Are you a struggling trader? Do you continue to lose money, even in a bull market?
If you answered yes to either question, you are not alone. Financial trading is difficult and statistics reveal that at least 90% of traders lose money. The good news is that profitable trading can be attained with hard work and persistence. Read on for this road map for trading success. Read more »
Keen readers of this blog and those following on Twitter will know that I just released my first audiobook, available on Amazon audible and iTunes. If you are looking for a good trading audiobook then look no further!
My trading audiobook
When I first published my book, How to Beat Wall Street, I was not sure how well it would be received.
I knew that I had put a great deal of work into it and I thought that it was fairly concise and good value but I honestly didn’t expect it to do as well as it has done.
In fact, the book has been consistently near the top of the Kindle charts (in the futures trading and stocks categories) for the last few months and I have had only positive comments from those who have bought it. (Which I am eternally grateful).
Considering this success I thought it only right to turn the book into an audio version and using the ACX Amazon platform it was remarkably easy. ACX matched me up with a number of highly qualified voiceover artists so all I really had to do was adjust the book for audio then choose my preferred narrator.
I opted for a really great reader in John Eastman. John has lots of experience in trading audiobooks and he did a really good job of meeting my exacting requirements for tone and clarity.
If you haven’t yet checked it out, you can get the audiobook from either Amazon audible or iTunes. Amazon audible are currently doing a promotion where you can get the audiobook for free with a trial of the service.
If you’re into audiobooks, it’s a great risk-free way to trial the program.
What’s in the audiobook?
Essentially, the How to Beat Wall Street trading audiobook contains the same content as the print and ebook versions.
Of course, buying the audiobook entitles you to the same FREE download pack of code and extras that comes with the print and ebook.
You can see exactly what’s covered in the book here, but to sum up, the audiobook is essentially a concise guide to all that has been written on trading and investing, covering:
– Trading fundamentals: central banks, macro-economics Keynes & more…
– Trading philosophies: trend following strategies, mean reversion techniques
– Famous position traders: strategies of Warren Buffett, Jim Rogers & George Soros…
– Timing: financial ratios, volatility analysis, Dow Theory, stock market cycles…
– Risk: money management techniques, trading psychology…
– Secrets & Tips: news trading, volume analysis, seasonal patterns…
– Technical analysis: MACD, moving averages, Bollinger Bands…
– Trading systems: design & optimisation, 20 stock trading strategies, trend following strategies and mean reversion trading systems…
– Resources & bonus material: Comprehensive resource material, tips for online trading, best trading books bibliography…
And of course the audiobook includes the 20 trading system ideas and code.
How to get the audiobook
It’s pretty simple. If you’re an Apple fan you can head over to iTunes and download it there. If you’re more of an Amazon kind of guy you can get it from Amazon audible. And on audible you can also get the free trial, which allows you to get the trading audiobook and download it completely free!
Remember, if you do buy the audiobook make sure to come back here and request your free code and extras pack.
Get the audiobook.
Just picked up ‘Finding the Next Starbucks: How to identify and invest in the hot stocks of tomorrow’ by Michael Moe.
It’s not a very new book, it was actually published in 2006 but I’m finding it pretty good so far. As you might guess, the gist of the book is to try and find the next hot stock; another Starbucks, Amazon or Google. The ten and twenty baggers as Peter Lynch likes to call them.
Finding the Next Starbucks
The author Michael Moe knows what he’s talking about. He’s been on Wall Street for over 20 years and was one of the first research analysts to identify Starbucks as a huge opportunity in 1992. Back then the company was worth around $220 million and today it’s worth over $56 billion, having gone up thousands of percent.
But that isn’t the only impressive stock pick Moe has made over the years and in this book he shows how he goes about looking for similar hot companies or Starbucks-esque ‘supernovas’. For example, he also picked Apollo Group and even called Google cheap at the time of IPO.
Opportunities in smaller cap stocks
Michael Moe strongly believes that if you want to obtain super sized returns you need to look at smaller companies. Moe claims that small-cap stocks are overlooked by Wall Street since they do not have the size to take large volume orders. That represents an opportunity for smaller investors to capitalise on their own knowledge and find the next big company while it’s still in it’s infancy. As the author states, nearly all big companies today were small caps once.
