Hey, what is the best trading book?
This answer will depend on the point where you are and where you want to go deeper, if you are starting, if you have experience, if you are looking for a more long-term or short-term approach…
If you are reading this article, you are surely looking for a book that can help you as a trader.. There are good books on trading, some focus on the technical part and others do more on experiences.
I have made a list with The trading books that have given me the most and that I consider that they can contribute more to you. Something like the trader’s library. Surely some of these books you did not know, how is this possible? If you do a quick search, most of the books you will find are loaded with aspirational messages and smoke. I anticipate that, as you know, My approach is quantitative and this is noticeable only by looking at the books I have chosen, but I recommend what has served me and helps me on my way.
The classification is divided by levels so you can choose the one that best suits your level. Although it may seem that they all deal with the same topics, what makes the difference is the approach of each one of them. There really are many pearls and gold nuggets. Some of these books are only available in English, but they are usually quite easy to read with terms similar to Spanish in some cases:
1. Trading books for beginners
When you start, what you read can mark you for better or for worse. That’s why if you’re looking a book to start trading among those that I am going to recommend, you will not see any title in all these books that is of the type “how to get your first million in 30 days” «How to become a trader in 15 days» . These books are the ones that I think can really add value and a good basis to start with realism:
Initiation guide to quantitative trading – Martí Castany
This book has been recently published and as its own name indicates, it is a very complete and basic guide if you are starting in this of quantitative trading or algorithmic. Recently I have been recommending it when you ask me, because it does a good review of all the basic concepts and explains the day to day of a quantitative trader (necessary equipment, programs, etc.).
Martí Castany is the author and he has known how to condense the information very well and make it very enjoyable to read. It is not a long book and you can read it in a short time. I especially like the realistic approach he gives to trading as a business.
The New Living of Trading – Alexander Elder
This is one of the best known and recommended books, especially the previous version. This is a new one that has come out recently. It places a lot of emphasis on psychological factor and emotions within trading and relates it to technical analysis and risk management. It deals with topics as important as they are basic.
In this book you will not find backtests or statistics of the operation, since Alexander Elder is constantly based on technical analysis to trade and in a manual operation. Recommended if you are just starting out.
Succeed in Trading (Trade Your Way to Financial Freedom) – Van K Tharp
This book focuses on the aspects that the author considers to be important to create a good trading system. He constantly points out that an input is only a small part of the strategy and explains how the inputs affect the strategy. exits and stop losses to your results.
The strengths that he deals with are money management (position size) and the psychology to be successful in trading. There are two versions: “Trade your way to financial freedom” (in English) and “Be successful in trading” (in Spanish).
2. Books for beginners in trading
Now yes, we get into work. First of all, most of the books that you are going to see are written in English, but they are understood quite well. If you have mastered the basics of trading and want more chicha, these books can help you a lot:
This is one of the most comprehensive books out there. Of course, I only recommend it if you have already started trading and you know algorithmic trading or are familiar with trading with systems. In this book, Kaufman talks not just about systems, but about tools, platforms, and a whole bunch of other useful concepts.
The best thing about it is that you reason why things are. For example, before I create a trending system on a market, I’ll explain why I think that market is trending and how I create everything from scratch. It is true that sometimes it can be a bit technical, but it is well worth it. In addition, to complement, it provides resources that you can consult on its website.
Quantitative Trading Systems- Howard Bandy
Howard Bandy is one of the best authors out there today on quantitative trading. Write in a very simple and enjoyable way. In this book he explains what quantitative analysis is, how to treat data, interpret the different ratios, create strategies in detail, the analysis or testing of systems…
The book is quite complete and each concept is explained in detail. Of course, the strategies are made by the author on the Amibróker platform. Even so, the concepts and explanations do not change and are general.
Cybernetic Trading Strategies – Murray Ruggiero
Murray Ruggiero is a reference for me in terms of creating and developing trading systems. In this book he touches on classic topics such as technical analysis and more advanced ones (neural networks, fuzzy logic, genetic algorithms) to demonstrate the power to carry out trading systems supported by computing. It is the common idea of the book, it makes us see that with a computer we have many tools and power at our disposal to do incredible things.
It is a book that is worth it for the range of topics it deals with and how it deals with them, since they are accompanied by examples and practical cases that will make you understand everything better.
Building Reliable Trading Systems – Keith Fitschen
Keith Fitschen is another author that I greatly admire. He brings a different perspective and a twist to building systems the traditional way. In this book what he does is that, he proposes a alternative method of building and testing systems to avoid our worst enemy: over-optimization. This method is called BRAC (“Build, Rebuild, and Compare”).
Also, to do all this in a practical and visual way, he constantly compares two totally different trading systems that he modifies throughout the chapters.
Larry Williams is one of the best traders of the last decades and here he leaves many pearls. The objective of this book is to demonstrate the non-randomness of the markets through proven patterns and strategies where strategies and backtests are shown. He has a first part about this content and a second part dedicated to his experience in a more personal way.
Inside this book are strategies that were created decades ago and are still working. Larry Williams has won several trading competitions and I personally apply some of the patterns I have learned from him.
Quantitative Trading – Ernest Chan
This is one of the first books I read on quantitative trading. Contributes interesting ideas about the statistical arbitrage. It develops the concept of seasonality and generates a quite original mental framework.
The systems that Ernest Chan usually proposes are quite theoretical and are not easy to implement. Even so, you can get many ideas from everything it transmits. He also talks about risk, backtesting, cointegration, correlation, and many other concepts that are important.
3. [Extra]: Books that can help you in your trading whether you are an expert or a novice
Now we are going with books that, despite not being about trading, can help you improve it. How is this possible? Because they deal with issues that are perfectly transferable to the world of investment and trading.
Beginnings – Ray Dalio
Ray Dalio is one of the people who has inspired me the most. This book seemed brutal to me, as the title indicates, it reflects principles not only at the work level, but as a philosophy of life. Open-mindedness, transparency and the ability to rise up are some of the messages that he transmits and teaches. He also defends the union algorithms and people to work and explains how he does it.
In the book, Ray Dalio constantly shares experiences and situations that make reading it quite enjoyable, especially in the part about principles of life. If you didn’t know him, he is the founder of Bridgewater, the world’s largest hedge fund.
Antifragile – Nassin Taleb
Nassin Taleb has become quite popular in recent years and you probably know him because he has other very good books such as “The Black Swan”. In this, he develops the idea that it is positive or preferable to stress something constantly than not to do it and when an unlikely event happens, it will take everything away. He works a lot on the concept of sturdinessvery important in trading.
Basically it tells us that anything that is not exposed to that fragility will not prosper and will end up incurring a greater risk. He puts many examples from day to day that will make you reflect.
I know that there are very good stock market books that can be more general or focus on other areas such as fundamentals, value or finance that you may have missed, but I have selected only those that seem interesting to me in trading.
And now I ask you, if you had to recommend him one trading book your son to learn, what would it be? I read you in comments.