Looking for the best swing trading books to get started in trading?
What many new traders do is search for books that teach trading strategies.
While they are important to understand how to trade the market, that’s not exactly going to help you going to become profitable.
That’s because the trading strategies taught by the authors are designed to fit their trading personality and style.
Hence, many traders buy these books thinking they can become profitable, but end up losing money.
Instead, what you need are a combination of 3 different types of books:
- Trading Strategies
- Risk Management
- Trading Psychology
With these 3 types of books, it will give you a complete understanding of how to take the trading strategies you learn, and apply the concepts to create your own unique trading methodology.
As such, I’ve compiled the 7 trading books that I feel are the best books for you to get started in swing trading.
1) Mastering The Trade
The very first book that I suggest you read is Mastering The Trade by John F. Carter.
This was one of the first few books I bought when I got started trading almost two decades ago.
John is a professional trader and in this book, he has compiled several trading strategies that he uses.
These strategies can be used for swing trading as well as day trading.
And it can be used across all the different markets.
In his book, you can see he uses a vast amount of trading strategies.
He has trading strategies that use price action, and he has trading strategies that use indicators.
What I like about his book isn’t the trading strategies…
But rather, how he walks through his trades with the trading examples.
So this gives me many insights as to how he processes his thoughts as the market moves.
To me, this is invaluable.
As for the trading strategies, I’ve tried every single one of them but haven’t exactly good results.
But it gave me ideas on how a professional trader constructs his trading strategies.
Overall, this book is good to give you an insight into how a professional trader trades.
However, do not think that the trading strategies provided in this book are going to make you instantly profitable.
Rather, use this book as a guide for you to develop your own trading strategies.
2) Trend Following
The next book I recommend to read is Trend Following by Michael Covel.
This book teaches the trend trading concept that the infamous turtle traders use.
In the book, Michael goes into reinforcing why trend trading works.
As more and more people learn about trend trading, its effectiveness came into question.
Even Richard Dennis, the father of the turtle traders, quit trading after his two funds lost more than half its value.
Hence, many people thought that trend trading no longer works.
However, in Michael’s book, he debunks that myth.
He presents many reasons and practical examples of why trend trading still works.
And then he brings up the past performance of funds that utilizes trend trading to show how profitable and effective trend trading still is.
So while trend trading is not as effective as it once was during the 1980s, it still is a profitable trading strategy.
Hence, this is a good book to really read and study.
You see, many traders have an unrealistic expectation of trading.
New traders think that they have to be profitable every single month, or the trading strategy is useless.
Hence they hop from one strategy to another hoping to find the “holy grail”.
But in this book, Michael shows that the top funds not only have losing months but also have losing years.
However, over the long term, they are still profitable.
That’s why it’s important to read this book to give you a sense of realistic expectation of trading…
And also to give you confidence that the trend trading strategies work.
So overall, this book is important not just for it’s trading strategy, but also for your trading psychology.
3) Come Into My Trading Room
The next book I recommend you read is Come Into My Trading Room by Dr. Alexander Elder.
This book is really for the beginner because it covers the three important aspects I talked about at the beginning of this post:
- Trading strategy
- Risk management
- Trading Psychology
Dr. Alexander Elder puts it in the form of 3 Ms – Mind, Method & Money Management.
So this is a holistic book that encompasses all three important aspects of trading.
In the section on mindset, he talks about becoming a disciplined trader.
This is very important because what new traders tend to do is overtrade.
Even when there is no trading signal, the new trader will still want to get in a trade to just “see how it turns out”.
When I first started trading, I too got into this habit of overtrading.
I wanted to get into as many trades as possible because of the “thrill” of trading.
Needless to say, that didn’t turn out very well.
Hence, in this book, Dr. Alexander Elder reminds the importance of being disciplined in trading.
He also talks about the characteristics of a “Mature Trader”.
And the part I LOVE about it is the mention of keeping good records of your trades.
When I was in the prop firm, I found that the traders who always performed well are the ones that kept a very detailed record of their trades.
When you keep a good record of your trades, you’re able to analyze them and then rectify your mistakes.
As for his trading method, Dr. Alexander Elder shares his strategy for trading the markets.
He uses technical analysis along with a few indicators to help make his trading decisions.
