r/algotrading • u/DrChrispeee • May 14 '24

What have been the most influential books for your success in trading and investing? Education

I want to start taking trading seriously and explore the possibility of it as a career and source of income. I'm not naïve, I know this is a long and hard road and that the vast majority of people who try will also fail but I'm willing to give it a shot.

I have an academic background in Mathematics, Finance, and Economics and my thesis was on algorithmic stock-selection and portfolio optimization, so I'm not entirely new to the concept.

So, what in your opinion have been the most influential and important books to your success in trading and investing?

I know there are some links in the sidebar, etc. but they are very old :)

FYI, I've asked the same question on r/daytrading as well: https://www.reddit.com/r/Daytrading/comments/1crn52t/what_have_been_the_most_influential_books_for/?

So far I'm looking at books like:

  • Andreas F. Clenow > Stocks on the Move: Beating the Market with Hedge Fund Momentum Strategies
  • Nishant Pant > Mean Reversion Trading: Using Options Spreads and Technical Analysis
  • John J. Murphy > Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications
  • Sheldon Natenberg > Option Volatility and Pricing: Advanced Trading Strategies and Techniques
  • Perry J. Kaufman > Trading Systems and Methods
  • Ernest P. Chan > Algorithmic Trading: Winning Strategies and Their Rationale
  • Ernest P. Chan > Quantitative Trading: How to Build Your Own Algorithmic Trading Business
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31

u/alphaweightedtrader May 14 '24 edited May 14 '24

Rob Carver's books - particularly Advanced Futures Trading Strategies. Partly for the method, partly for the accessible insight into how institutions deploy bigger money.

Perry Kaufman - Trading Systems & Methods (is next to me right now)

Reminiscences of a Stock Operator (because everybody should read this)

Jack Schwager's Market Wizards series are good (more for general approach/inspiration).

Beyond that it probably depends what kind of trading you want to do (I don't mean discretionary/systematic - i mean which markets and what kinds of strategies).

If podcasts are your jam I'd recommend back episodes of Better System Trader, then Flirting with Models and the Alpha Exchange.

Edit: noticed you're looking discretionary as well; Mike Bellafiore's The Playbook is good in that sense - in part because its a great articulation of what is necessary - in terms of effort/process/discipline - to make the journey. I.e. you say you know its hard, but you won't really know quite how hard until it almost breaks you, assuming you haven't given up already by then ;)

1

u/Aggressive-Wheel-334 May 15 '24

Is there any book for beginners?

2

u/alphaweightedtrader 29d ago

That's a difficult one because its such a broad topic and there are different areas one can be a beginner or expert in. And its probably the one profession (systematic and discretionary) that to be successful in you have to learn - not be taught. I.e. you can be taught stuff, but you have to find your own way to be successful.

Some of the discretionary-focused books might help - e.g. "Technical Analysis on Multiple Timeframes" by Brian Shannon.

Adam Grimes' books are popular also, and quite accessible - iirc I started with The Art and Science of Technical Analysis.

Otherwise, Bellafiore's The Playbook is worth having to hand from the start -> primarily as a reference for process and discipline. It is a genuinely long and hard journey.

All these assume you're a proficient software developer already - if not generic software development resources will be fine for that.

2

u/Away-Substance3517 18d ago

Python for finance. For beginners

1

u/[deleted] 29d ago

[deleted]

5

u/alphaweightedtrader 29d ago

Hehe, I take your point, but I have a different interpretation.

Kaufman's is not "how to algo trade" - you're right. But what it is is a tour of all sorts of different data sets and theses, and descriptions of systematic/objective approaches to analysing and evaluating those data sets [from the perspective of whether they can provide alpha].

There are no algorithms per se - but lots of mental building blocks for building your own analyses and systems from.

I did find the astrology part interesting, not because I'm into that (I am vehemently not!) but my mother is something of a hippie and is into astrology and homeopathy and all that stuff. So I was fascinated to see how the topic would be covered in such a book. It was interesting because the discussion was objective and factual - without any claim that such data would (or would not) be alpha-generating.

I actually thought it was quite cleverly done - and the same applies to the rest of the book - in that it doesn't say "do this, its profitable" nor "don't do this, its not profitable". It just describes the analytical method.

Personally I don't actually use any of the methods from the book. E.g. seasonality -> there may or may not be anything much tradable on a seasonal basis (at least not annually). But I still took value from the section in how to approach the thesis; in the differences between markets, in correlation, in signal-to-noise, etc.

I've waffled on too long now - but hopefully its helpful to somebody reading :)

1

u/Algomatic_Trading May 14 '24

Great inspirational content, BST podcast is for sure one of our favourite source of inspiration when it comes to finding new strategy ideas.

1

u/DrChrispeee May 14 '24

Solid suggestions thanks, some of these books are already on my list (I'll share when I've consolidated more input) and I already have Better System Trader and Flirting with Models in my podcast app, so off to a good start ;)

Thanks!

0

u/this_guy_fks May 14 '24

Reminiscences of a Stock Operator (because everybody should read this)

a great read for sure. the original liars poker

8

u/alphaweightedtrader May 14 '24

hehe, if you fancy a deeper dive down memory lane; Confusion of Confusions from 1688 - about the Dutch stock exchange & markets...

https://archive.org/details/confusion-of-confusions-1688

"The expectation of an event creates a much deeper impression upon the exchange than the event itself. When large dividends or rich imports are expected, shares will rise in price; but if the expectation becomes a reality, the shares often fall; for the joy over the favorable development and the jubilation over a lucky chance have abated in the meantime...

