7 Day Trading Books You Need To Read

Looking for some day trading books that are going to give you the exact blue print that ensures your success and ability to trade for a living? I have some bad news…they don’t exist.

The majority of the best day trading books to make our list weren’t even written by real traders. The fact is that most traders are pretty secretive about their trading strategies. The majority of the books you will find written by traders focus more on psychology than their actual trading strategy.

You may ask, “Why would I read any of these books then?”.

It’s quite simple really…becoming a successful trader is 80% psychology and 20% tactics and strategy. Once you understand this you will be light years ahead of the competition.

Selection Process

I’ve read A LOT of day trading books through out my trading career. When considering what books to put on this list I thought about what books still have an impact on my today. In doing so, I came up with a balanced list of classics and I share with you my favorite thing I took away after reading each book.

I wanted to come up with a list that had something for everyone no matter your level of trading experience. Some of the books focus purely on the mindset of professional traders where as other cover the lifestyle of some of the trading cowboys.

If you’re brand new to trading, scroll down to my number one book and purchase it today.

Best Day Trading Books

Click on any of the book images to view on Amazon

Trading For A Living

7. Trading for a Living: Psychology, Trading Tactics, Money Management

Soviet-born author and practicing psychiatrist Dr. Alexander Elder discusses what he learned over the years as a professional trader. He highlights his three main focuses in what he calls the three M’s (Mind, Method, and Money). He explores several factors in the markets that most new traders and even experts may overlook at times.

My Favorite Take Away: Price is a psychological event, a momentary balance of opinion between bulls and bears, its pattern reflects the mass psychology of the market.

Trading In The Zone

6. Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude

Mark Douglas was actually in the trading trenches for years. I would put this book much higher on the list but I feel to truly understand the value of this classic you need to have some trading experience under your belt.

Mark worked with countless traders throughout his career helping them to improve their game. He helps traders to  uncover the underlying reasons for their lack of consistency and helps traders to understand how to conquer the mental habits that cost them money.

My Favorite Took Away: Learn to understand what risk really is and how to become comfortable with the outcomes or probabilities of your trades.

The Power of Habit

5. The Power of Habit

How does a book that on the surface has nothing to do with trading made this list? It’s quite simple really. Trading requires extreme discipline.

People who look at discipline as something that requires will power will most likely never become truly disciplined in the areas they’re attempting to. White knuckling your way through life or trying to achieve discipline will ultimately fail at some point. Becoming truly disciplined at anything requires a new way of thinking and a new set of habits.

Charles Duhigg explains why habits exist and how they can be changed. When you think about it, discipline in anything is simply a collection of habits. Learning how to change those habits can help you achieve your ultimate goal.

My Favorite Take Away: Learn how habits are formed and how to get rid of the bad ones and keep the good.

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Ugly Americans

4. Ugly Americans: The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions

Ugly Americans is purely an enjoyment read. The book is about John Malcolm who was a wild trader in the Eastern Markets. He and his friends were the cowboys of trading whose lives were fueled by adrenaline, sex, and drugs…all while running billion dollar trading portfolios.

My Favorite Take Away: Purely enjoyment. 

Pit Bull

3. Pit Bull: Lessons from Wall Street’s Champion Day Trader

Martin “Buzzy” Schwartz may be one of the greatest day traders of all time. In his book you learn all about his trading career and why he eventually was given the nickname “Pit Bull”. This book is a classic because of the insights it offers into the mindset of arguably one of the best traders ever.

My Favorite Take Away: At the end of the book you will find “The Pit Bull’s Guide to Successful Trading” giving you some incredible insight into why Martin Schwartz was so successful at trading.

Market Wizards

2. Market Wizards, Interviews With Top Traders

Schwager interviews several of the world’s best traders. Every interview gives you a unique and different insights of the best traders. Learn not only about their successes, but their failures as well and what it took to overcome them.

Interviews include superstar money-makers Bruce Kovner, Richard Dennis, Paul Tudor Jones, Michel Steinhardt, Ed Seykota, Marty Schwartz, Tom Baldwin, and more.

