This list represents in my opinion the best books for a beginner to start with.
They (together) focus on key aspects of trading:
- money management
- technical trading (charting)
There is also bunch of books I consider to be worthy of reading referenced below, but I didn't have chance to dig into them just yet.
Also please note that the order is not significant -- the books can be read in (almost) any order, even though starting with Elder and/or Lefevre is probably a good idea. :-)
Excellent book by Edwin Lefevre about what it takes to be an successful speculator on the markets.
This book is not something I would call "trading manual" per se. It's more of a good fiction book (based partly on Jesse Livermore's life), but it offers useful insight into trader's mind.
Book by Alexander Elder that explains in a great detail principles of technical analysis, various indicators and even complete trading system. It also briefly touches on psychology and money management rules.
The edition I'm referencing here also includes workbook where one can test his own understanding of each individual chapter of the book.
Available via amazon: The complete trading for a living.
Elder also has two other books worth mentioning, but those remain on my to-read list for the time being (both have also separately available "study guide" counterpart):
Excellent book by Mark Douglas explaining psychology of trading. This book should be read by anyone who thinks that trading is about gambling and/or luck. One of the key points of the book is to help reader to think in probabilities and to judge his trading performance by long term results and not based on result of last trade.
Available via amazon: Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude.
Another very interesting and very thin book, written by Max Gunther, containing twelve major and sixteen minor axioms used by Swiss bankers to manage their investments.
Basically this book is about (not-so) common-sense risk management rules.
Btw, the major axioms are:
- On Risk
- Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.
- On Greed
- Always take your profits too soon.
- On Hope
- When the ship starts to sink, don't pray. Jump.
- On Forecasts
- Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.
- On Patterns
- Chaos is not dangerous until it begins to look orderly.
- On Mobility
- Avoid putting down roots. They impede motion.
- On Intuition
- A hunch can be trusted if it can be explained.
- On Religion and the Occult
- It is unlikely that God's plan for the universe includes making you rich.
- On Optimism and Pessimism
- Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.
- On Consensus
- Disregard the majority opinion. It is probably wrong.
- On Stubbornness
- If it doesn't pay off the first time, forget it.
- On Planning
- Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's, seriously.
But this list doesn't say much, unless you've read the book.
It's also available via amazon: The Zurich Axioms.
- Full title: Trading the Ross Hook
- Author: Joe Ross
- Price: $175
- Found on: Net
Available via Joe Ross' site: Books by Joe Ross.
This book is definitely not a light read. It took me significant amount of time and energy to read through it. But in the end I think it's worth it.
This book describes what the author calls "Ross Hook", which is extension of 1-2-3 formation.
He goes into great depth of explaining different setups and filters you can use trading this pattern as well as some of his money-management rules.
Even though the book felt a bit chaotic at times, it definitely gave me different mindset -- I'm spotting the "RH" trades almost instantly on charts, months after I've finished reading.
If you want to learn interesting way of trading without the need for "magic indicators", this is the book to pick up.
- Full title: Adventures of a Currency Trader: A Fable about Trading, Courage, and Doing the Right Thing
- Author: Rob Booker
- Price: $34.65
- Found on: financnik.cz
Available via amazon: Adventures of a Currency Trader.
I've bought this book expecting nothing short of a miracle... and I was dead on. :-)
We're introduced to a fictious character (Harry) who exhibits some common traits of beginning traders -- the "get ultra-rich super-quick" mindset, putting too much money on a single trade, disregarding the need for consistency, etc.
During the course of the book we follow him on his bumpy ride to become a profitable trader. He has to overcome many obstacles on his journey -- being fired from work, losing almost all of his account's equity.
In the end, with the help of a trading mentor, he's able to create his own trading plan and become profitable.
The only thing I wasn't all that happy about was the fact that the book is accelerating towards the end, precisely the opposite I'd like to see. Author runs through the closing chapters like he was on fire.
Overall, if you want to pick up good fiction book with trading theme, you could do a lot worse than getting this one.
