Trader Resources

What Should I Read on my New Kindle?

Last week I finally gave in and ordered myself a Kindle from Amazon. This is something I’ve been thinking about for quite a while. I read a ton, and some of it happens on my daily commute. While that’s fine for paperbacks, it’s not so great for hard covers, especially bigger ones. Just can’t handle them in one hand while holding on to a rail with my other riding on the train (I don’t get to sit very often). Plus, in the warmer months I like to read outside, and since I live near the coast that means wind flipping pages around when reading a larger book. The Kindle helps in both those situations.

I’ve also got a bit of green thinking going on here as well. I’ve started to feel guilty about buying print books when they are so readily available in electronic format now – and often at lower prices in any case.

Now, I’ve only just got the device, and have a few print books to get through before I’m likely to be focused on a Kindle book, so I won’t have a good impression on things for a little while yet. I have begun accumulating books to read, though. Project Gutenberg is a good source for public domain books and I grabbed a couple dozen of the classics from there last night. One of them is Adam Smith’s Wealth of Nations.

What I would love to find is old trading books, which basically means early 1900s. I’ve started doing some research. If you know of any, definitely leave a comment below.

I’m also going to be developing a list of books to read and include among my trading book reviews here on this blog. If there’s a book (or books) you would like to see me write about, definitely let me know. And they need not be strictly non-fiction. There’s a fair bit of trading and markets oriented fiction out there (for example, the books by Paul Erdman). I like to read that kind of stuff, so definitely include those titles too.

Trading Book Reviews

Book Review: Buy Don’t Hold

[easyazon-link asin=”0137045328″][/easyazon-link] [easyazon-link asin=”0137045328″]Buy – Don’t Hold[/easyazon-link] by Leslie Masonson is called a investing book, but I’m tempted to put it in the trading category. It depends on how you prefer to define the difference between the two. The book’s subtitle is “Investing with ETFs using relative strength to increase returns with less risk”.  Using relative strength makes me think trading, but there are definitely elements of the approach outlined in the book which speaks toward what I would probably think of as investing. In any case, as I noted in [easyazon-link asin=”047179063X”]The Essentials of Trading[/easyazon-link], I look at trading and investing as being functionally the same thing, with perhaps a philosophical difference in approach. I’ll leave it to the reader to make their own judgement.

This book is largely a practical text focused on application. The author outlines a very specific strategy for deciding whether the stock market is to be considered in an uptrend, downtrend, ranging, or turning. His “dashboard” comprises a collection of indicators which are very much technical analysis oriented. They include market breadth indicators, sentiment readings, and some basic price studies. The scoring of the indicators provides the user a market reading from which to develop a strategy. From there, Masonson moves on to picking the best trading/investment vehicle based on relative strength readings. In other words, it’s very much a top-down approach.

On the plus side, the author is very good about explaining the various methods he employs in his strategy. He suggests specific tools (most free, some paid, but not necessarily required) and walks the reader through applying things. On the negative side, much of the first third of the book is dedicated to proving how bad an idea buy-and-hold investing is - definitely overkill there – and I thought in general the writing could have been better. Also, while Masonson does demonstrate the value of the dashboard indicators he uses, he doesn’t actually show a good historical look at how the overall strategy would have done. Still, it’s a book which can certainly provide the fodder for research and development for those interested in longer-term stock market trading/investing and/or asset allocation between and among markets.

Make sure to check out all my trading book reviews.

News & Updates

Making sure you’re up to date

If you haven’t been following the updates on the Facebook page or via Twitter (Why not!?) there have been a couple of items you’ve missed.

  • I did an interview with Stocks & Commodities magazine which will be published in the October issue. The focus was on forex trading and markets. The October issue is handed out to attendees at the Vegas Futures and Forex Expo in late September. That’s the one I’m presenting at on September 25th.
  • I’ve begun reading the book Buy – Don’t Hold by Leslie Masonson. When I’m done I’ll post a review.
  • Trading FAQs contributor Billy Williams has an article in this month’s Futures Magazine: How to find stock market trends.
  • I took on the Chief Market Analyst at Currensee on his ideas for what the Fed should do.

I use Facebook and Twitter for quick hit sort of updates – stuff which generally doesn’t warrant a blog post of its own. Make sure you’re following one or both to stay updated.

Trader Resources

It’s gold Jerry!

OK, I don’t normally make old television references, but in this case I couldn’t help myself. A reader of my Trader FAQs book just sent me this:

“I’m sitting reading your book and I just have to tell you that SO far it’s REALLY good.  It’s invaluable really (and even after all this time spent there are things that are being made clearer to me simply by virtue of the fact that they’re being CLEARLY explained by people who KNOW what they’re talking about)!!!  It’s ‘Gold’ for a new trader.”

This particular gentleman – who’s been in the market for a while – is from South Africa, so I’m not sure if he’s familiar with Seinfeld. I was never a massive fan myself, but I couldn’t help picturing Banya saying “it’s gold” to Jerry in one episode and chuckling a bit to myself.

In all seriousness, though, the feedback for the FAQ has been fantastic! I heard good things from the contributors as they saw it develop, of course, but it’s a whole other thing when the people who can actually get the most value of the book are so enthusiastic. Another email that came in recently said “The FAQ is a great value because for what is probably less than the hourly wage of most middle class people, you save hours of researching to get the same or better answers.” I was really pumped to read that because it’s EXACTLY the purpose of the book – to save people all the time and effort of having to dig around to find answers to common questions, and to not really know how worthwhile those answers were when they got them.

Anyway, give the Trader FAQs a look. Check out the questions and contributors and take a peak inside.

