Trading Book Reviews

Update 8th Feb 2014

My doesn’t time fly etc. blah, blah and so on… Non-trading books that have really helped.

Bounce – Mathew Synd

Mindset – Carol Dweck

In fact if you’re going to learn anything at all, any sort of skill that’s more complex than breathing then read both of these. I’m still convinced reading books on trading and psychology are a waste of time/money.

Stepping through these two books above will show you why.

Updated 18th Feb 2012

So I’ve read a LOT of books about trading from the ones you pick up at the beginning to attempt to learn from to the ones you realise may actually have useful information in.

Before writing about specific titles there are some general points that I need to make.

  1. You can’t learn to trade by reading books about it. Sadly this is true and I really wish it wasn’t… because by now I’d be an awesome trader. You can read a lot more about the reasons for this here as to why it’s faster and more effective to learn from a real person.
  2. Books about specific trading strategies are generally useless to you as a trader and I’ve largely ignored them. If I do find something useful then I’ll post it here but I’m not using anything I’ve found in any books other than the very basics.
  3. However – Books about trading psychology are extremely useful. I’ve included some of the best ones I’ve found here. This also includes some books that don’t mention trading at all but will help you see things clearly – they’ve certainly helped me.

There’s still another problem with trading and books that I’ll go into in more detail at the bottom of this page but in the meantime here are some reviews 😉

The Disciplined Trader – Mark Douglas

This is the book Mark wrote before the one everyone talks about (Trading in the Zone) which I have not read so I’m not going to compare them. I love the way Mark writes about the market and the relationship you need to develop with it to not get knocked about.

There’s reference to the market having the ability to reflect your own issues and beliefs back at you. There’s a lot about intuition and developing as a person as well as a lot of talk about having to master fear. The interesting thing Mark does is explode the myth that you have to ‘trade without emotion’.

This is a book of great depth although like all Americans writing about trading he does make the same mistake. Why are books about trading so damn wordy – get to the point already! (sorry, just something that I’ve noticed) However the effort is worth it since Marks book is entirely awesome and filled with useful ideas to help improve your performance.

The Daily Trading Coach – Brett N. Steenbarger

I think this may be one of the most practical books about solving common issues (and some not so common) that traders face. My own copy is completely ruined by highlighters and notes. If you’ve started trading and keep screwing up then it’s definitely worth a read because you absolutely will find ways to improve.

Brett’s book covers everything you need to know to sort out the bit between your ears – possibly the most practical book on this out there. I need to re-read it.

Financial Risk Taking – Mike Elvin

This book references all the other sources on trading psychology and brings in some new ones I’d not heard about. Hugely authoritative, very practical and you can tell the author put an awful lot of work and trading experience into it. Impressive.

Zen in the Markets (confessions of a Samurai trader) – Edward Allen Toppel

It’s a really honest book about how your mind can screw you over when you’re trading and some deceptively simple things that you can do about it. Thanks to Mike (@FtseDay) on the twitter for the heads up about this one.

Now here’s my main problem with this page and why the reviews have gotten shorter and shorter as I’ve gotten down here… When you are actually trading you’re going to forget 99% of the stuff you’ve read in any of the above. Why? ‘Cause it’s hard to act in a rational way and remember information that you need when you’re under stress and the trade is all going to rat-s**t… You are absolutely not going to remember what you read on page 42 which will help you deal with the specific situation you’ve got yourself into.

Just like driving a car or doing any sort of sport well you will only achieve the high level of performance required through repeated practice. Think about driving as an example. You have three pedals, mirrors, rules, lights, nobs and a steering wheel. Now get in a car and make it all work seamlessly without any practice… No? So you will forget everything you read when it comes into contact with the real world.

So here’s my advice if you’ve just read a trading book of any kind but especially one related to psychology. In relative terms entering a trade is easy but managing it well once it’s out in the world is the difficult bit. Anyway do the following…

  1. Think of one and only one thing you do wrong when in a trade.
  2. Come up with a strategy to deal with this one thing and write it down as a ‘rule’
  3. Concentrate on keeping to this rule for every trade until it becomes a habit or you realise the solution you decided to try doesn’t work. Find another solution till you find one that works.
  4. Keep the rule and look for the next trading problem you have
  5. Rinse and repeat.

I’ll give you an example to get started. A few weeks ago I realised I was cutting all my trades way too early. The trade would be correct (i.e. I’d picked the right direction) but it would take maybe 90 minutes for this to really work out and I’d cut the trade in less than 20 minutes…

So I’ve adopted two strategies. First I don’t cut till after 25 minutes at least and secondly I try very hard to wait for the best price I possibly can.