Have you ever read a book that you can't put down? For anyone truly interested in trading, this book is a must-have. Most books are filled with technical information with a few warnings about the psychological side of trading. This book lets you live the common pitfalls of trading through the main character, all the while introducing in-depth concepts in a fun and interesting way. I think anyone who has seriously traded can see some of themselves in the main character, and learn a few things along the way. (Adam Emrick)
- Full title: Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders
- Author: Curtis Faith
- Price: $18.45
- Found on: Net
Available via amazon: Way of the Turtle.
I've been anxiously waiting for this book to arrive, particularly after reading so many positive things about it.
I was expecting dense read, like the "Ross Hook" mentioned above, but boy... was I wrong.
Beginning of the book is about the "Turtle experiment", which was bet between Dennis and Eckhardt whether it's possible to "grow" (nurture) extraordinary traders the way Turtles are grown in Singapore.
After talking about this experiment Curtis goes into a greath depth explaining properties of trend-following systems (mainly the Donchian-channel breakout system that was taught as part of their Turtle training), general ways of finding trading edge and the factors that influence success of traders in general.
If you've read a book or two on technical analysis and trading psychology, you won't find heaps of a new material here... but that's not necessarily a bad thing. Curtis' book serves as extremely well-written reminder of many things we ought (and ought not) to do as traders.
I'd definitely recommend this book for beginners to give them good perspective what the "trading for a living" might entail.
We're going to raise traders just like they raise turtles in Singapore.
So trading guru Richard Dennis reportedly said to his long-time friend William Eckhardt nearly 25 years ago. What started as a bet about whether great traders were born or made became a legendary trading experiment that, until now, has never been told in its entirety.
Way of the Turtle reveals, for the first time, the reasons for the success of the secretive trading system used by the group known as the "Turtles". Top-earning Turtle Curtis Faith lays bare the entire experiment, explaining how it was possible for Dennis and Eckhardt to recruit 23 ordinary people from all walks of life and train them to be extraordinary traders in just two weeks.
Only nineteen years old at the time-the youngest Turtle by far-Faith traded the largest account, making more than $30 million in just over four years. He takes you behind the scenes of the Turtle selection process and behind closed doors where the Turtles learned the lucrative trading strategies that enabled them to earn an average return of over 80 percent per year and profits of more than $100 million. You'll discover
- How the Turtles made money-the principles that guided their trading and the step-by-step methods they followed
- Why, even though they used the same approach, some Turtles were more successful than others
- How to look beyond the rules as the Turtles implemented them to find core strategies that work for any tradable market
- How to apply the Turtle Way to your own trades-and in your own life
- Ways to diversify your trading and limit your exposure to risk
Offering his unique perspective on the experience, Faith explains why the Turtle Way works in modern markets, and shares hard-earned wisdom on taking risks, choosing your own path, and learning from your mistakes.
This list contains books that I deem interesting but didn't read just yet.
- Full title: The Psychology of Trading: Tools and Techniques for Minding the Markets
- Author: Brett N. Steenbarger
- Price: $31.50
- Found on: Net
Available via amazon: The Psychology of Trading.
The author's M.D. counsellor-trader identity did help him making this an uncommon trading psychology book full of "highly trading relevant" counselling records from both trader and non trader patients. The catch is: if you are not interested in or equipped with an intermediate level of knowledge about psychology or counselling, I doubt very much whether you can finish reading this 300 page book till its end.
To let you have a better grasp of my "worry" mentioned above, I would like to quote something from the last or conclusion chapter, which the author regarded them as the 11 major themes explored in his book.
