These are the best books on technical analysis, trading techniques, psychotrading and general reference works to start from scratch
The training of a trader goes through different stages, but in all of them it is more than necessary to have a good bibliography to reinforce the knowledge acquired and progress adequately in trading.
The literature in this regard is very extensive, so in the end, the trader will have to do the selection work that best suits his profile and interests.
In addition, the training of the trader requires learning in different topics, which can be divided into technical analysis, trading as such and psychotrading. To these three epigraphs another one of general reference works can be added.
Taking into account this division, at finance.com we have made a selection of the essential books to learn how to trade from scratch.
1.- Technical analysis books
Technical analysis is the raw material that traders work with. To be precise, it can be divided into “chartism”, which only uses graphical patterns, and technical analysis itself, where other elements already come into play, such as oscillators or mathematical formulas.
Typically, “chartism” is considered to be part of technical analysis. This in turn can be defined as a set of techniques that try to study the market through price action.
Everything is based on the existence of patterns and trends defined by the movement of prices, understood as the result of the interaction between supply and demand. After all, the chart is the trail left by money, the result of the battle between bulls and bears. The essential works are.
A.- ‘Technical analysis of financial markets’. John J. Murphy.
This book is considered by many experts as the Bible of technical analysis, the work that should not be missing in any trader’s library.
Its first edition is from 1986, when technical analysis was practically unknown, but it already dealt with crucial issues, such as Dow theory, the construction of charts, the different types of trends or even the Japanese candles.
More than thirty years later, it is still fully valid. “It is the bedside book for any technical analyst, it touches all aspects with rigor and depth,” he says. Josep Codina, technical analyst of INVESTMENT and finance.com
B.- ‘Long Term Secrets to Short-Term Trading’. Larry Williams
The author of this book, Larry Williams, is one of the most reputable technical analysts of the last decades.
It offers a clear view on a wide range of topics, such as profit patterns, breakouts, volatility, as well as an analysis of the best strategies and indicators. In Codina’s opinion, this work is also essential.
C.- ‘Fundamentals of Technical Analysis’. Carlos Doblado and Isaac de la Peña
It is one of the best technical analysis books written by two Spanish authors, Carlos Doblado and Isaac de la Peña.
It is ideal to start from scratch in the study of technical analysis, precisely it addresses the fundamentals of the discipline. For example, before operating a figure it is necessary to understand where it comes from.
It is also a work of a markedly chartist nature, where investor sentiment is analyzed in depth, rather than reviewing the many oscillators that exist in the matter.
D.- ‘Japanese candles’. Steve Nison
It offers a complete overview of Japanese candles and the techniques to follow the market with these tools.
It is another of the works that he selects Codina, as it offers “all the candlestick patterns explained as well as their interpretation, operational implications and frequency. It is quite essential so as not to stay in the clichés.
Japanese candles are essential for certain assets, especially for trading commodities, and Nison goes beyond concepts, explaining the psychology behind these ancient tools.
E.- ‘The universal principle of Elliott’s modulus’. Antonio Sáez del Castillo
If there is a father of technical analysis in Spain that is Antonio Sáez del Castillo, the greatest Spanish expert on the subject and a regular speaker at the various events organized by the magazine ‘INVESTMENT‘.
Although his work is extensive, one of his most celebrated books is ‘The Universal Principle of Elliott’s Modulus’, probably one of the best stock market books written in Spanish that offers a new dimension on the formation of impulses within the framework of the famous theory of Elliott waves.
2.- Trading books
Once the basic concepts of technical analysis have been acquired, it is important to reinforce the operation and the development of different trading techniques. Recognizing patterns, controlling the limits of losses (stop loss) or developing adequate monetary management, are, among others, the objectives of this learning.
A. ‘Succeed in trading’. Van K. Tharp
Very important to understand how consistency is reached in trading and what basic mathematics is behind it to validate methodologies and trading systems.
It is important to know if these systems are applicable in reality and if they will be able to adapt to the way the trader operates.
Perhaps the most interesting thing is that the author, who is a trader as well as a trainer of operators, explains trading as if it were a company, for which he even proposes the development of a business plan.
B.- ‘Trading strategies with a high probability of success’. Robert C. Miner
An essential work to recognize the most favorable trading opportunities, locate the best entry prices or place a ‘stop loss’.
The author, Robert C. Miner, is an expert trader with more than twenty years of experience who publishes daily newsletters on Forex, stocks and futures markets.
It is a complete work, valid for advanced traders but also for beginners. For example, in the first chapters it teaches how to determine if a market is in an uptrend or correction, the first point that should be raised in any operation.
3.- Psychotrading books
Finally, the psychological aspect is the third part in which traders must be trained. Preparation and learning of concepts is useless as long as emotions are not controlled.
A.- ‘Trading in the area’. Mark douglas
As much as a trader masters the different techniques and knows the fundamentals of the market, success will not come until he knows himself.
This is precisely what this book is about, modeling the trader’s mindset. It links with the concepts of psychotrading to learn to control emotions, finding the appropriate methodology that best suits this objective.
B.- ‘That’s how I became a trader’. Jorge Labarta
It is one of the best works written by a Spanish author on the psychological aspects of trading. In it, Jorge Labarta reviews his experience and the steps he took to become a winning trader.
“Perhaps it is the book that has given me the most,” says Daniel Pernas, director of DPS Trading. Thus, Labarta talks about the process by which he was able to polish his mistakes and “perfectly explains the nature of trading, giving many useful keys for anyone who wants to dedicate themselves to this”, considers Pernas. In addition, the final part of the book includes different interviews with well-known traders on the national scene.
4.- General reference books
Finally, the trader must be trained in other aspects, such as fundamental analysis, fixed income, investment funds, trading systems, general operation of the markets, etc.
A.- ‘The intelligent investor’. Benjamin Graham.
This is probably the best stock market book ever written, in the words of Warren Buffett, which he considers his main work. Its reading is mandatory not only to be a trader, but to start investing in the stock market.
It is the Bible of ‘value investing’ or investment in value, but the concepts that Graham develops are of such importance that even traders far from this investing style should know them.
B.- ‘The book that you would have liked to read about the stock market and financial markets’. Various Authors. Inveralfa Institute
It gathers in its single volume all the general aspects that investors should know, in addition to the technical analysis. The characteristics of the financial system, the role of the ECB and monetary policy, the operation of warrants, exchange-traded funds, futures markets, bonds or the currency market.
The advantage is that their authors are professionals, portfolio managers, traders, analysts, so they offer a very practical vision of the subjects they address.