Having recently been to a Barnes and Noble, and visiting the investment/trading section, I can see how beginning traders can be overwhelmed. So many trading and investment books covering a wide arrange of topics. There were chart pattern, price pattern books, fibonnacci time and price clusters, technical indicators, fundamental stock investing, derivatives books.
There were many many more that do not come to mind now.
I am sure many of them provide legitimate value to people who read them. Even Warren Buffett said he found great value in the book Security Analysis by Benjamin Graham.
Plenty of the books were hardcover, with nice pictures, nice charts loaded up with moving averages and many retailing for a whopping $50 – $80. I flipped through them and was thoroughly disappointed. I don’t mind paying a lot more for a book, if it were to teach concepts about the markets that can cause order flow to be generated and cause your trade to profit.
And so I wondered how many of those trading and investment books can help people catch the next 200 pip, 500 pip, or 1,000 pip move in the markets.
Years ago, I would walk into the investment and trading section and have fear because I didn’t know how to make sense of the information. I didn’t know what to look for. I didn’t know what were the best order flow, liquidity, market participant, global macro questions to ask.
Making Sense of Trading Books
Nowadays I know exactly how to make sense of the information. I know what works and what doesn’t. I know what is important and what isn’t. I know what generates order flow and what doesn’t. I know what is nonsense and what isn’t. I have complete intellectual and market clarity. Doesn’t mean I am not open and flexible to new ideas. I just know to ask the best trading questions.
For I have spent many sleepless nights trading the markets and thinking about them. Comparing all the technical indicators, chart patterns, price patterns, astrology, forex robots, etc, and comparing them to order flow principles such as stops, option barriers, market sentiment, news, global macro, market positioning, market expectations. And I have come fully convinced that the order flow principles were the way to go. Once you know how to mix and match them, you can tweak and construct 30 pip, 50 pip, 100 pip, 200 pip, 500 pip, 1,000 pip, 5,000 pip moves in your head. You can see the battles between market participants in your head and see where price is headed. And as such, if the scenario does comes into play in the market, it is like you have already been through it because you played out the scenario in your mind. You have sort of lived through the market move already. Sounds surreal, but very true.
Harmony With The Financial Markets
It is like a new harmony with the markets movements, because you know that when a particular trigger or scenario plays out, the market almost has to move. The market has no other choice but to move.
Attaining that killer feel and harmony with the markets is not easy, especially when you are stuck in the technical indicator and chart pattern phase. As in those phases, you have not drilled down into the real reason why price moves. And trading systems that have a component of low winrates, make it difficult to experience that feel of the market.
When your trading system has a high win rate, whether temporary or lasting, and you can actually generate consecutive, leveraged winners, then you start to notice many new things about the markets and their fundamental truth. I talk about that in how I made the order flow breakthroughs.
The trick is not just to read the trading books. You need to link the concepts taught in them to a very recent market movement. If you link it to a market movement that occurred today, that is even better.
I like to assign some sort of meaning to the market movements. Break it down and assign pip ranges to each component of the move. The people trading in technical indicators may believe that the divergence, moving averages, etc “caused” the market to move 1,000 pips. When in reality that is hocus pocus mumbo jumbo B.S. If it actually caused the market to move, then it would always happen most of the time and you wouldn’t get false breakouts, and a few horrible consecutive trades.
But when you start thinking about the market in terms of stops, option barriers, news, sentiment, expectations, positioning, global macro, and how the market participants execute orders and interact over time, then that answers a heck of a lot more questions about what really causes the market to move.
I have plenty of books that I recommend to people. Every so often I add another one to the list. In the past I used to buy 3 poor trading books for every 1 good book that I found. Nowadays I can pretty much nail which books are the good ones pretty quickly. If you have the order flow mindset, things eventually start to fall into place.