Another question I get asked a lot is along the lines of: “I’ve got all this information to go through – all these books, ebooks, forum threads, courses I bought, indicators I downloaded, how do I know here to begin? In what order should I consume them?”
First, a congratulation is in order. One of the steps to succeed and transform yourself in trading and anything in life is to have a goal – and then acknowledge that you may need some more knowledge and information, and then going and getting that information. (whether some of the information you gather from most trading forums is valuable, is for a whole other story).
If you have gone out and gathered a stack of physical or digital information that you believe will help you towards your goal, then you are one step ahead of most people. To be further steps ahead would require having a powerful trading philosophy, which would lead you to have a much higher chance of selecting amazing trading information to work with. How do you develop a trading philosophy? Well one way is to record your trading and market beliefs today, and where they were in the past, and then do some research on some great traders market beliefs to see where you can go in the future.
Then, once you have the amazing information to work with, you have to extract the proper principles, insights, revelations, etc. Then form them into a plan and habits that you can implement on a weekly and daily basis. That is the abbreviated version of it. Certainly, there are many more secrets and trading sorcery I can get into, but that will be for another day.
Recommended Trading Books:
Trading books are one of the saving graces of my life. There may be some times in your life where you feel that people just haven’t been there for you. People can disappoint you terribly. I felt this on many occasions. Where did I find comfort in before I found the right people to be in my life? In the amazing trading books and articles – as well as in music. Books and music were always there for me when I needed them.
I would like to give a special thank you to all the authors out there. Isn’t it such a wonderful thing that there is just such vibrant literature out there about so many topics? About trading and investing – both short term, long term. About personal development, about spirituality, health, fantasy and any other topic you want. When the business philosopher Jim Rohn said that ‘All of the books that we will ever need to make us as rich, as healthy, as happy, as powerful, as sophisticated, and as successful as we want to be have already been written,’ he wasn’t kidding!
Isn’t it a great thing that they committed their ideas to paper instead of hoarding it all?
And yes, there is a lot of crap, nonsense, irrelevant, and useless information out there, but when you find the gems, they are worth the price you pay. Sometimes it only takes just one idea to turn your life around and/or make you rich.
One time I was studying a subject intensely. I committed to reading a book written about 20 years ago. It was a decent book, but I was getting bored of it and it felt like tedious work. I just felt that it wasn’t worth my time and that I should be doing something else. Just when I was having these doubts surface after the 100th something page, I read two paragraphs that gave me so many revelations, it literally transformed the way I thought and acted about that subject and project. The revolution and transformation began, literally after I finished reading and highlighting those two paragraphs. Lots of joy and excitement in finding the right information at the right moment in your life. It feels electrifying. You can feel it and so can everyone else around you. This has happened to me on so many occasions too numerous to count.
On another occasion I was reading and skimming through a 300+ magazine. I ripped out just 5 pages – about 1.5% of the magazine. That was the only part useful to my vision – just five pages out of three hundred. Those pages were worth much more to me than the few dollars spent on the magazine. The rest went into the garbage.
Sometimes when reading something, the proper attitude would be something along the lines of: ‘I wish that 100% of the information is highly relevant and useful to me, but even if just 1-10% of the information is amazingly useful and insightful, that is still well worth it.” When I interpret information during the trading day – I typically interpret fast and furiously. Some articles and snippets of information get read and the proper information isolated and recorded – in less than twenty seconds, some in just a few seconds. I have developed the art and skill of interpreting more information in a day, than most people get through in a month or week. If you are interested in developing this ability, click here.
Another principle of reading success is to not read casually. When I read a trading book, I read it intensely, with passion, and really pick it apart. I anticipate that I will discover secrets that few other people know or see. I anticipate that the book will make me money in some way. Now, more often than not, this attitude and philosophy helps me to properly select which material to read, and it helps me in finding the insights.
In the beginning 80-90% of the material I picked was wrong and useless information. Now, I do a much better job and 60 – 90% of the information I pick is usually pretty good. How do I do a better job? Well, I know about and have developed the universal principles of speculation.
Back to the proper order of reading the recommended trading books:
The proper of reading the books differs from person to person. It really depends on your unique situation. One of my pet peeves is when I hear a really wealthy person talk about the books they think everyone should read. Do not get intimidated by the rich people telling you that you should do this and that and read this and that. The books that a billionaire should read – who has already made their fortune, and has developed a team and has a structure in place is WAY DIFFERENT from the books someone should read when they are just starting out and trying to make it big. The books that a trader should read is way different from someone else who wants to become a doctor. The books that a candlestick trader should read is way different from a trader who wants to learn Global Macro Trading.
