The Finance Book Club

one book i didnt see on their but i thought would be of a great arsenal for all traders is Trading From Your Gut by Van K. Tharp also trading in the zone by Mark Douglas

I'll add those to the stack. Thanks!

It looks like 'Trading from your Gut' is by Curtis Faith. Is that the book you mean? Van Tharp's most famous book is 'Trade your way to financial freedom', which I've read and would be happy to summarize. It's basically a more convoluted version of Penfold's money management chapter. Van Tharp is all about money management and believes the market is totally, 100% random.

Chapter 16 - Putting the Pieces Together - the Most Important Chapter
Cooper and his editor are unsure if this chapter or chapter four, the hit list chapter, is the most important but it’s easy to summarize this one.

Trade issues that have more than one of these patterns going for it.
Unlikely to happen, and I’m not sure it really matters.

Chapter 17 - Mind Over Money

1. No one can predict the future
2. Speculation is an art, not science
3. The market is the ultimate arena
4. The market is an irrational creature
5. Teaching and writing down his methods benefited Cooper as it makes something ‘indelible’
6. Keep a journal
7. Cover up price action and try to anticipate it as it unfurls. It will teach you that setups are only setups and anything can happen.
8. Speculation is observation. Abandon opinions and be open to probabilities.
9. The story of the broker who hated being wrong. (he lost)
10. Society values winning so we personalize taking a loss. In some areas that can be beneficial but in trading it’s the kiss of death. There’s no harm in being wrong, only in staying wrong.
11. I wonder how many of these classic bits of wisdom, now almost clichés, were invented by Cooper?
12. The story of Ted Williams, baseball player, who modeled his hitting not after Babe Ruth who swung at everything and struck out as often as he hit home runs, but Rogers Hornsby who waited for the perfect ball. Wait for your pitch.
13. Cooper ends with a Livermore quote, “The diabolical purpose of the market is to continue higher (or lower) with as few people on board as possible.” (yes)
14. “Trading is a crazy game in which those who succeed big learn to thrive on chaos.”

oh i see, i have the book in pdf format and i didnt read the foreward by part before the name Van K. Tharp. Yes the book is by Curtis Faith, unfortunately i only got to page 42 of this book and im grateful this book was recommended to me by a stock trader. Also, trading in the zone by Mark Douglas is a great book mainly for the psychological and biological aspect of trading, also helps with thinking with a probabilistic mindset as oppose to trying to predict something with certainty that it has to happen.

Chapter 18
The final chapter is a sample of his trading journal


Cooper is one of those authors who doesn’t know how to actually end a book so keeps tacking on random thoughts to the end, but that’s about it. He has an addendum about the best way to maximize profits which basically involves holding trades that close strongly - momentum, momentum, momentum.

My thoughts
I really wanted to like Cooper and his methods as they fit my (momentum-trading) mindset but ultimately this book is a disappointment because after hooking our big fish we don’t know how to get them in the boat. Another trading book that falls flat because exits were a secondary consideration or not considered at all. Trades are like marriages or marathons - easy to start but hard to finish.

Update:
After glancing at the appendix (the appendix!) I see that Cooper actually does have a section on trailing stops!! At the very end of the damn book.

Trailing stops

1. Cooper mentions his exits are usually discretionary but here’s how he handles trailing

1. There is no perfect way to exit a trade
2. Success comes of having stops, even if you never maximize your trades
3. This is art, not science
4. The more volatile the stock, the bigger the gains but the more likely you will get stopped out - especially ‘NASDAQ’ stocks
5. The more risk you willingly take on, the higher your ‘pain threshold’ should be

So, definitely an afterthought, not a primary consideration as I feel they should be. Next up: Bird Watching in Lion Country!

If you've read through this thread you'll know I am not a fan of this book or the study of trading psychology in general, however this book is undoubtedly the last word in trading psychology so it should be in the stack. I will do my best to bite my tongue and give it a fair treatment.

oh, i was unaware of you disliking psychology aspect of trading. if you dont mind me asking, how come you view market psychology unfavorably? its good to hear others perspectives.

This sounds fairly interesting Simnz - especially the part about using statistics for exits.