Trading Book Reviews

Book Review: Popes and Bankers by Jack Cashill

[easyazon-link asin=”1595552731″][/easyazon-link]Here’s a book that really isn’t about trading, but may be of interest to those who like history and/or are interested in how we got to the point we are at today having gone through a nasty financial crisis. Actually, fundamental traders may get some use out of it in terms of learning some things to look for in their analysis. The book is [easyazon-link asin=”1595552731″]Popes and Bankers: A Cultural History of Credit and Debt, from Aristotle to AIG[/easyazon-link] by Jack Cashill. I just finished it, having made it my commute reading over the last couple of weeks.

My impression of this book is that it is a history lesson combined with a morality statement. The author goes back through history to show how we reached the modern view, particularly in the US, toward banking and borrowing, and demonstrate that recent events in the financial markets and economy are most definitely nothing new. Wrapped around the history he seems to be making a statement that we need to return to traditional Christian morality where debt and lending are concerned. I’m not sure if he’s quite advocating a return to the “lending at interest is usury and thus a sin” view of things or a somewhat toned down “neither a borrower nor a lender be” recommendation is unclear. His discussion as to the interpretation of biblical texts by both Jews and Christians over the years doesn’t really come to a conclusion as to where the right point on the spectrum should be. Similarly, his discussion of anti-Semitism over the centuries, generally as related to the usury question, leaves one wondering whether the author himself is expressing a personal anti-Semitic view.

That aside, the author does do a pretty good job of highlighting the array of disparate elements which contributed to the financial crises (and how others like it came about in the past). He demonstrates a decidedly conservative bent in attacking those individuals who took out loans they clearly could not afford and those in the media and elsewhere who see them as victims. At the same time, however, he does not hesitate to highlight the failures in government and the financial sector as well. It is one of the more even-handed discussions of the subject I have come across thus far.

For me the bottom line with this book is that it’s a good history lesson, with a moral view intertwined that’s never really clearly defined.

Trader Resources

Great Review of the Trader FAQs Book

Fred Elkins from Finance Banter wrote up an excellent review of my new FAQs book. I took the first part if it for use as a short testimonial on the book’s website. Here’s the full text, though.

Every trader needs a mentor. A sober third party that can provide input, advice, direction or just a different point of view. Trader FAQs gives you a dozen. John Forman has gained access to a group of successful traders whose combined 150+ years of trading experience are laid out in Q&A format to help make you a better trader.

John has posed questions to the traders on various topics from getting started to trading education to building your trading system and picking a broker. All of the things you need to know to trade.

The Power of 12
Every trader is different. You are a different trader than I am and we are both different than the person who will read this piece next. So are the traders in this book. And in that lies its power as a trading tool. Because every writer brings a different viewpoint to each topic, there will almost always be a viewpoint that will be similar to your trading style and others that may be different but force you to look at things in a different way. If you were to pick up a single book on trading and read it, you may have found “the” trader for you. Odds are however, some of what they say will work for you but some will not. You will need to keep reading until you get the whole picture. Trading FAQ’s is like 12 books in one.

Like a bucket of cold water
Sometimes the traders are a bit blunt. But lets face it, if they were all rosy telling you that trading was easy and that everyone should do it tomorrow, they would be lying. Every one of these traders has earned their stripes and knows how hard it is to do this for a living. They want, no need you to understand that. They are not trying to talk you out of trading. They are letting you convince yourself you can. With different styles, markets and experiences, you are left with a whole list of questions to ask yourself about whether you can be a trader. Can I follow my trading strategy in up and down markets? Have I made my Risk of Ruin 0%? Do I fully understand the market I am trading? Am I the kind of person who can and will put in the time needed to learn how to do this properly? There are enough questions you will need to ask yourself before you have completed this book that if you are not convinced it is for you, it probably isn’t!

Tools, Tools, Tools
If you read this book and find a trader or three that speak to you and convince yourself that you want to take the next step then you have also come across many of the tools you will need to be successful. Additional reading – There are many references to tomes that will help you be a better trader on topics from technical analysis to the psychological aspects of trading. Methods and models – the traders share their thoughts on how to build your trading method and where to find tools to help you test it. Practice – How to do it right including a very novel way to make sure you do it and do it right.

Something for everyone
I once was introduced to a theory on why traders burn out and a big part of the theory relates to them being unable to adjust to a “new normal” to use an over used term. Basically it means that once a trader stops learning, they stop trading. As I noted before, there is over 150 years of trading experience in this book and even an experienced trader would be able to find a few nuggets to help them be a better trader. Whether it is a return to basics or just a different way of thinking about a particular idea, I predict you will be a better trader after reading this book.

Reader Questions Answered Trader Resources

Is The Essentials Of Trading applicable to trading options?

An emailer by the name of Daniel asked:

My question: Is “Essentials Of Trading” applicable to trading options? I was looking at trading options

The answer is yes - in two ways.

The first way my book is applicable to trading options is in the fact that it focuses on the foundational elements of trading in general. At its core, trading options is no different than trading any other market. You need to understand the mechanics of trading, price movement, and tracking your P&L. You need to have a strong trading plan which includes the what, when, where, how, and why of your trading. You need to have a trading system of some sort to determine when to get in and out of positions. You need to have good money management. You need to understand where the psychological pitfalls could trip you up. All of that stuff is discussed in The Essentials of Trading.

The second way my book is applicable to trading options is much more specific. It’s in one of the appendices where I lay out the methodology I’ve used for years trading options on the stock market. I didn’t put it in there to recommend it as a system for everyone. In fact, I’d venture to say most folks wouldn’t be inclined toward using it, but it does present an example of a trading plan and system which employs options that’s well constructed.

If, by the way, you are looking for an introductory book on options trading you should give a look to Mark Wolfinger’s The Rookie’s Guide to Options: The Beginner’s Handbook of Trading Equity Options.