For example: Apple, Gilead Sciences, Nike, Home Depot, Wal-Mart, Cisco, Yahoo!, all these stocks began with a market cap (at IPO) of less than $1 billion.
After going through the book it’s clear that although Moe likes smaller companies that does not necessarily mean penny stocks. In general, it seems that Moe finds his best success stories in the small-cap range – between $200 million to $1 billion or there abouts. The reason for this is clear. Small-cap stocks outperform large stocks over time. For example $10,000 invested in small caps in 1973 would have been worth over $1 million dollars in 2005 (an annual gain of 16.3%) while $10,000 invested in large-cap stocks would have yielded only $127,963 (8.6% annual return).
Looking for bargains
One of the things Moe is keen to stress in the book is that finding the next Starbucks or Apple stock does not come down to luck. Rather it comes down to a lot of research and by using a system that he has honed over the years.
The essence of which is to find companies in their infancy that possess some key characteristics.
Firstly, Michael Moe suggests that earnings are the most important criteria by which to assess a stock and that a stock price will move in direct relation to it’s earnings over time (a fact the author repeats throughout the book).
Second, Moe talks about the ten commandments that govern his search process. These cover the long-term and short-term outlook of the company, the valuation, the management and the industry it operates in.
The Four Ps
Moe then writes about the 4 Ps that help him come to an investment decision. Which are:
Essentially then, Moe looks for companies with great people and he considers good management to be the biggest factor in finding ‘supernova’ stocks.
The company’s product must also be good. It must be unique and hard to replicate elsewhere and it could well be causing a stir among those who have come across it.
Potential is all about the opportunities for open-ended growth of the company. And this also comes down to global trends or as Moe puts it ‘megatrends’.
Finally, predictability means taking a professional, value approach to investing and minimising risk. Trying to find companies that in their short histories have been able to consistently drive up their revenue.
Without going too much further into the book, another key concept that Moe puts across in ‘Finding the Next Starbucks’ is the impact of ‘megatrends’, a term first coined by John Naisbitt. Moe gives several examples of these:
The Agrarian economy in the 18th Century, the Industrial revolution, the manufacturing boom around 1910, the services era in the 70s and the information economy brought on by the invention of the Internet.
Moe claims that we now exist in a knowledge megatrend and that knowledge jobs such as IT, health and business services will excel. The key is to study the world, look at what is happening and what people are talking about. Look at the things that are really changing people’s lives and where the money is flowing.
If the past is anything to go by, looking for a megatrend and hitching a ride seems like the surest way to get on board a tenbagger supernova and reaping the rewards.
All in all ‘Finding the Next Starbucks’ is an excellent book for stock pickers and written in a similar vein to Peter Lynch’s One Up on Wall Street or Chris Camillo’s Laughing at Wall Street. It’s easy to understand, somewhat inspiring, and a great read for those looking for small high growth stocks. While this book should not be number one on the list for new traders or investors it’s definitely quite high up.
Stock markets gained on Monday with the Dow Jones Industrial Average advancing by 0.32% and the S&P 500 moving up 0.32%. Technology stocks continued to struggle, however, and the Nasdaq dropped by -0.03% by the close of play. With markets not quite over the recent volatility caused by falls in high growth Internet and momentum stocks, this week’s stock picks looks at a couple of companies with solid financials and reporting earnings this week.
Seagate Technology Plc ($STX)
My favourite pick this week belongs to data storage company Seagate which reports earnings after the close on Tuesday. Data storage surely has a massive future and Seagate is a company I have previously written about here in a Seeking Alpha article. Seagate still looks very attractive with a PE of just 11.77, PEG of 0.94 and current ratio of 2.20.
Although it is impossible to predict earnings in the short term, I would not be surprised to see a good quarter’s results and that could see Seagate jump on the open on Wednesday. For that reason, I plan to buy Seagate shortly before the close on Tuesday. Stops can be kept tight as this is a short term trade.
Big 5 Sporting Goods Corp ($BGFV)
Big 5 Sporting Goods is another company that I like the look of and like Seagate I also wrote about the company in an article, this time for Emerging Growth. It makes this week’s stock picks for mainly for its financial strength and the firm will also be reporting earnings after the close on Tuesday.
