This post is written by Jet Toyco, a trader and trading coach.
I always get questions like these…
“Hey man, what’s the best book for price action?”
“Can you recommend me a book about Elliot Waves?”
“What’s the best trading book for indicators?”
There’s always a never-ending pool of trading books to read whenever you encounter a new subject in trading.
But let’s be real here:
Should you spend a lot of time reading 200+ pages to learn a topic?
Or should you google what you want to learn instead of getting a trading book you probably won’t finish?
Well, the answer is that it depends.
Because trading books can either waste your time or change your trading career forever.
So the question is…
How do you know which book to invest in and which topic to search on google?
You’re in luck because that’s what I’m going to teach you in today’s article.
But before that, it’s essential to know first what not to do when reading trading books…
The Biggest Trap When Reading Trading Books
Here’s the thing:
Trading books not only cost us money when we acquire them.
But also our time (unless you get them by other means for free… *wink* *wink*).
That’s why to make the most out of your time as a trader…
It’s crucial to learn how to use the books effectively and not just randomly squeeze some stock knowledge into your brain.
You must know the number one mistake traders make when reading a trading book.
Mistake #1: Finishing the book first before applying anything into the markets
This is important.
You have to accept that reading a trading book is a journey no matter how many pages it has.
So if you only start to apply concepts and strategies after you finished your journey…
You’ll be forced to piece the concepts together from the start, which you’d probably have forgotten already.
See what I mean?
That’s why the next time you open a trading book, you need to have these open at the same time:
- Your trading charts
- Your notebook
- Your trading journal
So that whenever you encounter an interesting concept you think would benefit you, you’d apply it immediately to understand the concept fully.
In the end, it’s not about how fast you read but how quickly you apply.
Mistake #2: Reading a book not related to where you are right now in trading
Have you ever experienced a time when your brain discards the information immediately after reading something?
It’s like you don’t get what you’re reading or it’s unrelatable.
So, what’s happening here?
The reason is that the book you’re reading doesn’t match the stage you’re at as a trader.
It’s like you’re reading a college book while you’re still in kindergarten!
Now you’re probably wondering:
“Hmm, now that you mention it, what are the different stages of a trader, and how do I know which stage I belong to?”
I might be simplifying it, but it all boils down to these three:
- Stage 1: Newbie trader
- Stage 2: Wounded trader
- Stage 3: Pro Trader
Let me explain…
Stage 1: Newbie trader
Newbie traders focus mainly on strategy.
There are many things they don’t know and are too fixed on being scalpers or day traders.
They focus on rewards and not the process of operating a trading business.
Stage 2: Wounded trader
Wounded traders not only focus on strategy but now focuses on risk management as well.
These are the type of traders who starts knowing what they don’t see as they start experiencing painful losses in the markets.
The majority quit at this stage, but those who stay will start learning that trading is more than just the money and will begin to enjoy the process.
Stage 3: Pro trader
Pro traders successfully maintain the balance of focusing on strategy, risk management, and trading psychology.
These traders have finally achieved consistency and attained the “feedback loop” of learning and improving from mistakes.
Pro traders are also more focused on their growth as they continue the never-ending pursuit of learning what they don’t know.
So they start scaling up their trading businesses by adopting new strategies and trying out new things.
Now let me ask you…
What stage are you currently in right now?
If you answered that you’re still in a newbie stage, do not be ashamed of it.
Every successful trader was once a newbie!
But whatever your answer is…
I want you to remember it because it will let you discover suitable books based on your stage.
Let’s get started…
A Book to Shorten Your Learning Curve As a New Trader (And What Not To Do)
I’m not going to lie to you…
If you’re a new trader who’s still learning terminologies and essential concepts out there…
You’d only be wasting your time reading a book.
Because there’s already so much free content, that’s enough to build your foundation in trading!
There are also so many traders out there on YouTube who’re willing to teach you the basics!
There’s nothing to invest only but your time and apply the concepts you learn without spending anything.
I know what you’re thinking:
“Does this mean that newbie traders should not read trading books? Then what the heck am I even here for!”
Let me explain.
If you want to find the best trading book as a newbie trader…
Then your objective should be to find trading books that expand your horizon on what trading is, and the number one book for this is…
So, what’s so special about this book, you may ask?
This book is unique because each interview uncovers their powerful mindset on why they trade the markets and why they choose to trade that way.
This book will equip you with the necessary trading principles to last long in this trading business.
In the end…
You’ll realize that it’s not about copying a trader’s method to be successful but about continuously honing your skill in one field that you believe in.
Because both of us can be two different traders but still be successful.
A line I could never forget is from Ed Seykota’s interview:
“I feel my success comes from my love of the markets. I am not a casual trader. It is my life. I have a passion for trading. It is not merely a hobby or even a career choice for me. There is no question that this is what I am supposed to do in my life.”
Read this book, and it’ll change the way you see trading as a newbie trader.
(Though I highly suggest you watch the film Floored to better relate with the book)
The next best trading book you’d never want to miss as a newbie trader is…
I’m not going to lie to you…
It’s hard to fully make sense and practically apply the strategies taught in this book, especially when you trade other stock markets.
I love this book because of the timeless principles shared to help you make better decisions as a trader and also the trading concepts shared are backed by William O’Neil’s research.
Let me give you an example…
“History demonstrates most bull markets last two to four years.”
“Old news will often have the opposite effect on the stock market from what it had when the news first broke.”
“What seems too high in price and risky to the majority usually goes higher eventually, and what seems low and cheap usually goes lower.”
From technical to intangibles, the amount of priceless information you’ll get from this magical book is invaluable!
Now, what about if you’re a “wounded” trader?
What’s the best trading book for you?
Discover in the next section below…
Best Trading Book for Wounded Traders To Get Back On The Green
If you’re still here eager to learn how to trade even though you’ve probably already blown a couple of trading accounts or kept on losing money…
I applaud you.
It tells me that you’re willing to own up to your mistakes and use them as a stepping stone towards becoming a successful trader.
I know it’s hard right now.
But the learning opportunity you’ll get at this stage will forever change your life and trading career.
Nonetheless, in times of darkness, this book will be your savior…
Ask any trader what the best trading book is, and I can almost guarantee you that they will at least mention this book.
So, what makes this book so famous?
This book breaks down everyday trading habits that repeatedly harm traders to the tiniest detail and teaches you how to conquer them.
This book also opens a door towards knowing more about who you are as a person.
One of the lines I’ll never forget in this book is this:
“Probably one of the hardest concepts for traders to effectively assimilate is that the market doesn’t create your attitude or state of mind; it simply acts as a mirror reflecting what’s inside back to you.”
Trading In The Zone is worth both your time and money, and you’ll always learn something new whenever you re-read this book.
The next book you’d never want to miss at this stage is…
I know you’re thinking…
“Why is this book not recommended for newbies?”
I find that the book has many advanced technical concepts a new trader might find hard to grasp.
But as a trader who’s done the hard work in the past and experienced losses…
This book will widen your horizon when it comes to managing risk, managing trades, and choosing systems to trade.
One line that left an impression on me was:
“You have to enjoy trading because if trading is a source of negative emotions, you have probably already lost the game, even if you make money.”
Finally, if you’ve reached the “Pro Trader” stage, then you’d love the next section…
Best Trading Books to Gain That Extra Edge In Trading
At this point…
You most likely do not trade mainly because of the money anymore, but you trade towards continuous growth and improvement of:
- Your skill as a trader
- Your performance
- Your risk control
- You as a person in general
So here’s the thing:
What trading books should you focus on as a trader who has experienced many ups and downs in trading?
Statistical trading books.
That’s right. You’d want to focus on concepts backed by statistics so that you can incorporate them with your current trading plan or adopt a new one.
In this case, you can never go wrong with Andreas Clenow’s book.
The best thing about this book is that it gives you a complete, simple, and backtested working trend-following strategy.
Learning a new concept from a book followed by statistical evidence to back it up is one of the most powerful things you can get from a trading book!
The only downside?
This book caters mainly to trend-followers in the futures market.
So, how about for mean reversion traders?
In this case, you may want to check out Howard Bandy’s book:
As you’d expect, this book gives you a variety of backtested mean reversion strategies.
The best part?
It gives you the code used in the tests so that you can test it out yourself!
The difference, of course, is that the previous book is for trend-followers, while this book is for mean reversion traders.
With that said, let’s do a quick recap on what you’ve learned today…
- It’s crucial to learn how to use books and apply fast than read fast and apply slow.
- The 1st edition of Jack Schwager’s Market Wizards and William O’ Neil’s How to Make Money in Stocks will help traders discover whether trading is or isn’t for them.
- Mark Douglas’ Trading In The Zone and Jack Schwager’s New Market Wizards is an outstanding book for wounded traders seeking answers on how to recover from their losses.
- Focusing on books backed by statistics will help leverage a pro trader’s consistency
Now here’s what I’d like to know…
What other trading books would you recommend?
Do you agree to the book recommendations above?
Let me know in the comments below!