A Comprehensive Reading List For Professional Traders

This is the second edition of my recommended reading list for professional traders. I have continued the theme of highlighting investing literature that is generally not found in traditional reading lists. The new additions are underlined.

Note that the literature listed below can easily be found in book stores or via the internet.

TRADING Psychology

The following books and articles target some of the core psychological obstacles that traders face every day and techniques to maximize their trading performance. This is an extremely important part of the reading list, in my opinion.

• “The Mental Edge: Maximize Your Sports Potential with the Mind-Body Connection” – Kenneth Baum
  • I’m a big believer in visualization techniques and the contribution it can make to trading success.  I first used visualization during my years playing hockey.
• “How Successful People Practice” – James Clear (www.jamesclear.com)
• “Zen and the Art of Management” – Financial Times, September 16, 2013
• “Good To Great” – Jim Collins
  • The book is centered on how companies can go from a position of mediocre to greatness.  Many of the concepts are readily applicable to the trading business and to building yourself into an elite trader.

All the books of Dr. Ari Kiev.:

• “Trading to Win: The Psychology of Mastering the Markets”
• “Trading in the Zone: Maximizing Performance with Focus and Discipline”
• “The Psychology of Risk: Mastering Market Uncertainty”
• “The Mental Strategies of Top Traders: the Psychological Determinants of Trading Success”
• “Hedge Fund Masters: How top Hedge Funds Set Goals, Overcome Barriers and Achieve Peak Performance”
• “Mastering Trading Stress: Strategies for Maximizing Performance”
  • Prior to his passing, I had been organizing a conference with Dr. Kiev.  He revolutionized the hedge fund industry in terms of trader performance

• “Psychology of the Stock Market” – G.C. Selden
  • The book was written in 1912, but offers great insight in stock market speculation.
• “On Managing Yourself” – Dr. Mario F. Conforti
• “As a Man Thinketh” – James Allen
  • A timeless classic in my opinion.
• “Fighting Attachment in Trading” – Jon Ossoff (Active Trader, August 2011)
• “The Crowd: A Study of the Popular Mind” – Gustave Le Bon, 1896
• “Who Are You?” – Linda Bradford Raschke (SFO, Aug. / Sept. 2003)
  • Linda has made a number of contributions to trading and I have utilized several of her general market observations and concepts.
• “Maintain Your Mindset: Using the Three R’s & Positive Thinking” – Linda Bradford Raschke (SFO, July 2004)
• “The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust” – John Coates, 2012
• “Deny Your Inner Gamble Monkey” – MarketWatch.com (December 11, 2012)
• “Why Smart Traders Do Dumb Things: Understanding Prospect Theory” – David Silverman (SFO, July 2005)
• “Self-Attribution Bias in Consumer Financial Decision-Making: How Investment Returns Affect Individuals’ Belief in Skill” – Arvid O. I. Hoffmann Thomas Post
• “Conquering Sabotage Traps in Your Trading” – Adrienne Toghraie – INO.com
• “Five Guiding Principles of Trading Psychology” – Brett N. Steenbarger, Ph.D.
  • Brett is one the must follows in the field of trading psychology. He has written so much on the topic and all is easily accessible on the web.
• “Explaining the Wisdom of Crowds: Applying the Logic of Diversity” – Michael J. Mauboussin (Legg Mason, Mar.2012)
• “The Playbook: An Inside Look at How to Think Like a Professional Trader” – Mike Bellafiore, 2014
  • The most comprehensive book I’ve read on what it takes to become a professional trader.  A lot of books talk about the concept, but this lays out a step-by-step blueprint. Very well written.

FUNDAMENTAL Analysis

After the internet bubble I realized I needed to become well versed in the fundamental side of active investing in order detect a potential Trojan horse.  I have found the following two books to be very helpful resources.

• “Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports” – Howard Schilit
• “Financial Warnings” – Charles W. Mulford & Eugene E. Comiskey

RISK Management

•  “Trading Risk”- Kenneth L. Grant
  • The author created the risk programs of Tudor Investments and SAC Capital
• “The Nature of Risk: Stock Market Survival & the Meaning of Life” – Justin Mamis
• “Managing Your Money” – Gibbons Burke (Active Trader Magazine, July 2000)
• “The Poker Face of Wall Street”– Aaron Brown
• “Black Swan of Cairo” – Nassim Taleb and Mark Blyth (Foreign Affairs / May-June 2011)
• “Understanding Risk-Reward and Position Sizing” – Van K. Tharp, Ph.D. (Active Trader Magazine, October 2005)
• “The Babe Ruth Effect: Frequency vs. Magnitude” – Credit Suisse
• “A Tail of Two Worlds: Fat Tails and Investing” – Credit Suisse First Boston – April 9, 2002
• “Position-sizing Effects on Trader Performance: An Experimental Analysis” – Johan Ginyard
• “Determining Optimal Risk” – Ed Seykota & Dave Druz (Stocks & Commodities V.11:3)
  • Whenever Ed Seykota speaks you should listen.
• “Information, Time and Risk” – William X. Scheinman (MTA Journal / Summer-Fall, 1994)

RESEARCH / Indicators / General Market Analysis

I’m a big believer in the importance of historical precedent analysis, whether it is the general market or stocks.  It is an objective approach that stacks the probabilities on your side.  I have done a lot of proprietary work in this area ranging from IPO studies to industry group leadership.