My Favorite Take Away: “Don’t focus on making money; focus on protecting what you have.” ~ Paul Tudor

Reminiscenses Of A Stock Operator

1. Reminiscences of a Stock Operator

Hands down the best book I have ever read. I still find new pieces of information when I read this book today.

Generations of readers have found that that this book teaches them more about the markets and people in general than years of trading experience. This timeless tale will not only enrich your trading but your life as well.

It’s the story of Jesse Livermore’s progression from day trading in the Bucket Shops and finally to Wall Street where he made and lost fortunes several times over.

My Favorite Take Away: “One of the most helpful things that anybody can learn is to give up trying to catch the last eighth-or the first. These two are the most expensive eighths in the world.”

That wraps up our list of the best day trading books money can buy!  Read the ones that sound interesting and let me know your thoughts!

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Trading Plan – The Ultimate Template

Your Trading Plan is essential to your success as a trader whether you trade stocks, futures, options or Forex.

Trading has to be treated like any other business. Anyone thinking of starting a business wouldn’t begin without a plan, and if they did they most likely wouldn’t like the end results.

Good trading should be effortless. The preparation is where the hard work comes.

Imagine two runners, on one hand someone completely out of shape trying to run 1 mile in 10 minutes versus a world-class runner. The process looks effortless for the world-class runner and it is. He put all of his hard work into his preparation resulting in a process that is effortless.

Great traders are very confident, partially due to their preparation. If you’re not sure your going to win, then you’re not where you need to be yet. The best traders in the world know they have won before they start the game.

Your trading plan is part of this necessary preparation.

The objectivity and clarity that a solid trading plan provides is essential in a market that requires split second decision making to take advantage of opportunities. It will empower you to trade objectively with confidence and less emotional involvement.

Consider it your playbook for success. It should be read every day before any trades are placed.

Trading Plan Outline

Step 1 – Premarket Routine

Develop a routine every morning that you follow to build discipline and consistency. It will prepare you and put you in the right frame of mind for the day ahead.

Examples:

  • Work out for 10 minutes when I wake up
  • Meditate for 10 minutes when I wake up
  • Be at computer 30 minutes prior to market open
  • Review yesterdays trade journal
  • View economic numbers for the day
  • Read trade plan before open
  • Define key support and resistance levels

Step 2 – The Vow

You need to make a simple yet serious commitment to follow your trade plan and never break it. Do this in your own words.

Step 3 – Goals

Define what you want trading to provide for you and why you are willing to work relentlessly for it.

Examples:

  • Create the lifestyle I want where I can turn work off when I’m done and enjoy everyday
  • Provide for my family and the ones I care about
  • Enjoy my career and be excited to go to work everyday

Step 4 – Market Theory

Define some constants or truths that you believe exist in the markets.

Examples:

  • The market can and will do anything
  • Old resistance becomes new support
  • At any second the market can take everything I worked so hard to gain

Step 5 – Trade Theory

Define what thoughts, attitudes, and rules you believe are critical to being a successful trader.

Examples:

  • Consistency is the key to long-term success
  • 4 basic outcomes: big winner, little winner, little loser, and big loser. Eliminate big losers for success.
  • There will always be another trade.
  • Taking trades outside of my trade plan will destroy me. Sometimes they work which is one of the worst things.

Step 6 –Define Your Trading Strategy Step by Step

This should be an example of the perfect/golden trade.

Example:

  1. Price breaks X
  2. A indicator is above X
  3. B indicator is above X
  4. Enter on following 1 minute bar

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Step 7 – Trade Management

Learning how to manage a trade can be just as difficult as when to get in a trade.

Having a precise set of rules you follow once in a trade is essential. Again we want to have a plan while we still have objectivity. Define precisely when you will take profit and where your stop will be.

I personally have several take profit strategies I use. It varies based on market action. (chop vs. strong trend)

Example:
Stop loss of 20 ticks/pips/points. Close half of position when price breaks X moving average. Close remaining half when price breaks Y moving average.

Step 8 – Money Management

Money management is a key component to a successful trade plan and typically the rule that is broken the most by new traders.

