One of the most frequent questions I get is "what book should I read to learn this stuff?" It’s kind of a hard question to answer. When I first created our Foundations of Stocks and Options program I referred to it as “the best of my notes”. Why? Because I had synthesized the entire training from my vast library of information and combined it with my real world experience.
I suppose if I were more resourceful I would just write my own book and tell people “here, buy my book, it’s the perfect trading book.” But after nearly 10 years of teaching people what I know about trading I have yet to write any more than the table of contents to my own book.
Recently I was again asked for a reading list by a guy named Ed. I asked him “why would you want to read books when you have access to our entire library of training? That’s a lot easier format to consume the information.”
Ed replied that he just wanted some reference books, something to stick on his shelf that he could go look at like a reference section in a library.
Well I suppose I can’t argue. If you could see my whole trading library you’d be impressed. If I’m honest with myself I would be a little sad if I didn’t have my own trading library and I figure every trader should have the gift of their own library as well.
So I want to give you the gift of my top library picks. If I had to choose which books from my huge library to take with me to a desert island, these are my picks. Certainly there are more books that could be added, but these are some winners and some of my favorites.
Let's kick things off with the subject that somehow found a way to hijack my life and held me captive ever since - Technical Analysis. Everything we teach at TSU is built around technical analysis. In my opinion is the only way to get truly timely market info and it will give you a great head start on all of your trading competition. The following books are a great start for building your library as it relates to Technical Analysis.
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Truly this is my "desert island" book for Technical Analysis. Originally written about 80 years ago, the information in this book is as relevant today as when it was first published. The book lacks in the areas of more modern technical analysis, but in terms of a basic understanding of the core principles of TA - it’s the bible.
This is a good utilitarian book. It kind of covers everything. I don’t think anything in this book is specifically profound enough to completely change your trading, but it is a single volume resource that covers pretty much everything in the world of TA. It's a must for the book shelf if you want a great library full of technical analysis books.
This book was written as the official textbook of the Market Technicians CMT program. It’s a bit nerdy at times, at other times it’s totally nerdy. But it’s a great resource and it certainly has helped make me a much better trader.
This was my first real “textbook” on Technical Analysis. When I first read John Murphy's book I thought I had found the greatest words ever put on paper. While it’s a little outdated today it has served as an excellent volume on trading over the years. I still consider it one of the best.
A relative newcomer to western technical analysis is the study of Japanese Candlesticks. Some people still consider them voodoo but once you learn the trading psychology behind candles and once you learn to read them, you can never look at a chart the same again. Below are some good books on the subject.
This is the book that started it all. Steve Nison’s original book on Candlestick trading. To be truly candid I think a student going through our classes on candlesticks is going to be better prepared to trade candles than they will by reading this book, but it’s still a worthy book to be in your library.
Greg Morris has an interesting work here that really digs into the patterns themselves. This is truly a reference work. Every pattern you can imagine is in this book complete with probabilities of success and frequency of occurrence.
What can I say about the Elliott Wave phenomenon? It's awesome. It' complex. It's promising. It'd dang near impossible to master. I spent years working with and playing with the principles of Elliott Wave and I owe all those years to the man who wrote the following two books. In full disclosure: I have moved on and rarely try to apply the Elliott principles. But if you want to read some great words on the subject of trading and if you would like to round out your technical analysis knowledge a bit, you can't beat a trip down the ol' Elliott Wave bandwagon!
The book that set the course of Robert Prechter’s career and the one that stands as the ultimate textbook related to Elliott Wave. Considering the complexity of the subject this is a surprisingly easy read. You will find it much easier to read this book than to trade the system but if you want to know about EW, this is where you start.
Also published by Prechter, this is a collection of Elliott's works. Even though actually trading Elliott Wave is insanely difficult, this is one of my all time favorite books. There is an excellent biography included on the life of R.N. Elliott and you can read the way Elliott first presented his own theories.
By far the most important skill to learn in trading is the SKILL of controlling your mindset and personal Psychology. Most people shy away from this subject because they tend to conjure up images of lying on the couch talking to a strange man about deep dark secrets that have never been told... that is NOT what we mean by trading psychology.
