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Top Five Trading Books

I often see new traders asking what trading books they should read that will help give them a head start on their trading so I’ve decided to review five books that I think every trader should read whether you are just starting out or are a veteran that needs a refresher. These are some of my personal favorites that benefited me in my trading and think they will help you out as well.

 

Trading In The Zone

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Trading In The Zone is a trading book classic and one of my personal favorites that I keep within arms reach at my trading desk. It was written by Mark Douglas who is an active trader and president of Trading Behavior Dynamics. The book was released back in 2000 and quickly grew in popularity among trading circles as it is one of the best books that successfully describes trader psychology and tips to overcome mental road blocks. Mark Douglas doesn’t give you a step by step trading system but rather focuses on the psychology of trading and what steps are necessary to think like a successful trader. When most people think of trading they think of buying and selling, taking profits, closing out losers quickly and technical analysis, which is all true and very important, but what they often forget is that trading requires mental toughness and a specific mindset to be successful. Anyone can place trades but to consistently pull money from the market is a whole different ball game.

Throughout the book Mark goes into the mindset of a trader and how they should perceive the market with a winner’s mindset. He teaches you how to gain confidence and how to take responsibility for your failures. One of my favorite parts of the book is in Chapter 7 when he talks about eliminating emotional risk. It’s very easy to get caught up in the moment but it’s important to make sure that you are thinking in terms of probabilities and that your exits for both profits and losses are predetermined before entering the trade. Your emotions can get in the way of thinking objectively and consequently cause you to lose money.

One of my favorite quotes from the book:

“Ninety-five percent of the trading errors you are likely to make—causing the money to just evaporate before your eyes—will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table. What I call the four primary trading fears.” – Mark Douglas

If you’re interested in purchasing this book or finding out more information on it you can check it out on Amazon.

 

Encyclopedia Of Chart Patterns

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The Encyclopedia Of Chart Patterns is an excellent reference book and one that I also keep close by. It was written by Thomas N. Bulkowski with the second edition printing back in 2005. The book covers just about every chart pattern there is with detailed information on when it works best and under what market conditions. Each chart pattern also has statistical data based on past performance so you know the likelihood of success before you even get in the trade. In the second edition he added a new section that specializes in “special event” patterns after big announcements like earnings and upgrades. This is valuable data to study because these big events cause stocks to become very volatile providing excellent opportunities for traders to take advantage of. If you’re new to trading you definitely need to read this book and if you’ve been trading for while then this is a great reference book to keep chart patterns fresh in your mind. Either way, the information in this book is incredibly valuable.

If you’re interested in purchasing this book or finding out more information on it you can check it out on Amazon.

 

Reminiscences Of A Stock Operator

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“A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him.  Never argue with it or ask for reasons or explanations.”

This book is different than the other two in that it is not a “how-to” but rather a story of a famous stock speculator that was written by Edwin Lefevre in 1923. Its a classic story about a fictionalized account of the life trader named Jesse Livermore who starts his trading career in bucket shops but was soon banned after winning too much money so he takes his skills to wall street where he made a lost several fortunes. It’s a great story that every trader should read and even though it doesn’t explain how to make money in the markets it does provide excellent insight into a big time traders mindset with invaluable advice about speculating and how the market works. I’ve read this book a few times and it never gets old. Check this one out, you won’t be disappointed!

If you’re interested in purchasing this book or finding out more information on it you can check it out on Amazon.

 

The Art And Science Of Technical Analysis

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The Art And Science Of Technical Analysis was written by  Adam Grimes who is a successful trader and educator of the markets. He also writes a blog that you can check out here. This book is a great read and one that I reference often for refreshers on chart analysis and market structure. The book starts off talking about developing an edge in the market through analysis and testing while using price action as confirmation. Having an edge in the markets and then having the discipline to trade your edge is crucial to surviving the trading world. A large part of the book covers market structure and trading strategies based on current market conditions and price action with the tools he recommends for entry and exit confirmation. He goes into depth about trading trends, ranges and breakouts with detailed examples to illustrate his strategies. The last section of the book covers the psychology and the process of becoming a trader and what steps you will need to take to be on the right path. I fully enjoyed this book and took a lot out of it that I still implement in my trading today.

If you’re interested in purchasing this book or finding out more information on it you can check it out on Amazon.

 

Market Wizards

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Market Wizards is a trading book classic written by Jack D. Schwager who interviews top traders that have made millions trading the markets. The interviews are great as it dives into the minds of traders who have lost it all, made it back and are now sitting on top of piles of cash. The book is sectioned by what the interviewers traded so the first section covers traders who traded futures and currences, the next covered stocks and then goes on to interview traders who traded a little bit of everything. Some of the traders interviewed include Paul Tudor Jones, Marty Schwartz, Tom Baldwin and Michael Steinhardt to name a few. One of my favorite interviews is with Paul Tudor Jones who is a billionaire hedge fund manager who started Tudor Investment Corporation. Jones started off as a floor clerk at the New York Cotton Exchange where he was mentored by famous cotton trader Eli Tullis. It is there that he learned how to trade with size and manage his positions like a professional trader. He went on to run his own fund and eventually become a billionaire.

This was a fun book to read as you get to see how successful traders think and how they handle adversity. Trading is a tough job and you always hear about traders failing to make it so it’s great to read success stories that you can learn from. If you’re interested in purchasing this book or finding out more information on it you can check it out on Amazon.

 

 

Reviews by Warrior Trading

 

 

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