in the field, including The Psychology of Trading, The Psychology of Trading 2.0, Improving Trader Effectiveness, and Day Trading Coach.

Mark Douglas
Mark began developing seminars and training programs on the psychology of trading in 1982. His books "Zone Trading" and "The Disciplined Trader: Developing a Positive Attitude" are considered industry classics and some of the first books to introduce traders to concepts from psychology.

Jack Schwager
Author of books in the "Market Masters" series, which is a collection of interviews with professional traders. Reading their statements, including from the field of psychology, you can better understand the way of thinking of those who have achieved notable success. And thus learn how you need to improve your qualities.

Alexander Elder
A qualified psychologist who advised traders in a private office on Wall Street, and then began trading himself. His famous book Trading for a Living (How to Play and Win at the Stock Exchange: Psychology. Technical Analysis. Capital Control) is a must-read.

The above list of books can be greatly expanded, but we have cited those with which it is worth starting to study the topic of the psychology of trading.
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Follow our updates for useful information in our series of articles. You can also visit our previous article to better understand this topic.