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What is real?

This is a question I find is increasingly important to me in my continuous process of learning this subject. In fact there are two, what is real and what is common?

Its like this. You read everything, look at a million systems, read books, try things. Its a total mess. However you start to pick out singular bits and pieces that you can definitely say are real.

For instance, I eventually came to the conclusion that support and resistance was real. Sound ridiculous I know, you’d say “of course its real!” – yes its true, but it depends on how you are determining what is support and resistance, because there are a million ways.

However after much experimentation and thought, I finally arrived at my way of determining these levels and I know its real. It works. It is one tool that I am totally sure of and I do not have to really spend time on that subject anymore. Its in the bag. I will probably use this method for the rest of my life.

There are others also, but this is how (I think) you begin to construct your trading method and style. Also, you may read about a hundred other peoples systems and then recognise that they have one core common theme. It may be (for instance) pull backs to an EMA. Despite the infinite variations, all of these systems you can group together and call them EMA pullback systems. You can then determine that there is something in it, but what? It then becomes a process of experimentation with the idea until you arrive at the method that works for you in this regard.

So out of the mess, you pick out core ideas to test and examine. Due to my increasing interest in news trading I have been reading as much as I can from other traders about this on the forums, books and ebooks etc. Even though they bitch and argue and debate, you can see one or two core similarities that are probably the key to what ever successful results they have, and its these that you want to zero in on.

Ten Anecdotal/Historical Book Ideas for Investors

About a month or so ago, I finally got around to reading Marty Schwartz’s classic, Pit Bull, which I can best describe as a colorful autobiography that uses the 1980s options world as a palette for many amusing anecdotes that are expertly conveyed. The book was such a fun read that I went through the whole thing in no more than 2-3 days, cobbling together bits and pieces of ‘free time’ in order to do so.

 

Schwartz’s book is pure entertainment and touches only briefly on methodologies and techniques, yet I was able to pull quite a few investment-related nuggets from it in a short period of time, with the added benefit that the learning process was all fun and no pain. The process got me thinking that perhaps the fastest way to effortlessly bombard the brain with useful investment ideas are those easy reads that provide a personal historical window into the markets.

 I am contrasting this process with the process I went through in trying to read and digest the ideas in Alan Farley’s The Master Swing Trader, which, despite the many interesting ideas, is about as fun to trudge through as Hegel.

 With this in mind, I offer the following ten books as relatively effortless ways to cross-pollinate your investment thinking with that of some of the better minds in the field, both past and present.

 Roughly in order of how quick and easy they are to read:

  • How I Made $2,000,000 in the Stock Market (Nicolas Darvas) – You can probably read this book in a little over an hour. There are only a few salient ideas, but these are destined to stick with you long after you have read the book. I also found that the path Darvas took along the way to developing his system bears a strong resemblance to my own.
  • Pit Bull (Marty Schwartz) – A fast-moving and superbly written account of a champion options trader. A great companion for a cross-country plane trip.
  • Reminiscences of a Stock Operator (Edwin Lefevre) – This is on almost everyone’s reading list, so I will say little about it, other than to point out that it is chock full of insight, yet still reads like a novel.
  • A Journey Through Economic Time (John Kenneth Galbraith) – A very different book from the others on this list, this is certainly one of the easiest economics reads out there, yet the survey of the economic landscape from WWI to after the fall of the Berlin Wall will give the reader a lot to think about.
  • My Life as a Quant (Emanuel Derman) – Another physicist who writes extremely well, Derman provides a thoughtful accounting of his personal journey through the (then) unlikely intersection of theoretical physics, finance and risk.
  • Investment Biker (Jim Rogers) and Adventure Capitalist (Jim Rogers) – These two books are probably best read back to back, in chronological order, starting with the Investment Biker’s 1990-1992 world tour, then using the 1999-2001 Adventure Capitalist jaunt to see how the world had changed over the course of a decade. This is first-person global macro analysis at its best, though you may not have the stamina to do your own world tour in one sitting…
  • Market Wizards (Jack Schwager), The New Market Wizards (Jack Schwager), and Stock Market Wizards (Jack Schwager) – I never thought I’d willingly place the Schwager wizards trilogy at the bottom of any list, but they end up here because they are more densely packed than the other books. Like the Jim Rogers duo, these are best consumed in small bites, on an empty stomach, leaving ample time for proper chewing and digestion. Schwager’s interview style and editing is such that he is able to deliver an astonishing amount of information in an easy to read fashion. The best news of all is that while the books are a great place for beginners to start, they somehow manage to improve with repeated reading.