By Dave Landry
The following are a list of books that have helped me in trading and life. Now, don't expect to be blown away by all of them/all in them. My litmus test for a "good book" is just one good idea. I believe that if you can get just one good idea, the book has paid for itself 10x over.
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Note: A few years back when I updated my website, my "books to read page" was wiped out. I thought that I could quickly replace it, but I now realize that I have so many books to add that it might take a while. Also, I had books scattered throughout my office that I was using as references for my upcoming master trading psychology course. We had company on the way so my wife re-shelved them. I have since started a bin of "to read/to reference" to prevent this from happening in the future. I'll start adding any ones that I deem worthy soon. Anyway, bookmark this book page since I plan on adding to it often.
A classic on technical analysis that everyone should have in their library. Do become familiar with all of the concepts and patterns, but do not try to apply all of them, all of the time. That's a recipe for analysis paralysis. Instead, find what makes sense to you and incorporate that into your own methodology.
As I often preach, intermarket technical analysis only matters when it matters. As Murphy himself says, there can be long lead and lag times. Nevertheless, it's worth understanding how different markets are related so you can recognize when they are currently correlated (or inversely correlated).
Disclaimer: Dick Fruth is a good friend of mine. As you'll see in the acknowledgements, I gave him my 2 cents. So, I'm a little biased.
There's nothing new under the sun when it comes to trading. I often learn that many of my discoveries were discovered long before me. It's humbling and comforting at the same time. With that said, part of this book covers a strategy similar to my "Phoenix Strategy," something Dick discovered over 40-years ago. The great thing is that he goes into a lot of details such as what happens with a stock's float over the years-very interesting!
The title is silly, but it's actually a worthwhile read. I think you'd be hard pressed to make a better $5 investment. Spoiler alert: Darvas traveled the world as a dancer. By accident, he stumbled into the stock market-he was paid in stock for a performance (essentially). When the stock took off, this peaked his interest in trading. After some trials and tribulations, he discovered that good stocks rallied, based, rallied, based, rinse and repeat-forming "boxes." If you knew which stocks would become "box stocks," you'd own the world. I do think through proper money management and good stock selection, you can stack the odds in your favor to find, get in, and hang on to box stocks.
I also read Wall Street: The Other Las Vegas from Darvas. It wasn't a fantastic read, but it did provide some insight from Davas regarding his method and philosophy. Therefore, I'd recommend you read this one after completing the above.
Many years later, Darvas wrote another book You Can Still Make It In The Stock Market. Like "Vegas," it's not as good as his original book but it does provide some additional insight to his methodology and more importantly, trading psychology.
Disclaimer: Greg Morris is a good friend of mine. I consider him a mentor, so anything I say here has a bias. I will tell you this: When Greg speaks, I listen. Carefully!
Greg takes on so-called modern finance and kicks its butt. He turns buy and hold arguments on their head. I often draw heavily from this book in my columns, webinars, and courses. Here's just one of the many gems found throughout: "All of the financial theories and all of the fundamentals will never be any better than what the trend of the market will allow." I can go on and on, but you get the point--definitely way more than the "just one good idea" litmus test mentioned above.
Trading Psychology and Neurology
Around 10-years ago, I discovered that in addition to trading psychology, you better also understand neurology as it relates to trading. These trader neurology books seemed to have popped up in recent years. My beef with many of them is they make false assumptions as facts about how market's work (e.g., you should "buy low and sell high", the market goes up longer-term, technical analysis doesn't work, you should buy value, don't bother trying to beat the market etc.). It's obvious the authors are stuck in academia and wouldn't understand a trade if it hit 'em in the ass. Although they might have something worthwhile to say about neurology, I can't get passed their flawed reasoning about the markets and trading. The Investor's Brain is refreshing book that gives you the neurology of investing and then leaves it up to you to decide on how it should be applied (there may be a few inferences that I see as flawed, but it's not blatant). My copy is dog eared, undlined, and full of notes. I re-read it often. If you've been trading for more than one day, you'll know that you're going to have some strange feelings and emotions. Knowing why you feel the way you do is enlightening. Understanding the neurology will help you hold onto winners and ditch losers. Get the book and read/re-read it. You will not be disappointed.
I read this book shortly after taking my trading efforts full time. It was a big inspiration. The only caveat is that upon re-reading it, it seems like a lot of the traders risked way too much on trades that could have just as easily gone the wrong way. ALSO, I've actually met a market wizard or three in my travels. One flat out told me that he was in the right place in the right time and he could never repeat that in today's markets. And, kudos to him for NOT being out there saying that you can! Nevertheless, there's a plethora of great lessons in trading psychology in there. Read the The New Market Wizards and Stock Market Wizards while you're at it. I haven't read Hedge Fund Wizards yet, but I'd be willing to bet that it would pass the aforementioned "one good idea" litmus test.
