20 must-read Finance, Investment & Trading books

On 24/12/2009, In Business, Finance, Hedge Funds, Investments, Masters at work, Personal Finance, Quantitative Analysis, Trading, By Josh
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These are some of the best Finance, Investment and Trading books in my library.

Useful for a last-minute gift for yourself or your loved ones.

Merry Christmas!

1. Lords of Finance – Liaquat Ahamed

Liaquat Ahamed won the Financial Times and Goldman Sachs Business Book of the Year Award 2009 for it but it’s about the Great Depression and the Crash of 1929.

2. One Up On Wall Street – Peter Lynch

How to spot the next ten-bagger.

3. Inside the House of Money – Steven Drobny

Macro-thinking. Interviews with top Hedge Fund Managers.

4. The Warren Buffet Way – Hagstrom, Fisher, Miller

Essentials of Value investing according to Buffett, with nods to Fisher & Graham.

5. The Greatest Trade Ever – Gregory Zuckerman

How John Paulson cemented his place as one of the greatest traders/hedge fund managers ever.

6. Trend Following – Michael Covel

All types of Trend-following information, including from the cryptic but highly successful Ed Seykota.

7. Way of the Turtle – Curtis Faith

Are traders born or bred? This question led to an experiment which is documented here. Hugely interesting.

8. Trade your way to financial freedom – Van Tharp

Describes criteria for a complete trading plan. Also speaks about Psychology.

9. Come into my trading room – Dr. Alexander Elder

Complete trading plan, with examples.

10. Trading for a living – Alexander Elder

11. Reminiscences of a stock operator – Edwin Lefèvre

Life of the legendary Jesse Livermore.

12. How I made $2,000,000 in the stock market – Nicolas Darvas

How Darvas, a dancer, approached the stock market from scratch and evolved a mix of fundamental and technical perspectives. Highly entertaining and educational.

13. Quantitative Trading – Ernie Chan

14. Generate Thousands in Cash on your Stocks Before Buying or Selling Them – Samir Elias

15. The Lazy Investor – Derek Foster

For the long, value and dividend approach with compounding. For investors, not traders.

16. An American Hedge-Fund – Timothy Sykes

How Tim made a fortune out of his bar mitzvah money, $12,500 and then proceeded to lose all of it. More importantly, how Tim dusted himself up again to do it one more time starting with the exact same amount of money. This time, however, he’s doing it in the open, documenting winning and losing trades through Covestor. He rules the penny stocks space. Follow him on his blog, on Covestor, on Twitter, Facebook, Livestream, etc… – he’s everywhere.

17. Investing The Templeton Way – Lauren Templeton, Scott Phillips

18. Market Wizards – Jack Schwager

19. Technical Analysis of the Financial Markets – John Murphy

20. Japanese Candlestick Charting Patterns – Steve Nison

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Investing vs Trading & Trend-following.

On 2/12/2009, In Algorithmic Trading, Finance, Hedge Funds, Investments, Masters at work, Personal Finance, Trading, By Yash
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Trading horizon

I nearly covered a shorting position with a limit today but cancelled it. The day was good and my portfolio is up 53.7%. One of the short positions is now top on the list in terms of dollar gain, though not percentage gain.

Shorting and trading, by their very nature are shorter-term positions as compared to investments. It is quite difficult to be able to hold on to a shorting position for a few days. For some traders it can be a nerve-wracking experience, especially if the threat of a short squeeze looms, where the potential for losses is unlimited. Therefore, level-headedness is of the essence.

The trade must be well-researched, and requisites for a good trade must be fulfilled: entry, exit, % of bankroll risked, stops or limits.

I believe you should forget about a short trade which was profitable when covered in the following sense: “You should have no regret about any other action which could have brought more profits.”

This said, it is important to have a trading journal where trades can be stored and analyzed.

Value Investing

Buy-and-hold and regular investing with DRIP can bring some peace of mind to the Trader/Investor, but in some market conditions it can be much more nerve-wracking than holding on a short.

Consider Buffett seeing his portfolio literally melt by $25 billion during the global economic crisis and still keeping at it. There is simply no way that he could not be affected by this stupendous loss unless he really doesn’t look at his portfolio at all.

In addition, it was possible as I showed in this blog to call the massive losses in the market months before October 2008. With such a large exposure to market and systemic risk, one could have cashed in, or done like Paulson and make the Greatest Trade Ever – as it is, the title of a new book by Gregory Zuckerman:

Trend-following

My thoughts on trend-following are related to the amplification effect of people using this strategy. Moreover, these strategies can also be set and triggered in an automated way.

With the tendency to go more towards automation, thus removing the deleterious effects of human emotions on trading, I can only foresee that similar strategies and systems will cause charts to spike one way or the other, with the amplitudes getting higher with time.

It would be interesting to model these changes, and build meta-strategies to profit from these trends.

A book I recommend on Trend Following is the one by Michael Covel:

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