My 3 Favorite Trading Books of All Time
Before diving into this blog, there are a few requirements that will ensure that any purchase and investment of time (the biggest investment of them all) will be well spent in reading these trading books. Such as:
- You know what stocks actually are – don’t be surprised by this one.
- That you understand some key trading terms, most notably moving averages and volume.
- You have a basic understanding of technical analysis.
- You are willing to read these books multiple times to fully appreciate their value.
- Knowing that good things take time. A surgeon doesn’t play Operation (The board game) and walk into an amphitheater.
If the above terms are unfamiliar then I kindly suggest you head over to Udemy and do a quick primer course into trading. Don’t stray too far as misinformation or confusion can escalate quickly in the trading universe, after all, who doesn’t want to make money!
If your interested in long term dividend seeking investments which move at glacial pace, I do have other books I would recommend. The books recommended in this article however emphasize a far more active strategy that can take at least one year to become familiar with.
Not All Trading Books Are Made Equal
Before I continue, it’s also very important to know that not all trading and investing books are created equal. Most notably because “those who can’t do, teach”.
There are thousands of books on trading, value investing and all sorts of creative methods of generating profits from the stock market. There aren’t however thousands of multi-millionaire traders who have audited track records quite like the authors of my favorites. Most notably Mark Minervini .
Mark’s track record boasts over 35,000% returns of his own personal portfolio. That in itself is a major accomplishment. Furthermore, Mark came from nothing, dropped out of school at 15 years of age and has no formal college education.
Unlike the classic PhD quants running around in banks and hedge funds, you are dealing with someone real or at least relatable. Just as real as you and me. This is not a scam or slight of hand, it’s a real person who has proven year after year that triple digit returns are not only attainable, but will give you the blueprint.
Furthermore, Dr. Van Tharp (the second author featured here) explains in great detail how the probabilities work in a simple and easy to follow format.
Trading Book 1: Trade Like a Stock Market Wizard – Mark Minervini
From 2009 until now, I have read easily over 300 books in investing, philosophy, neuroscience, psychology and mathematics. Why? In my head the rationale was ‘The more I know, the better I can do in the market’. This was my multi-year search for the trading Holy Grail. As I have written about previously the holy grail does not exist, this book however is as close as it gets.
In my experience, there are a few good books in the trading arena that touch on strategy, psychology, position sizing and also how to read order flow and interpret price action in such a succinct and approachable manner. It has been a labor intensive nightmare compiling these studies, applying them and then trying to reference multiple books to try and piece it all together. Trade Like a Stock Market Wizard however captures these elements, breaks them down and makes them easy to digest and apply.
Let me emphasize the ‘apply’. Many trading books compile tons of theory which can be difficult to emulate and repeat. Mark’s SEPA approach gives you all the tools you need to build a strategy as a laid out in my earlier blog
“An ounce of action is worth a ton of theory. Don’t be too timid and squeamish about your actions.”
– Ralph Waldo Emerson
Marks ability to synthesize complex knowledge across multiple genres and explain it in layman terms will save you years of misery. That is of course, if you have the discipline and focus required to follow the rules. Unfortunately, the latter can’t be done in theory. Applying the learning in time and reflecting on results is the only way to do this for yourself.
What You Will Learn
- You will learn why the news channels, media and alleged professionals can’t predict the market. And why it doesn’t matter.
- Why classic fundamental evaluations alone won’t cut it for superior gains.
- That anybody can learn how to trade if you have the time and patience required to do it.
- Mark will literally spell out his entire approach to stock selection.
- Specific skills required to time stock purchases and know when to buy, when to sell and how much.
- Mark’s risk-first approach to investing which has helped him become wealthy.
Reading Alone Will Not Suffice
I strongly suggest taking your time with Mark’s book. The content is very dense in that a few paragraphs, although simple, will take quite some time to digest and fully comprehend. Trading books can be littered with superficial information, this book is totally different. Pull out a pen and paper and make sure to highlight and re-read sections of this book until it sinks in.
In future, I will be releasing my scanners which take all the information on Mark’s Trend template and going over them in detail on TC2000 (my scanner). You can automate sections of this book by creating stock screeners and scanners on practically all trading platforms. There is no grey area here, you can easily D.I.Y.
