There are countless books about trading or investing in the World markets.
In fact, the number of books about this or any subject is growing at a high rate.
The amount of people publishing new books is quite big since with the new technologies and the advent of internet it is possible for everybody to do so.
Among all the books published every year we will find good and bad ones.
It will be difficult to discern between them.
The truth is that many of the books published recently are based on what the “classics” taught us, in other words, those who were pioneers in the world of investing.
I am going to speak about my favourite trading books and those who, I think, have a good global vision of the financial markets, investing and trading in general.
Some of them will be based on short-term trading and some on long-term investing.
Best of trading books
“Reminiscences of a stock operator” by Edwin Lefevre
This is my favourite trading book without a doubt.
The book narrates the adventures of Larry Livingstone, a pseudonym of the famous speculator Jesse Livermore, from his childhood till adulthood.
The book is almost like a diary in which Livermore tells us one thousand battles, riches, bankruptcies and more.
An authentic classic that inspired many of the great traders, investors and hedge fund managers ever.
The main advice of the book is: “be right and sit tight”, in other words, let the profits run.
“The fabulous world of money and the stock market” by André Kostolany
This book is probably the best you can find about contrarian investing or speculation, so to speak.
Kostolany defined this as speculation, in other words, not long-term investing, neither short-term trading, but taking positions against the majority when conditions where appropriate.
Something not very different than the Rothschild phrase: “buy when there is blood in the streets”.
Kostolany liked to bet against the consensus.
The problem, and this was emphasized by Kostolany, is that not everybody is suitable for this.
After all, you have to be very bold to bet against the opinion of the majority, although it has good results in the long-run.
However, this is not a system to be adopted by a hedge fund or fund of any type. It is more suited to an individual person.
The book is an easy reed, with Kostolany telling us many anecdotes about the stock markets in the 20th century.
“A random walk down Wall Street” by Burton Malkiel
This is a book that is not recommended by those looking for short-term riches, since it talks about the fact that the best way to invest is to follow the main market in the long term, which would mean simply to invest in the national main index.
Obviously, this is a long-term investing book which its interest in the stock market.
Malkiel destroys the Technical and Fundamental Analysis points of view.
Hundreds of studies done throughout the years show that the great majority of fund managers can not beat the s&P 500 in the long run.
Malkiel’s critics say that his thesis are wrong.
There are people, like Buffett, who have won more than the main indexes during 20 years.
However, it is true that these are very rare cases.
Malkiel is not saying that there are not people beating the market but that the probability of doing so is very low.
In other words, those who beat the market are not even 4 out of 400, so to speak. Therefore it is very possible that the individual investor do not need to bother in hiring a “professional investor”.
A book that deserves to be in any personal library.
“How I made 2 million in the stock market” by Nicholas Darvas
This is one of the simplest books about the art of trading, but not for being simple is not good.
The book tells us the story of Darvas and how he built up a portfolio of 2 million dollars little by little, simply using a technique based on accumulation of profitable stocks in a bull market.
The most interesting fact of the book is about a couple of lessons it gives us.
First: that the best way to win in the Stock Market is by buying stocks that rise in the long-term. In other words: let the profits run.
Choosing the adequate stocks is not easy, but what a lot of people do not understand is that the best way of making money in the markets is not by intraday, but looking for big trends that last months and years, such as Darvas used to do.
Second: when Darvas tried to trade from a broker premises he started to lose. That was due to being influenced by too many people and the frenzy of the markets.
The original system used to work with the prices coming from newspapers the next after the close.
It is impossible to have a simler system.
“The intelligent investor” by Benjamin Graham
One of the immortal classics and particularly of “value investing” and the long-term investment.
This book could be considered as the bible of the investing world, whose author inspired investors around the world.
This book should be in the personal library of any interested in investing.
“The Market Wizards” and “The New Market Wizards” by Jack Schwager
We will not find the typical commentaries about Technical Analysis, shoulder-head-shoulder, RSI, and such things.
We will not find the Holy Grail of trading though.
However, we can have lots of clues about what those big names used to do to success in the markets.
As a resume I will tell you that most of them were trend traders or investors.
In other words they did not make day trading.
The majority of trades took from months to years.
These people used to let profits run and cut losses short.
The book also tells the stories of the days when the trading used to be in the pits of New York or Chicago.
As we see these books go from short-term speculation to long-term investing counting on intermediate systems like that of Kostolany.
The lesson they taught us is that to be successful you have to keep your winning positions open. That is what those who invest in the long-run do.
We should, therefore, “buy and sit tight”.