For much the same reasons as stated by Penfold. The sell-side industry has 'positioned' trading as a game where you need 'balls of steel' and a strong will to overcome the pressures of trading which is itself 'un-masterable'. Penfold and I believe that in fact, there is a right and a wrong way to do things and if you're doing things correctly you don't need to feel much of anything. Trading done well is boring. So I don't need much psychological priming except to have faith in my well-designed system and to know what volatility is possible. The sell-side likes to use psychology as an excuse for when traders who don't have a good method inevitably fail.

Of course I have to admit my bias is towards mechanical, automated strategies and if I did put more effort into psychological training maybe I would prefer manual trading? It's a bit of a self-fulfilling prophecy. Once you decide what kind of trader you are, you tend to filter out things that are less useful to you, even if those things might be useful to someone who trades differently.

I have updated the upcoming book list. Every book in the poll now has at least one vote so I'll finish those first and then go through the reader-requested books. If you requested a book but don't see it in the 'table of contents' on page 1 please let me know so I can add it. A new poll will be coming soon.

another book that popped in my mind although it isnt necessarily niched for trading is the compound effect by darren hardy and the power of concentration by Theron Q. Dumont. Another book on trading i found useful and helped me become profitable is Security Analysis by Benjamin Graham, this book is written by Warren Buffets mentor, this book gave me a better perspective of the word investments and how it can be applied wether short term or long term.

A Benjamin Graham book has been on my to-do list since we started. I think I will add it. Thanks!

can this strategy be used on gbpjpy?

The only way to know for sure is to try it (on demo first).
Does your broker give you tight spreads on GJ?

Bird Watching in Lion Country by Dirk Du Toit

Finding the ‘standard’ version of this book is tricky. It’s not on Amazon, or apparently for sale anywhere, but on this website. dayforex.com. The other website addresses mentioned in the book are all offline or parked domains.
I’m going off of this ‘official’ version which was rewritten in 2010.

Preface

1. “the central question I wanted to answer for myself by writing this book was why so many smart people, but so many forex losers? It’s not as if the losers were doing crazy stuff. On the contrary. These are smart people who read, researched, studied, planned. Then they traded, and failed. Why?”
2. The reason is BWILC, the first version, wasn’t ‘contrarian’ enough.
3. People arrive at Du Toit (from now on, DT)’s ‘doorstep’ wounded from years of failed trading, seduced by a marketing message. His mentorship program gets them back on track. (so he says)
4. There is repetition in this book, DT warns, but it’s by design. (ugh)
5. DT mentions his online community. Indeed there is one. drforex.activeboard.com
   It’s not exactly a hopping place though. Most of the threads are years old with no new posts. This would be a good sign by the Clemmo Conjecture except I suspect one reason there are few visitors to this forum is you need to create an account before you can even read anything. I’ll defer for now.

Foreword

1. “Thousands of traders expected to become star traders, leaders of a new generation of ‘market wizards’. Instead they became the victims of the ‘marketing wizards’ at the heart of this industry.”
2. Advertising is making whole lies out of half-truths
   1. The forex trading industry is like this
   2. Half-truths about what can be achieved and in what time (true - think about how the industry could avoid imploding if even a few people could do what is bragged about. It couldn’t.)
   3. “Where are the customer’s yachts” - Book by Fred Schwed
   4. The main idea is the winners are the service providers, not the clients

3. “Developing a trading system is such a preoccupation with traders that it is very easy for us to get locked into a narrow-minded view about what we are busy with.”

Part 1 - How to Build a Bomb
Intro

1. Most people know Einstein’s formula for mass and energy equivalence (E=mc^2) but that by itself doesn’t teach you how to build a bomb.
   1. Similarly, your forex formula probably looks like this:
      “Learn technical analysis. Determine high probability trade setups. Do not risk more than 2% of your account. Place a stop loss order. Run your profits, cut your losses. Repeat this unemotionally and systematically.” A pretty good summary of Forex forums
   2. This formula causes beginner retail traders to blow up their accounts
   3. There are a small number using this formula who are successful (who? How does he know? And what makes them outliers? survivorship?)
   4. 1/10 traders anecdotally make a success of it