Also, if you think I am pushing this book to hard, just take a look at the reviews on Goodreads. In trading books as in trading itself – do your own due diligence before separating yourself with your money.
Trading Book 2: Think and Trade Like a Champion – Mark Minervini
Giving someone Guru status is risky. In fact, in a previous article I wrote about The Perils of Following Gurus. Every time you open Instagram, there are pictures of mountains of money, girls galore and usually the token rented lambo. I am now proceeding to recommend two trading books by the same author. Have I gone insane!
Why Recommend The Same Author
Mastering any process typically involves starting with the general and moves to the specific. In fact, one of my favorite books of all time about this process by Robert Greene is called exactly that (Mastery).
Throughout my trading journey I’ve had to eliminate hundreds of books and was not surprised that the ones left in my arsenal were written by the same people. If anything it was a relief to know I was on the right track and was reading true knowledge I could apply and trust, furthermore I could be accountable for the results myself and not have to blindly follow.
“The conventional mind is passive – it consumes information and regurgitates it in familiar forms. The dimensional mind is active, transforming everything it digests into something new and original, creating instead of consuming.”― Robert Greene
Why This Book is Different
I distinctly categorize these trading books as follows:
1. Trade Like a Stock Market Wizard: Strategy development and understanding a higher level view of a winning trading strategy.
2. Think and Trade Like a Stock Market Champion: A second more precise iteration of the above which focuses far more on numbers, testing and personal development.
This trading book is far more specific on the following points which have helped my trading immeasurably:
- Position sizing and how to scale in and out of trades without committing to a full trading position or high risk trade
- Understanding the raw numbers behind my trading that give me confidence to keep going and trust the system even through hard times
- Keeping focused on the process of trading and improving myself as a person as opposed to money alone
- Developing and maintaining a strict discipline and regime around creating my watch lists and putting on my trades in real time
- Optimizing and creating scanning or stock screening criteria directly from the book which have reduced market noise
The metrics Mark has pointed out in his book have helped me create a trading diary which gives me key insights into my trading. This includes how many low discipline or impulse decisions I make and most importantly my system expectancy.
If you want to understand your trading and psychology, you need to be able to look at the results and know what the numbers mean. This trading book can expose you to parts of your psyche you never thought possible and take your speculation game to the next level.
Again, if you don’t believe me, as you shouldn’t, then read the reviews for yourself.
I would suggest reading my recommendations in order starting at number 1. Queue the drum-roll for my third and favorite (and most recent) trading book…
Trading Book 3: Definitive Guide to Position Sizing Strategies – Dr. Van Tharp
If ever there was a book out there I wish I read when I started trading – this is it!
Written on the cover of this amazing volume is “size does matter in the markets”. No truer words have ever been spoken when it comes to markets and consistent profit. To avoid treating the stock market as a giant open air casino – you need to understand the math (expectancy) and maintain a trading edge.
Key Takeaways from this Trading Book
- You can be wrong (more than half of the time) and still win in the stock market
- Having a set system of rules is the only way you can defeat the market, you can’t manage what you can’t measure
- The probabilities and working them out is not that hard (at all)
- You do not need a PHd to build and test a sound trading system
- Having a system that is mathematically sound helps you trade without fear knowing that eventually, you are practically guaranteed to win (caveat regarding psychology).
Combining Van Tharp’s book along with Mark’s trading books has allowed me to build, monitor and maintain my core trading system which helped me outperform the market by more than 33% in 2018 ( happy to provide evidence for serious investors but do not wish to publish my account size online).
This will not be the last article I write on books and trading literature. Funnily enough however, in terms of raw system development, psychological skill and basic statistics or math, these books will arm you with:
- Enough information to fully devise and test the most probable and tested trading strategy that has lasted over 200 years due to the forces of supply and demand
- Give you sufficient knowledge to avoid the next major financial collapse which is practically a guarantee
- Explain all of the above in a way that someone with very basic knowledge on the subject can understand
I will be diving deeper in later blogs specifically with regards to trading psychology (sport psychology and cognitive behavioral practice) and more on philosophy and how it will shape and evolve your trading style.
In the interim however – I would highly suggest getting knowledge from the best in the business. If any of the terms and phrases are confusing, let me know and as always, I’ll email you back. Be sure to subscribe to get all my latest content: Subscribe