I will be posting a new book
review each week to Slope of Hope.  One
of the primary questions I receive as a trader is, “what should I read to learn
more about trading?”  My goal is to
introduce many of the books I have found helpful and provide a brief summary of
the tome.  Not all books about the
markets are relevant to everyone so hopefully this weekly posting will help you
decide if the selected books are for you.

Let me begin with, what I believe
is, one of the most timeless books ever written about trading:  Reminiscences of a Stock Operator.  Yes, it is cliché to start with
Reminiscences.  However, considering
oneself a professional trader and not reading this book is akin to going to
church and stating that one has never opened the Bible.  Skim the pages of Market Wizards and behold
the sheer volume of great traders and hedge funders who specifically point to it.

Originally published in 1923,
Reminiscences of a Stock Operator is the fictional account of Jesse Livermore;
arguably one of the greatest traders to ever operate on Wall Street.  The lessons and scenarios presented
throughout the book are timeless as the problems Mr. Livermore faces and the
strategies he employs are virtually unchanged in current times.

Why You Should Read Reminiscences

The sheer knowledge and anecdotal
advice sprinkled through the book is spectacular.  Let me present in bullet form quotes from the
book:

• “I didn’t ask the tape why (it moves) when I was
  fourteen, and I don’t ask it today when I am forty…What the dickens does
  that matter.”
• “The desire for constant action irrespective of
  underlying conditions is responsible for many losses on Wall Street.”
• “It never was my thinking that made the big money for
  me.  It was always my sitting.  Got that?  My sitting tight!”
• “Your best and only friend is a prevailing trend.”
• “Always sell what shows you a loss and keep what
  shows you a profit.”
• “I’ve got friends, of course, but my business has
  always been the same; a one man affair. 
  That is why I have always played a lone hand.”
• “Remember that stocks are never too high for you to
  begin buying or too low to begin selling.”

I could continue for hours
regurgitating the priceless pieces of advice throughout the book but that would
defeat the point.

If the prior quotes weren’t
enough to show the advice in Reminiscence is timeless, let me present to
everyone a situation Mr. Livermore faced in respect to a large coffee trade he
put on in 1917 (change the date to 2008/2009 and does the following sound
eerily familiar?):

“Coming sure and fast, that
profit of millions!  But it never reached
me.  No: it wasn’t side-tracked by a
sudden change in conditions….What happened?….It was simply that the fellows
who had sold me the coffee knew what was in store for them, and in their
efforts to squirm out of the positions, devised a new way of welshing.  They
rushed to Washington
for help, and got it (emphasis added).”

Sound familiar?  Not much has changed in Wall Street.  Read Reminiscences and much of the shenanigans
in the current market will no longer shock you. 
Trade the tape you have and listen to the sage advice of the original
Wizard of Wall Street.

Trading Verdict:  BUY

Applicable to:  EVERYONE

A few days ago, my little girl had the following conversation with me:

Daughter: I can always tell which Dad is mine.

Me: How's that?

Daughter: You're the one who's always reading.

It's true. I read all the time. And last night, I scanned my shelves of trading and technical analysis books and picked up Trading In the Zone, which I've read many times before. (It's in my list of recommended reading.)

Most books about trading are totally useless, but there are a few gems. And those you find are gems, I suggest you read over and over and over again. Highlight them; think about them; absorb them. Because as I grow – and you do as well – as a trader, the book's message will be richer and more meaningful.

Well, another el stinko day in bear-land! I've been getting a small handful of harassing emails about the continued upward movement of stocks (which always reminds me of the famed Australian Voicemail I got almost at the exact peak of the market a couple of years ago). Perhaps my detractors are hoping to get me rattled. Sorry, boys. It's not working. Go bother somebody else.

On a happier note, I just received The Mania Chronicles from Elliott Wave International, and I can't wait to read it. It has nearly 700 pages, and it's packed with the kinds of stuff we love discussing here on Slope – – particularly popular culture in the context of the financial markets from 1995 through 2008.

I'll let everyone know what I think when I'm done, but a quick thumb-through makes this looks like something I will have trouble putting down. They're offering it for 34% off, so if you want to get a copy, click here. I was kind of surprised it was only $79 for a very big book on such a niche subject.

I'm not going to do any more posts today. With the markets unable to dip, even on bad economic news like today's retail numbers, I feel like I'm pounding sand at this point, and I'd rather just let my individual positions work themselves out. I will say, however, that I am able to deal with drawdowns with barely a blip of emotions since:

1. I am dealing strictly with risk capital (there is a firewall between my trading and my "living";
2. My trades are based on logic, not emotion;
3. Profits delayed are not profits denied. I have come back from far worse than this! I have every expectation that 2009 will be a terrific year for me.

So I'm going to do some other things besides Slope for the rest of the day. Thanks, as always, for popping by (and a particular thank-you to regular commenters!) Good night.

Last night, I started reading Brett Steenbarger's book, Enhancing Trader Performance (because, God knows, the prior eight days I've felt like I could use some real enhancing).

The first chapter starts off with a couple of traders, Al and Mick. They are both trading the e-mini S&P, and they're both having rough days. The first one, Al, keeps his cool, changes his strategy when needed, and steps away from the markets for lunch to collect himself and do better when he gets back. The second, Mick, is furious with himself, angrily re-analyzes his mistakes to zoom in on where he screwed up, and in general seems like a psychological mess.

The surprise is that Mick is the one who's actually a really successful trader. I imagine most readers, like me, were expecting Al to be the hero. I'm only one chapter into the book, so I'm intrigued to learn more about this paradox.

You can imagine I'm having an absolutely horrible day in the markets. I am eerily calm about it (like "Al", which is distressing, I suppose). I imagine, even years from now, I will regarding my failure to take advantage of the rise from mid-March to now as one of the biggest mistakes of my trading life. But what's done is done.

At this point, I'm going to clear my mind, go through all the charts again, and find out what I see. The bulls are having an absolutely field day, though. Incredible.