Finding good Forex trading books to read can be more challenging than one might think.
Sure, there are plenty of options, but finding one that resonates with your style of trading can be difficult.
What’s worse is that most of them try to convey a particular strategy that may have worked for the writer many years ago in a specific market but probably won’t work for you today in your market of choice.
For this reason, I find books that cover trading from a higher vantage point much more useful and widely applicable.
What do I mean by “higher vantage point”?
I’m referring to discussions about the psychology of trading, or in the case of the Market Wizards series, lessons learned from top traders.
Both of these topics are helpful regardless of the style of trading you employ, which is why I’ve compiled the list below. Each one of these books has a special place in my office and gets read at least twice a year.
Do note, however, that none of the five books below are Forex-specific. But from one trader to another, I can assure you that they will have a positive and lasting effect on your trading performance as they did on mine.
Last but not least, don’t let the publication dates fool you. Yes, some of these books were written in the 90’s, but the lessons contained within them are timeless and without equal.
As always, feel free to ask any questions or share your favorite trading book in the comments section at the end of the post.
Let’s get started!
1. Market Wizards: Interviews with Top Traders
This is by far my favorite book in the Market Wizards series written by Jack Schwager.
Why is it my favorite?
One reason – a trader by the name of Ed Seykota. He is, in my opinion, the epitome of a successful trader.
But before we get too far along on my favorite part of the book, let me give a brief synopsis.
Every Market Wizards book (there are two others below) is in a class of its own. Instead of one writer attempting to share his personal experience or beliefs with you, these books share insights from dozens of the world’s most successful traders.
This book in particular shares the stories of Bruce Kovner, Paul Tudor Jones, Marty Schwartz, and James Rogers, Jr. to name a few. It also covers several financial markets ranging from currencies to stocks and everything in between.
Like other Market Wizards books, Interviews with Top Traders also includes a psychology of trading section in the back. In it, you can read an interview with Dr. Van K. Tharp, which is enlightening, to say the least.
My Favorite Interview
Remember that higher vantage point I mentioned earlier?
The interview with Ed Seykota is a perfect reflection of that perspective. Although he uses computerized trading systems – which is vastly different from trading with price action – his personal beliefs about what it takes to succeed as a trader are universally applicable and no doubt invaluable to any reader.
Here are a few of my favorite lines from Mr. Seykota:
Charting is a little like surfing. You don’t have to know a lot about the physics of tides, resonance, and fluid dynamics in order to catch a good wave. You just have to be able to sense when it’s happening and then have the drive to act at the right time.
To be clear, the “sense” that Ed is referring to comes with thousands of hours of screen time. I mentioned something similar to this idea of connecting with the market in the lesson on impulsive and corrective waves.
Be sensitive to the subtle differences between “intuition” and “into wishing.
The word hope is a “four-letter word” in the world of trading and is synonymous with the word wish. If you find yourself using either of these words while trading, take a break and reflect on what you might be doing wrong.
Here at DPA we took it one step further and explicitly banned the use of either word inside of the member’s area, and for good reason. It can single-handedly trigger emotions that conflict with a logical thought process.
Win or lose, everybody gets what they want out of the market.
Take a few minutes to digest this one. It’s simple, yet quite profound once you realize that he isn’t excluding the notion of self-sabotage.
But don’t think that the interview with Ed is the only valuable section of this book. There are many others that I simply can’t include here without running on for 20,000 words (which would probably put you to sleep).
So, do yourself a favor and pick up the book for yourself. It’ll undoubtedly change your perception of what it takes to succeed in this game called trading.
2. The Disciplined Trader
Instead of telling you what The Disciplined Trader by Mark Douglas is all about, I’ll let the foreword speak for itself:
I sincerely feel that success in trading is 80 percent psychological and 20 percent one’s methodology, be it fundamental or technical.
I couldn’t agree more.
And if that didn’t give it away, this Forex trading book tackles the diverse and often overlooked topic of psychological management.
The mental game is without question the most important aspect for any trader. Unfortunately, for most it’s also regularly neglected.
Why is that?
In my opinion, it’s because it isn’t “sexy”. Putting on trades and booking profits is sexy, managing your psychology is not.
It also isn’t visible. We can see the support and resistance and price action that make up our trading strategy. The inner workings of your mind, on the other hand, are hidden.
But this book doesn’t just tell you how you should think while trading. That would be both illogical and ill-advised to listen to such advice.
Instead, the author, Mark Douglas, breaks psychological management into three parts, making it easy to reverse engineer your way to a winning attitude.
