Favorite trading books

Which books do the experienced traders recommend?

Any of the "Market Wizards" books, "Trade your Way to Financial Freedom" by Van Tharp are all excellent. For a historical view of the markets, which is not surprisingly still applicable today, try "Reminiscences of a Stock Operator" - it is a classic.

A few that come to the top of my mind …

Trading for a Living - Dr. Alexander Elder

Mastering the Trade - John Carter.

Enhancing Trader Performance - Brett Steenbarger.

Evidence Based Technical Analysis - David Aronson

Fooled By Randomness - Nassim Taleb

Some great articles on trading psychology, evaluation and self-improvement from Dr. Bett Steenbarger.


International Finance - Financial Management and the International Economy by Dr. Maurice Levi, Bank of Montreal Professor, Univesity of British Columbia is a must in my opinion. There are several other books which I will post later…

Jules, Not sure with what purpose you’re asking your question. If you’re thinking about developing your own trading system–without pretending that I’m an experienced trader–I suggest you have a look at the wilmott forums. As a statistician you shouldn’t have a lot of problems understanding the “quant” approach to trading, e.g. stat arb, pricing of exotic options, dynamic/static hedging, wavelets, high-frequency trading and order-book models, to name just a few. You might actually like the papers and books discussed on this forum more than the stuff you can buy in bookstores. There are also some interesting “journals” on the Elitetrader website where traders discuss trading option greeks, that are quite interesting.

For something intermediate, I can certainly recommend “The Encyclopedia of Trading Systems” by Jeffrey Owen Katz. The author, an astronomer by training, discusses a framework work developing and testing trading systems from a statistical/scientific perspective, and includes some interesting stuff on genetic algorithms and neural nets without getting really technical. You can order the © code he uses from his website as well: http://www.scientific-consultants.com/trd-main.html.

Another book that I was thinking about buying myself is “Pairs Trading: Quantitative Methods and Analysis” by Ganapathy Vidyamurthy.

The question was inspired by what Sam wrote about that double-brained man in the closed thread, and what he wrote about the relation between "breadth"(?) and TMG, and also by what Lew wrote several times about "filtering" signals, and the discussion yesterday on the extreme-os forum. I reasoned that perhaps, if I know more about trading, I can better protect myself against not-so-good signals. Now I am more or less glued to a system, unless I decide not to trade it at all.

And perhaps we can have a thread that does not need to be closed :wink:

I do not have the intention to create a trading system. I am now at C2 for slightly more than one year, and in this time I have seen so many experienced vendors crashing with their system… It seems to me that it is much safer to play my private variations on a well established system. But perhaps if the filters work out really well, after some years…

This will provide you some titles and a fair number of comments by real traders on these books:


Fooled By Randomness - Nassim Taleb

It won’t help you in anything, but it’s interesting point of view on “Fooled By Randomness”.


Disclaims: I’m not professional trader/guru/wizard/so on. There are a lot of guys and girls who claims it without me lol

My impression is that English isn’t your first language.

I’ve seen you referring to “girls”, especially recently. Your intent isn’t translating well. So far your use of the word seems to infer weakness, fear, ineptitude, and/or misplaced bravado. Basically, incompetence.

Perhaps you meant the term as humor?

My impression is that English isn’t your first language.

Unfortunately for me, your impression is well correlated with my estimation about my knowledge of English. Correct. English isn’t my first language.

Basically, incompetence.

Right. It’s my attempt of translation a joke, but you’ve got it right.

Perhaps you meant the term as humor?

Yeahh!!! Bad one any way :frowning: But I think that sense of humor is very important for a trader, so I’m trying to support myself :wink:

Have a look at the mirror in a bad day and say “Stupid is, stupid does” ©


in that case I would recommend to focus on hedging (with options) and portfolio optimization. For the former, suppose you want to hedge yourself against a decline of more than 10% in the S&P, i.e. you believe the system will do well in most markets, but you’re not sure how much of your equity will be left after an Oct. 87 event. This could require a strategy of buying out-of-the-money put options, but how many, how often, and at what strikes requires a decent knowledge of dynamic hedging. Google “Crashmetrics” for some ideas.

Second, I understand you’re trading multiple systems, and so portfolio optimization to determine the optimal weights might be interesting.

I think the problem with filters is (from a subscriber’s perspective) that you usually won’t have enough data for a decent backtest of the filter. E.g. you can test any filter on the extreme-os 2 year history but you will never know how well that filter would protect you do during a crash, or a prolonged bear market.

> The question was inspired by what Sam wrote about that double-brained man in the closed thread…

“That double-brained man” sounds a little spooky. Robert Prechter went

to Yale on an academic scholarship. Usually your father needs to be as

ex US president or such for the honor of paying to go there. His book is the Elliott Wave Principle (1978?). I know I’ll get flack for it, but I think it’s a good read. While I think Elliott Wave can be overly ambitious, the basic thing that Elliott tried to accomplish was to catalog every chart pattern and document their properties. In theory these (fractal) patterns exist on every degree on trend from tick and one minute charts to weekly and monthly charts+. In recent years Benoit Mandelbrot (‘Father of Fractals’) “discovered” the fractal nature of the stock market:


>and what he wrote about the relation between “breadth”(?)

For example Prechter talks about how breadth (Advances/Declines) and

volume help identify where you are in a trend pattern. A specific example is the recent decline. In the middle and strongest part of a trend breadth and volume ratios tend to extremes. Right from the first hour the breadth

ratios on 2.27 were worse than they had been for months. Moreover, breadth had been trending lower (but not at an extreme) since 2.21. So

I wondered how TMG uses breadth since it was still pointing down on the close on 2.26, but hadn’t reached even a moderate extreme. I also wondered how “experienced” traders would add to long positions with

breadth in a downward acceleration right through the close on 2.27.

The Elliott Wave ideas may also help system developers. Corrective and impulse (trend) patterns have specific properties. Among those are range contraction and expansion. This is core to the basis of Crabel’s “Day Trading With Short Term Price Patterns” (a catalog of computerized pattern tests) to the extent that once price contractions reach an extreme they are more likely to “breakout” into a range expansion (trend).

I also like the Leferve book and the first Market Wizards book previously mentioned. Books like Street Smarts and Trading Systems Toolkit are fun because you can see lots of specific systems and their code. I find that food for thought.

Thank you all very much for your recommendations! I really appreciate it. If anyone posts after this: Thanks in advance.

Mastering the Trade - John Carter : Not a good book (really not good).

Better books:

Technical Analysis for trading professionals - Constance Brown

Trading with the odds - Patricia Kase

Connors on advanced trading strategies

Street smarts - Linda Raschke.

Best regards


One that I like is “The Mind of a Trader: Lessons in Trading Strategy from the World’s Leading Traders” by Alpesh Patel. Nice Read.

Long waited

"The Black Swan: The Impact of the Highly Improbable" by Nassim Nicholas Taleb. I haven’t read it it, because this title will be released on April 17, 2007. However, I think it won’t be so bad :wink: