If you would like to start trading various financial instruments such as stocks, bonds, commodities, ETFs, and mutual funds, it is important to read the best books on technical analysis.

Reading books is one of the best low-cost ways to advance your knowledge of the financial markets.

Since most of the technical analysis books that we are going to discuss in this article are written by renowned financial traders, they are excellent sources of information about the markets for beginners. They also provide some insight into how the big money operates on Wall Street.

But before going further, let’s first understand what technical analysis is and its significance for traders and investors.

What is Technical Analysis?

Technical analysis is the study of past market data such as volume and price within security charts to predict future price fluctuations and future activity.

For instance, one day a stock’s price may be up, another day it might go down. But you may see patterns and trends emerge if you look at the price’s movement over time.

The study of these trends and chart patterns helps investors and traders to make more financially sound investment decisions.

Importance of Technical Analysis for Day Trading

Technical analysis is used by a large number of financial traders all over the world. Here are some of the reasons why it is so important:

  • It helps in forecasting future price moves

By using technical analysis, traders are able to predict the future price movement of a stock without necessarily having to scrutinize the stock in great detail.

  • Helps identify resistance and support levels

Technical analysis also helps traders to determine resistance and support levels which are powerful concepts in financial markets. When you are able to find these levels, you can make better decisions whether to buy, hold, or sell a particular stock or not.

  • Easily spot trends

If you want to trade stocks, you need to be well aware of the past and current market trends and price fluctuations. With the help of technical analysis, you will be able to learn about long-term and short-term trends which will help you make wise investment decisions.

Best Technical Analysis Books

In order to understand how technical analysis works, it’s best to read books with updated and relevant information regarding the concept. Here is a list of the best books that you can read to hone your technical analysis skills.

  1. Technical Analysis Explained by Martin Pring

Technical Analysis Explained is perhaps the most popular book on technical analysis. Released in 1980, it covers ancillary topics like trading psychology and market mechanics that help traders understand application and importance of technical analysis.

This book is widely considered by many investors to be an “investment bible” since it is so comprehensive. The author gives you everything you need to predict accurately how traders will react to future events based on how they have statistically reacted in the past.

  1. The Art and Science of Technical Analysis by Adam Grimes

The Art and Science of Technical Analysis written by Adam Grimes provides an in-depth information about technical analysis. It teaches investors how to make profitable trading decisions and implement different technical analysis strategies.

In addition, Grimes explains why randomness exists in markets most of the time, and how traders can use technical analysis to capture statistically validated patterns in some market conditions.

According to the author, buying and selling pressure causes patterns in prices. He, however, goes to state that these technical patterns are only effective in the presence of true buying/selling imbalance. This reliable resource also discusses trader learning curves and trader psychology based on Grimes’ vast experience as a trader.

Although the book requires patience and time to understand what Grimes has to offer and may be a little complex at first, it is ideal for traders looking to sharpen their trading skills.

  1. Getting Started in Technical Analysis by Jack D. Schwager

This is another important book on technical analysis. It is written by Jack D. Schwager, a renowned futures and hedge fund expert. Schwager, a graduate of Brooklyn College and Brown University, wrote the book with an aim of turning beginner investors into experts using technical analysis.

The book clearly explains such basics as chart patterns, trading ranges, trends, stops, entry, and exit approaches. Schwager has used clear, simple explanations and numerous examples to provide a solid framework for applying technical analysis to make better and more informed investment decisions.

  1. Encyclopedia of Chart Patterns by Thomas N. Bulkowski

Encyclopedia of Chart Patterns by Thomas N. Bulkowski comprehensively covers chart patterns that provide distinct opportunities in the market. The author tells readers how to trade key events, such as retail sales, quarterly earnings reports, stock downgrades and upgrades. Bulkowski uses statistics to support his approach.

Bulkowski introduces readers to technical analysis and teaches them how to read and interpret various chart patterns. The book also features advanced chart patterns that are used by professional traders to know when to buy or sell stocks. It is a must-read if you are a technical trader or investor.

  1. Technical Analysis of the Financial Markets

Technical Analysis of the Financial Markets is written by John Murphy who is American financial market analyst. In this book, Murphy explains lots of technical analysis models and their application in stocks and futures markets. It covers all the essentials you need to objectively analyze stock charts from how to read charts to understanding technical indicators and tools.

This book also covers intermarket relationships, candlestick charting, stocks and stock rotation, and the latest developments in computer technology.

Bottom Line

It is true that the most successful traders/investors are usually the ones who are well informed and prepared. Technical analysis is an essential tool that can help a new trader or investor to make well-reasoned investment decisions.

Each book mentioned above is packed with techniques and strategies which will help you in minimizing risk and in making long-term successful investment decisions.