The best reads for traders.

By Krueger, Diane
Publication: Futures (Cedar Falls, Iowa) Date: Thursday, June 1 2000 http://www.allbusiness.com/accounting-reporting/budget-operating-budget/5725731.html Many of those new to trading wonder where to begin and often start with a book to bone up on the basics. The confusion begins by trying to decide where to start. Here we look at some books recommended by those familiar with trading and some titles that made it onto several best seller lists. Whether you're new to trading or have been trading for 20 years, chances are you read some books about trading before you started. If you did, you probably know how easy it is to get lost in the abundance of titles available on the subject. Maybe you perused the aisles of a bookstore, sorted through the hundreds or thousands of entries at online shops, or received a personal recommendation. Whatever the situation, once you started reading you probably realized just how many books exist on the different aspects of trading. From historical to psychological to various forms of analysis, it seems you can find a book about any topic related to trading. "When it comes to information, one of the best places people should go to first is the exchanges," says Dan Gramza, president of Gramza Capital Management Inc. and a teacher at the Chicago Mercantile Exchange (CME). "People need to understand the markets they'll be trading and the best place to do that is at the exchanges. They offer lot of good information." With the explosive success of the Internet, most exchanges provide a substantial amount of information online. From product and price information to the basics of what you need to know if you're interested in trading can be found on most sites. The CME offers a variety helpful information on its Web site. Online courses, including "Introduction to Futures," "Before You Trade" and "Options on Futures for Beginners," are available. A library with a bibliography of suggested reading materials and an index of articles on futures and options also is provided.

In addition to requesting brochures, the New York Board of Trade allows visitors to its Web site to access "Live on the Web." This is a feature that lists upcoming and past seminars offered by the exchange with audio, full graphics presentations and a question and answer session in real-time. Before reading any books about trading techniques, it is important to understand the basic foundation and nature of the markets. By understanding how the markets behave, you can better understand how and when to make a move. "I recommend Against the Gods: The Remarkable Story of Risk by Peter Bernstein," says Mike Wesley Covel, director of research at Turtle Trader. "Against the Gods is a book about risk. It takes an often elusive subject and places some numbers on it. Because futures trading is a zero sum game, no trader will ever really excel unless he is grounded in the numbers," Covel says. Against the Gods tells the story of a group of famous scientists who discover risk and scientifically link the present to the future. The book explains such concepts as probability, uncertainty, the difference between chance and skill, the connection between gambling and investing and rational vs. irrational decision making. The book describes a group of thinkers who learned how to understand, measure and weigh risk and its consequences. The discoveries about the nature of risk are the basis of the modem market economy. "Reminiscences of a Stock Operator," recommends a 15-year veteran futures trader (currently at the Chicago Board of Trade). "It introduces a trader to the whole game of trading, including risk management, and the psychology of trading gives great guidelines for what you should and should not do as a trader. These guidelines still hold true today," says the trader. Written in 1923, by Edwin Lefevre, the book follows the life of Jesse Livermore and captures the inner workings of the trader's mind, along with recalling mistakes made and insights about the market and trading. Market Wizards by Jack D. Schwager is a classic read for anyone interested in trading. Schwager, a trader himself, interviews a variety of successful traders to find out their methods. A couple of the traders profiled include Michael Marcus, who turned a $30,000 account into $80 million, and Ed Seykota, who, over the course of 16 years, earned a 250,000% return on his accounts. The book discusses the successes and failures of each trader, as well as how they manage risk and the lessons they learned.

Another aspect of trading to examine before you purchase your first contract is the psychological aspect. Knowing how to prepare and cope when most of your trades won't be profitable and how to maintain the proper focus is crucial. The Disciplined Trader: Developing Winning Attitudes by Mark Douglas takes a different look at trading by focusing on the psychology of trading. It identifies many of the emotional distractions that can prevent a trader from clearly planning and executing trades, as well as offers help for eliminating those distractions. The book shows the reader how to examine and limit trading behavior and looks at a few successful traders who have developed a mental discipline to make money consistently. Once you've read up on the nature of the markets and the underlying factors that can affect your trading, it's probably a good time to move on to books on the basics of trading. "The second thing I'd recommend is the 'Futures and Options' course book published by the Futures Industry Institute," Gramza says. "It has quizzes and tests so you can familiarize yourself with trading. Then, after you've done these things, you can get into books on trading techniques." "My recommendation is the Introduction to the Futures and Options markets," says Leslie Mitchell, director of marketing for the Futures Industry Institute. "Published by the Futures Industry Institute, it provides the basic vocabulary and concepts needed to understand the markets. It describes market players, functions and products of the futures and options markets," Mitchell says. "Trading 101 and Trading 102 by Sunny Harris are very popular," says David Solomon, a sales representative who handles all book and software for the New York Institute of Finance. "They provide a basic approach to trading." Trading 101: How to Trade like a Pro is specifically written for those new to trading. It explains market jargon and trading basics, as well as offers the reader a how-to guide for daily futures and options trading. The book also provides details on how to choose the best discount brokerage and which software packages are best for planning and evaluating trades. Trading 102: Getting Down to Business picks up where its predecessor left off. This time the focus is on designing an individual trading system and starting a personal

