TAPE READING Since most novices -- and not-so-novices -- are interested primarily in buying when the blue line crosses the red line and are therefore searching for which blue line is the "best" and what settings are the "best", there isn't much out there on the basics of supply/demand, support/resistance, price/volume. Those who would like to understand what's going on rather than just be told which button to push will benefit from: Techniques of Tape Reading by Vadym Graifer, Christopher Schumacher My review: There's been little of value written on tape reading since Neill's book in the 40s, and before that, Wyckoff's work in the 20s and 30s. Possibly the popularity of "indicators" stole some of tape reading's thunder, since indicators are purportedly "simpler" to use. I had hoped that the book would be a bit more thorough, but after finishing it and giving it a second read, I understood that what Vad and Chris are trying to do is reduce TR to a set of basic principles, easy to explain, easy to understand. The buts and unlesses and on the other hands are left to many specific examples which illustrate just what it is they're trying to get across. In this way, one can come up with his own examples to illustrate the concepts rather than rely on some sort of "blueprint", in the event that he is trading a different market, a different bar interval, a different timeframe, or even using indicators to supplement his judgement. Unfortunately, the book begins with what has become the obligatory "once I was a loser and then I became a winner" section. Not that it's boring or that there's anything wrong with this sort of autobiographical touch. After all, one would most likely be put off by someone who puts out a trading book beginning with only his successes and giving no hint of the often rocky road one must travel in order to achieve those successes. But those who have read more than a few trading books are likely to find that they could have skipped this and gone right to the meat of the book, i.e., the principles of tape reading, and there's plenty of meat here. No, the book is not encyclopedic, but, contrary to what you may have heard, tape-reading does not require the encyclopedic approach. Keep It Simple. If all you have, then, are Wyckoff and Neill, this should pull everything together for you in a way that will enable you to gain some traction on this tape-reading stuff. The advice on how to create a setup and how to evaluate what you've created should be of particular benefit to beginners who continue to struggle with this and with the misleading notion that the riches lie in finding that one perfect golden setup. Tape Reading and Market Tactics by Humphrey Neill Never got around to writing a review of this one, but you're talking about three tape-reading books in a hundred years. This may not be an absolutely essential book, but it's easy and interesting and he may just put something in a way that makes sense to you that didn't make sense before. Studies in Tape Reading by Richard Wyckoff (sometimes Rollo Tape) My review: Virtually everything written after Livermore and Wyckoff are variations on themes developed by these two men. Wyckoff was among the first to explain the accumulation-distribution cycle (which makes stock and market timing possible) and to develop the use of "surrogates", self-made indexes which consist of a handful of leading stocks in a group (such as semiconductors), which warn the investor of impending moves, and which enable the investor to filter out all the noise of broadcasters, publishers, newsletters, message boards, and chat rooms. Understand Wyckoff and you'll understand the engine that drives stocks and markets rather than be distracted by the genuine imitation wood trim and the smell of the leather seats. [Note: anything written by Wyckoff is worth study, but there's only so much to say, so if you're trying to read everything he ever wrote, don't be surprised by a sense of repetition; at that point, move on to Neill or Graifer or review Mamis and Magee.] (cont'd)
THE MENTAL GAME The Disciplined Trader and Trading in the Zone by Mark Douglas (and, yes, you need to read both, The Disciplined Trader first) The number one reason that I like The Disciplined Trader is that Mark Douglas has no formal training in psychology. Rather, Douglas was trained in the only classroom that matters: the battlefield of actual trading. Even though this book was published in 1990 and there have been a plethora of trading-psychology books published since then, Douglas' material stands out as an innovative classic. He uses his own gift for seeing the mental shortcomings of the losing trader and spells out his own fresh insights on what we, as traders, need to do to experience real success in trading. Douglas starts the book out from a perspective that many traders can identify with: crushing defeat. Humbling himself to the higher power that is the market and analyzing the formula for defeat, Douglas shows how he was able to reverse-engineer it to find the formula for success that many of the book's readers over the years have found useful in exorcising their own psychological demons. Central to Douglas' thesis is that the elements of character that produce success in most of life's endeavors are completely different from those that will make you successful as a trader. To