10 Must read Trading Books for Beginners + Important points to understand before you start trading

10 Must read Trading Books for Beginners + Important points to understand before you start trading
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As a new Trader, knowledge is one of most important parameters to successful trading.

It is the grass root foundation on which you will build successful strategies, be able to understand how to select good quality stocks and managing, minimizing risk.

Trading in the stock market requires a lot of preparation, hard work and knowledge accumulation in order to have a better probability of being able to generate consistent profits.

Due to almost no entry barriers to Stock market trading (A computer, good internet connection, Demat and Trading account is all you need to start trading), many new traders do not bother to read books or accumulate knowledge.

They take it as a source of easy money bundled with unrealistic returns expectations and trade without any real preparation.

Because of this, more than 90% traders lose all their trading capital within 6 months, never to come back again to trade.

If you are a new trader, Take serious note and in order to start off, I suggest these list of trading books for beginners which inspired and motivated me when I started off and I’m sure it would also helped in getting you in the right direction.

It will give you a proper understanding of how the financial market and its participants work and behave.

List of the 10 best Trading books for Beginners:

1. Market Wizards by Jack D. Schwager

This is by far, one of the best trading books for beginners. It covers amazing stories of successful traders.

The Author, through in-depth interviews reveals that each trader operates by a unique method tailored to suit their personality through a combination of solid methodology and the right attitude.

It would definitely get you more interested and excited about the markets.(Click here to read more reviews on Amazon)

2. Buffett: The Making of an American Capitalist by Roger Lowenstein

On a personal note, I hugely admire Warren Buffett and reading about the man, his character and personal traits really helped me in getting an insight into these aspects of Buffett, marking his life from his school days.

The Author has very well shared how Warren Buffett was able to amass the phenomenal wealth that he generated throughout his life, making him worth more than $10 billion and counting.

The book shows you how he started from scratch and how he kept picking up stocks and companies that he could invest in. It is a worth reading, well written and one of the good trading books for beginners. (Click here to read more reviews on Amazon)

3. Technical Analysis Explained by Martin J Pring

If you are new to Technical Analysis and would like to learn without the complicated approach, get an overall strong foundation on understanding technical aspect of trading, then this book would definitely help you to get on the right track.

The Author gives you everything you need to forecast how investors will respond to future events based on how they have statistically responded in the past.

He uses his popular straight-talk style of instruction to help all types of investors forecast price movements with reliable accuracy.

This book covers detail and simple explanation of most of the important Indicators. It also factors in various events and how Investors should used it to their advantage. A must have book for all budding Technical Traders. (Click here to read more reviews on Amazon)

4. One Up On Wall Street by Peter Lynch

This is a must read for new investors and also one of the excellent trading books for beginners, traders and investors alike to brush up investing basic concepts again and again.

The Author has covered every aspect of investing in a very precise manner. He gives an elaborate insight into the different types of companies based on growth, cycles, turnaround and saturated business environment.

The book also focuses more on how to find the Multibaggers, small unknown companies at present but with high growth potential in the future.

Also, he talks about how to interpret some of the very important ratios such as P/E ratio, Cash Flow, EPS, Growth rate to take an informed investment decision. (Click here to read more reviews on Amazon)

5. When the Genius Failed – By Roger Lowenstein. 

A book that talks about the true events of the smartest guys in finance, running the largest hedge fund during the early 90’s with the most sophisticated strategies. The book talks in detail about their success, arrogance and most importantly how they mis-managed risk.

A very important read if you want to understand the importance of Risk Management in your daily trading. (Click here to read more reviews on Amazon)

6. How I Made $2,000,000 in the Stock Market by Nicolas Darvas

It tells one of the most unusual success stories in the history of the stock market.

The Author was able to make himself a millionaire several times over by his unique investment approach to find quality stocks that are being accumulated in high volume near their all time highs and once found, keep adding them to the winners and get rid of the losers.

It worked regardless of whether the market rose or fell and is still as much as relevant as had been during his time. (Click here to read more reviews on Amazon)

7. Reminiscences of a Stock Operator by Jesse Livermore

This book is a combination of a personal trading philosophy and a general guideline for traders. It talks everything about how a trader should plan, what should he be aware of and how he should stick to his rules of trading.

If you believe that you are a serious trader, then this book is also a must read. It is a very old book but basically everything about trading wisdom started here and still works to this day. (Click here to read more reviews on Amazon)

8. How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition by William J. O’Neil

The author of this book has written down the hard-earned knowledge he gained from his own experiences as an investor.

The price charts of winning stocks from the previous century have been listed out in the beginning of this book.

These charts are supplemented with notes throughout in order to make them more comprehensible to readers. In this book, the author discusses his trademark CAN SLIM method of investing.