trading business. This book covers the science of the business, formulating a sound business plan, software for system testing, as well as system performance assessment. Getting Started in Options (Third Edition) by Michael Thomsett can be found on many best seller lists. It offers novices interested in trading options an opportunity to bone up on the basics. The book talks about choosing stocks, buy and sell puts and calls, understanding time values, strike price and expiration, as well as how to read the market and spot the risks of each type of option. It provides a good introduction to the sometimes-confusing world of options. Despite day-trading's debatable reputation among some traders, books on this topic capture the attention of many, as evidenced by its healthy representation on several best seller lists. How to Get Started in Electronic Day Trading: Everything You Need to Know to Play Wall Street's Hottest Game, by David Nassar, was Amazon's top selling trading book for 1999. "Day trading has been misrepresented by a lot of firms that make investors believe that you don't need to know anything about the company. You just need to know if they're going up or down," says Nassar. "If you're trading without understanding why you're making the trade, then all you're doing is gambling." In his book, Nassar describes the rules and strategies of Electronic Direct Access Trading, which is a system that allows the user of a personal computer to buy and sell at the best prices the market can offer. The book also discusses how to spot market inconsistencies and using technical analysis to spot trends and momentum. After covering the basics, the playing field is wide open on what to read next. From building trading systems to advanced methods of technical analysis, there's a bevy of books available for the choosing. "The best technical book for options and futures traders is Options' Futures & Other Derivatives by John Hull," says George Constantinides, professor of finance at the University of Chicago Graduate School of Business. "The book is technical, but a classic. It teaches the principles of pricing and hedging and provides enough leads and references that the reader can be educated to the technical state-of-the-art." The book deals with a wide range of derivative products and covers important analytical material. Topics covered include the use of futures for hedging, exchange-

traded options markets, swaps, trading strategies involving options and estimating volatilities and correlations. It offers readers explanations of difficult material and helps to analyze derivative products. Analyzing and Forecasting Futures Prices: A Guide for Hedgers, Speculators and Traders by Anthony Herbst can be found on the CME's selected bibliography list. The book contains examples of how to use spreadsheet programs to learn about cycles in the markets. Also discussed are programs that can be used to perform detailed cycle analysis, validation and forecasting. Topics covered include visual and manual methods for finding cycles, how to judge if a cycle is significant, as well as fundamental and technical analysis. "It was clear to me that many people thought of options as purely speculative investments," says Jim Bittman, an instructor at the options Institute of the Chicago Board Options Exchange and author of Options for the Stock Investor. "My purpose was to explain the difference between conservative, investment oriented strategies and trading, or speculative strategies." In addition to covering the mechanics of basic options strategies and using options to achieve long-term goals, the book provides tests and graphic summaries of various options strategies. Another important aspect of trading to research is trading systems. Design, Testing and Optimization of Trading Systems by Robert Pardo offers guidance for futures and options traders who are not computer literate. Traders, using any form of technical analysis they choose, learn how to set up and adjust a successful trading model for specific market consideration, trading techniques and products. The book covers trading system development, rules of simulation, exercises in testing and evaluation of performance. Although the possibilities are limitless, it's important to find the right books at the right time. Obviously, you don't start by reading a highly technical book when you're vaguely familiar with how futures work. It's also essential to read about the history and nature of the markets. As the saying goes, Those who do not remember the past are condemned to repeat It." Unfortunately, there isn't an all-encompassing guide to trading and anyone interested in trading faces the daunting task of trying to find the right book.

