What Books Should I Read?

This post’s title is probably the most common question I’ve gotten on Twitter.  Let me start by reminding readers about something that I believe and have talked about here and here and here and here and dozens of other places:

Trading is not an intellectual pursuit it is a performance endeavor.

Now I know some of you are reading this and thinking “uh….ok there ‘FatF1nger’, whatever you say”…..so I’ll lean on Mr. Buffett in an attempt to have the point I’m making hold more weight than it does when I say it:

You don’t need to be a rocket scientist.  Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.

So why bring this up in the context of question in the title of the post?  Whenever I get this question I never want to rattle off a list of books because all the books in the world aren’t going to make anyone a good or even average trader.  I don’t think I’m doing anything of real value for someone asking this question by giving them a list of things to read and acting as if that will make them a trader.

Since I view trading as a performance endeavor similar to something an athlete or musician is doing I often think of the question in that context which is why I don’t think providing a list of books is very helpful.  Think about it this way, would you walk up to a professional football player and ask him what book you can read to become a good football player?  Do you honestly believe if you read a book about football that you’d be good at playing it?  Do you think if you read a step by step manual from Tom Brady on how to throw a football that you could study it for a few weeks, memorize the manual, and then walk outside and throw like him?  Would you walk up to a professional concert pianist and ask them what book they can suggest for you so that you can learn to play like they do?  Do you think that after a detailed reading of theory or piano scales that you could hop on the piano and pound out a little Rachmaninoff for fun?   When you think about trading in this context, as a performance endeavor, you realize immediately that the question of which book to read will not ultimately provide the answer of how to become a good trader.

Here is what I suggest to anyone new(er) to the business of trading asking me what they should read.

  1. Read everything you can get your hands on.  Seriously.  Don’t limit your reading only to books specifically about markets or trading.  Embrace writings about any performance endeavor and human psychology.  Soak up as much material as you can.  If someone tells you a book is no good, so what….read it anyway.  You’ll find that some of what you read is going to be worthless, some of it will be great, and the vast majority of it is going to be somewhere in between.  Early on it is going to feel like you’ve placed your mouth on a fire hose and that’s ok.  In the fullness of time you’ll benefit from having done this in my opinion.  So that brings me the next point.
  2. Don’t get bogged down on every little thing in every book you are reading and then start thinking that in the real world markets are going to “work” just like what you read about in a book.  Not gonna happen.  Instead, try to take 1-2 things (or more if you find them) from the material that you can use to help forge your own path in trading and to help drive the process to developing your own approach and edges in the markets.  Don’t be afraid to find your own way by putting together pieces from various things you read.  You are going to find that a lot of things you read about in books are ultimately only rules of thumb and as a result you’ll need to take the next step in defining them so that they can be used for specific execution.  Trials and tribulation await you and ultimately you have to make the process your own.  Trying to copy what someone else is doing is not a great path forward, in my opinion.
  3. Find someone with experience that will answer questions for you.  Speak with them as often as you can. Be more interested in listening to them than you are in speaking.
  4. Don’t ever stop being a student of the business.  Or, stated another way, don’t ever stop working on your craft and looking for ways to improve it.  Markets are always changing in one way or another.  That is one thing I’m fairly confident describing as a constant in trading.  Strategies will need to be adapted and so will your attitude and daily routine over time.  We all have to constantly be working to maintain our edge and to get better.
  5. Be honest with yourself.  Take regular objective assessments of what you are doing that go beyond basic P&L tracking. Take inventory of your emotions on a regular basis.  If you don’t feel like you can do this on your own find someone who will help you do it.

Now I’m sure some of you have read this and you are still thinking “great, but what books should I read”?

Ok……I’m sure I’m leaving some out and that I’ll add to this list over time but for now here is a list of books that I can think of off the top of my head which I’ve enjoyed and benefitted from in one way or another over the years.

In no particular order

  • New Trading Systems and Methods, Perry Kaufman
  • Options as a Strategic Investment, Lawrence McMillan
  • Evidence-Based Technical Analysis, David Aronson
  • Thinking Fast and Slow, Daniel Kahneman
  • The Emperor’s Handbook, Marcus Aurelius
  • Anatomy of $SPY on First Trading Day of the Month, Kora Reddy
  • The Education of a Speculator and Practical Speculation, Vic Niederhoffer
  • Playing For Keeps, David Halberstam
  • Intermarket Analysis, John Murphy
  • The Signal and The Noise, Nate Silver
  • The Power of Habit, Charles Duhigg
  • How We Know What Isn’t So, Thomas Gilovich
  • Trading In The Zone, Mark Douglas
  • Trade Like a Stock Market Wizard, Mark Minervini
  • Inside the Mind of the Turtles and Way of the Turtle, Curtis Faith
  • All of Market Wizards books, Jack Schwager
  • Trade Stocks and Commodities with the Insiders, Larry Williams
  • Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay
  • Trade Your Way to Financial Freedom, Van Tharp
  • How To Calculate Quickly, Henry Sticker
  • How To Lie With Statistics, Darrell Huff
  • The Chimp Paradox, Steve Peters
  • A Sense of Where You Are, John McPhee

Websites/Other Resources

Good luck in your trading.

-FF

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About Fat F1nger

Full time futures trader.
This entry was posted in Homework, Process, Random Thoughts. Bookmark the permalink.

6 Responses to What Books Should I Read?

  1. Anonymous says:

    Excellent post

  2. raymond says:

    Your insight is very helpful

  3. Pingback: Applying Lessons From a Navy Seal To Trading | FF Trading Blog

  4. Anonymous says:

    Hi, my name is Thiago I trade the CL for just a year and using concepts of volume (Master the markets – tom Williams) and wickoff logic. My entries are purely based on candle signaling rejection of a high volume candle (fading it on max or min of the day or entering on a pullback after a big candle with high volume with candle rejecting a min of 2 candles before.

    My question is how can I add the orderflow and market profile to my trading analysis in order to improve my trading.

    I have this perception that orderflow and market profile are an evolution of the analysis of the volume just at a certain time.

    I would be very pleased if you could help me with some tips just on the best path to take.

    Best regards.

    • Fat F1nger says:

      Hey Thiago,
      I’m not sure I’m going to be of very much help on the questions you have asked here.

      I’ll tackle the question on orderflow first by simply saying I don’t know anything about orderflow and so I must refrain from commenting on that. As of now, I don’t use any orderflow tools as part of my trade execution and its not something I’ve studied in any detail. It certainly does seem to be gaining in popularity very rapidly of late as people come to realize its extremely difficult today to simply “trade off the DOM”.

      I don’t know anything about the other methods you are talking about here either but from what I can tell from your comment when you say you are looking for a candle that signals rejection on “high volume” I assume you just mean you see some candle that perhaps creates a long tail or wick and its a large volume candle on whatever time frame you are using. In other words, you are seeing that there is a lot of volume associated with any particular candle but if said candle covers say a 30 cent range in CL, you aren’t looking at exactly where the volume was inside of that candles range. Where the volume profile (I don’t use any market profiling, only volume profiling) might be a good compliment to what you are doing then is that it allows you to “look inside” the candle so that instead of only seeing that the candle was high volume you look more specifically at where the volume traded. That’s all the volume profile really does is allow you to categorize the market information in a logical way and then build trading plans from it with the basic idea being that all markets ever do is create balance (high volume) and then move away from that balance toward imbalance and then ultimately put in an excess low or high before creating a new balance area or reverting back to an old one.

      So, hopefully this is at least somewhat helpful….one of those questions where we could probably spend a few weeks talking about different ideas on the topic!

      All the best in your trading.

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