Before I get into this list, I have a warning for those looking for a book on trading, how to trade, or how to become a better trader. Learning about trading via books is a holdover from before this thing called “the internet,” which allowed things like trading blogs, trading services, and trading communities to exist.
Books are good for a general overview of the markets and trading concepts, trader biographies and anecdotal stories, and trading psychology, but by the very nature of their format, they are too limited and not dynamic enough to be relevant for very long.
Use them for a foundation, for ideas, but mostly for enjoyment. I think you will find that your trading will drastically improve that day you decided to stop looking for the latest trading book, and “write your own book” on trading.
As with every list, there will be disagreements. “Why is that book on the list?” “Why isn’t that book on the list?” I picked 20 books that stood out for me as a trader, that were a #valueadd (or a #valueloss) for one reason or another. That doesn’t even have to mean that they are about trading. For example, the “General Interest” section is made up of books that I think appeal to a trader’s mindset.
With that in mind, feel free to add your picks to the “comments” section, along with a sentence or two as to why you liked (or hated) them.
When I originally wrote this post, I committed a grave error in failing to mention one of the best books out there on technical analysis, Technical Analysis Using Multiple Timeframes by Brian Shannon. All I can say is that sometimes we take things that are so a part of our lives, like our wives, for granted, and Brian’s book has been a constant part of my life as a trader. They way he illustrates the power, and simplicity, of using multiple time frames in trading methodology will make you shake your head and wonder why it didn’t dawn on your sooner. A must have addition to any comprehensive trader’s library.
The Market Wizards Series – Chances are you will find these books on the shelf of any serious trader. They are without a doubt the most comprehensive collection of interviews with superstar traders ever published (Market Wizards, The New Market Wizards, Stock Market Wizards, and Hedge Fund Wizards). However, their dirty little secret is that although they capture perfectly a moment in time, they are extremely dated and will give you almost no insight into today’s markets or how to trade them. Their value now is in showing how even the greatest traders initially struggled and often blew up (repeatedly) before becoming successful. They are like benign candy, enjoyable to consume, but won’t help or hurt you.
Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets – This book was the first to quantify one of the most important concepts in trading; the four stages in which stocks move, which are the basing, advancing, topping, and declining stages. Despite the fact that the cover of this book has not been updated since it was published in 1988, stage analysis is still relevant today.
How to Make Money In Stocks: A Winning System in Good Times and Bad – As an unnamed trader friend of mine recently said, all you need to do is review the charts in the first 150 pages of this book and you will be good to go. These charts, along with O’Neil’s annotations, give you a great foundation to understand the patterns stocks form before they go on massive runs.
Reminiscences of a Stock Operator – Tough call on this book, only because I don’t think it is the Rosetta Stone of trading books that it is often described as. The language is dated and colloquial, which though strange, is actually part of its charm. There are definitely some foundational lessons for trading in this book, but you as the reader have to do the historical conversion in your head from venue’s like “bucket shops” to today’s market.
How I Made $2,000,000 in the Stock Market – This book should really be called, “How I Made$18,000,000 (adjusted for inflation) in the stock market,” because that is how much it would be in today’s dollars. That would be phenomenal for anybody, but for someone who did it while traveling the globe, in a pre-internet, computer, iPad, Smart phone world……while working as a professional dancer? Well that is just epic. His “Darvas Box” system, though crude and in need of adjustment to factor in today’s HFT, is still a foundation of a solid trading style/discipline.
The Stock Twits Edge: 40 Actionable Trade Set-Ups from Real Market Pros – Okay, before you accuse me of trying to kiss the ass of my blog overlords at StockTwits, let me just tell you that I was recommending this book publicly, way before I ever resurrected this blog, let alone was asked to join the network. This is the book I wish was written when I started trading 30 years ago. The irony though is that it could not really have been written until just recently. It is the “Market Wizards” for the retail trader, and more importantly, each chapter is written by someone who currently has an active presence on social media. Plus it’s the only place you will ever see @The_Real_Fly write two whole pages without saying “fuck!”
The Trading Book: A Complete Solution to Mastering Technical Analysis and Trading Psychology – I like Anne-Marie, but if she had asked me if it was a wise choice to add another trading book to the world, I would have advised against it. I would have been wrong. I was amazed at the scope of material that this book was able to cover, and do so in a meaningful way. Anne-Marie’s economical (and often humorous) style takes you right to the core of each concept, doing away with irrelevant and superfluous information. I don’t think it is hyperbole to say this is an instant classic for the beginning/intermediate trader.
Japanese Candlestick Charting Techniques – There are a lot of books out these on candlestick charting, but almost all of them are derivative of Nisson’s tome. It goes through and explains the basic concepts, as well as the most relevant patterns related to candlestick charting. Unless you really need to know about the “three-drunk-salarymen-rolled-by-the-hooker-in-the-Shinjuku-train-station” pattern, this book is all you will ever need for candlesticks.
