Top 20 Books Top 10 Topics that will make you a better Trader
Here’s a list of 20 stock trading books organized into 10 topics emphasizing on various key aspects of trading which will be critical in your trading success. The books are organized in different topics to help you quickly glance through and pick out particular topics which will be of interest to you. I’ve also included some short reviews on these books to help you understand the contents of the books and how it can help you improve your trading.
1. Top on my list Trading Books
Bill O'Neil is the founder of Investor's Business Daily, a national business of financial daily newspapers, and the creator of the CANSLIM system. If there is only one book that you will like to buy, I will definitely recommend this book. The contents of this book is very all rounded, providing a magic mix of fundamentals and technicals. I was already trading with much similarities to William J. O’Neil’s trading methods but he puts a very good structure around it through his CANSLIM system. A must-have book in your collection.
Marcel Link approaches the topic of trading in a very realistic manner. This is not a get rich quick book but you will get there after practicing the discipline. It covers fundamental concepts of trading which brings even seasoned traders back to re-look at their basics. Though this book is heavy of Technical Analysis, it covers a great deal of key aspects of trading like charts, time-frames, indicators, money management, thought process, timing, trading plans, trading journals, and day-to-day occurrences that you face while trading. It clearly pointed out many of the things I should have done and not have done in the past. Highly recommended.
2. Technical Analysis
This is a great book covering the subject topic of technical analysis. John Murphy talks about Philosophy, chart construction, trends, major technical pattern recognition, technical indicators like moving averages and oscillators, and much more. Best part of it is that it uses many graphical examples to illustrate his examples. As this book talks about financial markets, I also like the section where he shares how he uses intermarket relations to analyze market movements which in my opinion is a form of forward indicator.
Thomas N. Bulkowski’s Encyclopedia of chart patterns in indeed what the title is. I’ve personally read it twice and the second time was a few years later when I wanted to refine some of my trading strategies which involved using selected chart patterns. This book is covers a very niche area of technical analysis, specifically on chart patterns. The best part of this book is that it provides you with statistics on the success and failure rates, and suggestions on failure modes. A very good reference book if you are into trading chart patterns.
Steve Nison's book is like the classic book that introduced the Japanese Candlesticks into the western world. He does a good job in illustrating the market behavior behind the candlestick formations. Coupled with the conventional technical analysis methods, this book will greatly improve your trading execution accuracy with astonishing results.
If you want to have just the basics of candlestick knowledge, Gregory L. Morris book will be a good choice. The step-by-step exercises and tests really gives you an enjoyable learning journey, providing a more hands-on approach to learning some simple candlestick knowledge.
Another good book to add to your list if you want to sharpen your technical analysis skills. This book provides detailed insights into the use of volume which is very lightly discussed in most other technical analysis books. Anna Couling is very good at illustrating how the volume coupled with price movements, provide very good leading indication of future price movements. It adds a totally new dimension to your chart analysis the next time your bring up your charts.
The Intelligent Investor" (1949) by Benjamin Graham
This book is like the bible of fundamental analysis. Benjamin Graham is undisputedly the guru of value investing laid the foundation for a generation of investors in the space of stocks analysis. Recommended by Warren Buffett as "By far the best book on investing ever written." I call it a bible because it is also a thick read. This is great for hard core fundamental investors but if you want an easier read, check out the next two books below.
"Common Stocks And Uncommon Profits" (1958) by Philip Fisher
Philip Fisher is another guru in the value investing. Fisher has developed his methodology of filtering out small portfolio of companies that can generate uncommon sales and earnings over many years Though this book was published way back in 1958, Fisher's lessons are just as applicable to today’s markets.
A comment on the difference between above two books and their approaches. Though both are based on value investing, Benjamin Graham’s stock selection approach inclines towards targeting large cap stable stocks. Philip Fisher on the other hand looks towards targeting smaller cap and high growth stocks. Their risk appetites are different and reading both books gives you a good idea balance of how these legends make extraordinary wealth from different stock segments.
