4 Great Trading Books You Should Read

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6 Trading Psychology Books to Improve Market Strategies

Market Psychology Books Can Improve Your Trading Strategies

Trading is as much about psychology as it is about developing a solid strategy. Without the mental fortitude to stick to a plan, the most well-conceived strategy in the world won’t do you any good. Successful traders not only develop and master a strategy, but they also take become more familiar with their own psychological traits (such as discipline and patience) and cultivate them, which allows them to be more effective in implementing their strategies.

A variety of books can help traders take steps towards understanding psychology from an investment perspective.

Trading in the Zone

Written by Mark Douglas, this is a must-read for anyone who is struggling to attain consistency in the market. The author provides a roadmap for overcoming many trading issues.

While this is a book about trading, the author does not provide strategies.

This book includes addressing personal inclinations to seek short-cuts, being easily swayed by fear or greed, and getting distracted. These traits often cause traders to act irrationally even when they know better. In simple language, the book explains why and how these issues occur, and how to approach them to keep them from happening.

If you’d like to learn about the psychology of trading, you should first work to understand trading practices, techniques, and lingo before reading this book, so you can fully grasp the topics covered.

“The Disciplined Trader” is another popular trading psychology book by the same author.

Reminiscences of a Stock Operator

Even classic books can maintain their relevance over several generations. First published in 1923, this book by Edwin Lefevre is based on legendary trader Jesse Livermore. Combining rich storytelling with a deep insight into what it takes to trade successfully (and actions that can ruin a trader), the material can be read over and over again, offering new or different insights each time as you build familiarity with the subjects.

If you are an experienced trader already seeing positive results, not trading well, or just starting your trading journey, this book has something for you. In it, you’ll follow the trading career of a life-long trader, whose experiences might just be the insight you need to help you through the struggles you are facing, or have yet to encounter.

Sway: The Irresistible Pull of Irrational Behaviour

Written by Ori and Rom Brafman, “Sway” is a rare page-turner in the non-fiction genre.

In the book, the authors tackle problems many traders are aware of yet seem powerless to prevent. They include why it can be so hard to get out of a losing trade—even delving into why people stay in personal relationships, relating it to the trials of trading.

The book explores issues of which traders are often unaware. The authors examine how danger and risk affect the decision-making process and their relevance in facing the risks of the financial markets.

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The material also addresses such concepts as diagnostic bias—an inability to see beyond an initial hypothesis despite evidence to the contrary, and the chameleon effect—a person’s habit of taking on traits that are assigned to them. All of these psychological quirks can have a substantial effect on traders.

The research and anecdotes in this book can also teach the reader about hidden motivators that drive decision making, which in turn may help them make more informed decisions as a trader.

Top 5 Books for a Budding Professional Trader

What Are the Top 5 Books for a Budding Professional Trader?

Many people would like to learn how to become successful traders, whether via stocks, commodities, options, foreign exchange (forex), or all of the above. Unfortunately, trading and investing are not subjects commonly addressed in either high schools or colleges in the United States.

Fortunately, a wealth of excellent books is available on every aspect of trading for those with the desire and motivation to teach themselves the craft of trading.

Key Takeaways

  • Becoming a successful trader can be a difficult achievement, with several ups and downs along the way.
  • There’s no one right way to become a great trader, but reading about how others have done it can point you in the right direction for your personality and trading style.
  • Several classic books exist that not only document real-world traders and how they rose to the top, but also relate strategies you may not learn in finance class.

Understanding the Top 5 Books for a Budding Professional Trader

These books, and many others, can provide in-depth information on the complexities of investor trading from basic how-to tips to the psychology behind making investments. Visit your local bookstore or library to find these books and others on financial topics.

“Reminiscences of a Stock Operator”

“Reminiscences of a Stock Operator,” written by Edwin Lefèvre and published in 1923, is possibly the single most recommended book for aspiring traders and investors.

The book is a fictionalized account of the life of the man considered by many to be the greatest stock trader of all time, Jesse Livermore, presented as the main character, Larry Livingston, in the book.

This book, which is also noted as simply a good read, is one of the few attempts at a detailed biographical account of one of the famous investors in stock market circles in the early 20th century and provides interesting insights into Livermore’s self-education as a trader. The book is also filled with numerous pearls of wisdom on trading that are still often quoted today, such as, “Always sell what shows you a loss and keep what shows you a profit.”

“The Intelligent Investor”

Benjamin Graham’s “The Intelligent Investor” is considered the classic text on value investing, which is still one of the most popular basic investing strategies and the underlying principle of hundreds of investing strategies developed since Graham’s book was first published in 1949.

This book holds the distinction of being touted by famed investor Warren Buffett as the best book ever written on the subject of investing, and as one of the primary sources for his own education in trading stocks. In the book, Graham presents his core investing philosophy of identifying the intrinsic value of an investment and then looking to buy into it at a price below that value.

“Market Wizards”

Jack Schwager has put together two very popular books on trading: “Market Wizards” and “The New Market Wizards.” Both books consist of interviews with some of the most successful traders of the past half-century, such as Paul Tudor Jones, the billionaire founder of Tudor Investment Corporation.

It is often argued that the best way to learn any craft or occupation is to be mentored by people who have already attained success in the field. Schwager’s books offer readers the opportunity to pick up some mentor-like advice from very successful traders. The interviews offer both interesting biographical information on the interviewees and exposure to a wide variety of investing strategies.

“The Disciplined Trader”

“The Disciplined Trader: Developing Winning Attitudes” written by Mark Douglas in 1990, addresses the subject of the psychology of trading, the mental discipline that is required in order to be a successful trader.

