Best Of Trader Resources

My Top 5 Trading Books

The question gets asked a great deal in forums, and sometimes directly, as to what books are must reads or strongly recommended. It’s not necessarily an easy question to answer. We’re all different in what writing style and approach works best for us in a book. Also, we’re at varying stages in our development as traders. New traders have very different needs than experienced ones, for example.

That said, here are the five trading books I would rate as the best I’ve ever read. Obviously, I can’t include books I haven’t read, so there might be some really good books out there which belong here but I just haven’t got to yet. Of the many I have, though, here are the cream of the crop – in no particular order.

[easyazon-link asin=”0887306101″]Market Wizards[/easyazon-link][easyazon-link asin=”0887306101″]Market Wizards, by Jack Schwager[/easyazon-link]
This book won’t teach you any specific trading systems or anything like that. What it will give you, though, is insights into the thinking and approach of some of the great traders and investors of our time. The interviews Schwager conducted with these men and women provide some really outstanding nuggets of wisdom. By the way, I lump [easyazon-link asin=”0887306675″]The New Market Wizards[/easyazon-link] and the newest addition, [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link], in here as well.

How to Make Money in Stocks[easyazon-link asin=”0071614133″]How to Make Money in Stocks, by William O’Neil
[/easyazon-link]This book is the one I give credit for launching both my own trading and market analysis careers. Ironically, the title of the book is of the sort that strikes one as being of questionable design, the type we see so often promising lots but delivering little. In this case, though, the book really delivered for me. It was my introduction to a great many things – technical analysis, screening, researching methodologies, and having a comprehensive trading plan. This book contains a fully described and specific trading system which became the basis for the stock trading I still do today.

Enhancing Trader Performance[easyazon-link asin=”0470038667″]Enhancing Trader Performance, by Brett Steenbarger[/easyazon-link]
Brett Steenbarger is one of the most insightful commentators on trader psychology and development around today. This book focuses more on the development side of things, though it does touch on some of the psychology elements covered in his earlier book, [easyazon-link asin=”0471267619″]The Psychology of Trading[/easyazon-link], as well. Being a coach and educator myself I found this an incredible resource both for helping me help others and for traders looking to help themselves. (Read my full book review here)

Markets In Profile[easyazon-link asin=”0470039094″]Markets In Profile, by James Dalton[/easyazon-link]
This book is a discussion of the Market Profile analysis and trading methodology. More than that, though, it is an intensive discussion of how the way the markets at their core play out through the way prices move. This book is a follow-up to the author’s previous book, [easyazon-link asin=”0934380538″]Mind Over Markets[/easyazon-link], which is a bit more mechanical regarding the Market Profile technique. (Read my full book review here)

Trade Your Way to Financial Freedom[easyazon-link asin=”007147871X”]Trade Your Way to Financial Freedom, Van K. Tharp[/easyazon-link]
This book presents an excellent systematic way of approaching the application of risk and money management in trading. If you read it with the right mindset (not the one implied by the title), you can get a huge amount of value out of it. The concept of “expectancy” is more than worth the price of the book all by itself. There is a healthy does of trading psychology along the way also – all of which is quite useful as well, especially given that the author was among the first to be involved in the area of modelling success in trading.

These, of course, are my own views. Others will no doubt have their own ideas. Perhaps that includes you? By all means, feel free to share your own thoughts on the subject.

And definitely take a look at all the trading book reviews I’ve posted here on the blog for your benefit.

News & Updates

Book Reviews for The Essentials of Trading

I had been noticing a lot of recent buying activity in The Essentials of Trading lately. I figured something must have come out, and with a little searching I found that indeed is the case.

Both Technical Analysis of Stocks & Commodities and SFO have both featured the book in their July editions. Here is what they had to say.

Stocks & Commodities (July 2006)

“Buy low. Sell high.” It sounds easy, but the reality is very different. Changing market trends can make for turbulent trading. Lack of concentration can lead to costly mistakes. This book is written for those just beginning their journey into trading and provides a base of knowledge from which you can develop trading methods, systems, and techniques that suit you best. From the basics of analyzing a stock and placing a trade, through trading plans and risk management to the building of trading systems, this is your source of practical advice.

