There are some trading books that you should read, and there are some that you should own. Borrow or rent the former, and buy the latter for your trading library.
We came up with a list of trading books you should own. And this is our criteria:
- Technical trading books
- Does not need any proprietary trading system
- Prefers reference books
- Prefers trading topics that are equally applicable regardless of your trading style
Start building up your trading library with these 7 trading books.
(Click on the book images for more details.)
Technical Analysis
1. Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications
John Murphy has covered nearly everything you need to know about technical analysis and technical trading.
Experienced traders might find parts of this book elementary. However, with a clear writing style and a comprehensive range of topics, this book is impressive.
If you need to check up a trading concept quickly and expect to read something concise, this is the book you want.
2. Trading Systems and Methods
Perry Kaufman’s book takes a more quantitative view of technical analysis and some popular trading systems. It provides the link between statistical concepts and common market behaviors that traders take for granted.
While it is a must-have for designers of trading systems, grasping the statistical concepts behind price action is beneficial for any type of trader.
Even for the discretionary trader, trading boils down to having a mathematical edge.
Trading Psychology
3. Trading in the Zone
Mark Douglas’ book is a classic on trading psychology. It promotes the necessary probabilistic mindset of a trader, which is the key paradigm shift a trader has to attain.
Although the book belabors the same few concepts, it is golden. I have lost count of the traders who said that this was the turning point in their trading career.
4. The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist
Dealing with our emotional roller-coaster, confronting our weaknesses, coping with trading stress, and recovering from a slump in trading performance. These are just some of the many issues of a trader’s psyche.
Fortunately, Brett N. Steenbarger has broken down the vastness of trading psychology into 101 distinct parts for us to work on. No mental fluffiness. Just an actionable plan to improve our trading performance by working our minds.
Well, but there are only 101 daily lessons. We won’t need this book after three and a half months. So why are we curating this for our trading library? Why not just borrow or rent it?
Even if we complete one lesson a day (which I doubt), we will never be done with them. Dealing with our emotions while trading is a constant struggle. It is a process and not just a list of tasks that we check off. Expect to revisit the lessons.
Inspiration For Traders
5. Hedge Fund Market Wizards
We all need a little inspiration and motivation from time to time. Nothing works better than looking at the successful traders we aspire to be.
And nothing allows normal people like us to do that better than Jack Schwager’s Market Wizards series.
Jack Schwager’s flair for getting top traders to share their secrets is undoubted. The Hedge Fund Market Wizards is his latest work.
Position Sizing
6. Van Tharp’s Definitive Guide to Position Sizing
First, we need a trading edge. Then, we must stay alive while waiting for our trading edge to bring in the profits. This is risk management.
There are dozens of books on financial risk management. However, these books focus on the risk of investment portfolio and not trading positions. Their targets are professionals working in large financial institutions and not the individual trader.
For retail traders, a large part of risk management is position sizing.
Van Tharp’s book is the most comprehensive book on position sizing written for retail traders. It introduces the different position sizing models and discusses their pros and cons. It also highlights the different considerations of a trader when choosing a position sizing model.
How Markets Work
7. Trading and Exchanges: Market Microstructure for Practitioners
Most traders will not bother with how financial markets work, what goes behind the scenes, and the role of different market players.
However, understanding the make-up of the markets we dabble in daily does give us a sense of perspective. It brings the retail trader beyond the buy and sell button on the computer screen and provides an in-depth view of the trading mechanism.
Larry Harris has done a wonderful job in condensing this tough and dry topic into a relatively easy to read package.
More Trading Books
That’s our top picks for trading books to own for all technical traders. You can expand your library with more trading books that are relevant to your trading style and instrument.
For those interested in day trading, take a look at our Top 10 Day Trading Books.
What’s in your trading library? Share with us.
Image credit: Amazon & timetrax23 [CC BY-SA 2.0] via Flickr (cropped from original)
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