Before getting started with trading, make sure your head is in the right place. In case you are planning to be in the business for a long term, you need to make trading an integral part of your life.
Success may require you to change your belief system. What we believe to be true affects our actions and our actions translate into results.
Is your goal to become wealthy? What do you think about wealthy people? It’s a fact that many people hate the rich. The haters believe that the rich are only getting richer by taking from the poor. In case you share the same thinking, you need to change your belief system. How can you become wealthy if you hate wealthy people? While it’s true that some people are getting rich by taking from others, many create businesses, invent technologies, grow food, trade, help others and create wealth. Trading is super beneficial to world development. Including financial trading. Financial markets are the most efficient way to transfer money from investors to businesses and economies. Forex trading helps banks and businesses get liquidity when exchanging currencies.
What do you think about trading? Do you believe it’s a business, a giant casino, or a job? How can you balance work and personal life? What do you think about risks and rewards? How about choosing friends? When you see someone succeed, do you feel bitter and jealous or do you feel inspired? These are the questions that shape our belief system. There are a couple of amazing books that can help us build a proper understanding of the world around us and make trading an integral part of our better lives.
For starters, reading the champion of best sellers, Rich Dad Poor Dad by Robbert Kiyosaki can shape your thought process about business, jobs, wealth creation and wealth distribution. The book advocates the importance of financial literacy, financial independence and increasing wealth by investing in various endeavors as well as starting and owning businesses.
The second book on your list should be The Five Major Pieces to the Life Puzzle. The book is written by Jim Rohn. This best-seller puts an emphasis on how to transform your philosophy. It consists of 5 chapters that include: Philosophy, Attitude, Activity, Results and Lifestyle.
The third one in the must-read list is Ray Dalio’s Principles: Life and Work. Ray Dalio is a founder of an investment firm, Bridgewater Associates. The principles that have helped Dalio become a successful entrepreneur and investor are well put together in this book. Discovering Dalio’s philosophy can benefit any trader.
Now let’s move to the books that can directly affect your trading. Starting from terminology and beginners’ guides to more advanced technical and fundamental analysis books.
The best books to learn the terminology and get started
When you are starting out as a trader it’s important to understand the terms, trading slang and basics. Understanding the terms thoroughly will increase the speed of your learning curve and save you a lot of energy. What’s more, the faster you learn how to invest the better. As they say time is money. In trading the sentence is way more important than you might think. The reason behind this mystery is compounding. Compounding enables traders to reinvest their profits and make larger returns in the future. Reinvesting is how investors such as Warren Buffet got so rich. Moreover, learning slang and basics can help you communicate with the trading community. Retail trading feels very lonely for many people, especially if they’re placing orders from their mother’s basement and communication with fellow traders can help make new friends, learn faster and improve trading results.
The first one on the list is called Currency Trading For Dummies. The authors Brian Dolan and Kathleen Brooks have made the book super user friendly. The text is easy to understand and is intended for complete beginners. The book explains currency trading and covers basic risk management, currency trading conventions, trading tools and many other aspects of trading.
The second on the list is called A Three Dimensional Approach To Forex Trading. The book is created by Anna Coulling and it helps aspiring Forex traders in transition to full-time traders. When you are still learning or trading part time and plan on becoming a full time trader, there’re a lot of important aspects to take into account. How are you going to fund your day-to-day life when trading? It’s important to create an emergency fund and not be reliant on trading as your main source of monthly income. As there are periods of drawdowns and forcing the markets to provide you with profits will only make your balance worse.
Day Trading and Swing Trading the Currency Market written by Kathy Lien is another great book for novice traders. Kathy is a BK Asset Management’s managing director and well-established financial analyst. Her book explains how to apply technical and fundamental analysis in your trading.
The next on our list is a book written by Jim Brown. The book is titled: Forex Trading: The Basics Explained in Simple Terms. As the name of this book suggests, the book is intended for beginners. The author is a self taught Forex trader and understands the challenges associated with learning Forex trading on your own.