This was the first book that I read on trading psychology and my favorite. It really opened my eyes about how we're not alone in our struggle with the markets. If you've attended my Week In Charts, watched Trading Full Circle, or read columns here, you'll know that I often draw heavily from Douglas. This is a must read. Read everything you can get your hands on from Douglas including Trading In The Zone, but read this book first and foremost.
If you haven't read this book then stop trading immediately. Mine is dog-eared, highlighted, and underlined. If you have read it, then read it again! Lefevre is widely believed to be a pen name for Jesse Livermore. I like the newer version that I have listed here because it supplies a lot of background information which helps you to understand the context. Also, read the Livermore biography by Smitten, but read Reminiscenes first.
Wait Big Dave, a Gann book? Are you kidding me? Okay, Gann dabbled in the esoteric and mysticism of markets. Ignore all this. Read the first 50 or so pages of this book. There's a lot of solid technical analysis and trading psychology in there. I believe that if Mr. Gann would've followed his own advice here as opposed to "Grail hunting," he would not have died broke.
Way back in the 80s, I decided to get serious about my trading. My goal was to read every book from the two major trading book stores (there was no Amazon back then). I ended up with a lot of stinkers in my library, but I also made some great discoveries. "Viewpoints" was one of them. I recently re-read this one while working on my master trading psychology course. I have quoted many of the gems found within. So far, I have included Longstreet quotes in eight of my course presentations. Here is just one random one: "How many times has each of us, having set out on a course, thought it necessary to continue because we have begun?" Think about that the next time you fail to honor your stop.
The so-called "Turtles" made a lot of money trading a simple breakout system. I think they happened to be in the right place at the right time-SO, I wouldn't "try this at home." HOWEVER, you can't take that away from them! The "turtle books" were quite the rage a while back and I vowed not to bother reading them. Then, at an American Association Of Professional Technical Analysts meeting, Larry McMillian told me that it was actually a pretty good read. He said that he found it interesting that they played ping pong when the markets weren't moving. I was intrigued! It turned out to not only be a great book on trading psychology, but entertaining as well.
I found Dr. Maurer by complete accident. I was a speaker at a conference where he was a guest speaker. I was blown away by his presentation and immediately ordered his books. It's not exactly a trading psychology book, but much of what's in it applies directly to trading. It's a short read with tons of information. Mine is dog-eared and underlined. This is one that I definitely plan on outlining.
This one is as good or better than the above. There are two ways you can make positive changes in your life (and trading!): you can "rip it off like a band-aid" (make drastic changes) or take small steps toward your goal. Drastic changes often don't work. It's much easier to trick and train your brain with small steps. This book was the inspiration of my "tiptoe past the panic monster" discussion in Trading Full Circle.
I'm a huge fan of books written 50-100 or more years ago. I love seeking out original thought. This book is a quick "one sitting" read with lots of gems such as "Man begins with simplicity, advances to complexity, returns to simplicity"--sounds like finding a trading system to me!
Okay, A quick Google search on Mr. Faith and you'll see that he's quite the character. Do a YouTube search on him too-there's an awesome interview! The Amazon reviews aren't so hot, but a lot of this is attacking his personal character-and not the content. Like him or not, the book's a good read. It covers a lot of the things that I have been researching for my master trading psychology course (e.g., dopamine, physiology,left brain, right brain etc..).
This one's from Larry Williams's son. My copy is dogeared, underlined, and filled with notes in the margins. I plan on several re-reads. My biggest takeaway was to take a psychological traits test. Through this, I found that I had some traits that were not-so-good for trading (e.g., low, nearly no!, score in agreeableness). In addition to a little neurology and lots of psychology, he does case studies on psychological traits of famous traders such as his dad Larry Williams, Linda Raschke, and several others.
I love the psychology section of this book. Maybe this is because I read it early in my career and didn't realize it was perfectly normal to struggle with the markets. I later learned that Rotella himself was dealing with some issues when he wrote it.
This isn't exactly a book on trading psychology, but it could be. In fact, it's better than many of the trading psychology books that I have read. I'll have a lot more to say about this one soon (and already have in my columns and The Week In Charts).
This one's a little trading psychology, neurology, and some behaviour finance. I'll have a lot more to say about this one in future webinars. My copy is dog eared, underlined, and littered with notes.
This isn't exactly a book on trading, but a very worthwhile read nonetheless. It's more of a layman's guide to understanding how your brain works. If you have a brain, you might want to read this "owner's manual."
Here's another one that's not about trading, but a very worthwhile read. It will help you to understand how the chemicals in your brain affect you, especially dopamine. If you understand these things, you'll understand your feelings and bad trading behaviors.
My beef with the behavioral finance books is that after a while, they all start to sound the same. And, many draw heavily upon the work of Daniel Kahneman and Amos Tversky. So, I'd suggest that you'd go straight to the source first and then branch out into other behavioral finance books. This one will give you a good base into our flawed reasoning and how that spills over into our trading.
