One book to chart them all

Thomas Bulkowski's Encyclopedia of Chart Patterns is a must-have book for any forex trader interested in technical analysis.

As forex trading has become an increasingly hot topic, hundreds of forex books have been released onto the market. Whether you are a newbie or an experienced forex trader, having a useful book can be very helpful to better inform and improve your trading.

Choosing the right book

How you choose the right book depends a lot on your trading style. If your trading is based on fundamental analysis, you'll want to look for books on how to analyze the news, which bias you should take based on the the news, chronicles of news stats and how the market moves based on these stats.

If you are a chartist, you’d like to look for anything helpful for the technical analysis. For example, Japanese candlestick patterns and chart patterns are must-haves.

The right book for traders interested in technical analysis

 For us, if you're looking for a good technical analysis resource, it comes down to one obvious choice: Encyclopedia of Chart Patterns by Thomas N. Bulkowski (2005, Wiley Trading).

This book is a must-have for anyone learning technical analysis, no matter if you are a beginner to forex or a more experienced trader. It is a comprehensive review of forex chart patterns which really earns the name "encyclopedia".

The book is separated into two parts: chart patterns and event patterns. For us forex traders, the first part is what to focus on. It includes trading strategies for 53 kinds of forex chart patterns. What makes this book really great is how Bulkowski records the historical statistics of each pattern and takes you through chart identification guidelines, failure rates and other factors to consider. It literally tells you when and how you enter and exit the market.

Making the most of the book

If you’ve never had any knowledge of chart patterns you should read through all the chapters quickly and try to memorize the patterns. When you’ve learned the patterns, you will begin to spot many opportunities on the charts of different currency pairs. Switch to different time scales (preferably 4H 1D 1W MN) and you will find even more trading opportunities. (Usually the higher timeframe a pattern occurs, the more reliable it is.) Once you’ve spotted a chart pattern, look for it in the book, read the entry and exit guidance, and set up a trade.

A good forex book is a good tool to help you trade better and easier and increase your chances of winning trades. The Encyclopedia of Chart Patterns can definitely figure into that if you technical analysis forms part of the basis of your strategy.