2. DT’s formula for success
   1. “I take one currency,
   2. I trade it in one direction only,
   3. I regularly “bank” one percent of my capital and
   4. I do it with low gearing
   5. on multiple levels
   6. (my 4x1 strategy)”

3. Following this would require ‘endurance and staying power’
4. If you want to trade for a lifetime and you quit after 3 years you failed
5. Many don’t make it 3 weeks or 3 months
6. Most won’t make money due to their ‘idealistic view’ of trading

Chapter 1 - who is this book for

1. DT starts with a testimonial from one of his students - well, more like a bio
   1. They (the sudent) were looking for a new ‘income stream’
   2. A regular business has too many hassles
   3. Trading is just as risky as starting a new business, they reason (likely true in most cases)
   4. Choose between equities, options or forex
   5. Equities are ‘complicated’
   6. Buy TA books, watch Bloomberg, visit forums
   7. Trade H4 using EMA on D1 TF for directional bias and H1 for entry
   8. Sign up for demo account and start with $5000
   9. Try placing trades using the recommended 2% risk with no leverage and find that funds aren’t sufficient
   10. So raise account to $10k and raise leverage to 100:1 which they assume is the lowest possible leverage
   11. Keep trading notes
   12. Make 6% in one week, so 10% a month should be doable they think (evil laughter)
   13. By July everything has been given back (reversion)
   14. Add more indicators!! (nooo)
   15. More entry conditions means fewer trades
   16. Account goes up and down
   17. Since the signals are rare, this trader worried about missing them
   18. They add more pairs to trade
   19. They can’t seem to catch the trends so now they try price action, support and resistance, and pivot points
   20. Without indicators they feel insecure
   21. Price action setups still need to be waited for but they are more frequent
   22. Constant monitoring is required again; price action is short term trading
   23. Begins having doubts; reduces risk to 1%
   24. Wasn’t managing trades ‘well’
   25. New techniques would work at first and then stop
   26. 3-4 months of paper trading and they’re not profitable (boo hoo!)
   27. Start considering news releases
   28. Market sentiment too
   29. Research on the CoT
   30. It all simply adds to the confusion
   31. Don’t trade before news; but how is this possible when there are constant news releases
   32. 10 months go by and they decide they need a mentor
   33. Then they come across ‘Dr. Forex’ and enroll in DT’s program

DT doesn’t edit this section down because they want to make it seem like quite a trial. But to me personally, this seems like nothing! This is one year. Recall Penfold’s description of four years of wasted effort. It can take you a decade to learn how to become profitable. If you don’t have the stamina to endure a multi-year quest, don’t even bother.

1. When it comes to useful vs. non-useful trading books, DT says the former don’t even stack up to his knees.
2. The best books have a simple premise
   1. Reminiscences of a Stock Operator (yes)
   2. Fooled by Randomness (yes!)
   3. BWILC (well, it’s got a long way to go before it gets an A from me)

3. Useful trading books are hard to write because they don’t skirt the difficult issues
   1. Intangible concepts
   2. Trading is ‘great fun’
   3. DT carries on complaining about other books but we’ve already read a great many so we know. We know.

4. Bad technical analysis books are based on how to trade stocks, but Forex is a different beast
5. Why do most traders fail?
   1. “I believe one of the main reasons is a lack of understanding of the role that randomness plays in trading. … The radical changes caused by the availability of real-time information are also not properly discounted, especially in “new” markets such as the retail spot forex market.”
   2. “People are not making money in droves because they are not even getting close to a point where they are indeed the purveyors of scientific effort to make a success of trading.”

6. “Brutal honesty is necessary in order to be successful in trading.”
7. DT talks about ‘tryers’ and ‘cryers’. I’m not sure how any of this concerns us. One of the disadvantages of a self-published book is often, poor editing. I would take this out.
8. Tip services are no good because they’re so dependent on position size, stop placement, and with too much freedom given to any of these, it’s disastrous
9. “There is only one road to success. Your own. You have to learn to put everything together yourself.”
10. You need to have a mentor (but don’t forget that a book can be a mentor too)
11. DT claims one of his students won the 2009 FX Street live trading contest, which had only 3 positive results after 3 months