Like I said, a lot of these behavioral finance books draw heavily from the work of Daniel Kahneman and Amos Tversky. Well, this one is no exception. It actually IS about Danny and Amos. It is a good read and worth reading. These two are extraordinary individuals on a multitude of levels. If you're familiar with Lewis-e.g., Liar's Poker, The Big Short-you know that he doesn't disappoint. In addition to being entertained and intrigued, you'll learn a lot about the behavioral finance work of Danny and Amos.
Okay, yet another one of "those" behavioral finance books that draws heavily upon Danny and Amos. Again, one of my problems with all of the behavioral finance books is after a while, they all start to sound the same. Picking red balls from boxes, a ball and a bat cost $1.10, the bat cost $1 more than the bat-how much does the ball costs? No, it's not 10 cents. We get it, be careful of your first instinct, drawing conclusions etc. Mr. Rolf does have the those same lines of reasoning in his book-although he uses a "ping pong paddle" vs. a bat, and his balls are blue. Overall though, it is a good read. All of the stories are divided in to bite sized "one sitters." This makes it nice knowing that you'll be onto a new topic in a page or two, even if you're eyes are glazing over because you already know the answer/argument. I really shouldn't pick on Mr. Rolf too much since my copy already has plenty of dog ears, underlines, and notes scribbled.
Sway-The Irresistible Pull Of Irrational Behavior by Ori Brafman and Rom Brafman Rolf Dobelli.
Yes, this is another one of those we're pretty f'd up as human books, but at least this one is entertaining. The stories, in many cases of life and death, really help to drive the point home. A lot of this dovetails nicely with our often bad trading decisions. His covering of why we are often victims of loss aversion is worth the price of admission. I'm sure I'll have more to say about this one and you'll likely see the research referenced in upcoming articles and presentations.
Dollars And Sense-How We Misthink Money and How To Spend Smarter by Dan Ariely and Jeff Kreisler.
Ariely is becoming one of my favorite behavioral scientist. He makes this dull subject interesting by adding in the occasional anecdotes. See the last NOW for more on this book. I view this book as "behavioral economics light." It's a book intended for the masses while still hitting upon many of the important behavioral science "notes:" endowment effect, sunk cost fallacy, anchors, and other psychological pitfalls that we all must overcome.
Inspiration, Life, and Idea Generation
In a typical Tim Ferriss style, this one's an idea generator. He asks dozens of successful people the same questions. They mention books that have inspired them and products that have helped them. Be prepared to work. One Tim Ferriss book will generate 100s of ideas.
This was my first introduction to Tim Ferriss. It's a massive idea generator for health and wealth. I have scribbled dozens of books to read and things to explore on the inside cover pages. I'll add all worthy findings to this page.
In recent years, I have become more and more holistic when it comes to trading. There really is a mind, body, and soul connection. With that said (as previously mentioned), in 2017, I lost over 40 pounds following a lot of what I learned in this book. My goal for 2018 is to drop another 20 by following even more of the suggestions. "Big Dave" might have to find a new nickname! BTW, there's a couple of sex chapters in there--your partner will thank you. You're welcome!
This is one of my many "Tim Ferriss" finds.
I've always seen myself as more of an artist than a trader. This isn't because I have some sort of talent. It's because trading is an art. With that said:
Although the book is geared towards artists, you'll find that it applies to trading. Here's one of many great quotes from the book: “The counterfeit innovator is wildly self-confident. The real one is scared to death.” This is something I often think about when I'm struggling with the markets while "gurus" are pontificating how easy it is.
I found myself in a second-hand book store killing time (which, ironically, will eventually kill me). I've gotten a lot of fantastic ideas from this book such as Lotus Blossoms. These are a great pen and paper complement to digital mind mapping which I've recently been experimenting with. I've been applying the Lotus Blossoms to trading, business, and life.
Unless you've been living under a rock, you've probably heard about the Pareto principle. There's a big skew where 20% of your efforts often produces 80% of your positive results. On the flip side, 80% of your problems often come from the remaining 20%. Learning how to identify and focus on the 80/20 is key. This applies to both life and trading. For instance, through my travels, I've met quite a few skilled traders who make an enormous amount of trades. I'd be willing to bet that they could eliminate most of these trades and focus on the 20% that produce 80% of their profits. Life would then get a lot easier. I could go on and on, but you get the idea--identify what working and what's not. Eliminate those things that require a tremendous amount of effort but produce very little in return. Expand upon those things that require little effort but produce big returns. The book isn't earth-shattering--most of us already know the Pareto principle--but are we applying it in our lives and trading?
Well, that's it--for now. Again, check back often! And, again, leave a comment below to let me know what you think/would recommend reading.
May the trend be with you!