All readers are not leaders, but all leaders are readers. If you want to be successful at anything, the three most important factors are education, practice, and execution or action.
This all begins with education, because if you practice the wrong things, your execution will be flawed and you will fail. Therefore arming yourself with the sword of good information through reading, studying, and classes is the absolute best place to start any endeavor.
A quick Google search will lead you to discover that there are about as many books available on the subjects of trading, investing, and money management as there are lawyers in the world. That is to say, more than there are actually people. Navigating through this endless sea of information, or in some cases cesspool of information, can be a maddening and endless process for those who are looking to begin learning or increase their acumen in the field of stock market trading.
We here at HowToTradeStocks.org are in the business of making things easier for you, and contributing to your future success in trading. Therefore we have compiled a short list of books to help ease your search. These are books which cover a wide range of areas in trading and which should give the beginner trader a solid foundation from which to start while, providing the more advanced traders some sharpening for their saw.
If you know of any books which you think should have been included, please leave them in the comments section.
Trade Your Way to Financial Freedom by Van K Tharp
However, if you leave aside the title and some of the premises in this book, the author has laid out, although sometimes disjointedly, a fairly
solid foundation of money management principles and trade sizing as opposed to specific entry and exit points.Mr. Tharp’s book has been harshly criticized by some for several reasons, and rightly so in some cases. Any book, class, or person that claims they have a magic bullet solution to financial freedom or beating the market is chasing unicorns, or worse, stealing your money. In addition, Mr. Tharp has no personal experience trading.
There are no specific trading practices in the book, at least none worth discussing in depth, but what this book does is give you a good feel for the overall paradigm of trading. Good trading involves many aspects, and Mr. Tharp does a great job of broadly discussing the psychology of the markets, money management to keep you from losing all of your money quickly, and the idea of position sizing, which is highly under-discussed in most trading books or classes.
This book is not for the advanced trader, but for the beginning trader is a must-read. I would only suggest that you learn from his broad principles and not get hung up on any promises of fortune.
Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude by Mark Douglas
You can learn technicals, charting, earnings, range-trading, or whatever other methods you want to use until you are blue in the face. If you don’t learn how to master your own mind and your emotions, you will lose money in the markets.
Mark Douglas, who’s earlier book The Disciplined Trader is also considered a masterpiece in the realm of trading with self discipline and the right mindset, follows up on this concept in this book, which should be mandatory reading for anyone who decides to trade, whether for a living or on the side.
Being “in the zone” is a common expression that is used by athletes, entertainers, and business people alike. When you are in the zone, things are practically effortless. It’s like you were born to do what you are doing, at this moment in time, and no one could possibly be doing it better.
This is a matter of preparation and mindset, and Douglas explores and explains how to get there and what is required of you mentally like Shakespeare writing a sonnet. Read this book before you start trading. If you are already trading, stop until you finish this book. It will improve your trades without a doubt.
The Market Maker’s Edge by Josh Lukeman
Most books and information come from the buy side of things: other traders, investment firms, and people who study how to trade. Lukeman gives us a different perspective in this excellent book, taking a view of the seller’s side.
Lukeman was a market maker for Morgan Stanley Dean Witter, and if you are unsure what a market maker is or what they do, you need to learn. They are in many ways your enemy in trading, and beating the market means beating them.
While this book could go into more extensive details on market making activities, it definitely gives a good overview of them and does give a few strategies that you may not find too many places, like the “dead cat bounce”.
The importance of this book is that it again helps you to have a more complete understanding of the processes of the market and the different aspects of the forces at work in them. You should always develop your own strategies for trading, but the best way to do that is with a well-rounded knowledge base under your belt. Lukeman’s book is essential in rounding out that base.
Trading for a Living by Alexander Elder
This book by Dr. Elder is a prerequisite for beginners, but also gives some good food for thought on some strategies. He also discusses the mass psychology of the markets, and while Mark Douglas does this better if this is the only subject you are reading for, Dr. Elder does offer some analogies and thoughts that will expand your thinking a bit on the subject.
Once again a somewhat misleading title, don’t expect to read this book and quit your job to trade the next day. It does give you a great foundation, however, as well as a few things that even the most advanced trader will be able to add to their arsenal.
There are still many traders who don’t understand concepts like the fact that opening prices are almost always determined by amateurs while closing prices are almost always controlled by professionals, and this type of information can add a new strategy to your trading right away.
You can never learn too much, and I believe that this book is one that every beginner, and almost every other trader, should have under their belt.
Profitable Candlestick Trading by Stephen W. Bigalow
If you are a little more advanced and have a basic understanding of trading the market, this one can take you to the next level. In my opinion this is THE definitive book on the technique of Japanese Candlestick trading.
If you are not familiar with this method, all the more reason you need to read this new classic. Using candlesticks is a Japanese technique that dates back over 300 years and has proven to be one of the most accurate charting methods in modern trading.
Bigalow not only explains what this method is and looks like, he gets into the red meat of the matter. He explains why stochastics work best with it, what the most effective patterns are, and some real strategies for actually making money with them instead of just a high-level academic study of the method.
This book is for every level of trader. Although it is a bit on the pricey side, the only trader who should not buy this book is the one that already owns it. Period.
Unlocking Wealth: Secret to Market Timing by John Crane
I threw this one in the mix because some of you will be looking for more advanced specifics than the first few of my list may offer. If this is what you are looking for, then Bigelow’s book and this one by Crane should give you plenty to shout about.
Crane uses his own specific methods of market timing in this book to give a practical method for trading. While many trading books are more overview, and while market timing in general is frowned upon by many in the trade, Crane in this book proves that a specific market-timing methodology that is time-tested can indeed give you advantages.
Crane effectively identifies reversal patterns in this book using impulse and reaction swings of market structure to identify entry and exit points, and builds on other methods that you may have seen before to create a precise and effective strategy.
If you are an active trader looking for something new, check this book out. It is both elegant and practical, and Cranes writing will not have you wading through trying to figure out what he is saying.
Technical Analysis Explained by Martin J. Pring
The final book in this list is Pring’s technical analysis book. This is a must read for beginners, and a standard for the library of experienced traders as a reference and refresher from time to time. The only problem with this book is that it was edited by monkeys who were drinking at the time. The typos and sentence structure are truly horrid at times.
That not withstanding, Pring covers almost any area of technical analysis that you could want to know about, in a comprehensive (though sometimes hard to decipher) manner.
Beginners, read this book. Muddle through it if necessary, but the ideas, concepts, and strategies that this book will lead you through and to will be invaluable in years to come. It’s similar to the calculus class and teacher you had in high school. At the time you thought it was a waste of time and some concepts were impossible to wrap your mind around, but looking back from engineering school you thought, “wow, what would I have ever done without that information.”
As I said in the beginning, this by no means a comprehensive list of material that can help you in your trading. However, I have full confidence that if you read, study, and employ the methods and teaching in these books, you will have taken a large leap forward in your trading, and will see that much more success come your way. Trade well.