The CAN SLIM method put together by the author consists of 7 steps which are aimed at maximising profits.

This book imparts valuable information about the times when one needs to cut a loss and the times when one needs to invest and make a profit. (Click here to read more reviews on Amazon)

9. Trading for a Living: Psychology, Trading Tactics, Money Management by Alexander Elder

In this Book, Elder gives a proper foundation, especially with his triple screen method and his way of ranking success of various patterns and indicators in different markets (bull, bear, trading range).

The Author talks about the three M’s of trading to be successful which is to managing money, your mind, and the trading method to be really profitable. (Click here to read more reviews on Amazon)

10. Options, Futures, and Other Derivatives by John C. Hull

Derivatives can seem complicated for new Traders, especially Options. This book approaches a reader through a simple methodology making it quite easy to for beginners to understand.

It starts off with basic definitions and determinants of options. It also includes everything about option i.e. the type of options, strategies, formulae, pricing, Greeks etc.

You do not have to refer to any other book on options if you properly go through this one. (Click here to read more reviews on Amazon)

Checklist

STOCK MARKET TRADING FOR BEGINNERS

So as you get ready to start trading, apart from reading books, there are also some important points which you need to ponder over very carefully:

  • How much knowledge and educated are you regarding the Stock Market?
  • Do you have any Plan or Strategy in place already?
  • Have you taken into consideration the risk involved?
  • Are you in your perfect mindset to start trading?

1. Education and Knowledge accumulation:

In the business of Trading, Knowledge is the most important asset you can have to guard yourself against disastrous results.

Initially, as a newbie Trader, knowledge will contribute almost 80% to your overall trading performance. In due course of time (if you do stay in course), its percentage will keep on decreasing with the increase of your trading experience.

So, to equip yourself with the necessary knowledge, firstly start with reading good books/e-books available on the internet as well as offline.

Secondly, attend a short term course on Stock market trading and learn the various techniques used such as Fundamental and Technical Analysis, understanding how macro and microeconomic events affect the stock movement, how to select quality companies, when to enter and exit, the different types of trading instruments such as futures and options etc.

This may incur you some expenses but I assure you that it will take prevent you from many unnecessary mistakes which a beginner Trader goes through, and it would be one of the best investments you would have ever made.

Thirdly, try to follow a successful trader and listen to what he has to offer and how he did it.

You may not necessarily do what he/she says, but it will give you a very good perspective to how successful traders approach the markets.

2. Trading Strategy:

All of us keep hearing everyday regarding having a strategy in whatever you are pursuing. Be it preparation for an entrance exam, for a job interview, for winning a game or when you are running a business.

So even in the realm of trading, it is also very important that you develop a proper trading strategy and stick to it if you really want to have a better probability of success.

Depending upon your personality, choice of markets and time constraints, you can develop a strategy that really works for you.

A trading strategy can be build based on various technical indicators (RSI, Stochastics, Moving Averages, Japanese candlesticks), Patterns (Double bottom, Head & Shoulders), economic data and events (Fed rate Hike, RBI Interest rates, Quarterly results, CPI, WPI) and fundamental data (PE ratio, EPS, ROE).

3. Risk Management:

A very important point which most new traders tend to ignore is managing your risk.

You may have found the best opportunity in a particular stock or commodity but without proper risk management, it may well turn against you.

Like any other activities in your life where you assess the risk and reward involved, Trading involves a lot of understanding in regards to understanding the risk involved.

The focus entirely on profits clouds our judgement in regards to assessing our loss potential as well as capital preservation.

So depending upon your risk taking abilities, you should already know pre-hand how much percentage of your total trading you are willing to allocate to one certain trade.

How much loss you are willing to take and what profit percentage you are comfortable taking and exiting from it.

Understanding and taking these factors into consideration will take you a long way in your trading activity and will be a deciding factor whether you would have consistent returns and not just gambling away your hard earned money.

4. Mental Setup:

What factors have driven you to this point where you have decided to take up trading as a means of additional income?

Is it because you are very passionate about the markets and analyzing stocks really gives you a sense of satisfaction?

Or just the profit factor motivated you?

Are you in debt and see the markets as a way to get you out of that situation?

Whatever may be your motivation factor, it is very important that you sit down and really give a thought to it.

Without the right mindset and the right attitude, you would ultimately land yourself into more trouble as our basic human nature is governed by fear and greed.

If you are in debt or if the markets are going to be your only source of income, no matter how good your trading strategy is or you risk management, you are always going to be influenced by those underlying factors and that may turn out to be disastrous for your trading career.

CONCLUSION

It is very important that you thoroughly understand why you are going to trade.

If you believe that you are not yet in your right mindset, I would suggest you not to start trading and work on it and come to terms with it, build a positive attitude and then take the right decision.

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