While I found it interesting, it’s not necessarily a trading strategy that is suitable for everyone.
However, it’s good to read it to understand how he approaches the market.
Everyone has their unique trading style and it’s important to find your own instead of copy exactly how another trader trades.
As for money management, Dr. Alexander Elder introduced a very important concept called the 2% rule.
This rule states that you cannot risk more than 2% of your total equity on any single trade.
That means if your trading account has $10,000, then the biggest risk you can take per trade is $200 (2% of $10,000).
And if your trading account drops to $9,000, then the biggest risk you can take is $180 (2% pf $9,000).
This is very important because as your equity drops, you also lower your risk per trade.
And if your equity increases, you can increase your risk per trade accordingly.
This is to ensure that you never risk so big on any one trade that it can wipe out your trading account.
If you can stay in this “trading game” long enough, then you have a chance to win in the long-term.
And the way to be in the game long enough is to ensure you still have money in your trading account so you can keep trading.
4) Entries & Exits
The next book I recommend to read is also by Dr. Alexander Elder called Entries & Exits.
However, this book isn’t about his trading, but rather his students.
And the interesting thing is that although his students learned his trading strategies…
They all employed different variations of his trading methodology.
Some traders are systematic and some traders are discretionary traders.
But they are all profitable.
So this further goes to show that although you can have the same trading strategy, it’s up to the individual trader to fit it to their trading style.
What I love about this book is that the traders will do a walkthrough of their trades.
They will first show the chart that they see just before they enter the trade…
Then Dr. Alexander Elder will ask the question, “Will this trade make or lose money?”
This will get me to start analyzing the trade and imagine as though I was looking at the market.
It’s one thing to just read and absorb…
It’s another to immerse myself in analyzing the trade.
I love that as I get so much more insights than to just read and absorb.
Finally, the traders will share how their trade turned out and their thought process for the entire trade.
I found this invaluable as well because you get to have an insight into how traders think.
Then Dr. Alexander Elder will also give his commentary on the trade and share whether or not he would take the trade.
Overall, this is a very good book to see the different trading strategies that other traders employ…
But more importantly, their thought process before, during and after the trade.
5) Market Wizards
There is a saying that goes:
“Success leaves clues.”
That means if you want to be successful, then learn from others who have been successful.
And that’s where the Market Wizards book series by Jack Schwager comes in.
There are a total of 4 books in the Market Wizards series:
- Market Wizards
- New Market Wizards
- Stock Market Wizards
- Hedge Fund Market Wizards
All the books consist of interviews with the top traders in the world and share their trading strategies as well as the mindset in trading.
This book has been tremendously helpful for me in my trading journey, especially when I started trading more than a decade ago in 2006.
What I absolutely love about this book is that Jack Schwager got these traders to share what’s going on in their minds when they trade.
This is extremely invaluable because when you get into the minds of these top traders, it can give you insight into how you should be trading as well.
I remember when I just started as a prop trader, I would sit beside some of the senior traders and just watch them trade.
Then after they got out of each trade, I would ask them questions like:
“What did you see to make you enter the trade?”
“When you were in the trade, what was on your mind?”
“How do you decide when it’s time to get out of your trade?”
“Why did you enter here and not there?”
“Why did you choose to exit your trade at this level and not there?”
“What are some of the considerations you have before entering into a trade?”
This accelerated my learning curve and helped me do well at the prop firm.
And that’s why I love the Market Wizards series because I can get valuable insights into top traders I otherwise wouldn’t be able to get access to.
And so what I’ve done is list some of my favorite quotes below from the book that has really helped me in my trading, and I’m sure it will help you as well.
Here are two quotes from William Eckhardt:
“If a trader doesn’t know why he’s losing, then it’s hopeless unless he can find out what he’s doing wrong. In the case of the trader who knows what he’s doing wrong, my advice is deceptively simple: He should stop doing what he is doing wrong. If he can’t change his behavior, this type of person should consider becoming a dogmatic trader.”
“Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.”
Here is a quote from Gil Blake and is a response when he was asked why do traders lose:
“First of all, most traders don’t have a winning strategy. Second, even among those traders who do, many don’t follow strategy.”