BGFV in my eyes is even more attractive now than when I previously wrote the article and I can see the company doing well this year as a result of all the sporting events taking place.
Most importantly, the stock looks as though it may have bottomed and the financial statistics are very promising. PE is 12.06, forward PE 11.49, PEG is 0.69 and current ratio is 2.00.
To be perfectly honest, writing a stock market book was never very high on my list of priorities. Only after several years of experience trading in live markets and only after copious studying did I feel confident enough to put pen to paper. Even then, I wasn’t sure how well it a book would be received, particularly as I had no formal training in writing. Of course, now I’ve written it, I’m glad I did, and the response has been much better than I had anticipated.
I have always been interested in the stock market.
From an early age I would come home from school and watch the Money programme on TV, a weekly show that talked about UK investments. I remember picking a few names, writing them in my school book and then checking them every day to see whether they had gone up or down.
As I went through University, I still kept an interest in stocks but I also started to look at the forex market. For me, the forex market was ideal because it was highly liquid, always moving and cheap to trade. I began trading currencies using a spread betting firm while a student and I also played a lot of poker too.
After graduation, I continued to trade in my spare time but my education really went up a notch when I took a job as a futures day trader for a trading firm in London. To say the experience was intense is an understatement as I (and two other graduates) were thrown into the deep end from day one. It seems unbelievable now, but we were unfortunate enough to start trading the very day after Lehman Brothers filed for bankruptcy. Our first day of live trading was one of the most volatile day in the markets since 1987 and it only got worse in the coming weeks.
Learning the ropes
I won’t go into the details of my time as a day trader – it would probably read more like a drama than anything educational – but I will say that during that time I learnt just about all I could. I traded through the most volatile period in a generation, where I had to grind out a profit every day in order to survive. I read every book I could get my hands on, studied every article and put in hours of work. I had a good teacher in the form of an ex Deutsche Bank head of trading and needless to say I learnt a hell of a lot.
After working and struggling as a day trader for about a year, I started to realise that making money was easier and less stressful on slightly longer timeframes. It was then that I started to look more closely at trend following strategies and before long I branched out with a partner to create our own small fund. It’s the fund we still trade today and is based on a mixture of trend following and fundamental analysis, utilising a semi automated strategy.
My stock market book
In order to keep up to date with the markets, I found myself writing articles for sites like Seeking Alpha and this blog. Soon, I had a fair amount of content so it made sense to start putting it into a book. Of course, once I had made that decision there was no going back. Completing the book took a lot longer than I had hoped and was a lot more work than I bargained for but it was worth it in the end as the book is something I am now proud of.
How to Beat Wall Street: Everything You Need to Make Money in the Markets
In essence, HTBWS is a concise guide to the markets. It covers a large amount of material, reporting on many of the most important financial books and reports written.
It covers the fundamentals, financial ratios, technical analysis, trading systems and more, such as momentum trading and dollar cost averaging. It also comes with bonus material including historical data, excel files and the code for all of the systems in the book.
“This book is a great first book for new traders. The author takes the new trader step by step through explaining all the different dynamics of basic trading. This book does a great job of covering all the bases, fundamentals, timing, the risks, tips for beginning traders, the basics of technical analysis, along with the basic concepts of building a trading system. This is a rare book that actually gives some examples of basic trading systems along with their statistics and back tested profitability and their maximum draw down in equity.
This book is a great book chock full of educational material and information that are keys to a new trader surviving that first year in the markets and setting themselves up for profitability. I would put this on a top ten list of books for new traders and I have read hundreds and even written a few of those books myself.”
– Steve Burns, newtraderu.com
The author has provided a good overview of macro factors an investor needs if he aims to beat the market. Thorough introductions on requisite topics are provided. I wonder this might even be used by someone with,hardly much background knowledge to the subject. The book introduces 20 trading systems and Amibroker codes are provided upon request. A readable and usable book.
– Heman Wong, HK
Great book. Easy to read and clear. It gives an overall view of many aspects of trading (fundamentals and technical aspects of stock and forex trading, money management, diversification, economy in general). It helps you to visualize the the global aspects involved in trading, and not just stock trading.
