I read over 100 books on stock trading, including technical analysis, fundamental analysis, general investing books, and mechanical trading systems. The following 10 are the best technical analysis books in my opinion:
1. Trading for a Living: Psychology, Trading Tactics, Money Management
- This book is divided into 3 major parts: Psychology, Trading Tactics, and Money Management. You will learn many popular technical indicators and how to use them efficiently to generate trading signals.
It also helps you discipline your mind to be successful in the stock market. The book also covers money management skills. One thing that I don’t follow from this book is the author’s 2% stop loss because I think that is way too little in today’s volatile market.
- This book is quite interesting because it offers a few unique points that you wouldn’t find in other books. One of them is the discussion on overbought areas, which are identified by using the indicator, stochastic. Marcel Link, the author, suggested that we should not sell a stock while it is in the overbought area. Instead, we should wait until it pulls back from the overbought area or else you will miss a lot of good opportunities. I agree with him as I backtested the strategy with my own mechanical trading system.
3. Profitable Candlestick Trading: Pinpointing Market Opportunities to Maximize Profits
- This is the best book I read on candlesticks. Unlike other candlestick books, this one introduces candlesticks and how you would trade them in simple steps. For each pattern, there is a chart and steps that you need to follow. I finished the book in 2 days and I fully understood all the patterns and how they work.
4. Come Into My Trading Room: A Complete Guide to Trading
- This is the first book I read on technical analysis. I read the book 3 times for about 1 month to digest everything presented in the book. It will be much easier if you read “Trading for a Living” before reading this one, as they were both written by the same author. I followed the techniques presented in the book when I first started trading, but I didn’t make much profit. Obviously, that does not mean that this is a bad book. There might be thousands of people following his techniques and making fortunes. Currently, I’m only using daily charts to make my trading decisions. I don’t use weekly charts because I usually don’t hold a stock for over a week.
- This book is perfect for beginners. It is a very comprehensive book that covers almost every technical indicator that you need to know. However, if you already read the top 4 books and understand each of them well, then you don’ t need to read this book as you wouldn’t learn much new. I finished this book in 2 days skipping 2/3 of the book because I already knew the concepts and indicators presented in the book.
6. Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Wiley Trading)
- This is a good book to read if you are a computer programmer and know how to build your own trading systems, or at least you should be able to program tradestation to backtest trading signals in order to read this book.
7. Short-Term Trading in the New Stock Market
- This book covers trading skills and strategies and the author’s 7-step approach to the stock market. It also covers how to set stop losses and when you should not buy a stock, which is when the risk-reward ratio is less than 1:3. The book offers some interesting points and history stock market events that seemed to repeat itself.
8. A Beginner’s Guide to Day Trading Online (2nd edition)
- If you plan to day trade online, you should read this book as it shows you different trading strategies based on technical analysis and how they apply to day trading. It describes, step by step, on how to set up an online trading account and how to read the screen.
9. Encyclopedia of Chart Patterns (Wiley Trading)
- A great book on technical analysis and chart patterns for both beginners and experienced traders.
10. Entries & Exits: Visits to 16 Trading Rooms (Wiley Trading)
- This book is written by the same author as “Trading for a Living” and “Come into my Trading Room.” This is a great book if:
a) You are a beginner,
b) You read “Come into my Trading Room,” or
c) If you don’t fully understand “Come into my Trading Room”
This book is like a practice book on what you learn from “Come into my Trading Room.” The author interviewed 16 different people to see how they trade. Then he gives his own opinion on each trade based on his trading method which is first presented in “Come into my Trading Room.”