SFO (July 2006)

The Essentials of Trading is no $200, 600-page B-School text, but its writing style and format – yes, there’s homework – probably make this book a better fit for aspiring traders that thrive in a classroom structure: in this case, a self-directed course that tucks into a gym bag or bedside table drawer.Author John Forman packs into these nine chapters the best of his students’ struggles and breakthroughs on their way to profit. But lest anyone feel a pre-finals cold sweat coming on, it’s important to stress the efficacy of this approach. After all, Essentials is meant for novice, do-it-yourself investors willing to put in the time to learn the ins and outs of more complex markets. Forman gets the reader quickly from theory to practice with his emphasis on journal keeping and his dozen or so assignments throughout the book, including calculating win/loss ratios and following detailed steps for several dry runs on a mock trading platform.The theory portion of the book centers on psychology and risk-taking, understanding the mechanics of markets and the anatomy of a trade, plus determining what factors influence prices, and reading and analyzing price patterns.Those who learn best by example can rest assured that the author’s experience isn’t exclusively academic, and neither is his book. Forman has readers begin with elementary steps like recording market reaction to major economic indicators, court decisions or merger announcements. Readers soon advance to building their own trading strategy: how much can they risk; when and for how long will they trade; what are their expectations? They’re next directed to develop a risk management plan: tackling stop-loss trades, hedging and calculating value at risk (VaR), which is loosely defined as a portfolio’s stress limit over a given time frame. Forman helps readers make sense of fundamental analysis, technical analysis and the blend of both in quantitative analysis.

In the final chapters, those soon to graduate to live trading develop and test at least three systems to find the best match to their strategy. In simpler terms, students are setting up a series of pre-determined rules: go long if/when …; exit long if/when …, etc. Determining trade size and measuring performance round out the final pages, while the appendixes offer sample systems of varying complexity.

Forman seems to hinge new traders’ success on their dedication to journaling and review about as much as he emphasizes practice trading. That’s well-meaning advice likely to resonate with anyone who’s ever tackled a new pursuit steeped in theory. At the same time, some readers, particularly those kept busy with their day job or a family, may feel overwhelmed to keep the kind of thorough diary entries that the author recommends.

Clearly, the book is meant to be paired with the author’s analytical and trader community websites, given its several references to both. And Forman’s step-by-step walk-through of mock trading is limited to just one site — Oanda’s foreign exchange platform, called FXTrade. The author explains there’s no particular endorsement here for Oanda or any nod given to forex over other markets. (In fact, his sample system in the final pages is for stock and stock options trading). Forman says Oanda differentiates itself with its unlimited trade duration on its demo sites and its variable trade sizes, among other features, and the 24-hour currency market means neophyte traders can practice any time they want. Oanda’s prominence in The Essentials of Trading isn’t meant to discourage readers from perusing the fast-changing world of Internet trading for other practice platforms.

As with most how-to trading books, this one is rich in charts and tables. Even skimming eyes are quickly drawn to the gray-highlighted text boxes that offer anything from trading term definitions to a quick review of the equation for calculating moving averages, to anecdotes from traders’ blogs. This feature makes the book a handy reference to leave near the monitor well past the practice days.

Equal parts lecture and lab, The Essentials of Trading will help those contemplating hands-on investing to determine whether they’re cut out for the perilous and profitable world of global financial markets. If they proceed, Essentials will have armed them with the tricks for discipline and risk management. From there, the real lessons will come from trading.

Can’t complain too much about that!

News & Updates

Amazon ‘Top Seller’

Thanks to a fantastic book launch celebratory promotion, The Essentials of Trading became an Business & Investing ‘Top Seller’ on Thursday.

Very cool! 

My publisher is super pleased, naturally, and it’s a lot of fun to be able to say that The Essentials of Trading is a best seller.  The fact that my book stood shoulder to shoulder with some of the major titles on the market today is amazing!

So what’s next?

Hopefully a few days of rest, first.  I’ve got some very interesting projects in the works, though.  Check back on Monday to see what’s in store.