If you’re like me, you’re always on the lookout for the next trading book to pick to improve your trading skills. I bought a Kindle with unlimited subscription only because I found that there were dozens of trading books available in the subscription. If I bought all those books, it would have cost me a fortune. In hindsight, only a few of those books were fine and probably helpful for someone who is just starting. But most of them were literally junk.
Beyond Kindle, I have literally read hundreds of books on trading on nearly everything under the sun that is even remotely related to trading. Game theory, behavioral finance, sentiment analysis, macroeconomics and what not.
Though most of these books helped me learned something new, there are only a few books that really, I mean REALLY, helped me understand the nuances and get better at trading. If someone asks me for trading book recommendations, I always tell them the same five books mentioned below.
Technical Analysis of Stock Trends
If I have to pick only one book for Technical Analysis then this would be it. Since decades, this book by Edwards and Magee, has been the best book on technical analysis and would like remain so for a long time to come. Concepts explained in the book are evergreen and they had relevance when this book was written and they are still as valid today since when it comes to technical analysis, it’s all about mass psychology and that doesn’t really change.
In simpler words, you’ll get to learn all about common chart patterns like head & shoulders, double tops and bottoms, trendlines, support, resistances, triangles, wedges, gap theory and numerous other relevant things. Every single thing has been explained thoroughly with plenty of real stock examples.
You can find multiple editions of this book with minor additions but pick whichever edition you can find. I have ninth edition of the book and I never really felt that if I bought any other edition then I would have been better off.
How to Make Money Trading with Candlestick Charts
Title of the book might make it look like this is just an attempt at defrauding people by selling this book using a “catchy” title. But don’t judge this book by its cover 😂
This book helps interpret candlesticks in a very practical way, so much so that you won’t even need to remember all those funny candlestick pattern names like dragonfly doji, engulfing, three black crows and so on. You would look at the candles and know what’s going on. This book does a wonderful job at explaining the real reasons behind formation of specific candle shapes and patterns using the psychology of market participants.
After you read this book, your candlestick education will be complete. Period.
Trading in the Zone
Trading education is incomplete without a lesson in trading psychology and in my experience, this books does it best. Just learning the technical or fundamental analysis isn’t enough. I have seen a good number of traders are very good at technical analysis but still suck at trading profitably. And the reason for that is – not having the right mindset and psychology to handle the trading game.
It’s well known that trading is one of the hardest job. Most people think if they learn to analyze the markets, they’ll make money. And more often than not, they even learn to analyze the markets in a decent way. Why? Because learning the technical and fundamentals is the easy part. Handling the probabilistic nature of trading and the stress that can come with it is what makes it so hard. That’s the reason majority of people who start trading quit in a short time, often after losing a lot of money.
This book will help you understand the intricacies of trading psychology and will prepare you to deal with the trading game with right mindset. Let me tell you another thing – if you’re thinking you’re read it once and you’ll be ready then you’re mistaken. You have to re-read the book as many times as it takes till you actually reinforce the learnings from the book in your trading. It’s easy to read or learn but very difficult to follow what you’ll learn in this book. I bought this book years back and I still keep it handy and read chapters randomly every now and then. Take it from me that you can never read this book enough number of times.
Reminiscences of a Stock Operator
“Reminiscences of a Stock Operator” by Edwin Lefèvre is an essential read for every trader, encapsulating the timeless wisdom and lessons of Jesse Livermore, one of the most legendary traders in history. This book offers a compelling narrative that combines a historical perspective with practical trading insights, making it a must-read for both novice and seasoned traders.
The book chronicles the life and career of Livermore. From his early days as a quotation-board boy in bucket shops to his rise as a Wall Street titan, Livermore’s journey is a fascinating study in the art and science of trading. The book is full of anecdotes and experiences that vividly illustrate the psychological and emotional aspects of trading, which remain as relevant today as they were a century ago.
One of the key reasons this book is indispensable for traders is its emphasis on the psychological aspect of trading. Livermore’s insights into human behavior, market sentiment, and the emotional challenges of trading provide invaluable lessons. He emphasizes the importance of patience, discipline, and the ability to manage one’s emotions under pressure. Livermore’s famous adage, “The game taught me the game. And it didn’t spare me rod while teaching” underscores the idea that trading is a continuous learning process shaped by successes and failures.
Though most describe this book as a sea of trading wisdom, which it is, I personally also found the book very entertaining as if I were reading a nice fiction.
Market Wizards: Interviews with Top Traders
This is another must-read for every trader. Market Wizards by Jack Schwager offers a wealth of knowledge from some of the most successful traders in the world. Originally published in 1989, the book features in-depth interviews with a diverse group of trading legends, each sharing their unique strategies, philosophies, and insights into the financial markets. Over the time, this book has been revised many times with interviews of newer generation trading geniuses.
What makes this book essential for every trader is its rich collection of firsthand experiences and wisdom. Coming directly from the people who have been there, done that! In essence, this book gives you an insight into the psyche of these trading legends and every single one of them having their unique way of making it big in the market. Interviews in this book cover a wide range of trading styles, from technical analysis and trend following to fundamental analysis and macro trading. This diversity allows readers to see that there is no one-size-fits-all approach to trading. Instead, success comes from finding a style that suits your own personality and strengths.
The interviewed traders emphasize the importance of discipline, risk management, and emotional control. For example, Bruce Kovner talks about the necessity of cutting losses and not letting emotions drive trading decisions, while Paul Tudor Jones highlights the critical role of mental toughness and staying calm under pressure. These lessons underscore the fact that mastering the mental aspects of trading is as crucial as developing a robust trading strategy.
Ending Notes
You might be wondering why I didn’t mention any book about Elliott Waves. Well, that’s because the idea of this post was to cover the essentials that every trader needs. Knowledge and wisdom from the books covered here are essential in my experience for trading success. Elliott Waves is just one of the “extras” that you can learn to enhance you trading but it’s not essential by any means. You can find lot of good traders who have never used Elliott Waves.
Becoming successful trader is a long and hard journey as you would find while reading interviews of the in the Market Wizards book mentioned above. Wisdom from these books would equip you to deal with the obstacles that you would come across. By no means, I imply that these books along are enough. Read as many books as you need do but ensure you also read these five books mentioned here.
Happy reading!