I also appreciate the resources & bonus material that helps you tho develop your own trading system and continue your research.
– Ignacio Riera Fernandez
This is a great book that starts out by explaining the basics to a new beginners and then ends by giving some great advanced ways to increase your investment returns. I highly recommend this book for all levels of investors, the new, the old, and the in between.
– Curt Dalton
Where to get it
The term ‘quant’ or ‘quantitative trading system’ conjures up the image of a smart math graduate on the desk of an investment bank who spends their time creating sophisticated short-term algorithms. Such algorithms that pull millions of dollars from the market in a blink of an eye.
However, and though there are many of these types of quants, anyone who uses a mathematical, objective approach can also be called a quant.
So what are quantitative trading systems?
A quantitative trading system can be defined as any system that uses mathematical computations in order to make trading decisions. In finance, this is hugely beneficial for many reasons. Firstly, using a quantitative trading system means you can test your ideas objectively on past data and therefore come to conclusions about how those ideas will fare on real, future data. Some of the most successful hedge funds utilise quantitative methods to some degree. For a good example just take a look at Jim Simons whose Medallion fund has averaged 35% returns since 1989.
Secondly, quantitative trading systems can be statistically verified and tested. They can also be used to make instant, complex calculations that a human trader might not be able to.
Another advantage of using a quantitative trading system is that you can eliminate some of the human emotion involved in trading.
However, there is an important point to be made here because a trading system can never fully eliminate all of the emotion involved.
Indeed, in some cases, emotions merely get transferred to the system itself, rendering it useless.
This can happen in any number of ways; jumping on and off of the system, creating a system that it is not robust, curve-fitting the system to past data, ignoring the system or second-guessing the system’s signals…
Psychology is thus hugely important, even for quantitative traders.
One good book on the subject of quantitative trading systems is Ernie Chan’s Quantitative Trading: How to Build Your Own Algorithmic Trading Business. It’s particularly good because it contains some of Chan’s original ideas. Some of these are hard to implement and require sophisticated technology but some are simple, such as Chan’s system that seeks to take advantage of earnings drift.
Another good book on the subject is Quantitative Trading Systems by Dr Howard Bandy. This is a pretty good book on how to design a trading system, and it gives plenty of examples, though it is expensive and its mainly geared to Amibroker users.
And then there is my book which contains 20 systems, all of which are tested on 10 years of stock market data and provided with a number of performance metrics. They’re a mix of trend following and mean reversion systems and are mostly based on weekly timeframes.
20 quantitative trading systems:
System 1: Moving average crossover
System 2: Four weeks up in a row
System 3: Trading the noise
System 4: Trading the noise plus shorts
System 5: Trading gradients
System 6: Dollar cost averaging
System 7: Donchian style breakout
System 8: Breakout with EMA confirmation
System 9: Trend following with the TEMA
System 10: Bull/ Bear fear
System 11: Simple RSI with equity curve filter
System 12: The range indicator (TRI)
System 13: Volatility breakout with Bollinger Bands
System 14: Trading the gap
System 15: RSI with the VIX
System 16: Trading the TED
System 17: Simple MACD with EMA filter
System 18: Cherry picking penny stocks with EMA crossover
System 19: Using the Commitment of Traders (COT) report
System 20: Finding cheap stocks with linear regression and average true range
The Amibroker trading platform is extremely fast, flexible and is excellent value for money. I’ve been using the software for around five years now and my Amibroker AFL collection has grown considerably in that time.
Whether you’re interested in building trading systems, trading long term trends, investing in blue-chip companies, or picking penny stocks, you’ll be able to do that and lots more with Amibroker.
If you are just starting out with AFL, make sure to take a look at the user manuals on the Amibroker site and the post I did about writing AFL for Amibroker.
Best Amibroker AFL Collection
There are two places I go to look for free Amibroker AFL. One is the Amibroker online library and the other is the Yahoo Amibroker forum.
I recently came across this collection of 129 Amibroker systems too. I haven’t delved into it too deeply yet but the systems look simple and easy to use.
These are all great places to start learning about Amibroker but as with most sources of free material some hunting is often required in order to get to the good stuff.
