Category Archives: Trading Strategies

Best Stock Market Books

This is a list of the best stock market books and trading books that I read over the years and I highly recommended that you read at least a few of them if you are serious about trading and investing. I divided the stock market books into two categories, investing and trading. Investing books are for long term investors who want to buy and hold a stock for a long period of time. This approach requires you to study the company’s fundamental and predict how the company will perform many years later. Trading books are for traders who are interested in short term trading where the main focus is technical analysis and reading stock charts.

Best Investing Books

1. How to Make Money in Stocks: A Winning System in Good Times and Bad

This is a really good book on how to invest as well as trading in stocks. The book is written by William J. O’Neil, who is the founder and chairman of Investor’s Business Daily. He uses the CAN-SLIM method explained in the book that made himself a multi-millionaire. The book also teaches you how to read stock charts and technical analysis so that you find the best entry prices.

2. The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

The intelligent investor is like the bible of the stock market investing book. It is written by Benjamin Graham, known as the father of value investing. This is the book that inspired Warren Buffet, the world’s most successful and richest investor into investing in the stock market. This book teaches you how to find stocks that are currently undervalue and might explode in the future. This is a must read book if you are planning to invest in the stock market for the long term.

3. One Up On Wall Street

One Up On Wall Street is an unique book about investing written by Peter Lynch, who managed the Fidelity Magellan Fund from 1977 to 1990 when it was one of the most successful mutual-funds of all time. Unlike other investing books where they teach you how to read and use financial statements to find undervalue or growth stocks. One Up On Wall Street takes a different approach. It shows you how to find valuable companies around you that might take off before the public find out about them.

4. The Neatest Little Guide to Stock Market Investing

This is a great book for beginners to learn how the stock market works and evaluating individual stocks. The book goes through the basics of fundamental analysis, which is the way to analyze stocks and investing for the long term. These included things such as Price to Book ratio, Price to Sales ratio, Price to Earnings ratio, Dividends, Current Ratio, Market Cap, and a few others. You will learn what they mean and how to use them to find profitable stocks to invest.

5. Stock Market Investing for Beginners

Stock Market Investing for Beginners is another good book on investing. You will learn the fundamentals of stock market and investment strategies to deepen your investing literacy. You will also learn the 5 strategies that the author uses to find profitable stocks, and useful advice on buying, selling, owning, and diversifying.

Best Trading Books

1. Technical Analysis of the Financial Markets

Technical Analysis of the Financial Markets is the best introductory book on technical analysis. You will learn all about technical analysis and chart patterns and how to use them to predict the short term price movement of stocks. This is an easy to understand yet comprehensive book that is great for both beginners and experienced traders.

2. The New Trading for a Living

The New Trading for a Living is the new version of the classic book Trading for a Living. It is one of my favorite trading books because it combines technical analysis and psychology into one book. The psychology part of trading is even more important than technical analysis and trading strategies because it is easy to learn the strategies that other successful traders use, but it is harder to learn how to control your own emotions and discipline that are needed for long term success.

3. Japanese Candlestick Charting Techniques

Candlestick patterns are powerful charting patterns for swing trading stocks successfully. This book is a very detailed guide on how candlestick patterns work and all the different types of candlestick patterns such as trending and reversal patterns. Trending patterns allows you to jump and ride a rising stock whereas reversal patterns allows you to get on a trend early. You will learn how to buy and sell a stock based on candlestick patterns and signals, and how to find stocks to watch for trade setups.

4. Mastering the Trade

Mastering the Trade is a great book on swing trading. You will learn many trading techniques for profiting from intraday and swing trading setups. The book also talks about futures and options trading in addition to stock trading. Simply by reading and applying the trading strategies layout in the book, you are well ahead of most people who ever trade stocks. The book is good for both beginners and experienced traders.

5. A Beginner’s Guide to Day Trading Online

If you are interested in day trading, A Beginner’s Guide to Day Trading Online is one of the first books that you should read. The book introduces you to the world of day trading, trading jargon, terminology and a little bit of stock charting and technical analysis that will help you get started quickly.  You will learn how to day trade stocks in today’s fast changing market using decimalization of stock prices, E-minis and Exchange Traded Funds (ETF), precision entries and exits.

Free Trading eBook

Understanding Options

 

Stocks to Watch

The following is a list of stocks that are on my watchlist right now and I manually update this list on a daily basis. Feel free to come back and check out the latest stocks to watch. Please note the stocks are for short term swing trading only. It is a watchlist, not a stocks to buy list. You can check out my swing trading strategies post on how I trade.