Trade Your Way to Financial Freedom – Yes the title is cheesy and sounds like something from a late-night infomercial, but this book has one of the best overviews of the different types of methodologies you can use to make money in the markets. But more importantly, it shows you how to go about formulating a methodology for trading in the markets. The information on risk and position sizing alone makes the book worthwhile.
The Disciplined Trader & Trading In The Zone – These are the definitive books on trading psychology. I know traders who went from perpetual losers to consistent winners after reading these books. The way Douglas climbs into the psyche of a trader is scary, and there is a good chance you will wonder aloud how he managed to plant the hidden camera and microphones that he used to take notes on your trading deficiencies.
Real World Trading:
Pit Bull: Lessons from Wall Street’s Champion Day Trader – Extremely dated, but still the only full auto-biography (I believe) of a “Market Wizard.” It is a look into the mind and process of an extremely disciplined trader who is still putting up crushing numbers to this day. And despite the fact that he shares James Altucher’s somewhat dubious scatological advice regarding “cleaning out the plumbing” before starting the day, it’s a good read.
One Good Trade: Inside the Highly Competitive World of Proprietary Trading – If you want to know what it’s like trading in the real world of a prop firm, this is the book. But even more so, this book shows you how to focus on process instead profits to become a successful trader. There are a number of great trading lessons in this book, all wrapped around relatable stories (kinda like this blog).
The 50 Best (and Worst) Business Deals of All Time – This book is like eating a piece of candy; you will enjoy it so much but before you know it, it will be done. Clocking in at under 200 pages, it gives concise, informative, and fascinating insights into some well-known, and some not so well-know business successes and failures. The chapter about the ABA’s settlement with the “Spirits of St. Louis” alone is worth the price of admission.
Backstage Wall Street: An Insider’s Guide to Knowing Who to Trust, Who to Run From, and How to Maximize Your Investments – Sure, once again you can accuse me of “kissing ass” to one of the heavyweights of financial blogging, but really….if you have read Josh’s blog for any amount of time, you know he’s the real deal. This book pulls no punches and will probably be looked back upon years from now as the clarion call against the entrenched Wall Street establishment instead of those Occupy Wall Street douchebags.
Mean Business: How I Save Bad Companies and Make Good Companies Great – Dunlap made his name as a “turn-around” specialist for near-death companies, and this book chronicles some of his most famous successes. I get that Dunlap’s career ended in shareholder actions, SEC investigations, and his banning from ever running a public company again, but just because Michael Jackson’s final few albums sucked doesn’t mean that “Off the Wall” and “Thriller” weren’t masterpieces. Dunlap was an asshole to be sure, but often times an asshole is what is needed, and his excesses in restructuring were merely a response to the bloated corporate excesses of the times. It’s hard to fool guys like Kerry Packer, Sir James Goldsmith, and the principles at KKR, so “Chainsaw” Al must have been doing something right at some point.
The New Financial Capitalists: KKR and the Creation of Corporate Value – Every time I re-read this book I get financial wood. Love them or hate them, KKR changed the way M&A was done and left an imprint on corporate financing that is still felt today. It is hard to forget in the wake of the 2008 credit crisis that KKR was always responsible, and almost always successful in using debt and leverage to save failing companies and create or unlock value for shareholders and their investors. This is an authorized biography of the company, but done in a truly objective fashion, and it highlights how the key to a KKR deal did not so much have to do with the money (debt) that they brought to the table, but the wealth of managerial talent they brought to their target companies.
Trading For A Living: Psychology, Trading Tactics, Money Management – This is the “gateway” book that every new trader seems to come through on the road to trading, but I have to say, I have never been a fan of Dr. Elder. It stems for my suspicion that he makes (and has always made) more money from writing about trading and putting on overpriced seminars on trading, than he has from actually trading. In this book he espouses a multiple time frame method that is rudimentary at best and his nod to trading psychology is done better and in more depth by Douglas. The only interesting aspect of this book is his explanation of how trading is NOT a zero sum game, but that is really only worthy of a blog post at most.
The Education of a Speculator – I have a blog friend, who not only is a 100x better trader than I could ever hope to be, but is a connoisseur of art and literature, and even surfs. He is also a friend of the author, Victor Niederhoffer, and thinks highly of him. That is why it pains me to say that “Education…” is probably one of the top 5 worst written books that I have ever read. It would be better titled, “Let Me Tell You What A Great Squash Player I Am.” And even though I am sure there was meant to be some subtext in his narcissistic stories that relate to trading, it is written in such a purposefully exclusionary way that you can’t find it. Since I am part of the “chattering classes” it is probably that Neiderhoffer, a true intellect, is just writing above my level, but unless you are picking this book up on the way to your Nobel Prize luncheon, it’s probably best to just skip it.
Hey, don’t forget to check out my book Trading: The Best Of The Best – Top Trading Tips For Our Times destined to be on this top 20 list someday.
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