This is a key principle that I want you to remember – not just today, but for the rest of your life:
The books, articles, information, people, etc that you should read, experience, talk to, TODAY, all revolve on where you currently are in life, and where you want to go to (your vision, goals, desired results)
Now, having said that, I think it is a fascinating idea to see what books are in a traders library. A sizable portion of the trading books in my library are in the recommended list. If you ever were to see my complete library, you would quickly notice that I am a serious student of life, money, trading, health, spirituality, etc. And many of them were bought when I didn’t have much money. Even when I was down and out, I still realized that I had to find some money to invest in myself. There are so many people unwilling to invest in themselves. They are willing to pile on $50,000 or $100,000 or even $300,000 of student debt, yet unwilling to spend a few hundred dollars to begin building their library.
One principle of personal success is to start a side fund to invest in yourself. Take a percentage of the money you make during the year, say 5% or 10%, and invest it yourself. It could be books, audiobooks, home study courses, seminars, taking key people out to lunch, etc. Even if money is tight, at least just do 1% of your money. Spend it on bettering yourself. On what you believe will make you a more effective person. On what you believe will raise your desire and motivation. On what you believe will speed up your journey. On what you believe will enable you to create a vision for your life that gets you fired up. Even if you never buy anything that I have to offer – invest in yourself. Invest in whatever you believe is right for you.
I want you to be a much more informed trader and person than you were, when you first started reading this blog. A large part of the world is suffering – as it usually is – from misinformation, intimidation, frustration, and neurosis of so many people. If I can shine some light on some parts of life and trading and the markets with this blog, then I fully intend to do so!
Beginner, Intermediate and Advanced Trading Books
Now I will break down the books into three general categories: Beginner, Intermediate and Advanced.
There is no “right” or “wrong” order to reading books. Theoretically there is a “perfect” order – but you will never reach perfection. Some parts of success is cooked in messy kitchens – where you take bits and pieces from multiple places, go back and read and reread old books and information, up until you finally develop something that fits your unique personality.
When you read a trading book once – don’t assume you will never read it again. I go back and re read The Market Wizards books ever few years and a few other ones. Paul Tudor Jones said that he has read Reminiscences of a Stock Operator for the “umpteenth time.”
One of the ways you can better tell where a person is going in life and what they have on their mind – is by what they are reading! I was both shocked and ecstatic when I realized I was achieving things that I had read about months or years before. In many cases you really do become what you think about and read about!
So if you are reading that garbage forex ebook you downloaded that talks about a gazillion different technical indicators, or a forum thread that is just rehashing the same tired old strategies that don’t work – I am telling you, that at any moment you desire, you can change and start reading amazing trading material. Stop wasting your time on information that does not matter. Gather as much information as close to the trading truth as possible.
Most people don’t know that George Soros took $449 million dollars at the start of 1985, and turned it into $1 billion dollars at the end of that year for a whopping +122% return – and that he wrote a book on it called The Alchemy of Finance. That is a fact – not fiction. So if the book was written in 1987, and you still haven’t read it, then ask yourself why not? That was the question I asked myself when I was in the trading system hopping mode in the first year or two of my life trading career. Which eventually got me to kick some bad habits and shift my time over to more productive reading.
In an attempt to give you some guidance and structure to your reading, here are the books in their various categories with some comments and powerful trading quotes as well:
Beginner Trading Books:
Trading and Exchanges: Market Microstructure for Practitioners – by Larry Harris
This book helped to begin to form the model I was building of the different types of traders and the liquidity model. Most important chapters are probably chapters:
4 (orders and order properties)
8 (why people trade)
10 (Informed traders and market efficiency)
11 (order anticipators)
16 (value traders).
You can skip the rest if you want. A quote from the book is: “Traders who gamble can sometimes be identified by their enthusiasm for trading and by their inability to clearly articulate their reasons for trading.”
Reminiscences of a Stock Operator – by Edwin Lefevre
This book was written in the early 1920’s, before the huge boom and the eventual crash of 1929. Livermore already seemed to be popular and had a made a fair bit of money by this time. But this only tells half of his story. As his greatest triumphs came riding the bull market in 1920’s with very huge position sizes. He was raising his equity balance to swell the margin available for future bearish trades when the market did crash in 1929. If you are going to buy this book, invest in the Annotated hardcover edition, which contains illustrations and useful side commentary, as well as much room on the side for notes. I would pay lots of attention every time Livermore mentions the phrase “underlying conditions” and “general conditions.”
