Sunday, 12 June 2011

My Top Four Trading Book Recommendations

For this post I'm wearing my Avid Trader hat, rather than Avid Chartist...

Having moved house this week, most of the 100+ trading books in my collection were either given away before the move, or are still in packing boxes. There are only four trading books which are already unpacked and close at hand. These are the top four trading books that I regularly re-read or dip in to.

I won't attempt in depth reviews of the books, I'm simply putting them out there as recommendations, with a few words about why they are important to me.

Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading by Peter L. Brandt

Peter Brandt's average annual rate of return since 1981 has been 68%. This book shows you the building blocks of his trading plan and methods, and then shows you a diary of his trading for 21 weeks starting late in 2009. This book resonates strongly with me, because the author's trade entry signals are taken from simple classical charting patterns. However, as this book states, trade entry signals are at most 10% of a trading plan. This book focuses largely on the other 90% of the effort involved in trading, and is as honest, genuine, and insightful account of one man's version of the trading process as I can imagine reading. Published in early 2011, I doubt that this book is widely known, but I rate it as highly as any trading book I have read, and have already re-read it several times.

Reminiscences of a Stock Operator by Edwin Lefevre

A ripping yarn, a great read. A thinly disguised biography of Jesse Livermore, one of the great speculators of the early 20th century, it offers unsurpassed insight in to the workings of a traders mind. It also offers the warning that no matter how brilliant your market analysis, and how wise your knowledge of trader psychology, if you don't pay attention to money management, you will not make a lasting fortune as a trader. I read this book each year during my summer holidays, it's greatly enjoyable, gives my enthusiasm for trading a huge boost, and it helps get my mind set right for the new trading year.

Market Wizards: Interviews with Top Traders by Jack D. Schwager

In a similar vein to Reminiscences, this book offers many insights in the minds of great traders. In addition to that, the theme I took from it when I read it in my early years of trading, is that there are as many different ways to succeed at trading as there are traders. Each would be trader needs to find the trading plan that works for them. Even funnymentals whoops I mean fundamental analysis can work for some people, although for me it will always make as much sense as dancing about architecture. Wierd. But hey, whatever works for you, go with it. This is another summer holiday book for me, or one to read whenever I have had a bad run. Truly inspirational.

Trading In The Zone: Master the Market with Confidence, Discipline, and a Winning Attitude by Mark Douglas

The market continuously generates information about which way it will move next, but most people miss the signals unless those signals agree with their existing assumptions and biases. This book is about preparing your mind so that you can see all the signals that the market is sending you, and act on those signals without fear or greed getting in the way. It is not an easy read, quite verbose, and requires a lot of self reflection if the reader is going to make the best use of it. I think it is worth the effort, and I turn to this book whenever my trading psychology needs a tweak.

I have provided links to so that you can find out more details on the books, not necessarily as a recommendation to buy from there. I find that is often better value for myself, once I take in to account shipping costs. Likely you already have a favoured book store.