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The best books to improve your trading psychology
As you become more accustomed to trading, you begin to realize that the next big obstacle to overcome is your psychology. In trading, human emotions are considered as a flaw and professional traders are doing their best to base their decisions on logic, mathematical probabilities, fundamental and technical analysis and reason. Greed, fear, hope, boredom and the need to make money can and will ruin your trading career unless you learn how to control your emotions.
Greed leads to taking larger positions and ultimately losing everything with one trade. Fear leads to not taking trading opportunities when they establish themselves. Hope leads to heartbreak and tears. If you are hoping, it means you are not prepared and do not trust your trading system. Boredom leads to overtrading and wasting away the profits.
Luckily, there are some of the best books to read on the subject. The first on the list being Market Wizards by Jack D. Schwager. Jack is an experienced trader but prefers to be referred to as an author. And rightfully so, his Market Wizard book series are among the best-sellers on the bookstores. What makes certain individuals exceptional in trading? What makes some traders consistently profitable and how do they manage large sums of funds? In search of finding the answers to these questions Jack interviewed the best traders across all asset classes. Mr. Schwager wrote down what the traders said and made it available to the public eye. The book doesn’t teach you how to place orders, how to manage your risks or choose trading platforms. But the piece can show you how successful traders think. The main finding of the book is that there are a million ways to make money in the markets and unfortunately all of them are difficult to find. Each individual should develop a trading strategy that best suits their personality in order to make trading work.
Another amazing book on trading psychology comes from Mark Douglas. The book is a best-seller and is called Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude. The book is completely focused on trading psychology and is intended for all kinds of traders, despite their level of experience.
Douglas uncovers myths associated with trading and helps investors think in terms of probabilities. Ignoring a losing trade is not easy, yet losing is a part of the trading game. Losing trades lead to doubts. Doubts lead to chaos and sabotaging progress. Instead of providing traders with strategies and setups, the author shows us that the first step in trading is to understand and accept its nature. When you understand the rules fully, you are in control. Level of focus and confidence increases. Confidence in yourself and in your trading system is vitally important as it enables you to trade with discipline and let the trading edge bear fruit. Whenever traders are not fully confident in their strategies, they tend to dump the systems during the first signs of drawdown periods.
The best books to learn risk management
In trading, learning how to manage your risks is the key to long term success. Proper risk management protects your account from blowing up during the drawdowns and enables you to keep trading during the good times to cover the losses. When you are not managing your risks, you are gambling. It’s true that a highly leveraged position can make you a lot of money, but at the same time, it can kick you out of the game if trade goes against your prediction. In the world of dinancies the risks and rewards are positively correlated. Meaning, the higher the risk the higher the potential for reward and vice versa. The following books can enhance your knowledge on this subject.
The first one on our list is Wieland Arlt’s best-selling book named Risk and Money Management for Day and Swing Trading: A complete Guide on how to maximize your Profits and minimize your Risks in Forex, Futures and Stock Trading. Wieland Arlt is a very famous and highly successful trader in Germany. The book teaches traders easy to use, professional money management techniques that make trading success predictable.
Most of the how to trade books discuss the importance of risk management. However, the dedicated Forex risk management books are hard to come by. One more best-seller by Davis W. Edwards can show you how institutional traders think when they are managing risks. The book is called Risk Management in Trading: Techniques to Drive Profitability of Hedge Funds and Trading Desks. Davis W. Edwards has a rich experience in trading. The author has a deep understanding of the subject and specializes in risk management, statistical analysis, and valuation of financial instruments.