thrive in business or some professional career, you have to work hard to develop the skills that will allow you to be in control of your environment. To build a business empire, you have to be a great leader of people. To become a heart surgeon, you have to learn how to control your scalpel. To be a good mother, you have to know how to discipline your children. But successful trading, says Douglas, is the process of yielding to the market and being in control only of yourself and the way you respond to changing market conditions. When the idea of being in control of yourself sinks in, you realize that you as a trader get exactly what you deserve from the markets. If you consistently get poor results, you deserve this. If you consistently get great results, you deserve that. The market doesn't care, one way or the other. As with any book filled with original and profound ideas, The Disciplined Trader isn't always an easy read, particularly as it slogs through the painful process of pummeling away at our self-destructive mechanisms. Fortunately, as with life, the journey provides a reward and Douglas spends the final chapters of the book explaining practical techniques that will help you to "get it together" as a trader. -- Tradingmarkets.com The process of becoming a successful trader is not just about learning about markets and developing a trading system that works; there is so much more to it than that. Most people get wrapped up in the practical nuts-and-bolts of trading or investing but miss the most important step: developing the proper mental and psychological skills. To become consistent, it is essential that one spend some time getting to know what the market really is as opposed to what the trader would like it to be. The market is not your enemy, does not owe you anything, and does not care whether you win or lose. It just is. The sooner one accepts that, the faster he/she progresses. This means performing a careful self-assessment, identifying beliefs that will short-circuit consistency, and getting them out of the way. As Douglas describes it, 95% of the trading errors all traders make are due to his or her attitudes (fears) about four things: 1) being wrong, 2) losing money, 3) missing out, and 4 ) leaving money on the table. Getting over them may seem daunting in the beginning, but that is where [Trading in the Zone] comes in. Douglas also describes the process that all successful traders must go through and that is developing a probabilistic mindset. All great traders have learned to think in probabilities. This means that every market decision is made only once a risk/reward ratio has been determined, stop losses and profit goals established, and pre-determined conditions for taking the trade known. By removing the extraneous "noise" that causes undue emotional and psychological stress, decisions become easier to make. As is true of most things in life, sounds easier to do than it is, but the good news is that, with a little practice and with help of an exercise outlined in the book, it is very doable. Zone is a book that you will want to read multiple times. As Douglas says, it is a book that took him five years of his life to write. It was obviously a labor of love. This comes through loud and clear when reading it. The book is also one that should be in the library of anyone in the markets today, no matter whether his approach is straight technical analysis, strictly fundamental, or somewhere in between. My book is covered in post-it notes, underlines and yellow highlighter. It is also one of the three best books on trading to date that I have reviewed. -- Matt Blackman (regular contributor to TASC magazine) Zen and the Art of Poker by Larry Phillips From the perspective of a trader, I loved this book. I find it ironic but strangely fitting that one of the best books on trading psychology I have ever come across turns out to be a flimsy little throwaway paperback that was not written about trading at all. Poker and trading are strikingly similar disciplines. They are both one-man endeavors; they are both zero sum games played for financial gain at the expense of opponents; they are both oriented towards luck in the short run but skill in the long run; they both require proficiency in the realm of probability and statistics; they both require a taste for risk and an aversion to risk in equal amounts; they both require an ability to read the emotions of others while controlling the emotions within yourself; and they both see profits consistently flow from the losing many to the winning few over time. Because of these similarities, the skill sets of the poker player and the trader are in many ways interchangeable. Of the 100 "rules" for poker presented in this book, I would say at least 80 of them have a direct and valuable application to trading (just mentally substitute "losing" [or being "stopped out"] for folding, "markets" for cards, and so forth). Many of the rules overlap, or repeat a principle that was highlighted only a few pages back, but unless you are a nitpicker, this does not take away from the book. Some of the unique observations truly shine, for example, I was immediately struck by the concept of viewing inaction as a weapon, and intrigued by the nonstraining nature of patience (hint: if you are struggling, you are not doing it right). I