SDRL Quick Analysis

KOS Quick Analysis

FRO Quick Analysis

PBMD Quick Analysis

GSAT Quick Analysis

SALT Quick Analysis

JDST Quick Analysis

NBG Quick Analysis

Swing Trading Strategies

In this article, I’m going to show you a few swing trading strategies that I personally use and profitable for the past few years. The strategies work well on penny stocks as well as regular stocks. The major differences is that I hold penny stocks much shorter than regular stocks because they are much riskier. Before we go any further, let’s first define what swing trading is.

What is Swing Trading

Swing trading is a short term trading method to trade the stock or the options market. The typical trading period is anywhere from 2 days to 2 weeks. This is different than day trading where the holding time is anywhere from a few seconds to 1 day. Swing trading focuses on short term price movement and make a bet based the chart patterns and technical indicators. Swing trading is different than investing because swing trading does not care about how a company is doing whereas investing requires you to study a company fundamental thoroughly and then buy and hold a stock for a long time.

Swing Trading Stocks

Most of the swing trading strategies involved using technical analysis and stock chart patterns to find trade setups and exit strategies.

1. Trend Following Strategy – this is the most popular type of swing trading strategy where you recognize a trending stock and ride with the trend. For example, the stock TNA is in an uptrend and it is now trading at the bottom of the trend line. As long as the stock trades above the trend line, it is a good stock to trade. You would want to buy the stock around the current price and try to make a profit when the stock go back up. If the stock breaks below the trend line with strong volume, you would want to sell it because the trend line is broken and it is no longer a trending stock. On the other hand, if the stock breaks lower with low volume, it is okay hold a little longer because it could be a false signal that the trend is broken.

TNA

2. Cycle Trading Strategy – When a stock is trading in cycles, I would like to buy the stock around the bottom or the support level. For example, if a stock is trading between $5-$10 for a while, I would want to buy it the next time it trades near the $5 level. For example, ABX is trading in the range of $10-$13.5 since the beginner of this year. It is safe to say that $10 is the support and $13.5 is the resistance for this stock. I would want to trade this stock since the stock is approaching to the $10 level again. The stop loss level would be a little below the $10, if the stock breaks lower, then I would sell it to prevent further losses.ABX

3. Candlestick Trading – The Japanese Candlestick is a popular charting techniques that traders to find trade setups. It is more useful than the traditional bar charts because it is easier to see and use. Candlestick patterns is a set of patterns that offers bullish and bearish signals. Here are a few of my favorite candlestick patterns.

candlestick-patterns

Bullish Engulfing pattern is a bullish pattern when it occurs on a down trend. The pattern signals a reversal trend coming especially when the volume is high. 

Bearish Engulfing pattern is a bearish pattern when it occurs on a uptrend. The pattern signals a reversal trend. When the volume is high, the pattern is more accurate.

The doji pattern is a reversal trend that happens for both the uptrend and down trend. When the doji pattern occurs on an uptrend, it is a bearish signal. When the doji pattern occurs on a down trend, it is a bullish signal. Also, the signal is stronger when the volume is higher than the average trading volume. 

Let’s look at example, the stock ABX has a Bullish Engulfing pattern in the middle of March. The stock was in a down trend, and the volume is strong when the bullish engulfing pattern occurs. This signals strength and the stock went from $11 to $13.5 within 2 months.

bullish-engulfing-pattern

There are many more candlestick patterns, but I won’t get into the details in this post. I will discuss candlestick patterns in more detail in a future post.

You can check out Profitable Candlestick Trading to learn more.

4. Breakout Trading Strategy – When a stock is trading in the range for a while and then it breaks higher with good volume. This is a good breakout setup. For example, if a stock is trading in the $5-$10 range for a long time, and then it breaks higher one day, then I will consider buying especially when the volume is high. False breakout often happens when the volume is low. That is the stock breaks higher temporary and then pull back under the $10 price level, so watch out. Trade breakouts only when the volume is high and above the average trading volume.

For example, the stock HSC has a breakout yesterday with strong volume. This is a good time to trade the stock. The stock was trading in the consolidation area since Feb with a resistance around $17.5. After yesterday’s breakout, the resistance becomes the new support, so if HSC drop below this new support level with strong volume, it is time to sell as the stock is no longer consider as a breakout stock.

break-out-stocks