Thursday, February 20, 2014

Reading list: Books for new and veteran traders

There's a stack of books on a corner of my desk and it's piled 10 high. They are all, in some way, related to trading or professional money management and investing. 

These are books you may have heard me mention on Twitter. Some I've read and re-read. Some are newly acquired and I may have only had a chance to flip through or read to the halfway mark. We'll focus more on those I've read, but I want to give you the heads up on some of the newer (to me) titles as well. I think they all contain some useful insights that will help you to become a more focused and informed trader (or investor).

Quick disclosure note: all the books I write about on this site are either purchased by me or have been given to me, either as review copies (free) from authors and publishers or as gifts from friends. 

Now on to the reading list, which I hope will help you fill out your list of must-read trading books.

1. Inside the House of Money by Steven Drobny is a book I've mentioned several times in past posts and tweets. It is mainly composed of interviews with hedge fund managers operating in the "global macro" field - big picture macroeconomic analysis expressed through trades in multiple asset classes (currencies, bonds, derivatives, stocks) across the globe. The book begins with an introduction to the world of global macro investing and its historical progression to the present day. 

The interview chapters are laid out in the style of Jack Schwager's Market Wizards series, and in fact, Drobny's book arrived six years before Schwager's latest Wizards update, Hedge Fund Market Wizards

I'm currently in the process of re-reading both, dipping into randomly selected chapters as time allows. They are both full of interesting market insights and character studies. I'd recommend both to any avid investor or to more experienced traders. 

I'd only caution that newer traders may be overwhelmed by the variety of investing styles and markets represented here. The interviews may tempt some to venture outside their areas of competence or to spend time thinking about concepts that bear little relevance to their own trading styles. Having said that, Drobny's book and Schwager's are a great store of knowledge and quotes from some very experienced, top shelf money managers.

2. The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money is a newer interview book by Steven Drobny, originally published in 2010. I have the new paperback edition but have not had a chance to read it yet. 

Drobny's preface to the 2013 edition centers on the need to focus on lessons from the 2008 crisis, especially now that we've returned to complacency mode 5 years into a post-crash bull market and recovery. I'll provide more insights from this book, here and on Twitter, when I've had a chance to read more.

3. The Successful Investor and How to Make Money in Stocks by William O'Neil. 

I first read The Successful Investor, O'Neil's slimmer stock trading guide, sometime in 2009 or 2010. It served as a great introduction to his CANSLIM method and his overall philosophy on risk management and market timing. 

If you are really willing to commit to trading stocks or guiding your own investments, his How to Make Money in Stocks (4th edition) is a must-read. You don't have to follow his methods to a T, but the review of chart patterns and common characteristics of winning stocks are lessons that should be learned and absorbed. I wish I had acquired copies of both books sooner

4. How I Made $2,000,000 in the Stock Market by Nicolos Darvas. 

Maybe it was the hokey, attention-grabbing title that put me off of reading this book for years. However, it kept coming up as a top recommendation of stock traders I respected. Finally, when a friend told me I had to read Darvas' book, I acquired a copy. 

It's a fun read based on Darvas' journey from stock-picking neophyte to a "man with a plan". Darvas found a bull market system that worked for him, picking growth stocks emerging from a breakout "box" pattern. I'm going to have to pick this one up and start reading it again.

That's it for now. I'll provide more updates and lessons distilled from these books when I have more time to write. Until then, here's to your own unique educational path and success! 

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