1. Behavior is patterned. 2. Your trading patterns reflect your emotion patterns. 3. Change begins with self observation 4. Problem patterns tend to be anchored to particular states. (When you enter a particular state thru emotional, physical, or cognitive activity, you tend to activate the behavioral patterns associated with that state.) 5. Our normal states of mind, which define most of our daily experience, lie within a restricted range of our possibilities. (Your immersion in daily routine keeps you locked in routine mind states) 6. Most trading occurs in a limited range of states, trapping traders in problem patterns. (Traders tend to place greater emphasis on the data they process than on the ways in which they process those data.) 7. People in general, and traders specifically, enact solutions as well as problem patterns. 8. Eliminating emotions is not necessarily the secret to improving trading. (Traders can utilize positive emotional experiences to identify constructive solution patterns and to create an anchoring of new, positive patterns.) 9. Success in the markets often comes from doing what doesnt come naturally. 10. The intensity and the repetition of change efforts are directly responsible for their utlimate success. 11. Trading success is a function of possessing a statistical edge in the markets and being able to exploit this edge with regularity.
In short, if you can appreciate or at least have a slight idea of what the above 11 themes try to preach, this book suits you well. Otherwise, please give it a pass.
- Full title: Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology
- Author: Brett N. Steenbarger
- Price: $34.65
- Found on: Net
Available via amazon: Enhancing Trader Performance.
Trading is a performance discipline, and like Olympic athletes, elite military troops, and performing artists, traders can structure their development to achieve competence and expertise. Through his own trading experiences and those of individuals he has mentored, Dr. Brett Steenbarger is familiar with the challenges thattraders face and the performance and psychological strategies that can meet those challenges.
In his first book, The Psychology of Trading, Dr. Steenbarger provided a framework for understanding and overcoming the mental obstacles to successful trading. Now, in Enhancing Trader Performance, he goes a step further and shows you how to transform talent into trading skill through a structured process of expertise development.
Straightforward and accessible, this comprehensive guide:
- Discusses the importance of finding an optimal fit between your trading talents and interests; the markets you trade; and the ways you trade those markets
- Explores how you can enter into a learning process that will cultivate your tradingcompetence and expertise
- Introduces the concept of learning loops, which enable you to make progressive improvements in your trading methods
- Breaks down performance into three components--mechanics, tactics, and strategy--and examines the role of each in generating trading success
- Illustrates how you can coach yourself with practical cognitive and behavioral techniques that rapidly change problem patterns and build new, positive ways of thinking and behaving
When you enhance your performance as a trader, you replace a small piece of randomness with intention. This enables you to make more informed trading decisions as you make your way through today's dynamic markets. Filled with in-depth insights, practical advice, solid research, and detailed examples, Enhancing Trader Performance offers an innovative approach to market mastery.
- Full title: Japanese Candlestick Charting Techniques, Second Edition
- Author: Steve Nison
- Price: $63
- Found on: traderslaboratory.com
Available via amazon: Japanese Candlestick Charting Techniques.
A form of technical analysis, Japanese candlestick charts are a versatile tool that can be fused with any other technical tool, and will help improve any technician's market analysis. They can be used for speculation and hedging, for futures, equities or anywhere technical analysis is applied. Seasoned technicians will discover how joining Japanese candlesticks with other technical tools can create a powerful synergy of techniques; amateurs will find out how effective candlestick charts are as a stand-alone charting method. In easy-to-understand language, this title delivers to the reader the author's years of study, research and practical experience in this increasingly popular and dynamic approach to market analysis. The comprehensive coverage includes everything from the basics, with hundreds of examples showing how candlestick charting techniques can be used in almost any market.
- Full title: Maximum Adverse Excursion: Analyzing Price Fluctuations for Trading Management
- Author: John Sweeney
- Price: $41.96
- Found on: ?
Available via amazon: Maximum Adverse Excursion.
The first comprehensive guide on maximum adverse excursion -- a powerful new tool for dramatically lessening trading risks
"Trading successfully, like everything else, is built upon solid preparation. It is the well-prepared individual who will be able to cope in today's competitive market. John Sweeney's Maximum Adverse Excursion will provide you with the steps to perform the analytical review of your trading system that you should undertake before you ever risk your capital." -- Thomas Hartle, Editor Technical Analysis of Stocks & Commodities magazine
"Maximum Adverse Excursion deals with a much overlooked subject: how to minimize losses. If every trader took John Sweeney's advice and learned how to minimize losses before trying to make profits, they would be financially ahead." -- Martin J. Pring, President The International Institute for Economic Research
"John Sweeney has done it again. As with Campaign Trading, he takes a complex set of ideas and explains them in a simple, easy-to-understand manner, in a form that traders can use to help them make informed and profitable buy-sell decisions." -- Clifford Sherry, PhD, author The Mathematics of Technical Analysis
Most successful traders have a "sixth sense" that alerts them to loss points and amounts. But what happens when intuition fails?
