Favorite Trading Books

Your favorite trading books can become your best friends on your bookshelf. But which ones are good? Go to the bookstore and you are likely to find many, many books on trading and related areas. Over the years, I have read many of them. I am happy to include here some of my favorite trading books, not specifically concerned with options. I hope you find them insightful.

Mean Markets and Lizard Brains, by Terry Burnham. This book has been available since 2005 and, in my opinion, is already a classic. The central thesis of this book is that the more primitive parts of our brains (i.e. our “lizard brains”) are ill-equipped to be highly successful in the markets. The author suggests that the way to profit is to act when most everyone else is acting irrationally. He suggests that people generally underestimate risk. By being aware of our own lizard-brain tendencies, and controlling them by embracing a low-risk, well-thought-out investing plan, we can have a fighting chance in the marketplace.

Trading In The Zone, by Mark Douglas. Written in 2000, this masterpiece is all about developing confidence, discipline and a winning attitude in the trading and investing arena. He discusses the dangers inherent in trading, followed by becoming responsible to yourself and then developing consistency in trading. His “five fundamental truths of trading” are a distillation of trading wisdom anyone can benefit from.

Come Into My Trading Room, by Alexander Elder. The author, a psychologist and trader, outlines a realistic, systematic and practical approach to trading. He emphasizes that anyone desiring to trade should possess discipline, understand and come to grips with risk, and have a facility with numbers. Dr. Elder champions the 3M’s of trading: Mind, Method, and Money. His book, published in 2002, is, in my opinion, the best of several he has written.

Trend Following, by Michael Covel. In a highly readable style, the author details how many great traders made millions - by getting on a trend early and riding the trend until it is spent. Sounds easy, but for many it is quite difficult. Not the least reason being that not everyone has the patience to ride out the big trends. I suspect you will enjoy this book.

Fooled by Randomness, by Nassim Nicholas Taleb. As humans we tend to see patterns in everything. Taleb pokes holes into that assumption and suggests that plain old luck is important too. His thesis is that the hidden role of chance impacts our results in the markets…and in life. From the back cover of the book: “…an irreverent, iconoclastic, eye-opening, and endlessly entertaining multidisciplinary exploration of one of the least understood forces in all of our lives”

Super Trader, by Van K. Tharp. Here’s a book that distills the business of trading down into its critical components. Tharp describes the Five Steps to consistent profits: Working on Yourself, Developing a Business Plan, Developing trading systems that fit your personality, Using proper position sizing, and Eliminating mistakes. By the way, according to Tharp, a mistake is not following your plan. So if you don’t have a written trading plan, everything is a mistake. This book is clear, straightforward and highly illuminating.

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