To become a profitable trader, you need knowledge of the markets, and knowledge of yourself. Trading is one of the greatest educational pits to put yourself in. It shows your true colors when things get rough, and when you are heavy into profit. It highlights your emotional responses and reactions to them, and teaches you that knowing isn’t anything like doing. To be the top 5% of people making consistent profits trading, you must both know and do. These top books for trading will help you improve, understand both the markets and yourself better.
Book #1: The Candles & Patterns
Candlesticks are a common form of chart type which are useful in reading when price goes up or down, where it opens and closes. A candle on its own is useful, but candles make patterns and each set of candles can tell you different things about what the market has done and might do in future.
Candlestick Charting for Dummies provides a good set of references for patterns and what candlesticks to watch out for. It also goes into what the candles might mean for future price. A very useful read for those getting into trading and want to learn more about charts and price analysis.
Book #2: Plan It Out
Every good trader has a trading plan. Sticking to their guns, only taking trades that they understand the risk and likelihood of success. When you are starting out, that can be hard. This book will give you a great outline as to what should be included in any trading plan so that you can start piecing together the elements you need, such as how will you manage risk, how will you take profit and what is a good entry for your plan. Stick to the plan, even if it means having a separate demo account you use for finding new systems.
Trading Plans Made Simple is a book that does what it says on the tin. Every trader should have a trading plan. It clearly identifies what should work for you long term. It helps to reduce any emotional or abstract decisions which are often costly and allows you to reduce and eradicate unnecessary losses long term.
Book #3: Speaks Volumes
The market is effectively a bunch of people buying and selling something. It relates to supply, demand, the players involved and the prices at which the market sits. Supply and demand in particular, is depicted by both price and volume, so to analyze volume is to better understand the future supply and demand of an asset. Volume Spread Analysis (VSA) is the term used to describe the theory and is a useful tool to understand. While you can use strategies strictly around VSA, it is a great addition to any traders toolbox of trading knowledge.
Mastering the Markets is a 190 page document by Tom Williams, which depicts VSA and teaches you how to understand how volume and price can help you understand what the market is doing. A great (and also free) book available online, packed full of useful knowledge for any trader to learn.
Book #4: The Waves
The next book is an in depth overview of not only a theory, but also the most important concept of making a theory profitable. It is one thing to know ‘how things work’ in general. Many traders know a lot of things, but making it a profitable system over more than three months is a whole different topic.
Applying Elliot Wave Theory Profitably is a book that covers the ins and outs of Elliot wave theory and most importantly, how to apply it to live markets. This book goes into why waves are formed, what they mean and how you can trade them.
Book #5: Mastering Yourself
While trading the markets is a huge part of.. well, trading.. There is also another factor that has equal importance in the equation. The other major factor, is you. Mastering yourself is incredibly important if you are to be successful in financial markets. This includes mindset, health both mentally and biochemically along with understanding parts of the world many don’t understand. How things somehow influence other things and science does not yet have the answers for, nor would it be worth writing the quantum equations to work it out. To know, and to understand is enough to help in your trading journey.
Becoming Supernatural is a book filled with incredible bits of wisdom from Joe Dispenza. This book will help you to understand a bit about the world and how you have influence over it and most importantly yourself, through thought. It is not only thought that is important, but also how you feel to actually bring thought to life. On top of this, Joe walks you through how to engage the right amount of energy and focus to allow incredible change in your life.
Book #6: Imagine Your World
The Secret is a book that many will overlook as a useful book. I would agree, if it were around the words alone. There are many segments and paragraphs of The Secret that need deeper thought and consideration to be of any use. A secondary read in line with Joe Dispenza’s work, the Secret may help to clad the mental processes deeper and allow you to understand and utilise them.
Book #7: Your Own Experience
One of the most useful ways to learn and develop yourself as a trader is to write your own book. Keeping records of the following points will help you narrow in on what works for you and will be something to look back over when you need inspiration or past data to help your decisions. Sure, it will look a tad bleak initially, but as you add important details over time, it will be one of the best books in your possession. Below, we will go into what you can include and how it will help you become a better trader for long term profitability. A blank book to write into would be a very valuable purchase, just make sure there are plenty of pages for the years to come.
Your Trading Diary
Your trading diary is a way for you to express everything that might impact you in your trading. From expectations of the market for the coming day, through to what really happened and why you traded the way you did.
What to Include
Important things to include in your trading diary are below:
- Prediction for the trade you are looking at. What are you expecting and why?
- What is your emotional and mental state right now? Are you feeling anxious or stressed in any way?
- After the trade, examine what actually happened. Compare this to the prediction you wrote.
- Analyse any differences and what could have been done better, what was done well etc.
Further Additions to your book
Screenshots of trades, with description of the trade, impacts on the trade etc. These will help as a visual identifier to see how you might have improved later, but also act as a good reference if similar situations occur in the future. This type of record keeping will be sure to help you identify patterns and recurring activity in the market better than if you just try and remember.