When the potential loss incurred on a trade is significant, you need more than guesswork. But is it possible to estimate the loss point accurately--quantitatively? With maximum adverse excursion (MAE), the answer is a resounding "YES". This innovative method of risk management enables traders to steer clear of potentially devastating results by pinpointing loss points before implementing trading decisions. Now, in the first book to provide an in-depth examination of this vital trading tool, John Sweeney, MAE developer and Technical Editor of the highly regarded Technical Analysis of Stocks & Commodities magazine, takes you step by step through its various intricacies.
In this comprehensive and accessible reference, Sweeney shows how the key to successful MAE implementation lies in determining whether there is any consistency in market behavior. By measuring and charting price excursion from a set point of entry, you can establish--quickly and easily--whether prices show consistent behavior over a finite time frame. If, in fact, some regularity, some pattern in price changes is revealed, you can then exploit it while in the trade. The bottom line is a more reliable system for discerning whether your trade is going in your direction or not, and--in either case--what likely events are next. By replacing guesswork with statistical descriptions, you can objectively determine when to cut off a loser, or put in a protective stop . . . or take profits.
Maximum Adverse Excursion can give you "the elusive edge that traders seek . . . a line all your own, from which profits can flow with minimized, quantifiable risk." This comprehensive, accessible reference gives you the tools you need to employ MAE successfully, including detailed information on:
- Defining and calculating adverse, minimum, and maximum favorable excursion (MinFE and MaxFE)
- Displaying MAE--aggregation, frequency diagrams, stop size
- Determining specific capital requirements--capital conservation, defining drawdowns
- Profit definition by stop level--profit tradeoffs, profit curves, interpretation
- Impact of volatility changes--tweaks, changing stops by range or volatility
- Trading management--portfolio impacts, day-to-day management, elaborations
Complete with sample calculations, practical examples, and EXCEL programs for creating your own charts, this is the definitive guide to using MAE effectively--and profitably.
- Full title: How I Made One Million Dollars ... Last Year ... Trading Commodities
- Author: Larry Williams
- Price: $34
- Found on: financnik.cz
Available via amazon: How I Made One Million Dollars ... Last Year ... Trading Commodities.
This was the first book I bought about futures when I was 16. A whole new world open up before my eyes, and the credibility couldn't be paralleled turnin $10,000 into over 1.1 million in real time, no one has topped.
Three years later I sat and passed my Series 3 commodities broker license. I still kept this book with me and used some of the practical approaches detailed in the book to help my clients trade more successfully.
Now after being involved with futures for 11 continuous years as a broker, an investor, and the author of three futures books I still find myself referencing Larry Williams material.
Unfortunately, others have a hard time accepting his methodologies and ideas. But if you have read MarketWizard by Schwager, none of those traders were alike. They traded with their own style, with their own risk tolerance, and most importantly with their own goals.
That's why Williams' information should be used solely as a base for your own trade development and not as the gospel. Because of the few things mentioned above, and many other personal traits that individual traders bring to the trading experience, there are no "futures gurus" that can tell you exactly how to trade day to day.
So you have to decide for yourself what is most important being told how to trade or discovering how to trade for yourself. That's what this book, my books, and many other books can realistically do for you.
Good luck and God's speed.
I've compiled this list in hope it will be useful to any wanna-be trader.
But standard disclaimer applies -- informations contained here are for entertainment purposes only and anyone entertaining the idea of trading in the markets should bear in mind it's a high risk environment that shouldn't be taken lightly.