Although many other books have since been published on this subject, Douglas’ book is still considered a “must read” classic text on trading psychology. One of the strengths of the book is the fact that, although it addresses a subject that might appear dauntingly complex to some, it is a very clear and easy read.

Douglas does an excellent job of describing the basic mindset and attitudes that are essential for traders. Douglas subsequently penned another very popular book on trading psychology, “Trading in the Zone.”

“Trader Vic II: Principles of Professional Speculation”

This book, written by Victor Sperandeo, is not as well known as many books on trading but is a favorite of many traders who have read it. In the book, Sperandeo puts forth an investment strategy that is based not on specific market events or company-specific metrics but on analysis of the general direction of the economy as driven by factors such as the fiscal policies implemented by the Federal Reserve and tax policy.

Sperandeo argues that identifying the basic direction in which such policies will inevitably drive the economy enables traders to determine the most probable overall market direction, as well as specific market sectors that will thrive.

20 Best Stock Trading Books for 2020

Posted by Blain Reinkensmeyer | Last updated on Apr 5th, 2020 | Published Apr 6th, 2020

There are many stock trading books out there that can help new investors expand their stock education. This list highlights 20 great stock markets books every trader should read.

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Currently in its tenth edition, this book is a great first read for those starting a portfolio. Indexing, diversification, trends, bubbles, the value of patience coupled with time, alongside many more core concepts are all pronounced within.

Author Jack Bogle is the founder of The Vanguard Group, known for providing the lowest cost funds in industry. Vanguard is also the largest asset management house in the world with over $3 trillion in total assets under management. Jack’s message is simple, keep costs low and invest in market indexes for the long run. Jack’s other book, Common Sense on Mutual Funds, is another best seller and breaks down mutual fund investing.

Another great book with a similar message can be found in Jeremy Siegel’s, Stocks for the Long Run.

This is a classic by William O’Neil, describing the ins and outs of his CANSLIM system for finding future big winners in the stock market and how to time entries and exits. It combines fundamental and technical analysis and is a good guide for new investors.

Using his Oaktree Capital client memos as a foundation, Howard assembled a collection of the 21 most important things to know about investing. The book introduces multiple keys to long-term success including, “second-level thinking,” the price/value relationship, patient opportunism, and defensive investing.

This book is a true page turner. It is a breath-taking recount of how a young boy managed to amass one of the largest fortunes by speculating despite going broke a few times in his career. He has timeless advice for investors(“I’ve always made my money from sitting, not thinking”) which will help your trading for years to come.

This book sheds insight into the ways and means of the Oracle of Omaha. Warren Buffett’s thoughts are insightful and his methods may yield fruitful rewards for investors with enough patience to learn them, understand them and apply them correctly.

This book is a collection of interviews of successful traders in the 1970s/80s. Their experiences are fascinating, inspirational, and traders can draw endless lessons from their stories. Jack Schwager’s original interviews became so well known that he has published four more books since: The New Market Wizards (1994), Stock Market Wizards (2003), Hedge Fund Market Wizards (2020), and a summary of essential lessons from nearly 50 interviews with The Little Book of Market Wizards (2020).

This is a gem that encompasses investor psychology and system construction. While it may not give you a “Holy Grail” (an unbeatable method to the markets) for trading, it will give you the basics you need to construct a winning system. There is something for everyone in this book.

The foundation for value investing and being successful in the market, Benjamin Graham’s classic has sold over 1 million copies and earns its spot on every investors book shelf.

This is an investment classic that will give the individual investor hope. Peter Lynch explains how Wall Street may not be able to find the best investing opportunities from the start and shows step-by-step how the individual investor can find the next winner.

Explores the basic principles of investing in the stock market. The book breaks down the author’s proven “magic formula investing” method of outperforming the market by investing in quality companies at discounted prices.

An insider’s account of the late 1980s at Salomon Brothers. An interesting, though perhaps not profitable, narrative of how Wall Street works. Other Michael Lewis great reads: The Big Short: Inside the Doomsday Machine and Flash Boys.

This book, along with Soros’s latest book, The New Financial Paradigm explain the author’s theory of reflexivity and how it relates to the market. Though it may not provide a direct system for trading, it is extremely thoughtful and deepens one’s understanding of how the financial markets work. The book may be a bit dense but it is rewarding for those who are willing to finish it.

This book, which would go along well with “The Black Swan”, explains the author’s thoughts about how randomness plays a larger role in our lives than we expect. For traders, this would imply that risks are usually large than we expect. Also, it would mean that some things in the financial world aren’t exactly what they seem.

This book introduces candlestick charting, which some investors may find useful in their trading. It sure helps to make charts more visual!

Tulipomania, the South Sea bubble and the Mississipi Land scheme are covered in this book, showing how herd mentality worked to create bubbles in past eras. It may serve as an interesting read as well as a guide for dealing with future bubbles.

This unseeming book is written by Philip Fisher, who Buffett credits with most of his success. In the age of quantitative finance, this book is a must-read for those who want to understand how to inspect a company qualitatively.

As the winner of the 2020 Nobel Prize in Economics, Robert Shiller understands the markets and has spent his career studying their movements. An author of multiple books, Irrational Exuberance explores how trends turn into booms and ultimately bubbles that burst.

A scintillating narrative of how one of the darlings of the hedge fund world rose and how it fell. A reminder for traders to keep their minds focused on risk and their circle of competence.

An extremely detailed work that rivals “Technical Analysis of Stock Trends” and should provide traders with a complete understanding of chart patterns. The hard work is to apply the knowledge.

What’s your favorite investing book? Tweet this post and tag me, @InvestorBlain!

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