Recommended Reading List

My Recommended Reading List

     One of the most common requests I get is for recommendations of what to read to improve trading and investing knowledge.  I believe it is particularly important since successful traders need to spend some serious time educating themselves.  There are a lot of good trading books out there and perhaps even more that aren't so good.  In this article I want to cover briefly a few that I have found to be really valuable to my own trading career. 

     Among the books on the general subject of trading, I must rank Dr. Alexander Elder's Trading for a Living (New York: John Wiley & Sons, 1993) at or near the top of any list.  Trading for a Living is a classic among trading books and does a marvelous job discussing discipline,methods and money management. Dr. Elder is a psychiatrist as well as a trader and author so his insight is particularly helpful in a field (trading) that I believe is often much more psychological than it is logical. His other books, Come Into My Trading Room (New York: John Wiley & Sons, 2002) and Entries and Exits (Hoboken: John Wiley & Sons, 2006) are also important additions to any serious trader's library.  Entries and Exits, in my view, is more for the at least somewhat experienced trader as it takes specific good trades and not so good  trades by students or associates of Dr. Elder and discusses the trader's reasons for entries and exits and then provides Dr. Elder's own analysis of the trades. I would suggest reading Dr. Elder's other two books first to enable an easier understanding of Entries and Exits, but it is definitely a very worthwhile read.

      Another favorite of mine is Trading to Win: The Psychology of Mastering the Markets (New York: John Wiley & Sons, 1998) by Ari Kiev.  Dr. Kiev, interestingly, is also a psychiatrist who has worked extensively with professional traders after achieving great success working with Olympic athletes.  As with Dr. Elder, Dr. Kiev provides the trader with some remarkable insights into the psychology of achieving trading success.  I commend him to you as well.

     If you are interested in options and option strategies I would recommend Lawrence G.  McMillan's Options as a Strategic Investment, 4th Edition (Paramus: New York Institute of Finance, 2002).  This tome provides a solid foundation in the properties of options as well as an in depth analysis and discussion of techniques and tactics for the option trader. After well more than a decade as a successful trader I often find myself going back to McMillan's work when I feel I need a brush-up.

     Another extremely important book on option trading is Sheldon Natenberg's Option Pricing and Volatility: Advanced Trading Strategies and Techniques (McGraw Hill, 1994).  Not too long after I had become a full time trader I had the privilege of being on the floor of one of the major brokerage houses in New York and speaking to their head options trader.  I said to him that I guessed that McMillan's Options as a Strategic Investment was the bible for option traders and he said: "No, it is a bible, but so is Natenberg's Option Pricing and Volatility."  It is truly a valuable resource for any serious options trader.  However, as the title suggests it is an advanced work and not for the raw beginner until they have gotten some basic option education.

     I believe that any trader who wants to achieve success (that's all of us, isn't it?) needs to educate himself in technical analysis or the use of charts as a discipline to establish entry and exit strategies.  There are a number of important works on technical analysis that I can recommend to you.  My absolute favorite is Technical Analysis: The Complete Resource for Financial Market Technicians (Upper Saddle River: FT Press, 2007) by Charles D. Kirkpatrick and Julie R. Dahlquist.  This valuable resource not only demonstrates ways to use sentiment and momentum indicators, but also shows what patterns and indicators have proven reliable in the past. It is an excellent work.

    Having praised Kirkpatrick and Dahlquist's work, I do not mean to give short shrift to a couple of other giants in the field, Martin Pring and John Murphy.  Pring's Technical Analysis Explained: The Successful Investor's Guide to Spotting Investment Trends and Turning Points, 4th Edition (McGraw hill, 2002) has long been one of the most important works in the field.  So, too, has John J. Murphy's Technical Analysis of the Financial Markets (New York Institute of Finance, 1999).

     Getting a bit more specific in technical analysis, I am a devotee of Japanese Candlesticks as an important indicator of reversals, particularly at levels of support and resistance.  Some of the best work on Japanese Candlesticks has been done by Steve Nison whose book, Japanese Candlestick Charting Techniques, Second Edition (Prentice Hall, 2001) is simply excellent.  I also recommend Nison's The Candlestick Course (John Wiley & Sons, 2003) as a valuable tool to the candlestick student.

     I would also hope you might consider my books, Trade Your Way to Wealth (Hoboken: John Wiley & Sons, 2008) and Smart Investors Money Machine (Hoboken: John Wiley & Sons, 2009) as additions to your trading library.  Trade Your Way... is a book designed for those who want to become successful traders.  It discusses the necessity and development of a trading business plan before describing thirteen different strategies including an analysis of such things as the realtive risk and reward of each, the relative size of capital required for each and the level of monitoring required.

     Smart Investors Money Machine is a more general work designed for those who want to add streams of income to their life.  It was one of the first books that discussed MLPs (Master Limited Partnerships) in any depth and includes ways to generate income that are as widely varied as writing covered calls to reverse mortgages, from bonds to dividends.

     In any event, you now have enough recommendations to keep you reading for a while.  I believe each of the books mentioned here will make a positive addition to your trading knowledge.