The other problem with any Amibroker AFL collection, is that any trading system you find online is available for anyone to use. Because of this, you’re pretty unlikely to find one that works, or at least works well. Nevertheless, Amibroker AFL that you find online can always be adjusted, altered and learnt from for your own means.
Don’t forget the data
Another important thing to remember when using Amibroker is that a trading system is only as good as the data you’re using.
It is essential to use high quality, clean stock data. Otherwise you will end up with a flawed trading system that will lose money in real trading. I use the services at Norgate Premium Data and am very happy, especially with the new historical constituents database which comes with the new NDU program. You can get a free trial of the service here.
AFL in my courses
If you are looking for Amibroker AFL, my courses contain a collection of trading systems, some trend following and some mean reverting. These are tested on at least ten years of historical stock data in most situations and the systems come with full Amibroker source code.
The trading systems shown on my courses are the best trading systems I’ve found from years of back-testing and research. They are all simple, straightforward systems that can be easily implemented on a daily or weekly basis.
Free Trading System Rules & AFL
I have also developed a free trading system that is a long only trend following strategy for US stocks. This particular system is based on very simple rules and made 53% return in 2013. It is a simple and robust system that can act as a useful template for your future trading strategy.
The full rules and Amibroker source code can be downloaded here.
16 Best trading books of all time
I wrote in a previous article about the advantages of a good book over a blog so here is my list of the 16 best trading books of all time. These are all books I’ve read and can recommend. If you are new to financial markets, these books are the best place to start.
For an even more extensive reading list, and to see some of my favourite trading tools, make sure to check out the resources page. Or, if you prefer to learn online, check out my list of the 15 best stock trading courses on the web.
There are hundreds of trading books out there but there are only two that are mentioned over and again as being the best of the bunch.
1 – Reminiscences of a Stock Operator (Wiley Investment Classics)
Jesse Livermore, also known as the ‘boy plunger’, is considered to be one of the best traders of all time, winning and losing many millions of dollars during the Great Depression and surrounding years. This classic book is both educational and a great read.
2 – Market Wizards, Updated: Interviews With Top Traders
The Market Wizards series by Jack Schwager includes the original Market Wizards, New Market Wizards and Hedge Fund Wizards. The books contain invaluable interviews with some of the greatest traders of the last 30 years. Schwager is the author of a number of other books, however, his original Market Wizards has never been bettered.
More trading classics
3 – Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets
Easily one of the best trend following books out there if not the best. Michael Covel’s book is completely persuasive and full of detailed examples of trading strategies and the trend following funds that use them. There’s a section on trend following performance and a segment about trend following stocks. A lot of my current trading ideas are based on some of the ideas from this book.
4 – Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders
Not as good as Trend Following in terms of depth but still an informative and educative trend following book. Curtis Faith’s book deserves its place in the list of best trading books as it details the exploits of the famous Turtle Traders mentored by Richard Dennis in the 1970’s.
5 – Laughing at Wall Street: How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too
I could be wrong but I dont think many have read this one. Laughing at Wall Street details how small time investor Chris Camillo turned $20,000 into over $2 million in just a few years and he did it with a really unique strategy that looked at social media and popular trends. A great book for modern times and shows why it’s so important to be original.
6 – Trading Systems and Methods (Wiley Trading)
I picked this up at the library years ago at a time when I was working as a day trader and struggling to make ends meet. It was Perry Kaufman who first persuaded me that trading systems are crucial if you have difficulty holding on to your trades or with the emotional side of trading.
7 – Quantitative Trading Systems
This book, by Dr Howard Bandy, is designed for Amibroker but it also contains brilliant insight into system design as well as detailing the AFL code for a number of trading system examples. The code can be easily adapted for other trading programs.
As well as QTS, Dr Bandy also has a number of other books out about trading system design including Mean Reversion Trading Systems, Modelling System Performance, and his latest book, Quantitative Technical Analysis. All of Dr Bandy’s books are excellent reading for system developers.
8 – Extraordinary Popular Delusions and The Madness of Crowds
Charles MacKay’s classic book was first published in 1841 but retains its allure for its eloquent portrayal of bubbles and manias. After reading this you’ll understand how economic bubbles happen and why they really are nothing new.