AMAZON.COM'S TOP TRADING SELLERS The following is a ranking of the top selling trading books taken from Amazon's 50 personal finance and investing bestsellers of 1999. 4. How to Get Started in Electronic Day Trading: Everything You Need to Know to Play Wall Streets Hottest Game by David Nassar 9. Electronic Day Trader by Marc Friedfertig 13. Electronic Day Trader's Secrets by Marc Friedfertig 22. Getting Started in Options (Third Edition) by Michael Thomsett 26. Day Trade Online by Christopher A. Farrell 37. Trade Your Way to Financial Freedom by Van K. Tharp 39. The Disciplined Trader: Developing Winning Attitudes by Mark Douglas 41. The Options Course: High Profit & Low Stress Trading Methods by George A. Fontanills 48. Trading Online by Alpesh B: Patel and Patrick Arbor TOPS FOR TRADER'S PRESS A variety of trading books appear on the Trader's Press Bookstore 100 Best Sellers list. Here are the top 20. 1. Stock Patterns for Day Trading, Volume 1 by Barry Rudd 2. The Amazing Life of Jesse Livermore: World's Greatest Stock Trader by Richard Smitten 3. How I Trade For a Living by Gary Smith 4. Exceptional Trading: The Mind Game by Ruth Roosevelt 5. The Magic of Moving Average by Scott Lowry 6. Cut Your Trading Taxes in Half by Ted Tesser 7. Jesse Livermore: Speculator King by Paul Sarnoff

8. Stock Trading Wizards by Tony Oz 9. Ask Mr. Easy Language by Samuel Tennis 10. Short-term Trading with Price Patterns by Michael Harris 11. Street Smarts by Laurence Connors and Linda Bradford Raschke 12. When to Sell Stocks & Pin Down Your Profits by Ira U. Cobleigh 13. Trading for a Living: Psychology, Trading Tactics, Money Management By Dr. Alexander Elder. 14. The Taylor Trading Technique by G. Douglas Taylor 15. Stock Patterns for Day Trading, Volume 2 by Barry Rudd 16. The Trading Rule That Can make You Rich by Edward D. Dobson 17. Candlestick Charting Explained by Gregory L. Morris 18. The Encyclopedia of Chart Patterns by Thomas Bulkowski 19. Profiting with Futures Options by David L. Caplan 20. How to Trade in Stocks by Jesse Livermore SUGGESTIONS FROM STOCK SOLUTIONS This is a list of 20 of the top 50 bestsellers on futures trading at Stock Solutions. 1. Trading for a Living; Psychology, Trading Tactics, Money Management by Dr. Alexander Eider 2. The Complete Day Trader: Trading Systems, Strategies, Time Indicators and Analytical Methods by Jake Bernstein 3. The Day Trader's Advantage: How to Move from One Winning Position to the Next by Howard Abell 4. Futures 101: An Introduction to Commodity Trading by Richard E. Waldron 5. Keys to Investing in Options and Futures by Nicholas G. Apostolou

6. Study Guide for Technical Analysis of the Futures Markets: A Self-Training Manual by John J. Murphy 7. Getting Started in Futures by Todd K. Lofton 8. Hedge Funds: Investment and Portfolio Strategies for the Institutional Investor by Jess Lederman 9. Trading Chaos: Supplying Expert Techniques to Maximize Your Profits by Bill Williams 10. The Elements of Successful Trading by Fred D. Arditti 11. Starting Out in Futures Trading by Mark J. Powers 12. Al Frank's New Speculator: The Master of Value Investing Shows You How to Pick Winning Stocks by Al Frank 13. Derivatives: A Comprehensive Resource for Options, Futures, Interest Rate Swaps and Mortgage Securities by Fred D. Arditti 14. The Futures Game: Who Wins? Who Loses? Why? By Richard J. Teweles, et al 15. Schwager on Futures: Fundamental Analysis by Jack D. Schwager 16. Design, Testing and Optimization of Trading Systems by Robert Pardo 17. Trading with the Odds: Using the Power of Probability to Profit in the Futures Market by Cynthia A. Kase 18. Option Strategies: Profit-Making Techniques for Stock, Stock Index and Commodity Options by Courtney D. Smith 19. The Intuitive Trader: Developing Your Inner Trading Wisdom by Robert Koppel 20. Sure-Thing Options Trading: A Money-Making Guide to the New Listed Stock and Commodity Options Markets by George Angel