Creating trading success also has to come from many angles.
When I am asked about what option trading books to read, it’s complicated.
With that in mind, here is my list of recommended trading books.
I believe that video is a much more effective medium when learning about options. There’s a ton of information that needs to be processed graphically, and the evolution of risk cannot be easily shown on paper. If you want to be a great options trader, this is where to start.
I partnered up with FTPress and wrote an ebook about how to use volatility indexes to time the markets. It’s a quick read and focuses on a single topic rather than trying to address a million things at once. Using volatility to structure your risk in the options market is very important, and Timing Volatility
Books on Options Trading
Option Volatility and Pricing – Natenberg
This is my “go-to” book for new option traders. Natenberg does a good job explaining option trading through the lens of volatility, which is a perspective many don’t think about when they start to trade options. This also has the full listing of basic option strategies and management techniques associated with them.
Anything by Jeff Augen is worth a read. This particular text goes a bit more into the nasty bits of options trading– namely defining volatility and managing trades. This goes a bit more into the quantitative side, which can be fun if you know your way around excel or R.
Are you ready to go way down the rabbit hole? Sinclair has a ton of heavy math, along with real-world examples. This book brings insight into how hedge funds and derivatives desks actually play the options market. There’s a good chapter on how to properly plan your trades, and a surprising amount of insight into trading psychology.
This is the bible of options trading. It’s tough to get through and sometimes sections won’t apply to your trading style, but it’s great to have on hand as a reference, especially if you have a longer term timeframe in mind.
I didn’t really want to put this one on the list because I don’t think it serves traders very well. But since it’s a required text for many college classes, it’s good to know about it– you will gain the perspective of all the MBAs you’ll be trading against.
Books on Markets
Edwards and Magee is the definitive source for technical analysis. It goes beyond the pattern and explains the underlying supply and demand dynamics. This book is in its 8th edition, which shows you the staying power of the content.
EBTA will take evrything you just learned with Edwards and Magee and tear it down. This book shows that there is a ton of pseudoscience attached to traditional technical analysis, and patterns don’t always have a statistical edge. This book will teach you how to properly get an edge in the market. To be honest, I was really uncomfortable reading this book as I do incorporate TA into my trading– if anything I now have a respect for when patterns fail.
The amount of caffeine I needed to read this book could kill a small village in Bhutan. But this one you have to read if you are to understand how exchanges operate. If you trade at all in a shorter term timeframe this will give you insight not found in any other book about how the market operates.
If you want to learn about the markets from the perspective of a prop firm, Bella will give you what you want. There is a ton of wisdom on these pages, and plenty of narratives to make this an easy read. There’s very little information out there on the art of tape reading, and OGT will give you a rundown of how it works.
I believe one of the most underutilized forms of analysis is market profile. It’s a dark art, and there isn’t much literature on it. But this book is a must read. It’s a struggle to read at times but I often review chapters every so often to understand the short term market.
This is the second book you must read on Market Profile, and it’s a little more up to date compared to MoM. There’s a little more integration with newer behavioral finance stuff and neuroeconomics. Seriously, you must understand auction market theory if you want to learn to trade.
The setups are a bit outdated, but this holds a special place with me as it first introduced me to derivatives trading. This has a little bit of everything, including some trading psych, analyzing the TICK, and day/swing trading setups.
Trading Psychology Books
If you haven’t read anything by Dr. Brett you are doing yourself a disservice. I love this book because the author comes from a background of Clinical Psychology focusing on high-performing individuals. The anecdotes easily crossover into the trading realm, and you can gain plenty of insights about yourself and your trader profile.
Treat this book like a daily devotional. Dr. Brett smartly broke up the book into 101 lessons. Read one lesson per day and see how you could implement it in your trading. Continual, incremental self-improvement will do wonders for your performance.
If you ever wanted the best way to track your performance, you will learn it here. The book discusses the concept of “R-multiples,” which I believe is critical for traders and investors to understand. Tharp focuses not on the individual setups but how to approach them from a risk-oriented approach.
This one seems to always show up on lists. It’s a great weekend read that can get you motivated to take on the market again, and how to get into the proper trading state. This book will tell you a ton of things that you already know but you need to hear anyways. If you have trouble defining and accepting risk, this book is for you.
A nervous, fatalistic, pessimistic personality is not the right kind of profile you want to have as a trader. These letters from Seneca taught me how to accept randomness, embrace risk, and focus on the things that are important in my life.
Books on Performance
A great way to get better at the markets is to see how others become great in other fields. There are a ton of parallels, and this book gives you the steps necessary to become great in a trade. In-depth practice, self-corrective mistakes, and proper coaching are the true keys to talent.
Have you ever felt joy while trading? You were fully immersed in the market and in a state called “Flow.” This book goes into the psycholgoical components of flow and how to stay there longer. Being in “Flow” during trading significantly increases your performance.
This book by Michael Bigger is what caused me to read “Flow” in the first place. It’s a quick read and it goes over how to properly get into the mental state to develop as a trader. As the title says, trading can be a very creative endeavor and this book will show you how.
I was a little hesitant to put this one on here. I’m a card carrying member of the Cult of Tim Ferriss, and I don’t mind saying it. What’s good about this book is that it focuses on elimination. 80% of your trading gains will come from 20% of your perceived market information. If you focus on that 20% and remove all the extraneous stuff