Reading books on investing and stock trading is a great way to prepare yourself for live trading. Here are my 16 recommended investing books every trader should read.
This classic by Dr. Alexander Elder teaches the 3 M’s, Mind, Method, and Money. It gets deep into the psychology of trading. It combines technical analysis, strategy, and money management.
Dr. Elder has done it again! This book is destined to become another classic in trading literature. I remember reading the first print of this book in the early 90’s. I carried it with me to my day job, read on my breaks, and continued reading after work. This new version has been updated and adapted for use in modern volatile markets including the use of new tools. I also like how this new version includes beautiful charts from the StockCharts website that most of us already use for trading. If you are looking to better understand the dynamics of risk management and trader psychology, this book is a must read.
This book is a collection of interviews with some of the most successful traders on the planet. The interviews are fascinating and you can take many lessons away from each as consistent themes emerge across all types of traders. This is THE book for anyone who wants to learn about trading or investing.
This popular book by William O’Neil has sold over 2 million copies. Mr. O’Neil explains how markets rise and fall because of the daily collective decisions of thousands of financial institutions (mutual funds, banks, insurance companies, hedge funds, etc.) moving billions of dollars around in search of growth. Mr. O’Neil advances his CAN SLIM trading strategy. CAN SLIM is Investor Business Daily’s acronym for the seven common characteristics all great performing stocks have before they make their biggest gains:
C= Current earnings per share should be up 25% or more and in many cases accelerating in recent quarters. Quarterly sales should also be up 25% or more or accelerating over prior quarters.
A= Annual earnings should be up 25% or more in each of the last three years. Annual return on equity should be 17% or more.
N= A company should have a new product or service that’s fueling earnings growth. The stock should be emerging from a proper chart pattern and about to make a new high in price.
S= Supply and demand. Shares outstanding can be large or small, but trading volume should be big as the stock price increases.
L= Leader or laggard? Buy the leading stock in a leading industry. A stock’s Relative Price Strength Rating should be 80 or higher.
I= Institutional sponsorship should be increasing. Invest in stocks showing increasing ownership by mutual funds in recent quarters. IBD’s Accumulation/Distribution Rating gauges mutual fund activity in a stock.
One of the greatest investing books of all time. Benjamin Graham first published this book back in 1949. Jason Zweig (author) and Warren Buffett (Collaborator) updated Graham’s timeless trading wisdom for today’s market conditions.
A fun book to read. Reminiscences of a Stock Operator, by Edwin Lefèvre, was first published in 1923. It is the story of how a young boy, Jesse Livermore, managed to amass one of the largest fortunes by speculating despite going broke a few times in his career. A favorite quote from the book is: “It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”
Short Selling with the O’Neil Disciples is a guide to optimizing investment performance by employing the unique strategies put forth by William O’Neil, to profit from downward moves in the market. There are many great ideas and some new ways of looking at price action overlaps at price support zones or moving average action zones. This book is technical and is not for beginners.
Over 1.5 million copies sold. Malkiel puts forth the argument that an individual who buys over time and holds a low-cost, internationally diversified index of securities is still likely to exceed the performance of portfolios carefully picked by professionals using sophisticated analytical techniques. There is a lot of wisdom and knowledge packed into this book, everything from bonds, to index funds, and even gold. It has many take-aways that any individual investor, regardless of trading strategy, can use to great advantage in their own trading.
Introduces the concept of candlestick charting. This is one of my favorite books on technical analysis. The book is comprehensive with many candlestick charts that are easy to understand with detailed, easy to follow explanations. This book does not teach a trading system, it only introduces the patterns that have the highest probability of indicating reversals. It does not cover the other indicators you need to use in conjunction with candlesticks like MACD, Stochastics, ADX, RSI Bollingers, it looks only at candlestick chart patterns.
Mr. Bigalow explains every candle and pattern as it relates to the psychology of bulls and bears. The Japanese candlestick signals are combined with the Stochastic indicator for more effective signals. The most valuable candlestick patterns are discussed which are: the Doji, the Hammer, the Hanging Man, Engulfing Patterns, and Dark Cloud Cover.
Hedge fund manager and professor Joel Greenblatt, whose investment firm has averaged 40% annual returns for over twenty years, teaches their trading strategy in this book. Mr. Greenblatt’s formula is based on two measures: earnings yield and return on capital. An excellent book to improve your fundamental analysis trading skills.
Warren Buffett recommended John Bogle’s book in his 2014 Annual Shareholder Letter, that reads:
“There are a few investment managers, of course, who are very good – though in the short run, it’s difficult to determine whether a great record is due to luck or talent. Most advisors, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship. Rather than listen to their siren songs, investors – large and small – should instead read Jack Bogle’s The Little Book of Common Sense Investing.”
There’s more than one way to make money in the stock market folks. Author John Bogle developed the world’s first mutual fund back in 1975 when he worked for Vanguard. John Bogle makes the case that index funds are the best investment vehicles as opposed to active trading or managed funds. Mr. Bogle’s philosophy is simple enough for two words: index funds; He spends the rest of the book explaining his rationale.
Tyler Cowen’s book is key for understanding how microeconomics impacts business, politics, world affairs, and everyday life.
Dr. Peter Navarro’s book will expand your mind, helping you to see the bigger picture when it comes to searching for catalysts. This book will help you bring the knowledge of macroeconomics into your trading and investing. This book introduces the trader and investor to the power of large, global economic forces and explains in detail how these forces affect the market. It provides a big picture overview of the global fundamentals that move the market as well as indivdual stocks, clearly showing the links between major economic events and stock market movement.
Thomas Bulkowski’s book is about 1000 pages, and it contains 53 chart patterns plus 9 more event patterns which will pretty much cover you for any chart you come across. Being an encyclopedia, it is not a book to read from cover to cover but instead is a reference book. When I find a chart pattern showing a potential for profits, I check it with this encyclopedia.
16. High Probability Trading
Author: Marcel Link
Marcel Link gives a time frame of 3 to 5 years before one can expect to become a successful trader. Mr. Link also discusses unrealistic expectations of beginning traders, who typically open accounts of $10,000 to $25,000, and expect to make a living trading such accounts. Mr. Link covers psychology, money management, risk management, and a few of his favorite chart setups, without being excessively wordy.
Further Trading Education:
For personal one-on-one coaching by one of the best swing traders on the planet, I recommend Jason Bond’s service.
For extremely powerful stock screening with an easy to use interface, I recommend Finviz.
For weekly stock market analysis, follow me on YouTube. I do the Weekly Saturday Show where I attempt to forecast market direction for the week ahead.