• “Finding the Next Super Stock” – Frank A. Cappiello
• “Profile of a Growth Stock” – Kermit C. Zieg Jr. & Susannah H. Zieg
• “Selecting Superior Securities” – Marc R. Reinganum
  • Comprehensive study of 222 stock market winners during 1970-1983.  The research was partially funded by the William O’Neil Company.
• “The Anatomy of a Stock Market Winner” – Marc R. Reinganum (Financial Analysts Journal / March – April 1988)
• “New Ideas in Technical Analysis: The Pocket Pivot Buy Point” – Dr. Chris Kacher (April, 2011)
• “The Research Driven Investor” – Timothy Hayes
  • Tim is the Chief Investment Strategist at Ned Davis Research.  I’m a big fan of their objective research.
• “The Capitalism Distribution” – Blackstar Funds
• “Momentum – A Contrarian Case for Following the Herd” – Tom Hancock, GMO (2012)
• “How to Make Money in Stocks” – William J. O’Neil
  • It was the second book I ever read on trading / investment.  It just made sense.
• “Winning on Wall Street” – Martin Zweig
  • More than 6,000 subscribers were paying $95 a year for 18 mimeographed editions of The Zweig Forecast, his investment letter – Miami Herald.
• “Identifying Market Bottoms: IBD Follow-Through Days” – TradeStation (June 13, 2012)
• “Top Stocks Yearly Editions” – MarketSmith
  • MarketSmith compilation of the top stocks for each calendar year along with charts.  Great historical source.
• “Momentum Investing Can Achieve Market-Beating Returns” – Matthew Tuttle (Advisor Perspectives)
• “Identifying Bear Market Bottoms and New Bull Markets” – Paul F. Desmond (Lowry’s Reports Inc., 2002)
• “Investor’s / Trader’s Corner” – Investment Business Daily
  • Investor’s Corner (the section was called Trader’s Corner back in the day) has played a huge role in my development as a trader.  In fact, prior to IBD going online (more than 10 years ago) I used to have the hard copy shipped to Chile just for the Investor’s Corner section.  I have compiled 18 booklets covering about 13 years of Investor’s Corner publications.
• “The Relative Strength Concept of Common Stock Price Forecasting” – Robert A. Levy, Ph.D., 1968
  • Perhaps the best book I’ve read on using relative strength in stock selection.  One of the core books on my trade desk.
• “Year-End Rally” – Active Trader Staff (Active Trade, January 2014)
• “Secrets for Profiting in Bull and Bear Markets” – Stan Weinstein
• “Technical Analysis of Gaps: Identifying Profitable Gap for Trading” – Julie R. Dahlquist Richard J. Bauer Jr. – 2012
• “How to Make Money Selling Stocks Short” – William J. O’Neil
  • I regard this book as the foundation of my shorting program.  It is a concise approach that removes much of the uncertainty regarding short selling.
• “Trading with the Cup-With-Handle” – Greg Kuhn (Stocks & Commodities V.13)
  • Introduces the Cup-Completion-Cheat pattern.  A strategy for getting into the Cup-with-Handle pattern early.
• “Low-Risk Trades Using Cup-With-Handle” – Dale Glaspie (Stocks & Commodities V. 27:6)
• “The Puzzling Pre-FOMC Announcement Drift” – David Lucca and Emanuel Moench (New York Fed)
• “Deemer on Technical Analysis: Expert Insights on Timing the Market and Profiting in the Long Run” – Walter Deemer and Susan Cragin, 2012

COMPILATIONS / Economics / Classics

• “Skyscrapers and Business Cycles” – Mark Thornton (The Quarterly Journal of Austrian Economics / Spring 2005)
• “The Professional Commodity Trader” – Stanley Kroll
• “Bob Farrell’s 10 Rules For Investing”
• “Market Wizards: Interviews with Top Traders” – Jack D. Schwager (This is the first book of the series.)
  • In my opinion this is the best collection of elite market operators every compiled.
• “Trading: The Best of the Best – Top Trading Tips for Our Times” – Brian C. Lund
  • I have the privilege of being included in this book of real life traders.
• “Reminiscences of a Stock Operator – Illustrated Edition” – Edwin Lefévre
• “The Game in Wall Street and How to Play It Successfully” – Hoyle, 1898
• “A Bubble that Broke the World” – Garet Garrett, 1932
• “Principles” – Ray Dalio
• “The Fear Index” – Robert Harris, 2011
• “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression” – Ben Bernanke (1983)
• “Margin Debt Balance vs. Stock Market Movements and Expected GDP Growth” – Shuo Chen, State University of New York at Geneseo & Anthony Yanxiang Gu, State University of New York at Geneseo (Academy of Accounting and Financial Studies Journal, Volume 15, Number 2, 2011)
• “Scientific Stock Speculation” – Charles Henry Dow, 1920
• “The Geometry of Art and Life” – Matila Gyka
• “History of the Terrible Financial Panic of 1873” – A Journalist, 1873
• “The Stock Market Trading Secrets of the Late Jesse Livermore” – American Academy of Financial Management, 1965
• “The Unincorporated Man” – Dani Kollin and Eytan Kollin, 2009

Hope you find this list to be insightful and educational.  For disclosure purposes, I do not stand to benefit monetarily by recommending any of the literature in this reading list.

Twitter:  @hertcapital

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.