Kathryn F. Staley's The Art of Short Selling offers an interesting insight of an incredibly profitable but often misunderstood discipline that no novice trader should be without. In this book, Staley provides key signals for when a stock's price is going to drop, where these signals are found, and how to utilize these signals to make a profit. Short selling, however, remains incredibly risky, and a few missteps can yield an irrevocable loss. Having a good foundation in the practice is a must, and Staley's guide is a fantastic resources to build one.
Written by Bennett A. McDowell, this book is recommended specifically to emphasize the area of money management. It provides a very good breakdown into the risks of stocks trading and how you can minimize your risk exposure. I will not say that this is an all-in-one book, but because this topic is so important. Capital preservation is critical in long term survival in the any form of trading, hence do take some time to understand what you can do to protect yourself.
If you are to search around the internet on trading psychology, no doubt Mark Douglas’s Trading in the Zone and The Disciplined Trader will pop up everywhere. In his book, The Disciplined Trader, he shows you the routine serious traders set up for themselves to prepare them for their battles. And especially if you are a full-time trader or a day trader, this is going to be a must read.
Douglas shows you how to get into the trading zone. An analogy is like on top of your years of training, you bring your mind, body and soul into that full gear readiness to enter the battle arena, setting up your full focus to give yourself that additional edge.
Super Trader provides a time-tested strategy for creating the conditions that allow you to reach levels of trading success you never thought possible. Providing expert insight into both trading practices and psychology, Van K. Tharp teaches you how to steadily cut losses short and meet your investment goals through the use of position sizing strategies – the keys to steady profitability. Tharp offers concepts and tactics designed to help you.
7. Market cycles
This little book of stock market cycles by Jeffrey Hirsch is a gem. Though patterns do not repeat exactly the same overtime, it packs a good punch in helping identify potential opportunities ahead. The book also provides historical statistics on the accuracy to help you determine how much emphasis to put on. Coupled with your knowledge on technical analysis, this can become very powerful profit generating combination.
Jeffrey Hirsch also writes the annual Stock Traders Almanac, which is published every year with updated statistics. If you like the Little Book of Stock Market Cycles, you’ll definitely not mind investing in a yearly update, and new seasonality that he discovered.
There are a few dividend books out there and while all of them try to sell the benefits of dividend investing, some overstates the potential of dividend stocks while most don’t provide a concrete guide to finding such high potential stocks. This book by Joseph Hogue is different where it starts the approach from where your financial goals are and then lead you into building up your portfolio to reach your goals. Its step by step approach allows readers follow his approach of dividend stock selection. Especially recommended to dividend investors, and am sure anyone who reads this will gain a thing or two.
New book on the block from a veteran and captures very relevant sharing applicable to the current market conditions. He publishes newsletters currently and is rated by Hulbert Digest as the number one low risk investment letter. He approaches the market with a systematic manner and provides a clear and no nonsense explanation of why he is adding or dropping a stock from his portfolio. This is another good read for dividend investors.
9. Penny stocks
Peter Leeds, author of 'Invest in Penny Stocks,' is known as the penny stock professional. Credits include interviews on mainstream media like NBC, CBS, CNNfn, Fox, and more. Don’t be fooled by the title Penny Stocks for Dummies. It consists of more than what you can imagine. Starting with a Dummies book has its benefits where things are broken down into very simple to understand concepts and the topics, and risks are well emphasized. Definitely a book you need to grab if you are just starting to venture into penny stocks trading. Always remember, high returns comes with high risks!
Jesse Stine’s approach to penny stocks is an eye-opener to explosive returns. This big book got me really excited when I first pondered upon it in a book store because of the size of the book and it’s large charts that he uses to illustrate his trading examples. He provides lots of real examples of superstocks with good illustrations of his thought process with charts and notes that he had captured. He shares openly how he sorts out the potential superstocks and what triggers the explosive runs and how he exits them based on his cumulated experience. The interesting thing was that even being such a successful trader, he utilizes a lot of free tools available from the internet. Very easy to read, understand and definitely fulfilling if you can replicate his success.
10. Intermarket analysis
As John Murphy is known to trade across different financial markets, this book of his dedicates to a unique analysis of the relationships between different financial markets. This is knowledge which many hedge funds managers understands well, and moves their money around different markets to capitalize on growth. His book will give you great insights into how hedge fund managers think and allow you to become more nimble and strategic in your trading approach.