You’ll only succeed if you have a strategy that fits you!
You’ll only succeed if you have a trading or investing philosophy that is unique to you!
But the question is how do you achieve that?
Well, the only best way that I know is to keep an open mind and read books.
Books can give you a broader perspective which can be very helpful to develop a trading or investing system that fits you!
Below are some of the books that have completely shaped my beliefs about the markets.
These books have greatly influenced my thinking about trading & investing.
These are the books that I keep on referring from time to time.
As you’ll read through the list, you’ll realize that I am biased towards systematic and quantitative approaches to momentum & mean reversion.
Dr. Van Tharp has rightly said, “You don’t trade markets. You trade your beliefs about the markets.”
And these book recommendations reflect my own beliefs about trading and investing. Some of the books are so common that you’ll find them in any recommended reading. So keep an open mind and go through it.
Best Behavioural & Psychology books:
Well, to succeed in any endeavor, be it trading or any other worthwhile activity, you need to get your head straight. These books will help you learn or unlearn some of the most important aspects of trading or investing success.
1. Think & Grow Rich by Napoleon Hill:
Well, this is not the book related to trading or investing. But the principles are the same that are required to be successful in any endeavor that you desire to pursue. I just love this book and have lost count on how many times have I read this book. I would think this book is the starting point of becoming a successful trader or investor.
2. Reminiscences of a stock operator by Edwin Lefevre:
Any recommended list of books is incomplete without this book. It is the fascinating tale of success and failure of the legendary trader Jesse Livermore, who made and lost many fortunes and eventually killed himself. Originally written in 1923 by Edwin Lefevre, the concepts are still applicable today after almost 100 years.
3. Trade your way to financial freedom by Dr. Van Tharp:
This is an amazing book from Dr. Van Tharp which takes you through the complete process of developing a winning trading system that suits you. The book is packed with practical advice on how to get started on the way to designing a trading system that works for you. From addressing our inherent biases and beliefs to evaluating trading systems in terms of expectancy. The chapter on expectancy itself is way more worth than the price of the book. It’s mandatory reading if you want to be a successful trader or investor.
4. Market Wizards series by Jack Schwager:
Market Wizard series by Jack Schwager is an absolute must-have book on any trader’s shelf. It contains interviews with some of the most successful traders and investors like Ed Seykota, Richard Dennis, Linda Rashke, Paul Tudor Jones, Larry Hite, William O’Neil, William Eckhardt, David Shaw, Steve Cohen, and many more.
One thing you can learn from these extraordinary traders is that they all have different approaches to trade or invest in the market. So any particular trading system or approach is not the key to their success. The key to their success is finding the approach that suits them and applying consistently for a long period of time.
5. Thinking Fast & Slow by Daniel Kahneman:
Written by Noble laureate Daniel Kahneman on human irrationality and cognitive biases that we face. It’s a groundbreaking account of how we think and make decisions be it stock markets or buying a car. It’s a heavy book but a must-read if you want to understand why we behave the way we do.
Must-read books on Technical Analysis.
Being a technical analyst myself, how can I not have books on technical analysis? I have been practicing technical analysis for over a decade and that’s the way I approach markets every day. All the quantitative and algorithmic strategies draw ideas from technical analysis. These are some of the best books on Technical Analysis.
6. Technical Analysis of Stock Trends by Edwards & Magee:
There is so much nonsense available on the internet about technical analysis that the basics are forgotten. This is the first book you should read if you want to get your feets wet into the world of technicals.
Originally written in 1948 by Robert Edwards and John Magee, some of the concepts have stood the test of time. Chapters on Market Structure, Dow Theory, Trendlines, and channels are worth the price of the book. This book is a strong base from where you can build upon it.
7. The New Science of Technical Analysis by Tom Demark:
Tom Demark is a veteran technical analyst who has worked for four market wizards including Geroge Soros, Steve Cohen, Michael Steinhardt, and Paul Tudor Jones. His ideas about how to use technical analysis objectively are outstanding. He is the creator of some of the most famous indicators like TD Lines, TD Sequential, etc. his books are a goldmine for anyone looking to develop unique and innovative trading systems.
8. Beyond Technical Analysis by Tushar S. Chande:
This book bridges the gap between analysis and trading. The book discusses various important ideas to test and implement trading strategies.
9. How to make money in stocks by William O’Neil:
The modern investment classic on stock market investing. The popular CAN SLIM method is from this book. It’s one of the best books on growth & relative strength investing. The book combines fundamental and technical factors into one method of selecting winning stocks. This is my favorite way to combine the best of all, technical, fundamental & quant which I call the Hybrid Approach.
10. The Encyclopedia of Technical Market Indicators by Robert Colby:
As the name suggests, it is an encyclopedia of over 100 technical indicators. The more important thing is those indicators are backtested so that you can evaluate which technical indicators have been the most profitable historically.
Must-read books on Swing Trading:
Swing trading is the compromise between day trading and long term trading. In fact, if you combine swing trading with trend following, you can really improve your portfolio returns with reduced risk which I fondly call the Hybrid Approach. There are a few books that are excellent sources to understand swing trading.
11. Street Smarts By Laurence Connors and Linda Bradford Raschke:
The absolute best book on the topic and I have learned a great deal from this book. The fundamental principles of swing trading that they talk about in the book are still fresh. The book shows how the market works in the short term & how you can take advantage of it. The basics of swing trading are the best I have ever seen in any other book.
