Many book recommendations for traders focus on timeless classics, such as A Random Walk Down Wall Street or Reminiscences of a Stock Operator. While these are timeless classics that are certainly worth reading, traders may want to turn toward more technical books to gain the insights they need to profit during their day-to-day activities.
Let’s take a look at five books that can help traders of any skill level improve their skillsets.
#1. Trading & Exchanges
by Larry Harris
The first step in becoming a good trader is learning how the market operates. For example, many traders talk about liquidity, but they might not know its origins. Traders that intend to offer or take liquidity should understand the market functions at a low level to best position themselves to profit.
Professor Larry Harris covers market mechanics, participants and prediction in this 656 page must-read book published by Oxford University Press. You’ll learn all about liquidity, transaction costs, informative prices, volatility and trading profits from one of the most respected names in finance.
#2. Encyclopedia of Chart Patterns
by Thomas Bulkowski
Chart patterns are the primary tools used by many swing and position traders. While day traders may look at L2 quotes or trend lines, longer term position and swing traders make extensive use of ascending triangles, price channels, head and shoulders and countless other chart patterns.
Thomas Bulkowski has created the premier reference for chart pattern analysis, complete with bull and bear market statistics, event patterns and a trading tactics using these patterns. The quantitative approach to chart patterns differs from the softer analyses from other authors.
#3. Building Winning Algorithmic Trading Systems
by Kevin Davey
Algorithmic trading has become popular due to the widespread availability of computing resources and broker APIs. While you don’t need an advanced math degree to develop these trading systems, it helps to have some statistics and programming knowledge before getting started.
Kevin Davey became well-known after his success in the World Cup Championship of Futures Trading where he used algorithmic trading systems. In this book, he breaks down how to develop an algorithmic approach for any trading idea using off-the-shelf software or popular platforms, test the idea and execute.
#4. Green’s 2019 Trader Tax Guide
by Robert Green
Full-time traders, and many part-time traders, have complicated taxes. While an accountant may be able to handle the basics, many traders needs to go to higher cost specialists to ensure that they’re saving the most. And, these specialists may not even offer optimal financial planning advice.
Each year, Robert Green publishes his Traders Tax Guide to help you navigate these issues. The book includes a complete guide to navigating these tricky tax issues, as well as provides timeless advice on entity solutions, retirement plan strategies and tax planning — which many accountants fail to deliver.
#5. Trading in the Zone
by Mark Douglas
The most knowledgeable trader in the world won’t make money if they let their emotions take over, but psychology remains one of the most underappreciated topics for traders. How many times have you second-guessed yourself and missed out on a trade or bought a position based more on greed than rationality?
Mark Douglas explains how and why many traders lack consistency and helps them overcome established mental habits that cost them money. By understanding the cognitive biases at play when trading, you can recognize and avoid them to help improve your odds of making successful trades.
#6. Technical Analysis Using Multiple Timeframes
by Brian Shannon
‘The trend is your friend’ is a popular expression for a reason — trends are one of the most important factors influencing trading decisions. Whether trading with the trend or against the trend, it’s important to understand how to identify trends and understand what they’re saying about market psychology.
Brian Shannon shows you how to recognize trends and market cycles, how to control emotions when making decisions, specific strategies for short-term trades and a variety of common market dynamics, such as the short squeeze. These timeless insights can help anyone to become a better trader.
The Bottom Line
There are countless books on active trading and more are published each day. After gaining a basic understanding of how things work and gleaning some of the best practices, the best way to get started with active trading is to paper trade or start with a small account.
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