Losing trades are inevitable. Your money management needs to define not only what you will risk per trade but also what you will do in the event of a large drawdown.

Example:

  • Never risk more than 1% on a trade
  • Two losses in a row I’m done trading for the day
  • Two consecutive trading days negative in a row cut trading size in half
  • Three negative days in a row I will take the week off

Step 9 – Aftermarket Routine

Every trader makes mistakes. The question is whether or not you will learn from those mistakes or just keep paying over and over again to experience them.

Keeping a trade journal throughout the day of all your trades as well as what you did right and wrong on every trade is essential to growing as a trader. Make sure to take screen shots of everyday so you can go back and review your trades.

Step 10 – Weekend Routine

Typically I perform my weekend routine on Sunday evening.

Examples:

  • Review trade journal notes
  • Review trades from the week
  • Backup computer and any changes made to my charting software

The markets are always changing and presenting new opportunities as well as challenges. Even after 14 years, I learn something new almost everyday.

Remaining focused on why you started trading in the first place is important. Don’t ever lose sight of your goals. Your new trading plan is your tool to constantly evaluate your behavior allowing you to grow into a successful trader.

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Best Day Trading Indicators

You’ve finally found it…

From beginner to seasoned pro – all traders are looking to get better at what they do – always looking for an edge. It’s our defining characteristic.

Improving your edge even a small amount can lead to significant gains in the long run.

When considering the best day trading indicators, it was pretty simple for me as I primarily only use two of them. Odds are you have never heard of the indicators we are about to discuss, but they can be extremely powerful when implemented along with your trading strategy.

Prior to jumping into the best day trading indicators, let’s take a look at what a trading indicator is and what you should consider prior to trying a new day trading indicator.

Day Trading Indicators

Trading Indicators

Day trading indicators are based on mathematical studies of historical price and/or volume data. Technical traders use this data to help predict future price movements.

It’s important to remember that trading deals in probabilities, not certainties. There is no “holy Grail” trading indicator that will predict future price movement 100% of the time.

Keep Trading Simple

Trading is as complicated as you want to make it. There is a belief that successful traders have found some super secret advantage that allows them to consistently make money.

Here are some cold hard truths about trading.

  1. A trader’s actual system plays a very small role in determine a trader’s success. Psychology and a trader’s decision-making process is ultimately what will determine their success or failure over the long run.
  2. Some of the best traders in the world have win percentages around 60%. The perfect example that there is no Holy Grail that wins all the time.
  3. The simpler the trading system which requires less user input usually will work best. The more variable you include will require more decision making on your part, which generally speaking a recipe for failure, especially for newer traders.

Using too many trading indicators can cause indecision making it difficult to pull the trigger when it’s time to take a trade. Furthermore, a lot of indicators can be redundant.

Keeping things simple and not over complicating your charts will most likely lead to more confidence and  success when trading.

Now that you understand that there is no perfect indicator and the simplicity usually works best, lets take a look at the trading indicators that have been the most useful through out my trading career.

Market Sentiment

The markets are driven by human emotions, primarily fear and greed. Market sentiment is the combined feelings and beliefs of a crowd (investors) towards a particular stock, currency, or any other financial security.

Wouldn’t it make sense to try and capture these emotions into a trading indicator that would give an overall view of the market? Well now you can…

Market Breadth Trading Indicators

Market breadth indicators tend to be used primarily when analyzing stock indexes or individual stocks. They measure the internal strength or weakness of a market by analyzing the net action of the component stocks with a particular index.

There are many market breadth indicators available. Today we will examine two of the most popular including the NYSE Tick Index and the Advance-Decline Market Internals.

NYSE Tick Index

NYSE TICK INDEX

($TICK on ThinkorSwim Platform)

What is a ‘Tick’

A tick, similar to a pip in Forex, is the minimum movement of a price of a security. Since 2001, the minimum tick size for stocks trading above $1 is 1 cent.

There are two types of ticks, an uptick and a downtick.

Uptick

A security is on an uptick when the last price traded occurred at a higher price than the previous price. For example, Google’s last price traded was $750.25 and the previous trade occurred at $750.20. Google would be on an uptick.

