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Top 5 Books For Penny Stocks Trading

I've read dozens and dozens of trading books in the past ten years. There are many good ones and some bad ones. Overall, here are the top 5 swing trading books that help me the most as a penny stock trader although none of the books deal with penny stocks directly. These books help me to think like a trader and taught me the disciplines that I needed to make money from trading.

Trading in the Zone

Trading in the Zone, written by Mark Douglas is a timeless trading psychology book. This is the book that taught me that chart patterns by themselves are not enough to beat the market. The other ingredient which is even more important in trading is your mental attitude. Two traders follow the same chart patterns and using the same trading methods may get two completely different results because of their discipline or lack of it. A profitable chart pattern gives you an edge, but it is merely an edge. Without discipline, a trader won't last long.

It is from this book that I learn trading is a statistics game. To make money from trading is not about having one or a few big trades, but think in terms of 10,000 trades. When you have that many trades, an average gain of 5% is a lot of money, and not all stocks make a 100% gain in a single day. Therefore, we must have discipline in all of our trades and not let a few big losses crush our portfolio or confidence.

Technical Analysis of the Financial Markets

Technical analysis of the FInancial Market is a bible in technical analysis and chart patterns, written by John J. Murphy. This is a great introductory book to learn about trading and how to apply the various technical indicators and stock chart patterns to find profitable setups. You will find a comprehensive list of technical indicators such as the moving average, the head and shoulders, double tops and bottoms, trend lines, support and resistance, triangles, flag and pennants, and many more. If you are just starting out, this is a great book to learn about what's out there and how to use them. Please note, blindly applying all the technical indicators in this book will not get you very far. Instead, you should use these popular patterns as a foundation to find your own winning pattern in penny stocks.

Trading for a Living

Trading for a Living, written by Alexander Elder, was first published in 1993. This book covers all aspects of trading, from technical analysis to trading psychology, from trading tactics to money management.

You will learn how to find stocks to trade, develop a trading system, and how to find entries and exits. You will also learn why the psychology of trading is vital, and discipline is the key to trading success. Learn how to train your mind to stay disciplined, and make a profit from reading the behavior of the market crowd.

Since this book covers a lot of topics, it is hard for a beginner to digest all the information. Therefore, I wouldn't recommend this to be the first book to read if you are just starting out. Keep in mind, the strategies and stop-loss used in this book are conservative compared to the risk involved in penny stocks; you may not apply the author's trading strategies to penny stocks trading. On the other hand, trading psychology is always the same whether you trade blue chip stocks or penny stocks, and the author's step-by-step guide to developing a powerful trading system is useful for any type of trader.

Market Wizards

Market Wizards, a classic trading book by Jack D. Schwager, written in the interview format. In this book, you will learn how top traders make tens, hundreds of millions of dollars a year trading different markets. Some of the stories featured in the book include a trader who turned $30,000 into $80 million, another who had a 30 percent return every year for over twenty years, and then there is the T bond futures trader who parlayed $25,000 into $2 billion. While you may not be able to apply their strategies to your own trading today, you learn to think like a top trader. All of these top traders have something in common, they are obsessed with the market. It seems trading is everything and all they do in life. I have this book in front of my desk to remind me in order to make money from trading, I must be in love with trading rather than be in love with money.

Peace Is Every Step

Great, this is not even a trading book. You may be wondering what can a book that has nothing to do with trading teach me anything about trading. Peace Is Every Step is written by Thich Nhat Hanh, a world-famous Vietnamese monk who lives in France. This is the book that led me to start meditating which helps me relax and developed a peaceful mind towards trading and life. Whenever I'm in a bad situation such as a big trading loss, I would meditate and calm myself. It works wonderfully. Not only did I learn meditation from this book, but I also learn how to live life in the now rather than in the future. I learn to appreciate more about the little things in life and I'm happier than I used to. I grew up in a family where we were always struggling with money. In the past, I used to think happiness is found when I have a certain amount of money, or when I become a more successful trader. Neither less to say, most of my trading decisions were based on money and that turned out to be a disaster. Meditation helps me to stay focused, and I learn that money is not the goal in life, happiness is.  Realizing this fact, I concentrate my effort on improving my trading skills rather than getting rich quickly. As a result, I've made better trading decisions, and make more money in trading. Also, you don't have to meditate all day to get results. I only spend about 5-10 minutes each day meditating when I get up from the bed and before going to sleep.


Books are important, practicing what you have learned is even more important. Many beginners get excited when they learn a new strategy or reading a new book about trading, but they don't put enough effort into practicing what they have learned. They move from strategy to strategy, pattern to pattern trying to discover the ultimate secret in trading. The truth is everything is already written in the books. All you have to do is to spend 5,000 hours practicing and trying to turn the theories you learn into reality.

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