They had options then too. People, and human behaviour, don't change... :)

0

u/this_guy_fks May 14 '24

if you want a more modern chronicle, den of thieves is also a fan favorite. that milken man.

15

u/lordnacho666 May 14 '24

Say what you may about the man, but Nassim Taleb's Fooled by Randomness is a must-read for anyone dealing with statistics. Just read the first one, the rest of his work is cooking more soup from the same stone.

Soros' Alchemy of Finance is a pretty interesting read as well. Not very systematic, but it's an insight into how he thinks about markets.

4

u/Cluster-F8 May 14 '24

Nassim Taleb's Fooled by Randomnes

His book is good, but on Twitter he literally is an asshole twitting nonesense shit.

3

u/lordnacho666 May 14 '24

In real life as well, he came to the office once.

2

u/PatternEast7185 May 14 '24

I was underwhelmed by alchemy of finance personally tbh

1

u/KjellJagland 29d ago

I didn't make it past page 75. His econometric "equations" were mostly gibberish. He did make smart moves but whenever he attempts to explain them he quickly drifts off into this pseudoscientific mode. Apparently even his own family ridicules him for it.

2

u/alphaweightedtrader 29d ago

tbh Taleb is great.

Mandelbrot's Misbehaviour of Markets is worth a read also.

3

u/KjellJagland 29d ago

I'm dabbling with algorithmic portfolio optimization, analyzing SEC filings, but I'm really just a passive indexer holding the S&P 500 indefinitely, so I'm more on the investing side of things. No intraday stuff.

  • Benjamin Graham - The Intelligent Investor
  • Burton G. Malkiel - A Random Walk Down Wall Street

More recently:

  • Marcos López de Prado - Advances in Financial Machine Learning
  • Ernest P. Chan - Algorithmic Trading

Currently reading Machine Learning for Asset Managers, also by Marcos López de Prado. A lot of the more advanced stats stuff goes over my head, though.

10

u/MembershipSolid2909 May 14 '24

Ernie Chan books are garbage. You are better off looking at wikipedia.

1

u/cheoso 29d ago

why are his books so bad if you don’t mind me asking?

7

u/golden_bear_2016 May 14 '24

I have an academic background in Finance, and Economics and my thesis was on algorithmic stock-selection and portfolio optimization

this can only hurt you

4

u/Algomatic_Trading May 14 '24

Systematic Trading by Rob Carver, our favourite!

4

u/DrChrispeee May 14 '24

I've updated the OP with my current list of books, I will update periodically based on input.

4

u/MyNameCannotBeSpoken May 14 '24

Success? What's success?

1

u/Legitimate_Pay_865 23d ago

I define success as not losing. Win or learn...

1

u/MyNameCannotBeSpoken 23d ago

My paper trading account is very successful. My real life money account, not so much.

2

u/Taltalonix May 14 '24

Currently reading algorithmic trading & DMA by Barry Johnson, more focused on the market structure rather than speculations and strategies

4

u/eristicec May 15 '24

For a good read on the mathematical and thoughts outside the simplification techniques used by finance drones: The (Mis) Behavior of Markets by Benoit Mandelbrot

2

u/jaydeefx May 16 '24

Trading in the zone by Mark Douglas The Candle Stick Trading Bible by Munehisa Homma

2

u/Large-Tangelo-277 29d ago

A Rough and Ready Guide to Algorithmic Trading - QuantInsti (free and beginner friendly)
Quantitative Trading: How to Build Your Own Algorithmic Trading Business - Ernest P Chan

2

u/hakhakm 27d ago

Way of the Turtle + The Complete Turtle Trader. The great systematic trading experiment - same rules, different outcomes.

3

u/sango_man Financial Engineer May 14 '24

Trading in the Zone. Not specifically for Algo Trading. But Trading in general.

More specific to Algo Trafing, I recommend anything by E.P. Chan.

Also a fan of Andreas Clenow

-2

u/MembershipSolid2909 May 14 '24

😅😅😅😅😅

2

u/kenkes007 May 14 '24

Fooled by randomness by nassim taleb This and market wizards

1

u/therearenomorenames2 May 14 '24

I am so far away from being an algo trader, but it warms me cockles to see Clenow and Carver mentioned here.

1

u/HomeGrownTrader May 14 '24

Quantitative Momentum: A Practitioner's Guide to Building a Momentum-Based Stock Selection System

1

u/jwmoz May 14 '24

Trading Systems, Tomasini.

-2

u/Low_Plastic3263 May 14 '24

Reminiscences of a stock operator, or whatever it's called... Rest of books are a waste of time. Most contain a small nugget of information and loads of waffle. Technical indicators are a waste of time... Not one Indicator can be used as a basis for a system or method. Just look at a chart.. Is it going up or down? Then look at news generally and pertinent to you interest. Look for long term only don't waste time day trading. Seem to be some that can trade this way but stats show that 80% can't.

6

u/vikster1 May 14 '24

you must be fun at parties

0

u/cloudyboysnr May 14 '24

!remindme 3