Downtick

A security is on a downtick when the last price traded occurred at a lower price than the previous price. For example, Google’s last price traded was $751.50 and the previous trade occurred at $751.65. Google would now be on a downtick.

A Tick Index represents the number of stocks ticking up versus the number of stocks ticking down in a particular market such as the New York Stock Exchange.

For example, if the NYSE Tick reads +350, a bullish signal, then 350 more stocks are ticking up then are ticking down. If the NYSE Tick were to read -400, a bearish signal, then 400 more stocks would be ticking down then are ticking up.

When using a tick index you’re looking for extremes in the index to help determine a trending versus chopping market.

Tick Extremes

NYSE Tick Index Extremes

Over time the definition of an extreme or powerful reading has changed due to the increase in listings at the exchanges. As there are more stocks traded at an exchange, the range of a tick index will continue to expand.

In my own trading I consider a reading above 300 to be a bullish signal and a reading below -300 to be a bearish signal.

A tick index is an extremely short-term indicator of overall market sentiment. Used alone, the tick index is probably not a very effective trading system. However, when combined with your current trading strategy, a Tick Index can dramatically improve your entry points.

How to Use a Tick Index

There are two schools of thoughts when using a tick index depending on if you’re a trend trader or countertrend trader.

Trend traders look for a reading that signals the start or continuation of a trend.

Being a trend trader myself, I look for a sustained tick count above 300 when entering a long position and below -300 when entering a short position. A sustained tick count is when the reading holds above 300 or below -300 for 3-5 seconds.

Counter trend traders will also use the Tick Index to try and determine a reversal point in the market. Typically countertrend traders will look for a reading above 800 or below -800 on the NYSE Tick to signaling an extreme and a potential reversal.

The belief is that at the end of strong trends there is a blow off, or a final “puke” as I like to call it, of weak handed traders blowing out of their positions or getting in late to chase a move.

While the Tick Index is primarily used when trading stocks or index futures, some traders may find other uses when studying correlations between a given market and stocks.

Advance-Decline Line (A/D Line)

A/D Line
($ADVN-$DECN on ThinkorSwim Platform)

The A/D Line is a very broad indicator as the calculation takes into account over 2,500 stocks. It is a cumulative calculation that plots the change in value of the number of advancing stocks minus declining stocks.

A reading of 500 would indicate 500 more stocks advancing than declining stocks (Bullish). (Bullish) A reading of -400 would indicate 400 more stocks declining than advancing (Bearish).

Important A/D Line Levels: 750, 0, -750

Having traded using the A/D Line for over a decade, I have noticed the pattern of support and resistance levels forming at  750, 0, and -750.

On the chart below you can see how these three areas had formed key reversal points.

A/D Line Support & Resistance

How to use the A/D Line

When looking to enter a setup you can use the A/D line as an additional rule to take a trade.

When the A/D line is advancing you want to look for long setups and if the A/D line is declining you want to look for short setups. Furthermore, if the A/D line is approaching a Support or Resistance level (750, 0, -750) you may want to hold off on the trade and look for further confirmation, especially if it’s midday.

No Indicator the Best Indicator?

Trading With No Indicators

Far too often I see traders messy charts and dozens of trading indicators. Keeping things as simple as possible will benefit you over the long run.

I know a lot of successful day traders who simply use price action to determine entries and exits.

Price action traders read the market and make all of their decision based off a securities actual price movement, rather than relying on lagging trading indicators to determine entries and exits.

So-called traders are often said to trade off of “Naked Charts” as they lack the use of any trading indicators.

As a price action trader myself I look at the following when taking a trade:

  1. Current price structural patterns
  2. Key support and resistance levels
  3. Momentum in the market determined by the the A/D line, NYSE tick, and overall price structure.

Keeping things simple, especially as a new trader, can be very beneficial. I would suggest you don’t use more than two indicators when developing your system.

So there you have it! That is a short dive into the best day trading indicators that will help boost your profits. Thanks for reading, and I really hope you enjoyed it. Take what you like and try implementing it into your own trading system, then let me know how it goes!