“My biggest winnings were not in dollars but in the intangibles: I had learned what a man must do in order to make big money; I was permanently out of the gambler class; I had at last learned to trade intelligently in a big way. It was a day of days for me.”
The Greatest Trade Ever: The Behind the Scenes Story of How John Paulson Defied Wall Street and Made Financial History – by Gregory Zuckerman
The book talks about how John Paulson shorted the housing market to make almost $4 billion in 2007 for himself and $15 billion in profits for his fund. George Soros was not the only person to make $1 billion dollars in a day. John Paulson did it as well.
A remarkable book detailing the history of hedge funds over the past 60 years or so. Describes all sorts of different market events and crises like the 1985 Soros shorting of the U.S. dollar, the 1987 market crash, the 1992 breaking the Bank of England, the dot com bust, the housing bust, etc. The notes in the back portion of the book can be worth even more than the rest of the book combined!
Soros: The Life, Ideas, and Impact of the World’s Most Influential Investor – By Robert Slater
In my opinion, if you want to be a discretionary trader placing directional trades, with even a hint of global macro component, you better get your hands on anything and everything from and about, George Soros. There are two biographies on him, and I got them both. And yes, I found things in them that both confirmed my hunches, and also found some different quotes as well.
Some people wonder how I know so much. I studied anything and everything about George Soros… until my eyes almost bled. It was rough in the beginning, but afterwards, it got the job done and I ascended to a higher plane of understanding – permanently. I probably know more about him and his trading past than even people who have worked for him. Now, I don’t want your eyes to bleed, so there is a bit easier way.
Pit Bull: Lessons from Wall Street’s Champion Day Trader – by Martin Schwartz
A fabulous and funny story of Marty Schwartz taking his small account of a few thousand dollars and running it up into millions and double digit millions. Rumor had it, he was making around 25% per month trading mostly the S&P in the 1980’s.
“Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself.”
Pring on Price Patterns: The Definitive Guide to Price Pattern Analysis and Interpretation – by Martin Pring
Some people ask me why I recommend this book. I would say because we live in the modern world, and you can use a chart to make your life easier. While I could trade without a chart some of the time, a chart makes my life easier and opens up possibilities for stop hunting and option barrier type trades, and helps with entries and exits. So I do not see a problem with one book on chart patterns, and one book on price patterns.
The problem comes when one becomes infatuated with purely chart and price patterns and you assume that they are the cause behind the market movements. Buy 1-2 books on them. I wouldn’t necessarily go buy 20 books on them. I would rather spent a few hundred hours learning about macro trading.
Spend lots of attention on the chart patterns and price patterns that fail – and why they fail! There are great revelations in failure, especially if it challenges previous, mediocre market thinking.
Intermediate Trading Books:
Market Wizards: Interviews with Top Traders – by Jack Schwager
The trading world owes a debt of gratitude to Mr. Schwager for starting this series of books. Some of my favorite interviews are with Michael Marcus, Paul Tudor Jones and Bruce Kovner. A very good trading quote is: “One of the jobs of a good trader is to imagine alternative scenarios. I try to form many different mental pictures of what the world should be like and wait for one of them to be confirmed.”
New Market Wizards: Conversations with America’s Top Traders – by Jack Schwager
This is one of the first trading books I bought and read. I did not understand much the first time around. Years later when I was undergoing the order flow transformation, did I finally understand the power of the information in this book. It contains one of the greatest trading quotes in history in my opinion: “Not everyone is going to interpret things in the same way, at the same time, as you do, and it’s important to understand that.”
Stock Market Wizards: Interviews with America’s Top Stock Traders – by Jack Schwager
Schwager turned his focus to interviewing a lot of stock traders during the huge tech boom. Some of my favorite ones are Steve Cohen and the late John Bender. A nice quote is: “If I am in the trade because of a catalyst, the first thing I check is whether the catalyst still applies.”
How To Trade in Stocks – by Jesse Livermore
This is a book I did not know existed. When I discovered a book written by Jesse Livermore, I was astonished. I thought Reminiscences of a Stock Operator was all there was. But then I found this book. This book was written by Livermore around early 1940. The writing of this book helped to keep Livermore focused and it brought some joy to his life. Eventually though, he did take his own life later that year.
There are two portions to this book: The portion that Livermore himself wrote, and the portion that Richard Smitten wrote. Needless to say the portion written by Livermore are what you are after.