Here is a quote from Robert Krausz on the subconscious mind’s role in trading:
“It’s your subconscious mind that prevents you from taking correct action in the market. The problem will persist until you convince the subconscious in a very direct manner that the new methodology is valid and that it has to forget about the old methodology.”
And when he was asked what are the key characteristics of a winning trader, he said:
“Persistence, patience, and a willingness to take risks.”
Here is a quote from Michael Steinhardt when he was asked what he thought are the elements of good trading:
“Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.”
And this my favorite quote on risk management by Marty Schwartz who is a trading legend:
“Learn to take losses. The most important thing in making money is not letting your losses get out of hand. Also, don’t increase your position size until you have doubled or tripled your capital. Most people make the mistake of increasing their bets as soon as they start making money. That is a quick way to get wiped out.”
If you’re new to trading, this advice applies even more so to you because managing risk is at the bottom of the list for many new traders.
So heed Marty’s advice.
After all, in 9 out of 10 trading championships he entered, he made more money than all the other contestants combined.
He knows what he’s talking about.
Overall, this series of books is by far one of the most important collections of books if you’re serious about swing trading.
6) Trade Your Way To Financial Freedom
The next book I recommend to read is written by Dr. Van K. Tharp who is a professional coach for traders and investors.
Don’t be fooled by the bombastic title of this book because it has played a pivotal role for many traders…
And it has really helped me understand how to approach risk in trading.
This is extremely important if you want to manage your risk well in swing trading.
Before this book came along, traders would talk about profit and loss in terms of X dollars or X ticks/pips/cents.
For example, traders would say, “I made $500 on this trade.” or “I made 200 pips on this trade.”
But after this book was released, traders now talk about it in R-Multiples.
For example, “I made 3R on this trade.” or “I made a total of 20R this month.”
This is a concept taught in the book and it’s about seeing profit and loss not in terms of value, but rather in terms of each unit of risk.
So if you risk $100 per trade, then $100 would be your 1R.
And if you risk $500 per trade, then your $500 would be your 1R.
When you categorize risk this way, you can be objective.
The goal of your trading system is to get as many Rs as you can.
For example, if you ask a trader how much he made today and he says $2,000…
You would have no context of whether $2,000 is good or not.
From a dollar perspective, making $2,000 in a day is certainly considered good.
But if you found out that he risked $5,000 on each trade, you’d realize that his profit was only 0.4R.
This means that with just one losing trade, his $2,000 profit could easily be wiped out.
And he’d be down $3,000.
Furthermore, if you talk about profit and loss in dollar terms, it could affect the trader’s emotions and performance.
For example, when I was at the prop firm, I had a colleague who had finally been profitable after losing for two months in a row.
That meant that he hadn’t gotten paid for two months.
This affected him greatly because he was the sole breadwinner of his family and he was starting to feel the pressure.
So when he was finally profitable in the third month, his trading psychology changed.
At that time, there was still another two weeks to the end of the month.
As prop traders, we are required to trade every single day.
But because he had already made some profits, he was afraid of losing it and not getting paid for another month.
And so he didn’t want to risk that and decided to trade small for the rest of the month.
Also, whenever there were any trade opportunities, he would talk himself out of it for fear of losing money.
And when he was in a profitable trade, he would get out too soon as he feared the market would turn against him.
Although he did make a profit for that month and go paid…
His performance was no longer at his best because he couldn’t be objective in his trading anymore.
Hence it’s important to not see risk in terms of dollar value but in R-Multiples.
This way you can be objective about your risk and not let it affect your trading decisions.
The other concept that the book teaches on is Trading Expectancy.
Expectancy is the average amount your trading system expects to make or lose per trade.
To calculate the Expectancy of your trading system, there are 3 factors you need to know:
- Win/Loss Percentage
- Average Won Per Winning Trade
- Average Loss Per Losing Trade
Here’s the formula to calculate Expectancy:
(Percentage Win x Average Won) – (Percentage Lose x Average Loss)
Now, this is very important to understand because new traders have the misconception that to be profitable, they need to have a high winning percentage.
But that’s not true at all because you can still win even if you have a winning percentage of 20 percent.
For example, let’s use 5R as your Average Won and 1R as your Average Loss to calculate your Expectancy:
(20% x 5R) – (80% x 1R) = 0.2R
What this means is that on average, you will expect to make 0.2R per trade.
