In my textbook it says you can use the 読みます form to talk about habitual actions, such as
But I read on the internet (source) that the correct form for this is 読んで and the sentence should be
Is my textbook wrong?
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I think you're just missing what the source is referring to.
The part where it says
It is also used to describe a habitual action and a condition.
Is referring to this:
(2) The present progressive: the ~ te form iru or imasu (formal)
So it's not referring to the て form but the ている/ています construction.
So for example, 私はひまなとき本を読んでいます。
Note also that this doesn't mean that ている is used exclusively to describe a habit. Just that it can be.