This book is a hidden gem – no doubt about it. It contains nice pictures and also some of the greatest trading quotes ever. Here are three of them to ponder:
“The realization struck me that the time element was vital in forming a correct opinion as to the approach of the really important movements.”
“In the market – Time Is Not Money – Time is Time – and Money is Money.”
“Often money that is just sitting can later be moved into the right situation at the right time and make a vast fortune.”
Trading In The Zone : Master the Market with Confidence, Discipline and a Winning Attitude – by Mark Douglas
One of the standard books for trader psychology. If you are still stuck in the world of solely searching for the next holy grail indicator, then this is not for you. If you want to understand some of the hidden reasons of your behavior in the markets, then this is a good book.
“Trading is an activity that offers the individual unlimited freedom of creative expression, a freedom of expression that has been denied most of us for most of our lives.”
How I Made $2,000,000 In The Stock Market – by Nicolas Darvas
This book described Darvas as starting off with just a few tens of thousands of dollars and trading it to around $2,000,000 equity value within 2 years during the huge 1958 – 1959 bull market. He did not just capture some monster volatility, he also did it with big leverage.
“There are no good or bad stocks, there are only rising and falling stocks.”
Trade Your Way To Financial Freedom & Super Trader: Make Consistent Profits in Good and Bad Markets – by Van Tharp
Van Tharp talks about some important concepts such as position sizing, R multiples, analyzing a sequence of trades, trading expectancy, etc. This is not exactly exciting concepts for most people who are focused solely on developing their trading method. But still important concepts to focus on, once you have some sort of trading method you are working in the markets.
“My belief is that the largest profit percentages are made by active short-term traders who really have their psychology together. I’ve seen short-term traders who could make as much as 50 percent or more per month (on small amounts of money such as a $50,000 account) when they were very in tune with the market and themselves.”
“There are many successful value investors, but you probably couldn’t be a value trader if you believed that things must be moving rapidly in your favor for you to make money.”
Advanced Trading Books:
Soros on Soros: Staying Ahead of the Curve – by George Soros
This is the second book by Soros after The Alchemy of Finance. This book filled in a lot of gaps in my knowledge about how he operated his fund and his history and also had a big description of his analysis of the 1992 Breaking of the Bank of England. A quote: “The amazing thing about investing is that there are so many different ways of doing something. We can be described as momentum investors, but there are value investors who do extremely well.”
Hedge Fund Market Wizards: How Winning Traders Win – by Jack Schwager
After a 10 year hiatus, Jack Schwager comes back with the largest book in the series with very insightful interviews with people like Colm O’Shea, Ray Dalio, and Michael Platt. A great quote is: “One reason I like macro so much is because I am a small fish swimming in a sea of real money.”
Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets & The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money – by Steven Drobny
If the Market Wizard books are like a Bachelor’s degree in trading, then these books by Steven Drobny are like a Master’s degree. It was these books that while more complicated, helped to progress me to implement a heavy dose of Global Macro Trading. Throughout the time I was reading this book, I was saying to myself something along the lines of: “Yes, yes! This is it right here – the foundation of the markets – scenarios and expectations and example after example showing it in action.”
Some nice quotes are: “That’s what was interesting about Soros, he never cared about the business. The reason he’s worth $8 billion is because if he was up 20% in June, he would try to be up 100% by December.”
“Livermore goes long before he goes short. That’s genius. He would buy because he wanted to experience the thrill of owning something. Taking a position changes the chemical balance of the body and the brain and you start to understand what is you were missing. Likewise being subject to the risk that it might go down opens up neuro passageways in the mind which you perhaps didn’t see. So you begin to understand and articulate what you’re fighting against, which you wouldn’t have known had you just gone short straight away.”
When Genius Failed: The Rise and Fall of Long-Term Capital Management – by Roger Lowenstein
A fascinating book detailing the rise and fall of supposed geniuses in the market. This book helped me to further develop my volatility mindset and realize that many people have structured their trades and portfolios around some version of being long volatility vs short volatility, betting on risk appetite or risk aversion, or assuming calm world vs crisis world.
Someone can ask, is it really necessary to read all these books for trading success? My answer would be no it isn’t. There a few known shortcuts – though they still most certainly involve effort.
The most powerful activities in most cases revolve around acting in a certain way during the trading day. The powerful habits and activities done on the trading days will probably always be the most important. However, if someone has not developed those yet and they do not feel confident enough, then some of the above can certainly stimulate some thought.