Pete’s Recommended Reading List
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This first book is from one of my most favorite authors, Nassim Nicholas Taleb. Titled “Fooled By Randomness”, the author gradually builds the case for a world where randomness rules. Just because we see correlations or patterns does not mean there is causation. Assuming A causes B just because there is a strong correlation can lead us into a swamp of confusion. This book really opened my eyes and helped me to look at the markets with a healthier appreciation of the element of random chance.
I couldn’t mention the previous book without listing two of my other favorites from Taleb. “The Black Swan”, published just months before the great financial collapse of 2008 was the follow-up to “Fooled By Randomness”. Followed later by “Antifragile”.
In “The Black Swan”, Taleb expands on the topics of randomness and probabilities he laid out previously. There is a much finer grain of detail in the second book, as Taleb explores “the impact of the highly improbable”. He spends a lot of time explaining how and why modern economic theory fails to allocate resources to account for those Black Swan events.
Of the three, Antifragile was the most fun to read. Taleb builds on the previous material and describes ways to make financial systems more robust. In explaining the title, Taleb goes on to explain his search through numerous languages trying to find a suitable word to describe “things that gain from disorder”. His search came up empty, so he coined the term Antifragile. Consider the fragility of fine China shipped parcel post, and compare that to muscles growing stronger from lifting weights. The latter are said to be Anitfragile, while the former, fragile.
Books on Trading
I’ve got two books on trading that stand out as having a major impact on my understanding of financial markets, as well as those who operate in them. The first one is technical, while the last one is of historical perspective.
Robert C. Miner’s “High Probability Trading Strategies” was instrumental in helping me understand the value of multiple time frames, Elliot Waves, and Fibonacci retracements. Most importantly, regarding the latter, the technique of finding clusters of key levels, confluence. Some of you may have heard of Carolyn Boroden, also known as the Fibonacci Queen. Well she was mentored by Robert Miner before going on to build a very successful business based on his concepts.
“Reminiscences of a Stock Operator” by Edwin Lefevre is a true classic. The version I am linking to here makes a wonder coffee-table book. It is really a fun book to read to someone else, preferable in a group. The stories in the book take you on a bit of a history lesson, spanning the years leading up to the ’29 crash and a bit of time after. It really is a joy to read. But it’s important to realize that just because the material dates back nearly 100 years, nothing ever changes in the markets. The same shenanigans are taking place today, only the names of the actors have changed.
Another essential book, Trading In The Zone by Mark Douglas. Have you ever been afraid to hit the button, only to see a winning trade slip through your fingers? Well I can tell you the fear is the most normal part of trading. In fact I don’t know of any professional trader who has been immune to this. So actually I would go so far as to say it’s a required part of the process. I personally don’t have advice that I can give you. But I can recommend a book that has helped many other traders deal with the psychological aspects of trading. And trust me when I say that fear is the least of your worries. The greatest danger is the exact opposite, over-confidence. It can wreck an account far more quickly than fear.
The last book I have to recommend is by no means inferior to the previous. “The Web of Debt” by E. H. Brown. This book takes you on a very informative trip through history explaining how our current monetary system came to be. Why do governments have to barrow money? Why are the government loans never paid back? Did it always used to be this way? Who gave the Federal Reserve the authority to control the money supply and interest rates? How did our monetary system function before there was a Fed? Yeah, if these questions are bugging you then you need to buy this book. But you may spend a few sleepless nights as the reality of our present situation comes to light.