12. Short Term Trading Strategies that Work by Lawrence Connors and Cezar Alvares:
Another excellent book by Larry Connors. I still use some of the ideas presented in the book. I can go a step further and say that all my short term trading strategies are based on the work of Larry Connors. The quantitative, rule-based approach to take advantage of the short term price extremes is very much informative and useful. In fact, any book by Larry Connors is a must-read if you’re looking to trade data-driven strategies to trade on a short term basis.
13. The New Trading for a Living by Dr. Alexander Elder:
This is the updated version to the original bestseller, Trading for a Living by Dr. Alexander Elder. Apart from much practical advice on how to combine trading psychology, tactics, and money management, it focuses on record keeping.
Must-Read Books on Trend Following & Momentum Investing:
Momentum is one of the most researched & highly debated finance topics in recent times. Many academic research papers have established momentum as the premier market anomaly that works almost on all the asset classes like stocks, bonds, commodities, currencies & real estate. I trade long term trend following and momentum strategies whos ideas have come from some of these books.
14. Kirkpatrick’s Investment & Trading Strategies by Charles D. Kirkpatrick.
Charles Kirkpatrick, CMT is the most prominent advocate of relative momentum or relative strength. He has won twice the prestigious Charles H Dow award from the CMT Association for his research on relative strength investing. This book has some excellent ideas to trade on the basis of momentum.
I also use one of his idea into my momentum strategy as one of the criteria to rank stocks based on their relative strength. He ran an actual out of sample test of his strategies on completely unknown data for 17 and half years which outperformed the S&P 500 by a margin of four to one. You can read the paper here.
15. Stocks on the Move by Andreas Clenow:
This one is another excellent book on momentum investing. Andreas Clenew presents a simple yet powerful rotational momentum strategy in the book. The author is humorous, witty, and yet provides an excellent peek into the world of momentum investing.
16. Dual Momentum Investing by Gary Antonacci:
This award-winning book by Gary Antonacci introduced the concept of dual momentum investing as a viable and complete approach to beat the markets with less risk. Gary combines the two types of momentum, relative and absolute, into one easy to follow strategy. A must-read for the complete background on the momentum investing.
17. Unholy Grails by Nick Radge:
Nick Radge is an Australian trader who trades multiple trend and momentum strategies on his own money. This book shows some of the simplest but highly profitable trend-following strategies on stocks.
18. Quantitative Momentum by Wesley Gray and Jack Vogel:
This one is also one of the best books written on the subject where authors present a workable momentum strategy. The most common way to measure momentum has been the rate of change over the last 3, 6, or 12 months.
But the issue is that it does nothing to differentiate between the quality of the momentum. They showed in the book that smoother momentum outperforms its jumpy counterpart. I learned this concept from the book and applied it to my long term momentum strategy. They also have a blog, which has some excellent research on momentum, trend following, and factor investing.
19. Trend Following by Michael Covel:
This one is a great one for anyone who wants to understand how some of the largest and most successful traders and CTAs make money through trend following. Covel does a nice job of collecting performance reports of these Market Wizards like Ed Seykota, Bill Dunn, Larry Hite, John Henry, etc.
Must-Read Books on Options:
20. Options Volatility & Pricing by Sheldon Natenberg:
This is the best book as far as options trading is concerned. The chapter on probability is probably worth the price of the book in my opinion. This book is required reading for options traders.
21. Options Strategies for Directionless markets by Antony Saliba:
Antony Saliba is the only options trader to have featured into Jack Schwager’s first book Market Wizards. There are plenty of strategies presented by him in a simple way.
Other must-read titles:
These are some other excellent books that can provide a great deal of knowledge in trading or investing.
22. Fortune’s Formula by William Poundstone:
It’s a great tale of how two mathematicians, Ed Thorp and Dr. Claude Shannon beat the casinos at their own game and eventually beat the stock markets. The story also highlights the importance of a proportional betting system which is called Kelly Formula developed by John Kelly while working at Bell Labs. It’s a fascinating account of how both the professors used the Kelly Formula to beat the markets for a long period of time. Ed Thorp’s performance for over two decades is far more superior than Warren Buffett when the volatility and risks are taken into account.
23. Fooled By Randomness by Nassim Nicholas Taleb:
Amazing book on how luck, randomness, and chance influence our life and work more than we realize. We remember those who succeeded but forget how many failed at the same time. Similarly, we remember the stocks that created a lot of wealth but forget all which destroyed. His other book, the Black Swan is also a must-read.
24. What works on Wall Street by James O’Shaughnessy:
It’s a great primer of sorts on factor investing. The author backtests multiple factors like size, value, momentum or relative strength, growth, etc. and shows historically what has worked.
25. Day Trading with Short Term Price Patterns and Opening Range Breakouts by Toby Crable:
Toby Crable is a commodities trader and wrote a series of articles on range contraction and expansions which eventually turned in this book. I used to trade Narrow range breakouts on daily bars particularly NR4/ID. The principles are even more effective on weekly or monthly bars in my opinion.
Books on my reading list:
- Value Investing and Behavioral Finance by Parag Parikh.
- The Little Books that still Beat the Market.
- Quantitative Value by Wesley Gray and Tobias E. Carlisle.
- The Man Who Solved the Markets: How Jim Simons Launched the Quant Revolution.
- Principles by Ray Dalio
- Options as a Strategic Investments by Lawrence G McMillan.
- The Art of Thinking Clearly by Rolf Dobelli.
- Your Complete Guide to Factor-Based Investing by Andrew L Berkin and Larry Swedroe.
- The Warren Buffett Way by Robert G Hagstrom.
You can also download my FREE e-book, Double Your Investment Returns!
All the best!