Those three parts include:
- The Nature of the Trading Environment From a Psychology Perspective
- Building a Framework for Understanding Ourselves
What I especially love about this book is how relevant and relatable it is from every angle. You won’t read a single chapter without connecting it to something you did or didn’t do in the past. Perhaps it was a mistake, or merely a gap in your understand of the markets. Either way, it’s all very relatable.
But although having an “ah ha” moment is nice, it isn’t complete without a gameplan on how to improve yourself and your trading performance.
This is where part 3 of the book comes into play. It discusses everything from the dynamics of goal setting to managing mental energy, all the while providing the reader with actionable information.
My Favorite Chapters
I have always believed that to be able to profit consistently in the Forex market (or any financial market), your perception of the market needs to be accurate.
Too many new traders believe that they must know what will happen next if they want to profit or that there always needs to be a reason for a market to move a certain way.
These fallacies obstruct their perspective in a way that prohibits consistent profits, regardless of how good their trading strategy or risk management strategy might be.
For this reason, chapters 3 and 7 stand apart as my two favorites in The Disciplined Trader.
Chapter 3 is titled “The Market is Always Right”, which covers a very similar concept to that of the post I wrote titled How the Forex Market is Smarter Than You.
Perhaps my two favorite quotes from this chapter that tie together nicely are as follows.
What you believe about value and your reasons for believing it may be of highest quality, but if the market doesn’t share your belief, it doesn’t really matter how “right” you are based on your superior reasoning process or what you believe to be the quality of your information, because prices are going to go in the direction of the greatest force.
The point here is that right and wrong as you may traditionally think of them don’t exist in the market environment.
The second quote above is similar to a lesson I wrote about how achieving consistent profits is not measured by right versus wrong.
Chapter 7 is titled “In the Market Environment, Reasons Are Irrelevant”.
The title alone is enough for this chapter to be one of my favorites. I get hundreds of emails every week from Forex traders around the world. Many of these emails involve a question about why a particular market did what it did.
Well, I’m here to tell you that as a technical trader, the reason behind a movement in price doesn’t matter. And if you’re on a quest to determine the reasons why a market reacted the way it did in an effort to decipher what it will do next, you should probably focus your attention elsewhere.
For those who have seen a currency plummet on relatively positive figures or rally on what seems like bad news, you know this to be true.
You cannot and should not try to reason with the market. It’s a dead end.
So, if you’re ready to get a handle on your mental game by dissecting the reasons behind the mistakes you make and also correct them, I can’t recommend The Disciplined Trader enough.
3. Hedge Fund Market Wizards
Another one of my favorites by Jack Schwager is Hedge Fund Market Wizards.
Now I know what you may be thinking – I don’t run a hedge fund, so how can this help me?
But remember, these books aren’t about learning specific trading strategies or techniques. They’re about learning best practices from those who have found massive success in the financial markets.
And the traders in this book have certainly done that!
Think of every Market Wizards book as a workout for your former perceptions about the financial markets. They will challenge your beliefs about what it takes to be a successful trader, but I guarantee you’ll be better for it.
Just like the first book in the series, Hedge Fund Market Wizards offers in-depth interviews with some of the world’s best traders. These include iconic figures such as Ray Dalio to lesser-known (but no less impressive) traders such as Jamie Mai.
A nice touch with this book, in particular, is the conclusion, which provides 40 Market Wizard lessons. It’s the perfect summary for another incredible piece of work by Jack Schwager.
My Favorite Interview
Of all the legendary traders featured in this book, my favorite is the interview with Michael Platt.
Michael is a discretionary trader who has a particular intolerance for losses. But instead of hampering his ability to make money, it has made him extremely selective about the trades he puts on, making him more profitable than he would be otherwise.
This is also how I approach trading and is a key belief within the DPA member’s community.
One of my favorite quotes from his interview is:
In trading, 80 percent of your profits come from 20 percent of your ideas.
I believe this notion is true regardless of the market you’re trading. It’s for this very reason that doing nothing is preferable in most cases.
He later goes on to say that the two biggest mistakes traders make are not doing enough homework and being too casual about risk.
From my experience, he is spot on with both observations.
If you want to read and learn from the interview with Michael Platt and other highly successful traders, the link below will get you started.
4. Trading in the Zone
The psychology behind trading is arguably the most misunderstood and underutilized aspects of what it takes to become successful.
The book, Trading in the Zone by Mark Douglas tackles the subject head on and does a beautiful job of connecting the dots.