An example of the last point. Say that price goes up parabolic towards a level and I want to sell it. I am not, absolutely not going to go short at the top of the first 5 minute bar, or the second, or even the third ’cause I’m waiting to see that the price has properly stalled…

What goes up does not immediately reverse – ever… or hardly ever. Why not wait till it looks like it may well go back down rather than being all impatient and getting in ’cause you’ll go through all that pain sitting through maybe an hour before there’s a drop.

Off the cuff rules I try to keep in mind

  1. There’s always a better price – patience always pays
  2. Price will go higher or drop lower than you think possible 
  3. Don’t exit out of fear – always have a reason – preferably related to why you got in
  4. Do not look at your P&L while a trade is on

See, that’s only 4 rules and I have trouble with them – or I will have till they’re all habits. Then I’ll have the mental capacity to address another set of trading issues that I have.

Interesting to note that all these rules are about managing exits eh?

11 thoughts on “Trading Book Reviews

    1. robertsweetman Post author

      This is from the book ‘Secrets of the Millionaire Mind’ that I mentioned on this age before I re-wrote it. It’s a great book and contains some good points about people’s attitude to wealth.

      Reply
  1. Pingback: Teach yourself to trade – LEARNING (part 4 of 6) « robertsweetman

  2. Simon

    Have read Mastering the Trade. Very interesting.
    I found the begining illuminating.
    I am currently trying to incorporate Box Plays into my trading strategy.

    Reply
    1. robertsweetman Post author

      I’ll be honest and say that somewhere in the middle of ‘Mastering the Trade’ I stalled due to the author’s tendency to use 5 words when 2 will do…

      Currently on the pile to read again! What I have read is very good though 😉

      Reply
  3. Diane

    Hi, Rob
    I have read your blog with interest. I agree with your comments about learning to trade.Trading is a set of skills that don’t relate to any other type of work, the pyschological element being around 80 percent. The other key elements are money and risk management as well as a good trading strategy of course.

    Here are a few tips that I hope you find useful:

    Trend trading – there are trends to be found in all markets on all timeframes

    Write a trading plan, I have found an excellent one on the net and I can email to you if you wish. It asks a number of relevant questions which enable you to examine the various aspects of trading. I am using this version as my previous plan did not have enough detail.

    Making a method your own: you can trade other peoples methods, however you need to make that method your own by backtesting, collating the results, understanding the results, trading on demo and then finally onto a small live account. By doing this, you will be have confidence to trade it.

    Spreadbetting accounts from 20cents per pip(euro) – Marketspreads in Ireland offer spreadbetting in small stakes. This is a useful account to have as other spreadbetters that were offering low stakes do not offer them now. There has been issues at Marketspreads but the are now resolved and involved the previous owners. After a lot of research, I am confident, they are sound. Somebody mentioned Gfuk which I think is Smartlive. They offer an MT 4 platform for spreadbetters with small stakes. I am sure my friend trades with them and has no issues.

    Training from a reliable source:

    I have an account with ETX and they are providing free training. This training is carried out by Trade with Precision. They have two trend following methods that can be traded on any timeframe. The training is excellent, all done on the net and free to traders who have opened a live account with them. I have done the course and although I don’t trade their strategy, I have picked some useful pointers for my own trading.
    I hope that you or other people on the blog will find some of this useful.

    Diane

    Reply
    1. robertsweetman Post author

      Thanks for all the awesome comments Diane – they’re much appreciated!

      Personally I’ve always had problems connecting to the idea of ‘trends’ although I can appreciate this definitely works for people. What’s a trend in relation to different timeframes? I’ve just not managed to get this clear in my head yet 😉

      I feel that trends are relevant more for macro ‘longer-term’ position trades (especially in FX) or properly hedged equity trades on daily/weekly timeframes. Intra-day I’ve got a problem getting my head around this 😀

      I did finally write a trading plan but based on recent experience it’s clear to me that 90% of what I wrote at the start of the year was not useful at all. However the testing/validation piece etc. is definitely something I’m doing at the moment and this is based on some really comprehensive training I’ve just been through. My next blog will reference this so keep an eye out

      Finally I’ve got to the point where I have a good idea how I want to trade/what I’m interested in doing or not doing – it’s going to take me a while to cut this all up into a trading model though!

      Thanks again

      Really appreciated as I said

      Cheers

      Robert

      Reply
  4. Diane

    Hi, Rob

    It is great to hear that you are making progress and I am looking forward to hearing about it when you update the blog. Learning to trade is like taking a degree with no syllabus!

    Have a great weekend

    Diane

    Reply
  5. tradefollowr.com

    I like the valuable information you provide in your articles. I’ll bookmark your blog and test once more right here regularly. I am rather certain I will be told lots of new stuff right right here! Best of luck for the following!

    Reply

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