11 Must-Read Books for Beginning Traders
By Alex Brokaw Jan 14, 2013 12:00 pm
From one top trading firm's reading list for incoming trainees.
5. Secrets for Profiting in Bull and Bear Markets by Stan Weinstein
In 1988, financial expert Stan Weinstein decided to sit down and put his market-tested trading strategies on paper. What came next was a book outlining his stage analysis technique, which is widely regarded to still hold true over two decades later. Weinstein’s methodology discourages traders from betting on the news, and urges them instead to trade future trends, the four market cycles that every stock will pass through. By looking for specific patterns in stock charts, investors can pinpoint the right times to buy and sell shares. This might seem obvious to some, but for many beginning traders, it can be misconstrued.
Secrets for Profiting in Bull and Bear Markets has remained such a solid fixture of the trading canon that Weinstein has often found himself pressured to write another book. To these requests he has famously replied: “I’ve already said everything I could have said.”
6. Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John Murphy
This thick, technical tome is less a casual beach read and better suited for coffee-fueled highlighting and copious margin notes. John J. Murphy’s Technical Analysis of the Financial Markets has earned its place as one of the foremost references for learning the ins and outs of complex charting techniques. It’s not only been cited in Federal Reserve studies, but is also used as the primary source in the Market Technicians Association testing program. A recently updated edition is suited better to modern technologies and markets, and includes coverage of intermarket relationships, stock rotations, and candlestick charting.
7. The Art of Short Selling by Kathryn F. Staley
Goelz and his team are quick to notice a poor understanding of how to sell short among their new trainees. Kathryn F. Staley’s The Art of Short Selling offers a dexterous explanation of an incredibly profitable but oft misunderstood discipline that no novice trader should be without. Staley gives insight into the key signals for when a stock's price is going to drop, where these signals are found, and how to utilize these signals to make a profit. Short selling, however, remains incredibly risky, and a few missteps can yield an irrevocable loss. Having a good foundation in the practice is a must, and Staley’s guide is a fantastic resources to build one.
8. Trader Vic II: Principles of Professional Speculation by Victor Sperandeo
Victor Sperandeo, the author of what Goelz considers an overlooked book, Trader Vic II: Principles of Professional Speculation, proposes that market moves are not random, but instead are driven by fundamental economic forces, which themselves are influenced by political decision-making. Because of this, Sperandeo argues that the first step in making successful investment decisions is to think about the effects that changes in the tax law and fiscal policy will have on the market, as well as on individuals and groups. While others might focus on precise timing to master the markets, Sperandeo believes success comes in pinpointing the commonsensical effects of changes in the country’s economy, which, in time, will drive the market in a predictable direction. Trader Vic’s well-learned philosophy is geared to both amateurs and pros, helping all make more prudent investment decisions.
9. Elliott Wave Principle: Key to Market Behavior by A.J. Frost and Robert R. Prechter
Developed in the 1930s by Ralph Nelson Elliott, a financial accountant, the Wave Principle remained relatively obscure for decades until two analysts, Robert R. Prechter and A.J. Frost, began utilizing the method in the 1970s. When they published Elliott Wave Principle: Key to Market Behavior in 1978, the investing community quickly became aware of how fundamental mathematical patterns not only observed throughout the scientific and natural world, but also in historical human behavior, could be utilized to profit from seemingly unpredictable markets. The book has since proven to be an investing classic, and is one of the few that promises a tried and tested, reliable trading method.
10. Options as a Strategic Investment by Lawrence G. McMillan
Options as a Strategic Investment by Lawrence McMillans is great resource to help novice investors wrap their heads around the world of options investing. It covers the basics of how options work, and offers numerous strategies for a variety of different markets. The newest edition of this guide showcases a variety of options trading products now available, as well as contains a section on volatility trading. If you’re thinking of using puts and calls, read this book first.
11. The Day They Shook the Plum Tree by Arthur H. Lewis
While being familiar with trading strategies and market behaviors will take you far, understanding the history and culture of Wall Street is a quintessential part of any new trader’s education. The Day They Shook the Plum Tree by Arthur H. Lewis recounts the life of Hetty Green, the infamous financier nicknamed “The Witch of Wall Street,” whose accumulation of wealth throughout the Gilded Age put her on par with Rockefeller, Carnegie, and Morgan. As “The First Female Tycoon,” Hetty was, at the time, the richest woman in the world -- a reputation topped only by her infamous penny-pinching. Hetty was a notorious miser, making the story of how she made her money almost as interesting as the ways she managed to keep it.
No positions in stocks mentioned.
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