9 – Come Into My Trading Room
I find good trading psychology books to be hard to come by. Though they are well received I personally do not think much of Trading in the Zone or the Naked Trader has they both have a fair amount of filler material. Come into my trading room, however, by Dr Alexander Elder, is a good balance of science and intuition.
10 – Adventure Capitalist: The Ultimate Road Trip
Jim Rogers co-founded the Quantum Fund with George Soros and retired from Wall Street by the age of 37. In this book, he circumnavigates the globe in a custom built Mercedes Benz whilst providing investment wisdom as he goes. I like all of Rogers’ books but this is the best.
11 – The Big Short: Inside the Doomsday Machine
There’s a good reason why Michael Lewis‘ book became a bestseller. It offers fascinating insight into financial markets but most importantly, it’s a great read, even to those with no interest in trading.
12 – Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions)
This is the classic Benjamin Graham investment tome that Buffet claims to have read cover to cover no less than 7 times before putting money into the markets. The book is still considered to be the essential primer on value investing.
13 – Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds
There are numerous books floating around that try to explain Warren Buffett’s market beating investment style but I find Buffetology to be the clearest and easiest to read. Put together by his former daughter-in-law, Mary Buffett, this book is a great introduction to Buffet’s style.
14 – The Research Driven Investor: How to Use Information, Data and Analysis for Investment Success
An excellent book written by Timothy Hayes of Ned Davis Research that details how to build composite economic indicators that can be used to predict broad market turning points and trends. It’s very well put together and is exhaustive in its research, giving lots of charts and examples.
More advanced reads
15 – The Misbehavior of Markets: A Fractal View of Financial Turbulence
Mandelbrot is a nobel winning mathematician and pioneered fractal mathematics. Fractals describe things that no matter how close you look, never get simpler. Like the branches of cauliflowers, jagged coastlines and financial markets.
16 – The New Money Management: A Framework for Asset Allocation (Wiley Finance)
Money management is possibly the most important component of successful trading. In The New Money Management, Ralph Vince, gives his own take on the subject including the coverage of ‘optimal f’ and ‘risk of ruin’. This book is the most comprehensive I have read on the subject of money management. It isn’t cheap, however.
How to Beat Wall Street
It would be stupid to write a list of the best trading books without mentioning my own book. In many ways, HTBWS is an accumulation of all the books on this page. All the secrets and techniques from these classics helped shape my book, which I have tried to put together in a concise way.
Prefer audiobooks? Get my audiobook now from Amazon audible (free trial) or on iTunes.
Any I missed?
I can already think of a few that could be added to this list but I think I’ll stop there. What trading books would you recommend? And are there any you think I should have included?
Need even more book recommendations?
There’s loads more top trading books for you to check out over on the Resources page.
Or, if you’d rather learn online make sure to check out my list of the 15 best stock trading courses on the web.
Thanks for reading!
I read a comment a while back about how blogs are better than books these days for learning about trading and finance and I had to reply because I don’t think it’s true at all. While blogs are often more up to date, they are too often lacking in great content.
I would argue that books generally provide much stronger analysis and advice than blogs. Online content is free (unless behind a paywall) which means that bloggers do not have as much incentive to write top quality content. This is why there are so many poor quality finance blogs and articles online, many of which are trying to sell another worthless product or service. As well as this, bloggers have to deal with SEO which means good articles can be hard to find.
Conversely, a good finance book is worth it’s weight in gold and can be referred to time and time again. Warren Buffett, for example, would not have got to where he is today if it wasn’t for many re-reads of Benjamin Graham’s classic investing Book:
Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions)
Books, after all, have to go through many processes prior to printing to make sure they are up to standard and most books will never find a publisher willing to publish the material.
Granted, blogs were not around in Buffett’s day but it seems obvious to me that anything that costs money to research and produce is going to be more valuable than stuff you can get online.
The same goes for white papers and special reports. Indeed, I recently read that the value of a good 3-5 page report – the kind published by a trade journal or University is typically over $4000.
With this in mind, I believe it’s important to search out the best information and content available. I have read dozens of good finance books over the years and am always excited when a new one comes out. Blogs have there place and get better all the time, but you cant beat the value of a good book.