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You Really Want to be a Trader?
Ah, so glad you made it here. The market is always looking for fresh blood. Think you can swim with the sharks? Well, you made it this far. Now, are you willing to sacrifice your capital and time to become a professional trader? Let's start you out with two books so you know what you're getting into: Professional Stock Trading: System Design and Automation and Trading for a Living: Psychology, Trading Tactics, Money Management. The two books are complementary: the former is more advanced with emphasis on trading systems and the mechanics of trading, and the latter is a broad introduction to technical analysis and the psychology of trading.
Technical Analysis
There are dozens of books covering technical analysis, but you really need only three. For traditional technical analysis covering all of the price patterns, get Technical Analysis of Stock Trends, 8th Edition. Becoming a successful trader requires total immersion in technical analysis, and you will need to know these patterns cold. The second book is Japanese Candlestick Charting - Second Edition, the definitive book to the Japanese technique of candlestick charting. Most stock traders will graduate to candlestick charting from bar charts because they are more descriptive. I am a big fan of Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices, 2nd Edition (A Marketplace Book) because of its pure focus on the movement of stock prices. Last but not least, if you're going to get only one book amongst those written in the past ten years, then give the nod to Farley's The Master Swing Trader: Tools and Techniques to Profit from Outstanding Short-Term Trading Opportunities; he is an expert at integrating trading concepts, and his pattern cycles inspired one of our own trading systems.
War Stories
These guys had it a lot harder. In Reminiscences of a Stock Operator (A Marketplace Book), Jesse Livermore traded from prices posted on a bulletin board in a bucket shop. In How I Made 2,000,000 in the Stock Market, Nicolas Darvas placed trades by telegram while holed up overseas. Technology is not a substitute for profitability, so don't be mesmerized by the bells and whistles such as a Level II window.
Wall of Voodoo
"I hear the talking of the dj, Can't understand just what does he say?, I'm on a Mexican radio." CNBC is the Mexican radio of the trading world with lots of money managers shilling their positions. Instead, focus on learning everything you can from the old masters: Gann Made Easy (Book/9 Maps/4 Charts), New Blueprints for Gains in Stocks & Grains and One-Way Formula for Trading in Stocks & Commodities (Traders' Masterclass), and Profits in the Stock Market/With Charts. Don't be dismissive of these pioneers; their work is buried treasure under a pile of useless day trading books.
Gambling or Trading
What's the difference, you ask? There's a concept called price persistency, discussed by several of the traders profiled in Market Wizards: Interviews with Top Traders and The New Market Wizards: Conversations with America's Top Traders. If systematic trading is for you, then it all boils down to risk/reward and statistics. To thoroughly evaluate your trading system, try Tradings Systems That Work: Building and Evaluating Effective Trading Systems. For a comprehensive grounding in probability and statistics with real-world practicality, then study The Theory of Gambling and Statistical Logic, Revised Edition.
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