I’m often asked to list my favourite, most influential trading books. Over the last 35 years I’ve read a LOT of trading books, good and bad. So before we go any further let’s think…what’s in a trading book? Probably nothing unless you make it your own. For example, I have known Peter for 15 years. He’s a doctor – a specialist actually, so he must be damn smart. He loves reading trading books. He has hundreds of them. Whenever a new trading book is released, wham!, he’s ordered it and read it. He then stows it on a huge bookshelf bulging with trading books. Like little trophies.
But Peter is not a good trader. In fact he’s given it up altogether. If you want to read trading books to collect trophies, that’s fine. But if you want to read trading books to enhance your knowledge and become a better trader, then just reading them isn’t going to cut it. You need to act on the knowledge. Run with it. Make it your own. That is not to say that everything in a trading book is worthwhile but you need to explore, test and validate the parts that may enhance your trading arsenal. So rather than tell you what books I like, I’d like to tell you how certain books influenced me and how I used the information to improve my trading skills.
Curtis Arnold’s PPS Trading System: A Proven Method for Consistently Beating the Market![]()
I had been plodding along with my trading until I read this book back in the 90’s. It was the life changer. The light bulb moment. It just made sense: low risk patterns, high win/loss ratios, a positive expectancy. This book was my first serious foray into systems testing and design (I had tinkered during the 80’s firstly using hand drawn charts and then on those newfangled computers). For 18 months after reading this book I spent 2 hours a day, 7 days a week, scanning hundreds of commodity charts for the setups discussed. Ask Trish – she almost left me. I built countless spreadsheets and took notes and made observations. Some patterns I discarded, but others I adjusted. I added additional techniques, such as the Traders Trick Entry (which I learned from a Joe Ross book). Slowly but surely a complete trading plan emerged and in my first full year of trading I made a 40% return. We still use those techniques today at The Chartist.
Long-Term Secrets to Short-Term Trading (Wiley Trading)![]()
This book contains some serious statistical flaws with regards to data mining but from an ideas perspective it is invigorating. I was eager to put some of his patterns to the test, but quickly found the flaw. By the time I got around to reading it, many of the patterns had fallen flat because of the sample size bias used – a topic for another day. However, if you’re a thinking trader, if you’re willing to innovate and test differently, then there is gold to be had. Take the Oops! pattern – possibly the best known around the world and now completely arbitraged out due to the book’s popularity. But reworking that pattern slightly made a big difference. For example, rather than buying as prices broke back into the prior days range, why not buy on the open itself? Better still, the risk adjusted reward could be enhanced by using the size of the opening gap as a setup trigger. Then I realized that the opening gaps across Asia were bigger than the US markets so was able to apply the same setup on the Australian open, the Taiwan open, the Japan open and then the Hong Kong open. The gap faded as Europe opened. It’s been 13 years or so since I found those patterns – and they still work today.
Market Wizards, Updated: Interviews With Top Traders![]()
I vividly remember sitting beside my mentor when she was handed a copy of Market Wizards by our boss. She knew some of the people featured in it, but it was a few years later before I read it myself. The importance lies in the theme of the book, almost between the lines, if you like. How these traders failed, yet continued to push forward. How they doubted themselves. How others doubted them. The Market Wizard books taught me the psychological issues affecting traders and, more importantly, me. As a result I had many sessions with a clinical psychologist in an attempt to understand my reactions to the markets and maybe more importantly my reactions to me. I’ve tried to pass on this information in my own books. Have you taken parts and made them your own? Or are they just trophies on your trading shelf? Till later, Nick P.S. – Speaking of books, we’ve just released our latest eBook,
Profiting from Dividend Momentum![]()
It’s short, succinct and contains no fluff. This is a systematic approach to trading in and around dividends – pertinent for today’s markets with institutions chasing yield.
