If you are new to the stock market, the number one thing to do is to educate yourself as much as you can. Before you start doing any investing or trading, it’s important to start thinking like a professional investor or trader. Even if you’re already experienced, continuous education is essential in this business.
The internet offers a mass of information (a lot of it not worth your time) and it’s easy to get overwhelmed and intimidated. I have found that the best way to start is by reading some of the classic texts on investing, trading and trading psychology. They are a must read for anyone serious about the stock market.
When I started investing and trading, I had to teach myself from scratch. Everything I know today I had painstakingly learned, bit by bit, some from books, some from other traders and much from trial and error. To help you get started right away, here are some of the books that have influenced me (as well as some true must read classics).
SECURITY ANALYSIS (Ben Graham, David Dodd) is a must read classic, the bible of value investing.
THE INTELLIGENT INVESTOR (Benjamin Graham) – here’s a lighter version of Graham’s value investing teachings.
CONTRARIAN INVESTMENT STRATEGIES: The Next Generation (David Dreman) – a must read for any investor who wants to beat the market (and most professional money managers).
THE ART OF CONTRARY THINKING (Humphrey B. Neill) – a classic on contrary thinking and investment strategy. (“When everybody thinks alike, everyone is likely to be wrong.”)
THE CROWD: A Study of the Popular Mind (Gustave Le Bon) – a 19th century classic on crowd psychology, as relevant as ever.
THE SNOWBALL – Warren Buffett and the Business of Life (Alice Schroeder) – a fascinating, in depth insight into Buffett’s life and investing career.
THE ESSAYS OF WARREN BUFFETT – Lessons for Investors and Managers (L. A. Cunningham) – gems of financial wisdom taken from the annual reports Buffett writes for his holding company, Berkshire Hathaway.
THE LITTLE BOOK THAT BEATS THE MARKET (Joel Greenblatt) – this is an odd little book by one of the world’s most successful value investors. Don’t let the (somewhat misplaced) anecdotal, story-based style put you off, this tiny book is well worth reading. Greenblatt shows you a very simple stock picking methodology that actually works.
YOU CAN BE A STOCK MARKET GENIUS (Joel Greenblatt) – despite the somewhat silly title, this is a good, practical, easy-to-use guide to special situations investing.
REMINISCENCES OF A STOCK OPERATOR (Edwin Lefevre) is a (disguised) biography of Jesse Livermore, a remarkable trader in the early 20th century, who made and lost fortunes several times over. Livermore’s lessons about investing, speculating, and the nature of the market itself are invaluable and still relevant today. A true classic.
MARKET WIZARDS – Interviews with Top Traders (Jack Schwager) – learn how 17 superstar traders make millions in the markets, often within weeks or days. One of top-selling trading books of all times.
THE NEW MARKET WIZARDS – Conversations with America’s Top Traders (Jack Schwager) – another excellent book offering insights into the minds of superstar traders.
MASTER TRADERS – Strategies for Superior Returns from Today’s Top Traders (Fari Hamzei) – learn the proven strategies of successful hedge fund managers and top traders.
THE DISCIPLINED TRADER – Developing Winning Attitudes (Mark Douglas) is the most in-depth book on trading psychology. A leading market-psychology expert (and successful trader) teaches you what is required to be successful in the markets. A must read for any trader.
TECHNICAL ANALYSIS OF THE FINANCIAL MARKETS – A Comprehensive Guide to Trading Methods and Applications (John Murphy) is the bible of technical analysis. A must read for every trader, from beginners to experts. A huge book but easy to read and understand.
TRADING FOR A LIVING – Psychology, Trading Tactics, Money Management (Dr. Alexander Elder) – a bestseller and must read for all beginning traders. Successful trader and psychologist debunks the myths and teaches you how to survive and prosper as a trader. Focused on the 3 M’s – Mind, Method, Money.
COME INTO MY TRADING ROOM – A Complete Guide to Trading (Dr. Alexander Elder) – another useful book (especially for less experienced traders) about winning trading methodology, psychological pitfalls, money management, time management and much more.
THE GREATEST TRADE EVER: How John Paulson Bet Against the Markets and Made $20 Billion (Gregory Zuckerman) – a fascinating insider look at the hedge fund wizard’s bet against the subprime mortgage market.
THE BIG SHORT: Inside the Doomsday Machine (Michael Lewis) – the story of a few renegade and largely eccentric investors who bet against the financial system by shorting the subprime mortgage market, and made a killing along the way.
TOO BIG TO FAIL: Inside the Battle to Save Wall Street (Andrew Ross Sorkin) – a gripping, in-depth account of the 2008 crisis that threatened to bring down the financial system. A must read book – lively, easy to read…a real life thriller.
WHEN GENIUS FAILED – The Rise and Fall of Long Term Capital Management (Roger Lowenstein) – a riveting story behind the extraordinary success of LTCM and its dramatic demise that nearly took down the entire financial system in 1998. A must read classic.