Hello qnp9999,
Welcome to the world of trading. I want to commend you for your reading efforts. I can’t think of a better way to start. Since I’ve re...
Hello qnp9999,
Welcome to the world of trading. I want to commend you for your reading ef... More
Hello qnp9999,
Welcome to the world of trading. I want to commend you for your reading efforts. I can’t think of a better way to start. Since I’ve read a great deal on trading, I have a few comments about what’s out there, and a few specific recommendations. They fall roughly into these categories: Stock Selection, Timing vs Buy and Hold, Money Management, Behaviorial Finance, and what might be called Inspirational.
1) On Stock Selection: James P O’Shaughnessy’s What Works on Wall Street, 3rd edition. He covers all of the key ratios and concepts (earnings, sales, momentum…), and shows how well they’ve done over the last 50 plus years. In my opinion, this is the most important book written on stock selection. And his chapter two on the unreliability of experts and why we need quantified data is the best thing that I know of in one short place.
2) Timing vs Buy and Hold: For a good recent work, Michael Covel’s Trend Following. And one of the best books on using charts for timing is still the classic by Edwards and Magee, Technical Analysis of Stock Trends. As for the scorn heaped on timing by various authors, including the renowned Burton G Malkiel, who I view as a kept academic, it’s possible to find smart people on every side of every issue in existence. The proof is in the pudding. There’s ample evidence out there that timing beats the pants off of Buy and Hold.
3) On Money Management: Van K Tharp’s Trade Your Way to Financial Freedom shows why the amount that you put at risk per trade is supremely important, and cannot be left to subjective judgment.
4) Behavioral Finance: There are a number of extra good books in this area that explain why almost all traders, the pros included, make the repeated mistake of selling their winners too soon, and holding on to losers too long. An entertaining one to start with is Gary Belsky and Thomas Gilovich: Why Smart People Make Big Money Mistakes and How to Correct Them. And a step further in that area: John Nofsinger’s Investment Blunders of the Rich and Famous.
5) Inspirational (and highly informative): Interviews and the personal stories of highly successful traders. There’s the classic 3 volume series by Jack Schwager: Market Wizards, The New Market Wizards, and Stock Market Wizards; Gary Smith’s How I Trade for a Living; Nicolas Darvas’ How I made $2,000,000- in the Stock Market; the classic on Jesse Livermore, Reminiscences of a Stock Operator, by Edwin Lefevre, and our very own Covestor member Timothy Sykes, An American Hedge Fund.
Good luck!
Don
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qnp9999
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