can't claim that this book taught me a lot of new things. Instead it clarified my vision of old things, which is truly far more valuable. I cannot stress enough how valuable it is to deepen your understanding of the principles that you think you already know, but in reality do not. Focusing on depth rather than breadth of knowledge is so central that it has been a constant underlying theme in my growth as a trader and a student of life in general. Certain sections of this book, not to mention the full book itself, could literally make it worth 100 times the price to the beginning trader. If the lessons sink into your psyche, they could easily help shave a few thousand dollars off the cost of your "tuition" (the losses incurred from the time you begin to the time you achieve profitability, if ever). A few powerful sections that spring to mind immediately are the ones on folding and inaction, the nature of patience, the interplay of skill and chance, the long-run aspects of the game, and potential hidden motives for playing. -- "trader 75"
This poor person is going to have a stack a mile high once this thread is over... Any ideas of how Yelitza can choose where to start? Perhaps a random number generator in Excel? lol
By now we should have definetly demotivated the OP from starting trading My advice to you - skip all the books for now. Read some (!) info on the internet sites. Open a demo account with virtual money. Play around, do real trades (with virtual money), watch them win/lose AND HAVE FUN doing it. and when you feel like this, read a little more, think a little more about it all... start slow
I guess this leads to an interesting discussion, how do you best start the learning process in trading? I remember when I started I was totally clueless, I never had a mentor and all I had was a bunch of books, 90% of which I downloaded online (which probably saved enough money for a small futures account, lol). I didn't know who to trust, I had no idea how to devise a trading strategy, and I was afraid of spending a lot of time barking up the wrong tree (which, I've learned over time, is simply an inevitable part of the process). You go somewhere like this forum to find advice and you're given a dozen opinions on everything down the line, and then inevitably someone starts in on how one author sucks, then someone comes in and advertizes their services (subtly or not so subtly), and then a flame war begins. It's pretty intimidating, you don't know what to think and who to trust. As far as reading is concerned, I read at a rate of 10 pages per hour (if I'm looking to absorb something). So for a 300 page book of mostly text, that's about 30 hours of reading. Add more if English isn't your first language. So non-English speakers are at a disadvantage. I guess you can envy doctors, they don't have to choose amidst a hundred textbooks and methodologies, lol.
By far, very best lists of material to read that I have ever seen offered by experienced trader. For those who look at trading as something to make for a few years, tons of reading not necessary and just the basics and great deal of luck, but those who believe they be trading be a life time and that trading is a craft just like being a Master bricklayer or welder, your skills become honed to just know what is happening and that only accomplished by study of Price Charts and not through computers. I believe in the old indicators but I use them not as intended, it is not using them as a way for "indicator" to indicate Price, it is using them for how you interpret relativeship of them with price. Best books are ones that challenge your concepts each year you read them.
So true. It's a big disadvantage that traders don't have their pre-defined learning path. If you want to be a doctor, you know how to get there. Enroll in university, read the books and do what your teachers recommend you. But becoming a trader? To me it's similar to becoming a painter. There are a lot of books about colours, design and styles. But will it make you paint well? You need to figure it out on your own and develop your personal style, just like in trading. So, also trading is a creative exercise
When beginners ask me where to get started, I refer them here, the first step of which follows: The first step is to decide what kind of trader you want to be. What do you want to accomplish with your trading? Is it recreational? Supplementary income? A part-time job? Do you want to make a living at it? Even the greenest of the green knows whether or not he wants to make a living at it, trade only part time, trade for recreation, trade for the action, trade to have something to talk about with other traders (for whatever reason), trade only long enough to earn money to do or buy X. Do you have any idea what sort of trading is most comfortable? Long or intermediate-term trading? Short-term trading? Day-trading? Trend-trading? Scalping? (Note here that a short-term trader, for example, does not become a long-term trader just because his stop was hit and he didn't sell; a long-term trader doesn't become a short-term trader because he chickened out and sold too soon. Each of these approaches is selected deliberately and for thoroughly-considered reasons.) How patient are you? How adventurous? Are you a leader or a follower (most people think they're leaders)? And so on . . .