As an aspiring trader, the journey to success can be long and challenging. Many obstacles can be overcome along the way, and knowing where to turn for guidance and inspiration is difficult. For me, one of the most valuable resources has been trading books. Over the past 20 years, I’ve read hundreds of books on trading, but a few have stood out as particularly impactful, with actionable advice and solid trading principles. These books have helped me acquire my trading skills and the confidence and mindset needed to succeed in this challenging industry.
5 Must-Read Books for Aspiring Traders
- Trend Following by Michael Covel
- Market Wizards by Jack Schwager
- Trade Like a Casino by Richard Weissman
- Come into my trading room by Alexander Elder
- Trade your way to financial freedom by Van Tharp
1. Trend Following by Michael Covel
This book is a classic in the world of trading and is a must-read for anyone interested in trend following or investing. Michael Covel is the most respected trend-following author in the financial industry, and his book provides a comprehensive overview of this powerful investment and trading strategy. He covers everything from the history and principles of trend following to the practical aspects of implementing it in your trading. The book is also filled with real-life examples and case studies, making it easy to understand and apply the concepts to your trading.
What’s in the book:
- The history and principles of trend following: The book provides a comprehensive overview of trend following and how it has evolved. It also covers the key principles of trend following, such as the importance of following trends and the power of compounding returns.
- The psychology of trend following: The book delves into the psychological aspects of trend following, including the importance of discipline and the ability to handle volatility and risk.
- The practical aspects of implementing trend following: The book provides a detailed guide to the practical aspects of implementing trend following, including how to identify trends, how to manage risk, and how to create a trading system.
- Real-life examples and case studies: The book is filled with real-life examples and case studies that illustrate the concepts discussed in the book. These examples and case studies make understanding and applying the concepts to your trading easy.
- Analysis of famous trend followers: The book also analyzes famous trend followers, how they trade, and their success rate along with verified returns.
- Risk management techniques: The author also covers various risk management techniques that can be applied in trend following to minimize losses.
- Comparison of trend following with other strategies: The author also compares trend following with other strategies like value investing, momentum investing, and contrarian investing and explains why trend following is the superior strategy.
Trend Following by Michael Covel is a must-read for anyone interested in trend following. The trading principles and psychology that this book teaches apply to all types of trading but focus on reactive technical analysis and catching the big trends in the market.
2. Market Wizards by Jack Schwager
This book is a collection of interviews with some of the most successful traders of their generation. Jack Schwager has done an excellent job of capturing these traders’ insights, strategies, and mindsets, and the book is a treasure trove of wisdom for aspiring traders. I particularly liked the emphasis on process, discipline, risk management, and the ability to adapt to changing markets.
What’s in the book:
- Interviews with successful traders: The book is a collection of interviews with some of the most successful traders. These traders come from different backgrounds and have succeeded in different markets and strategies. They all have verified track records.
- Insights into the mindsets of successful traders: The book provides a glimpse into the mindsets of these successful traders and how they approach the markets. It covers topics such as discipline, risk management, and the ability to adapt to changing markets.
- Detailed analysis of the strategies used by successful traders: The book delves into the specific strategies used by these traders and how they have been able to achieve success. It covers various strategies, from trend following to discretionary trading and from futures to equities.
- Discussion of risk management techniques: The book also covers the risk management techniques used by successful traders and how they have minimized losses and maximized returns.
- Analysis of the psychological aspects of trading: The book also covers the psychological aspects of trading and how successful traders have maintained their discipline and emotional control in the face of market volatility.
- Comparison of different markets: The author also compares various financial markets and how traders approach them differently.
Market Wizards is an excellent resource for aspiring traders. It provides a treasure trove of wisdom and insights from some of the most successful traders and is a must-read for anyone looking to improve their trading skills and achieve success in the markets.
3. Trade Like a Casino by Richard Weissman
This book is a unique and powerful look at the world of trading and is one of the most thought-provoking books I’ve ever read. Richard Weissman makes the case that successful trading is more like playing a casino game than investing, and he provides a detailed guide to how to trade like a casino. The book is filled with practical tips and insights on developing the right mindset and approach to trading.
What’s in the book:
- The comparison of trading to casino games: The author makes the case that successful trading is more like playing a casino game than investing and provides a detailed explanation of the similarities and differences between the two.
- The importance of a proper mindset and approach: The author emphasizes the importance of developing the right mindset and approach to trading and provides practical tips and insights on how to do so.