The best books to learn technical analysis
Technical analysis studies past performance and creates predictions on future prices based on the past. The obvious shortcoming is that the process doesn’t take into account fundamentals and it takes time to cope with the new conditions. Markets are dynamic, what has worked before, might fail to work in the future. Technical analysis is the basis of most of the trades that are conducted today. Algorithmic trades are technical and most intraday traders are heavily dependent on technical analysis. What’s more, even if you are planning to purely trade fundamentals, you can still make a good use of technical knowledge. Many fundamental analysts predict the future prices based on market news and at the same time are using technical tools to place orders. These books can help you increase your understanding of technical analysis:
The first on the list is Japanese candlestick charting techniques by Steve Nison. The candlesticks patterns and trading techniques can be integrated with several trading indicators and provide highly probable trading setups. In this book Steve Nison provides a thorough candlesticks explanation.
Another great book that teaches how to conduct technical analysis is called Trading: Technical Analysis Masterclass: Master the financial markets. The piece is written by Rolf Schlotmann and Moritz Czubatinski. In this book you will come across ready-to-use trading strategies, chart patterns, explanations of trading tools and more.
The best books to learn fundamental analysis
Fundamental analysis studies what is currently happening in the world and predicts future prices. The practice takes into an account political news, micro and macro factors, market news and more. Fundamental analysis usually helps to predict the general direction of the markets. Mostly long term investors and position traders are studying fundamentals.
There are a couple of great books on the topic that teaches traders how to conduct fundamental analysis.
The first on our list is Fundamentals Of Currency Trading: Mastering Technical Analysis, Fundamental Analysis, Trading Psychology & Risk Management by Karen Foo. The book gives highly valuable information to its readers regarding the central banks, monetary policies, currency fundamentals and more. In addition, you can find tips on how to pick the best brokers and what to look for when searching.
Another book by David Carli can give you an insight on how fund managers are conducting fundamental analysis. David has more than 25 years of experience as a fund manager. The book is called Forex Fundamental Analysis – Trade Forex Like a Fund Manager.
Benefits of learning trading from books
Learning trading from books can certainly bring you many benefits as well as shortcomings. In order to get the best of both worlds, it is advised to keep learning from the real trading world and books simultaneously.
Let’s talk about the benefits first. There are a wide range of trading books available online. The huge variety enables you to select the best ones and experience first hand information from top traders and authors. Books are always there for you, meaning, in case you missed or forgot something, you can always go back and read again. Books are convenient as you can carry them with you wherever you go and can delay the reading process in emergencies.
Shortcomings of learning trading from books
An obvious downside of learning from books is that you do not get much hands-on experience. Your understanding of the markets becomes theoretical and less practical. It’s more difficult to learn how to use trading platforms and indicators through books. However, you can always use the combination of books, seminars, webinars, video guides and articles to become the best version of yourself in terms of trading.
Demo trading or Micro account trading can help you gain practical experience risk free or in Micro account’s case with very little risk. Demo trading enables traders to place orders with virtual funds in the live trading alike environment.
The main takeaways
To sum everything up, learning how to trade profitably long term is not easy. First thing to do is to make sure your belief system is in line with your financial goals. Books on terminology, psychology, risk management, and technical and fundamental analysis can greatly help you become better at trading. However, keep in mind that only books are not enough and you should also make good use of webinars, seminars, video guides and articles.
FAQs on the best books in Forex
What is the best way to learn forex trading?
The best way to learn anything is to start. Watch, read and learn anything you can get your hands on. In this guide we offer you some of the best trading related books that we could find. Keep in mind that learning how to trade forex consistently profitably takes time.
What is the best book to read for forex trading?
Some of the best books on learning how to trade Forex are: Currency Trading For Dummies, Market Wizards, Trading in the Zone, Risk and Money Management for Day and Swing Trading, Japanese candlestick charting techniques and Fundamentals Of Currency Trading: Mastering Technical Analysis, Fundamental Analysis, Trading Psychology & Risk Management.
Is it possible to learn forex trading from a book?
It surely is, however, it’s better to get some practical experience along the way. Demo accounts are a great way to learn how to use trading platforms, indicators and place orders without risking an actual capital. Books on the other hand can help you understand the markets better and make better trading decisions.
