Trading the financial markets might look simple on the surface but delving deeper into successful traders’ approach a series of skills is revealed that can make the difference. Successful trading usually requires a combination of technical analysis skills, money management, knowledge of the markets and trading psychology. Although this is far from an exhaustive list, we have narrowed down the list to the 3 great financial books that will cover as much ground as possible in the pre-mentioned expertise areas.
1. Technical Analysis of the Financial Markets by John J. Murphy
This book written by John Murphy is considered the “bible” of technical analysis theory. Easy to read and understand with visuals and quick explanations. It almost covers the entire span of technical analysis theory in one book.
Aspects like trend lines, support and resistance, continuation patterns, reversal patterns, candlestick patterns, elliott wave theory, volume, dow theory and many more are covered in this book. No serious trader should miss acquiring this knowledge through either similar books or other sources like the internet, webinars and courses. But this book has the clear advantage of covering all the important topics in one place from a well respected and recognized writer. Furthermore a large part of this book’s material is even considered a must read for candidates pursuing the prestige designation of the Certified Financial Technician (CFTe). This makes the book a must have for serious traders navigating the markets with the help of technical analysis.
Summing things up, reading this book and understanding its material will cover your bases in terms of technical analysis theory skill. Technical analysis is used by many successful and experienced traders in all financial markets like stocks, commodities and currencies.
2. The Intelligent Investor by Benjamin Graham
While the first book’s material can be used in all markets, this book’s material is focused on stocks. The writer of the book Benjamin Graham is considered the “father” of value investing in stocks.
This book is also the favourite of Warren Buffet who is the co-founder of Berkshire Hathaway and is one of the most successful investors of our time. His company’s stock has outperformed the S&P 500 in terms of performance by an annualized margin of 18.3% to 10.2% since 1965. Benjamin Graham had always inspired Warren Buffet and shaped his stock investing philosophy. The second of the 3 great financial books that we are describing covers topics like selecting stocks based on value criteria that lead to selecting stocks that can potentially outperform the market. The writer goes in depth about topics like the margin of safety in investments and explains the P/E (price to earnings) ratio and how to use it when screening stocks in the best possible way. The idea of inverting the ratios as E/P to find out the profit yield of each stock is pure genius.
While the philosophy of value investing is well explained and emphasized throughout the book, it does not mean that value investing is the only way. But the knowledge gained from this book can be applied to other styles of stock investing too as it lays the foundation for stock fundamentals and impact on stock performance.
3. High Performance Trading by Steve Ward
So we covered technical analysis and fundamentals through the previous two books mentioned above. This book is all about being able to put everything to work once you have the correct mindset. Trading can sometimes be exhaustive mentally and psychologically.
The proper mindset is critical for successful traders so they can always be the best they can under any market conditions. This book is about preparing for success in trading with proper planning, identifying strengths and weaknesses, building resilience in trading, becoming persistent on decision making, despiplice and flawless execution. If all these already sound like too much, they are only just describing a few parts of the book.
The real value of this book is that it makes you feel what it’s like having a coach or mentor that is genuinely interested in seeing you succeed in trading. Like every professional athlete needs a coach or mentor to ensure the athlete is impremeting his or her knowledge and experience properly on the field, the same goes for the trader. Success is not dependent on technical analysis or fundamental analysis skills alone but on how these skills are implemented, on maximum performance, consistency and a healthy mindset in achieving all these.
Conclusion
If you have just started your trip in trading or already have acquired enough knowledge to get you by, these 3 great financial books can help you take the next step. The Intelligent Investor might only be focused on stocks but Technical Analysis of the Financial Markets and High Performance Trading are for trading as a whole. Reading these books will take out a lot of gruesome guesswork and research on the internet.
Have you read these picks or have other financial books to recommend? Share your thoughts and experience in the comments below!
Disclaimer: The content in this presentation comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation of any transactions in financial instruments.