All great traders will agree your mindset and how you think about a trade will determine your probability of succeeding or not succeeding in the market. Even though these books are down the list a ways, they are quite possibly the most important books on the list. I present to you, the best of the best when it comes to trading psychology:
The best introduction to why trading is 80% psychology and 20% execution. Every trader must learn to manage their emotions and their psychology. This is a must have for every trading library period. If you get one book on this list, make it this book. Mark was years ahead of his time when he wrote this book and his work thrust the topic of trading psychology into the mainstream. Read it.
"The Red Pill for Traders and Investors". I was at a trading event in LA a few years back and a guy I met at lunch told me about this book. I bought it, it showed up, I threw it on the shelf and forgot about it. Then one day I picked it up and read and thought and “dang, why have I never read this book.” In this book you will learn about “Tharp Think.” It’s a good one.
Options are one of the greatest things to ever hit the world of trading. And since the late 1990s, the volume and interest in the options market has continued to grow. More than ever, traders are finding reasons and motivation to add options to their trades. I think I have more option books with pages I can't quite get through than any other subject! But alas everyone's library needs a great book on options.
This was the first book on options I picked up - I then put it down. Once you pick it up you will see why. It is not an introduction to options at all, however it is an excellent reference for just about everything you could ever want to know about options. When you pick it up you will see why so many refer to it as the bible of options trading.
I recently spoke at an event with Mark and decided to include his book for the list. Mark and his business partner Andrew are two of the smartest option traders you will ever meet. However this book is not for the faint of heart. The information presented is for those who wish to know the inner workings of option greeks and how to create an edge with that knowledge.
The Fibonacci sequence has been around hundreds of years, but modern computing has made the application to the financial markets finally possible. The good news is you don't need a degree in mathematics to apply this tool in your trading. You will want some training though!
The only book in my opinion that really explains Fibonacci. Enough said. It's a difficult read, and I think you'd be better off attending Total Fibonacci Trading, but this is a standard on Fibonacci Analysis. It's worth noting Constance also has a book on Elliott Wave that is a nice companion to this book and may be a nice addition to your understanding of the wave principle if you are interested in digging deeper there.
Some of the most valuable books in my library do not fit into a nice category, and yet they really are a great addition for every trader's library. Below are a couple you should consider if you want to round out your collection.
Jack Schwager has spent his career now interviewing great traders and learning from their successes. His “Market Wizards” series is in my opinion a must for ever trader. He has now released several in the series and some of the older ones have been updated to newer editions as well. I recommend all of them.
It’s not technically a trading book but it is responsible for turning my life around. I read this book when I was 22 years old and it was the first time I “got” the American spirit. I remember picking it up in the bookstore and when I got home and started reading it I just could not put it down. I read almost the entire book in one sitting. The thing that struck me from Think and Grow Rich is the reality that anybody can do it. It was the first time I started to realize that my thinking controlled my life and my destiny. Up until then I just believed I was a result of whatever happened to me. This book changed the direction of my life and I suggest everyone should read it.
So there you have it - that would be a pretty powerful trading library. Perhaps I will add to it in the future and maybe I will eventually get around to writing my own book, but until then, if I were stranded on a desert island and forgot everything I know about trading, I could probably piece it back together with these books and learn how to trade again.
The bad news is this collection of books is going to set you back quite a bit - then you still have to read them. And then you still have to interpret them.
The good news is you’re not stuck on an island and if you just hang around TSU long enough you can have access to the best of my notes from all these books and more!
Let me save you the time and trouble of reading all these fine books. You can get the "best of my notes" when you take my course Foundations of Stocks & Options. And RIGHT NOW, for a LIMITED TIME, you can get the first level for free with a scholarship from TradeSmart University!
Jeremy Whaley is Co-Founder of TradeSmart University. When he is not working on new trading ideas he is developing new business concepts, tracking down investment ideas, playing with his 3 kids, spending time with his wife, working on their lake house, or maybe, if time permits, flying.