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The year-end holiday is a time when I totally remove myself from the markets.
I stop watching results, stock moves and all data from around mid-December for at least three or four weeks.
But there is one exception: I do use this time off from the market to read.
I love reading and I always read at least two investing or trading books over the holiday.
One will always be Trading in the Zone by Mark Douglas (I have read this book more than a dozen times over the years) while the second book will either be a new one I have discovered, or I’ll return to one of my old favourites.
People are always asking me which books they should read so here are my thoughts on some of the trading and investing books I have read:
TRADING
Trading in the Zone by Mark Douglas
This is my absolute all-time go-to book on trading.
It deals exclusively with the psychology of trading and is undoubtedly not only the book that started me making profits, but also the one that keeps me on the straight and narrow of disciplined trading.
There are no pictures or funny stories; it is tough to get through, but an absolute must-read.
When it was initially published, the theory of managing emotions in trading was to banish them – easier said than done.
These days a lot of the emotional work is more around identifying and managing the emotions than banishing them, but that in no way detracts from this excellent book.
Reminiscences of a Stock Operator by Edwin Lefèvre
This book was first published in 1923 and details the story of Jessie Livermore.
Livermore was a trader who made every possible trading mistake but, importantly, learnt most of the lessons, which makes this such a powerful book.
He makes the mistakes, thinks long and hard about them and corrects them. As such, we can learn from him and hopefully avoid making the same mistakes.
I still find myself quoting his lessons in my written work and presentations, and also include them in my trading systems.
Ultimately Livermore died broke and by his own hand, but that in no way diminishes the lessons imparted in this excellent book.
Trend Following by Michael W Covel
I am a trend-following trader in my trading and much of my conviction from this style of trading comes from this book.
Covel paints a very clear and convincing picture of what makes trend trading so powerful, and helps readers understand the hardships of trend trading (such as large drawdowns and long streaks of losing trades).
But ultimately he convinces one that trend following is by far the best way to trade. T
his book does not include trading systems or ideas; he wants you to sign up for his courses and software to get those details, but I wouldn’t go that far. We can find all the systems we need on the internet or from our own efforts.
This is an excerpt from an article that originally appeared in the 17 December 2015 edition of finweek. Buy and download the magazine here.