So if your 1R is $100, then you will expect to make an average of $20 per trade.
And if your 1R is $500, then you will expect to make an average of $100 per trade.
As you can see, even if your trading system only wins 20 percent of the time, you still can be profitable.
So if you want to learn how to build a profitable trading system and manage your risk properly, then you must read this book.
7) Trading In The Zone
The final book that I highly recommend you read that will greatly help you in your swing trading is Trading In The Zone by Mark Douglas.
In fact, this is a must-read for all traders because it tells of the importance of thinking in probabilities.
Thinking in probabilities means to accept that there will be losing trades and winning trades.
However, you won’t know which of the trades are going to be winners or losers.
That’s why he stresses the importance of being mechanical in your trading.
That means you do not second-guess your trades whenever you have a valid trade signal.
One of the problems I’ve seen with many new traders, including new prop traders who just got into the firm, is being fearful of loss.
For example, when you have hit your Stop Loss many times in a row, you start to doubt yourself and your trading strategy.
So when the next trading signal comes, instead of mechanically taking the trade, you start to think of different reasons why the trade will not work out.
That’s what happens with many new traders.
And the problem is because they do not know what percentage of the time they win, the percentage of the time they lose, and the longest losing streak of their trading system.
And because of that, they cannot think in probabilities.
In this book, Mark Douglas references the casino business model with regards to thinking in probabilities.
For example, casinos make money day after day, year after year, without fail.
And the reason is that they let their probabilities play out for them in the long run.
They aren’t worried if they lose two, three or even ten bets in a row.
That’s because they know they will be profitable from their edge in the long run.
And what that means is that the casino games are already designed to win right from the start.
Let’s take for example the game of Roulette.
In the European Roulette Wheel, there is a total of 37 numbers on the wheel.
18 black, 18 red, and 1 green.
The payout to bet black or red is 1:1.
That means if you bet $100 on red and you win, your payout is $100 (on top of your original $100).
The misconception that many people have about this bet is that it’s a 50 percent chance of a win.
But the truth is that it’s less than 50 percent because of the green “zero” on the wheel.
So the win percentage is only 18 / 37 = 48.6 percent (rounded to the nearest two decimals).
What this means is that 48.65 percent of the time you will win $100.
And 51.35 percent of the time you will lose $100.
Let’s now calculate your Expectancy with this input:
(48.65% x $100) – (51.35% x $100) = -$2.70
This means that on average you are losing $2.70 each time you bet.
Now, you may get lucky and win 3 times in a row and make a profit of $300.
But the casino knows that if you stay and continue to play long enough, the probability will play out and you will lose.
That is why the casino isn’t concerned if you win a few times.
They know that in the long run, they will be profitable.
And that’s how you want to approach your trading as well.
In the book, Mark Douglas states that having a probabilistic mindset accept 5 fundamental truths:
- Anything can happen.
- You don’t need to know what is going to happen next to make money.
- There is a random distribution between wins and losses for any given set of variables that define an edge.
- An edge is nothing more than an indication of a higher probability of one thing happening over another.
- Every moment in the market is unique
When you adopt this thinking, your trading will improve by leaps and bounds.
Finally, there’s an exercise that he encourages traders to do and that is to essentially treat your trades as a test.
That means once you have defined your trading strategy, just take 20 trades mechanically.
Doesn’t matter if you win or lose.
Use that 20 trades as a sample size to understand your trading strategy and write down its wins and losses.
What percentage of the time does it win and lose?
How much does it make on average when you win?
How much does it lose on average per loss?
What is the longest losing streak?
When you understand your trading strategy well enough, you will be able to trade confidently and have an edge like the casinos.
While there are many more books on swing trading, these 7 books that I’ve shared here are the books I highly suggest to start with.
If you want to improve your trading performance, then stop searching for the “Holy Grail” trading strategy and read these books instead.
Many new traders spend the bulk of their time searching for the best swing trading strategy thinking that it’s what they need to be profitable.
However, swing trading isn’t just about trading strategy.
Rather, it’s a holistic approach of strategy, money management, and psychology.
And these 7 books I’ve listed here will help you with that.
One more thing…
Did you like this post?
If so, would you please share it?
Remember, sharing is caring, and it won’t even take 5 seconds of your time.
So go ahead, click the share button below now