- A guide to developing a winning strategy: The book provides a guide to developing a winning strategy for trading, drawing on the principles of casino games and the experience of successful traders.
- Tips and techniques for managing risk: The book covers risk management techniques used in casino games and how they can be adapted and applied to trading.
- Analysis of psychological factors in trading: The book also covers the psychological factors that can impact trading and how to overcome them.
- The importance of discipline and emotional control: The author emphasizes the importance of discipline and emotional control in trading and provides practical tips for achieving them.
- Comparison of different markets and instruments: The author also compares different markets and instruments and how the principles of casinos can be applied to them.
Trade Like a Casino by Richard Weissman is a thought-provoking and unique look at the world of trading. The book provides practical tips and insights on developing the right mindset and approach to trading and is a must-read for anyone looking to take their trading to the next level. It explains the casino business model and paradigm to traders.
4. Come into my Trading Room by Alexander Elder
This book is an absolute classic in the world of trading and is one of the most comprehensive guides to trading I’ve ever read. Alexander Elder covers everything from the basics of trading to advanced concepts, and he does it in an easy way to understand and apply. The book is filled with practical examples and is a must-read for anyone looking to improve their trading skills.
What’s in the book:
- The basics of trading: The book covers the basics of trading, including the different types of markets, charting, and technical indicators.
- Advanced concepts in trading: The book delves into more advanced concepts, such as trading systems, risk management, and position sizing.
- The psychological aspects of trading: The book covers the psychological aspects of trading, including the importance of discipline, emotional control, and the ability to handle stress and uncertainty.
- Practical examples and case studies: The book is filled with practical examples and case studies that illustrate the concepts discussed in the book. These examples and case studies make understanding and applying the concepts to your trading easy.
- A comprehensive guide to trading strategies: The book provides a comprehensive guide, including how to develop, test, and implement them.
- A guide to risk management: The book provides a guide to risk management, including how to manage risk and position size and evaluate and manage the risks of different trading strategies.
- A guide to understanding and interpreting market indicators: The book also covers a guide to interpreting market indicators and how to use them in trading.
- A detailed analysis of market cycles: The author also covers a detailed analysis of market cycles and how to trade according to them.
Come into My Trading Room by Alexander Elder is a must-read for anyone looking to improve their trading. The book is a gem in the world of trading. Dr. Elder is the author that explained to me the importance of the three core trading dynamics, risk management, trading psychology, and the right trading strategy, what he calls the three “Ms” of trading: mind, money, and method.
5. Trade Your Way to Financial Freedom by Van Tharp
This book is a comprehensive guide to the world of trading and is one of the most valuable resources I’ve ever read. Van Tharp covers everything from the basics of trading to advanced concepts, and he does it in an easy way to understand and apply. This book has some very unique insights into position sizing and trading psychology.
What’s in the book:
- The basics of trading: The book covers the basics of trading, including the different types of markets, charting, and technical indicators.
- Advanced concepts in trading: The book also delves into more advanced concepts in trading, such as position sizing, risk management, and performance measurement.
- The psychological aspects of trading: The book covers the psychological aspects of trading, including the importance of discipline, emotional control, and the ability to handle stress and uncertainty.
- Practical examples: The book is filled with practical examples that illustrate the concepts discussed in the book. These examples and case studies make understanding and applying the concepts to your trading easy.
- A comprehensive guide to developing trading strategies: The book provides a comprehensive guide to developing trading strategies, including how to develop, test, and implement them.
- A guide to risk management: The book provides a guide to risk management, including how to manage risk and position size and evaluate and manage the risks of different trading strategies.
- A guide to financial freedom: The book also covers a guide to achieving financial freedom through trading and the steps you need to take to reach it by creating the right mindset and trading system that fits you.
Trade Your Way to Financial Freedom by Van Tharp is a must-read for anyone looking to improve their trading skills. The book is a comprehensive guide to everything from the basics of trading to advanced concepts, with practical examples that make it easy to understand and apply the concepts to your trading. His explanation of the marble game that he used to teach the effects of different position size levels to his trading students is one the best examples of understanding the impact of risk on a trading system’s performance I have ever seen. The late Van Tharp was an elite trading teacher and author.
Conclusion
I hope these books will be as helpful to you as they were to me. Remember that trading is a journey; it takes time and effort to succeed. But with the right mindset, risk management, and system, you can achieve your financial goals and trade your way to capital gains and financial freedom with an edge, enough capital, and the right market environment.
