5 Must-read Books for Successful Stock Traders
Justine Pollard is a successful Australian stock market trader, author and sought after trading mentor. She enjoys sharing her trading insights on how she became successful. Her training programs help fellow traders improve their skills and knowledge to become peak performers in the market. She has been interviewed in several books, Peter Switzer and Janine Perrett on Sky Business News. You can learn more about her through her website www.smarttrading.com.au
Today Justine shares some thoughts on reading for trading success with WhyToRead.com
Like all the other successful traders I’ve met, I always emphasize how important planning and psychology is to trading. There’s coming to terms with the emotional swings and internal dialogue you will experience while in a trade. And there’s the challenge of continually working on improving your mindset – in the end, this is what makes or breaks you in the markets.
There are a lot of helpful books available on self development, self-healing and the psychology of trading. It is books like this that continue to inspire me and confirm that I am on the right track. I wanted to share these with you and why I enjoyed them so much and how much they can benefit you as a trader.
Trading is a business and for a business to survive and prosper it must have a business plan. But how do you develop a plan for trading? Where do you start? And what do you put into a trading plan?
This book will steer you through the process of developing and implementing your own personal trading plan, increasing your chances of success in the market. Complete with Smart Action Steps, case studies of actual trades and bonus planning templates, “Smart Trading Plans” is essential reading for all savvy traders.
Listed as one of the top 10 best selling finance books by Australia’s leading Money Magazine.
2. Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude – Mark Douglas
Trading in the Zone is another book that is invaluable to a trader. It’s about the psychology of trading, finding your edge and really getting into that state of mind you need to be in to be successful as a trader.
In this book Mark Douglas recommends that once you’ve got your trading plan written down, undertake 20 trades exactly as per your trading plan (with a very small account size), and do not deviate from that. See what your results are after those 20 trades and recognise if you’ve got an edge in the market.
The objective of trading is thinking like a casino. Casinos have an edge and they know their percentage hit rate. They know they’re going to be winning a percentage of the time and wins are going to be a lot larger than their losses. They know what their statistics are over a large sample size. So you need to have a good sample size of trades to be able to make it statistically significant. The book discusses finding your edge and simply trading it.
This book is a great read and the ego of the author in his early days of trading is amazing. Of course the market always has a way of bringing that back down, and in Jim Paul’s case, beating it down. He personalised his trades and let losses get out of control and along the way lost a fortune to learn key trading lessons. He provides a wealth of wisdom and insights in his book and aims to help other traders benefit from his lessons.
I highly recommend reading the foreword from the book by Jack Schwager. He really hits home the reality about trading and losing. He writes:
“No sane person would walk into a bookstore, go to a medical section, find a book on brain surgery, read it over the weekend and then believe he could walk into an operating room on Monday morning and perform successful brain surgery. …
Yet how many people do you know who would think that it is perfectly reasonable to walk into a bookstore, go the investment section, find a book with a title like How I made a Million Dollars Trading Stocks Last Year, read it over the weekend, and then start trading Monday morning and expect to beat the professionals at their own game….
Trading…is the only endeavour in which the rank amateur has a 50/50 chance of being right. Why? Because there are only two things you could do in trading: you can buy or you can sell. And, as a consequence, some portion of clueless beginners will get it right simply by chance—for a while. This potential for temporary success by pure luck beguiles people into thinking that trading is a lot easier than it is. The potential for even temporary success doesn’t exist in any other profession.
…Trading has this quirk that allows some people to be successful temporarily without true skill or an edge—and that fools people into mistaking luck for skill….
The truth is that trading, both successful and unsuccessful, is more about psychology than tactics….What winning traders share, however, is that they all understand that losing is part of the game, and they all have learned how to lose.”
The book reconfirms that the most important part of trading is your psychology, having a strategy to minimize losses and the need to have them documented in a trading plan.
All professional traders have different entry criteria and often opposing views. But one thing they all have in common is strong money management rules. Losses are all a part of the game of trading. It is most important though that you have a strategy to handle them. And most importantly, you act on it too.
This is another one of my favorite books and one of my Mastermind clients also recently read it and posted this on the Mastermind forum:
“I just finished “How I made $2,000,000 in the Stock Market” by Nicolas Darvas. He was an economist and then a dancer who fled the communists in Europe in the 1950’s for the US, and it’s the story of his trading and how he eventually achieved success in the markets. Love this paragraph towards the end when he’s finally made it (early 1960’s before the NASA space program etc)… “It began to be a strange life. I sat in the Plaza every evening, reading my telegram and filing it. There was nothing further I could do. I felt elated and restless, but powerless. I was like a scientist who, after years of work and research, has successfully launched a rocket to the moon, and now as he tracks it climbing higher and higher he has a tremendous sense of achievement and also a strange let-down feeling of inactivity.”
I’ve read a lot of trading books and this was a really good one from a guy who describes what he actually did.
Take your trading as an example. It’s like you simply cannot make yourself consistently successful. Chances are you’ve reached your thermostat set point for success and believe that there’s nothing more you can reach. Thus, you begin to harbor some beliefs and fears that work against your success as a trader. This is what the author is trying to point out in his book.
The author discusses how we have a universal human tendency to sabotage ourselves when we have surpassed the artificial upper limit we have placed on ourselves. He calls it the “Upper Limit Problem” which is the effect of a very low thermostat setting we’ve set on our ability to achieve and enjoy our ultimate success.
We also create false fears and beliefs that hold us back from achieving real success. This may be fear around money and moving out of your comfort zone or staying in a dead end job. The earlier you can discover that you are encountering the “Upper Limit Problem” and find your zone of genius, the better chances you have of thriving.
This is a not a trading book per se but can be applied to trading and in many areas of your life. It is a must read for everyone.