A key objective for any writer is being able to make the material both easy to understand and also applicable to everyday life.
Mark Douglas has accomplished both with Trading in the Zone.
What sets this Forex trading book apart is how he describes the positive and negative forces at work that make us do what we do as traders. It’s the perfect compliment to The Disciplined Trader, which we discussed earlier.
My Favorite Chapters
If you don’t want to read the entire book (I highly recommend that you do), chapters two, three and four are must-reads in my opinion.
Chapter two sets the stage for why trading has such a lure for most individuals. Mr. Douglas also presents the dangers but does so by pointing out the flaws in the human mind that exacerbate these threats.
Pay close attention to the section titled, “Failure to Take Responsibility”. The ideas discussed here will certainly resonate with many of your experiences as was the case for me when I read this book for the first time many years ago.
Chapter three continues with the importance (and failure for many) of taking responsibility for their trading.
This chapter hones in on the emotional impact that winning and losing has on your emotional stability and how it can affect your capacity to take responsibility.
Chapter four is the icing on the cake. It covers what it truly takes to develop consistency as a trader.
My favorite section of this chapter is titled “Really Understanding Risk”.
Why is it my favorite?
It’s my favorite because most traders, in my experience, fail to understand fully and accept the risks they take. This single failing is the epitome of why 90% of traders fail to achieve consistent profits.
If you are serious about trading Forex, you need to be serious about taking control of your emotions, and Trading in the Zone is a great place to start.
5. The New Market Wizards
Do you see a theme yet?
I’m a big fan of the Market Wizards series of books and for good reason. There’s no better way to learn how to become successful than by studying those who have already done it.
That’s what these books offer – an unprecedented look inside the minds of some of the greatest traders who have ever lived.
Okay, back to Conversations with America’s Top Traders…
This book is the sequel to Market Wizards: Interviews with Top Traders, which was the first book we covered in this post.
So what’s special about this one?
Everything! It follows the same Q&A style as the other books in the series but includes interviews with more than twenty new traders.
My Favorite Interview
Choosing a favorite was a no-brainer for me. Without question, my personal favorite interview is the one with Bill Lipschutz.
For those of you who don’t know him, Mr. Lipschutz is one of the greatest Forex traders who’s ever lived. He started out at Salomon Brothers in the early 1980s before co-founding his own fund in 1995.
Aside from being the only currency trader in this book, what intrigues me most about Bill is his story. I won’t spoil it for those who haven’t read it yet, but to say he experienced the highs and lows of trading early in his career would be a massive understatement.
Here is one of my favorite quotes from Bill Lipschutz:
I don’t think you can consistently be a winning trader if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money being right only 20 or 30 percent of the time.
What Mr. Lipschutz is referring to here is the power of a favorable risk to reward ratio.
Too many Forex traders focus on achieving a high win rate. You see this a lot in various forums and especially those selling trading systems, where they brag about having a 94% win rate.
I don’t care who you are, that simply isn’t sustainable nor is it necessary to profit consistently.
I’ve had many months where my win rate fell below 50%, yet I still came out ahead because of a positively skewed risk to reward ratio. Before I can even consider a trade, I need to see a minimum of 3R, where the potential reward as at least three times the size of any loss.
Do yourself a favor and pick up a copy of this book, it will undoubtedly take your trading, and perhaps your life, to the next level.
One Last Thing...
For those of you who like summaries (who doesn’t?), there is another book in the Market Wizards series that I know you’ll love. It’s called, The Little Book of Market Wizards: Lessons from the Greatest Traders.
This book was also written by Jack Schwager and includes excerpts from the other books in the series. Think of it as your very own 208-page cheat sheet.
But here’s the deal…
If you’re serious about making it as a Forex trader, I suggest you own and study all of the Market Wizards books.
Sure, this one will summarize many of the greatest lessons from the series, but it doesn’t replace the other books in their entirety. There are tons of invaluable lessons to be learned from the three books above that you simply won’t find here.
So feel free to use this as a quick reference guide, but I believe it’s important to own the whole series to learn what it takes to succeed as a trader.
I hope this post has opened your eyes to a few Forex trading books that deserve to be on your reading list.
While none of the books above will show you a particular trading strategy or system, they present you with something far more valuable– the mental blueprint needed to make consistent profits.
Regardless of the trading strategies you use, the right mental attitude is always necessary to become successful. The five books above are sure to set you on the right path.
What are your favorite Forex trading books?
Leave your comment or ask a question below and I’ll be sure to respond.