Why most trading books aren’t worth the money.

It is only natural for people to look to the bookshops or Amazon reading lists to get amongst all the books that are “must reads” for the aspiring trader. Are they worthwhile? Yes and No.

I’ve spent a fair bit of money buy up trading books, mostly I’ve found that the ones on the top of the search lists aren’t necessarily the ones that are worthwhile. Not to be cynical but a lot of these books are on the top of those lists because they’ve played a good game at publicising their book and quite often are prominent in the trading education scene or are regulars on the financial press.

Not to say there is anything wrong with this, but I find that their products often centre on the wrong parts of trading that beginners need to get their head around, offer a bucket load of mechanical strategies and some hard and fast rules for a very fluid and dynamic game.  The upside to this is that if you are someone that is looking for an out of the box strategy that you can apply immediately on getting up and running, these books might appeal. Sadly though, those strategies won’t get you to where you want to be.

Why do I say this? Quite simply because having read these books and tried to implement what they say its nearly impossible to do well. The first issue is that you are trying to implement a strategy that you have no knowledge of other than a few pages in a book, you weren’t part of the stresses and joys that went into discovering that strategy and you most likely don’t have the knowledge of the nuances that form the basis for its foundation. Secondly you are trying to implement a book which was published in the past. Broad Brush basic principles of the market are timeless, individual, technical strategies are old news even if they were designed yesterday.

A lot of beginner books do have some useful points in them I’m happy and pleased to admit. Some of them have a good chapter on basic market mechanics or for those like me who know nothing gave a good outline of economics or basic psychology. What I will say is that if you are reading these types of books don’t put too much expectation on them building you into a trader, instead look for one or two good points to tuck away for the future. Most trading titles I think attack things from the wrong angle and it’s almost always practical. I think, like anything, you need to get a decent grasp of what game it is you are trying to play before you try and master the specific techniques.

On that note I put a lot of stock in books that deal with the much broader subject of what the markets are, how people make decisions, what money is,how it moves and how the financial industry works as a whole. The reason I say this is because I found myself reading so much that I never quite understood because my understanding of the basics of markets wasn’t there.

After a while I gave up on most of these “must have” trading books. Generally anything with techniques, secrets or pro’s in the title or anything that states a timeframe or money in it’s synopsis is worth steering clear of. The one exception to that is “What I learned from loosing a Million Dollars”. This is one book I highly recommend. It’s an excellent look into dealing with risk, trading losses and the psychology of market participants.

Once I moved away from the more obvious trading how to books I started to find the real gems were in the more obscure titles that deal with much bigger concepts than when just to enter and when to exit a trade. The book that acted as a bit of a revelation for me was “One Good Trade”

I’d generally steered away from books on trading equities (Stock) because it wasn’t a market I traded. I’ve now read this book a couple of times and listen to it on audiobook when I’m lost for something to read. I’ve heard some people say it’s not so good because it doesn’t give any set ups or talks too much about the authors Proprietary Trading Floor. What they are missing is that this is the entire point of the book. The author, Mike Bellafiore founded SNB Capital and the book is a fantastic insight into the mind of successful traders and what it takes to be a trader in a modern, prosperous Prop Group. For those that aren’t aware all a Proprietary Trading Group is is a private trading group that deals  with trading to simply make profit for itself, they are notoriously hard to run well and control risk tightly – generally their long term traders are very good.

One Good Trade is a book about how to take action one trade at a time, how to make that trade a good one and to how best mould yourself into someone who acts like a professional trader. It’s a broad brush book that talks on a big picture level and for me it was a game changer, from reading it I started reading books that were much more geared around understanding big market principles and behaviour and I’m so glad I did.

Another Classic we hear almost immediately on getting into trading are the “Market Wizards” series. These are brilliant. When I first read them they didn’t make sense and to be honest were a bit of a slog, simply because all the information contained within them were of no use to me because I didn’t understand the principles they were discussing, having learned a few of those principles I re read them and found them to be amazing, another fantastic insight into the minds of those who have achieved what they set out to in the market.

So that’s my take on what is out there in terms of reading material, some of it is amazing, mostly the more obscure stuff. A lot of it doesn’t serve a purpose other than to rob you of your $30, that might sound harsh but it’s something I’ve come to believe after reading a lot of rubbish.

At the end of the day the financial markets are just that, they are a market, they are a place where buyers and sellers meet to trade a commodity, whatever it might be in that particular market. It is no different to buying or selling anything else, the decisions that drive what price they will pay are the same and the market prices will fall and rise in line with supply and demand. So many books go into so much detail as to what technical indicators to use or what method to use to make money, what they don’t do is tell you that this is all obscure detail and doesn’t have any bearing on the underlying market and won’t help you see what is going on. Read books on the financial industry, financial crisis, how things work in the markets, anything about professional trader’s careers and anything that gives you an insight into big picture market mechanics.

As a help I’ll put up a page of recommended stuff to read and maybe some videos to see as I realise you don’t know these books offer what you need until you’ve read them. People read books to acquire knowledge. In trading mostly people read books to acquire knowledge that professionals have that we think non professionals don’t have. The thing to remember is that by and large the big financial institutions and market professionals have two things we don’t and that is huge huge sums of money to play with and the ability to assign risk. They control the market place, no doubt but they don’t have any golden secrets in terms of predicting what might happen next, I’ll try and expand on this soon because I feel it takes a bit of explaining as it sounds somewhat unbelievable.

I truly believe that yes they have the huge support their institution provides but at the end of the day they are people, making decisions with limited information about the decisions other people are making for the purposes of making a profit. There is no reason we can’t do the same and you don’t need a stack of guru trading books to do it.

Any comments? I’d be delighted to hear them.

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