Technical Analysis of the Financial Markets

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1. kevasJul 2018
   For me...

   1. Technical Analysis of the Financial Markets by John Murphy

   2. Options as a Strategic Investment by Lawrence G. McMillan

   3. [just finished] The Checklist Manifesto: How to Get Things Right By Atul Gawande

   4. [finished last week] Dealers of Lightning by Michael A. Hiltzik

   5. [currently working on] Design Patterns: Elements of Reusable Object-Oriented Software By GOF

   6. [currently working on] Dan Appleman's Visual Basic Programmer's Guide to the Win32 API by Dan Appleman

   7. [next on the list] Skunk Works: A Personal Memoir of My Years at Lockheed by Ben Rich, Leo Janos

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2. pellerJun 2017
   From a trader's perspective, losses are the cost of doing business. When you're starting out, your losses are your tuition. An engineer spends at least $100K+ and 4+ years going school to learn their craft; why should it be any different for traders? (Aside from the fact that there's no school and no curriculum; there's only the library, the market, and your wits.) If you read the Market Wizards series, you'll find a lot of pros saying things that amount to "on average out of 10 trades 6 or 7 of them will be losers - but I keep my losses small and let my winners run."

   Here's how it works for a casino: the outcome of any given roll of the dice (say) is random. But over a thousand rolls of the dice, the odds of the game are not random. For a casino, obviously the games are set up so the odds favor the house, and "in the end the house always wins." For a trader, your "odds" against the market are determined by your skill. Every individual trade is still essentially random, but if you're good at what you do - if your market analysis, entry timing, risk/money management, and adherence to your trading rules is solid - over a large enough sample size the outcome will be net positive. It's a strange duality for some people to grasp.

   A good first read: High Probability Trading (Marcel Link)

   The Bible: Reminiscences of a Stock Operator (Edwin Lefevre)

   The basics: Technical Analysis of the Financial Markets (John Murphy), Japanese Candlestick Analysis (Steve Nixon - skip the first chapter), Trading and Exchanges (Larry Harris)

   Good follow ups: All the Market Wizards books (Jack Schwager)

   Psychology: Trading in the Zone (Mark Douglas), The Nature of Risk (Justin Mamis)

   Less theory, more practical: Mastering the Trade (John Carter)

   Putting it all together: How to Buy (out of print) and When to Sell (both Justin and Robert Mamis; slightly outdated but 100% worth reading.)

   Some of these books are "expensive." But even if you only learn one thing from a book, it'll have paid for itself 10 times over. Take copious notes. Find the commonalities. Filter out the bullshit. Watch the markets; see what "clicks" for you. The trading exercise towards the end of Trading in the Zone is a great way to test yourself without risking a whole lot. (On that note, a theme you'll find, if loosing 2 or 3 thousand is going to be an issue for your current well being, perhaps better to wait to put money up until such a cost is somewhat closer to pocket change...)

   If that all sounds like too much effort, then perhaps the more typical buy index funds and hold until you retire answer you'll often get around here is more your speed. No shame in it.

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3. laxativesDec 2016
   * Fiction *

   The Alchemist -- reread one of my favorites of all time

   Candidate -- reread

   Infinite Jest -- takes 300 pages to "get" David Foster Wallace's style and 500 pages to enjoy it, but well worth the investment. Probably one of my favorites of all time now.

   The Brothers Karamazov (in progress) -- Have been wanting to read more Russian Literature and apparently Infinite Jest borrows many plot points from Brothers Karamazov. I just started it a few days ago...

   * Non-Fiction *

   String Theory -- another book by David Foster Wallace containing a few essays on tennis. Even if you don't like his fiction, I doubt anyone would argue that the eponymous essay isn't great.

   Open -- Andre Agassi's autobiography

   Inner Game of Tennis -- reread

   Winning Ugly -- Read this twice in 2016 (reread in progress). My mental game is volatile to say the least.

   My System (in progress) -- Aron Nimzowitsch's Chess study

   In a Sunburned Country -- Bill Bryson's description of his trip to Australia

   Sailing Made Easy -- ASA 101/102

   Coastal Cruising Made Easy -- ASA 103

   Buying Your First Sailboat

   Open Water Diver Manual -- PADI Open Water Certification

   Enriched Air Diver Manual -- PADI Nitrox Certification

   Adventures in Diving Manual (in progress) -- PADI Advanced Open Water Certification

   Shadow Divers -- Diver's in the 90's discover a German U-Boat just dozens of miles off the coast of New Jersey

   Triple Your Reading Speed -- It definitely works, but its only applicable to simple texts like popular fiction and maybe news articles/blogs. I guess it probably does still benefit denser stuff though.

   The Origin of Conciousness in the Breakdown of the Bicameral Mind -- This is quite possibly the work of a crank, but there's some interesting ideas that seem not impossible. A lot of his arguments are clearly cherry picked and loads of sentences like, "The statue had a big ear, obviously an example of bicameralism".

   Piano Handbook (in progress) -- Been working on the exercises in this and started learning the piano as an adult, two years ago. Just two chapters of eighteen to go...

   Jazz Piano (in progress) -- Will focus on this once the above text is done

   The Wine Bible (in progress)

   Porsche: Origin of Species (in progress)

   Millionaire Next Door (in progress) -- In strong conflict with the ideas presented in the text above...

   * Technical Non-Fiction *

   Functional Programming in Scala

   Pro Git

   Learning from Data

   Optimization Models; Califiore, El Ghaoui (in progress)

   Technical Analysis of the Financial Markets (in progress) -- Not great. Very little motivation to finish this one...

   Had the goal of 30 books, at least 8 of which had to be textbooks. Not quite there, but there's some really dense stuff this year, so I'm not too worried. I had no idea how little fiction I was reading; will need to adjust that next year.

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4. lionheartedSep 2011
   I'm enjoying this discussion heavily, particularly your contributions to it which are great. Just a minor (but important) nitpick -

   > A stock analyst is going off of timing and trends more than data.

   Not necessarily. You can broadly divide analysis into two camps - "technical analysis" [1] which is what you're describing, and "fundamental analysis" [2] which is looking more at intrinsic value, numbers, assets, things like that.

   Warren Buffett, for instance, does plenty of stock analysis and he's not a technical trader at all. He repeatedly says he doesn't try to time the market. [3]

   The first book I read on trading - Technical Analysis of the Financial Markets [4] - was from a technical analysis perspective, and I lost money trying to implement it.

   Then I read about value investing and started trying to apply those principles - only buying fundamentally sound stocks trading at a favorable price earnings ratio, either in fundamentally defensible businesses or with lots of solid assets on their books, and buying with a big margin of safety.

   I haven't had a losing trade since then, though in fairness my sample size is small and I don't sell unless the price of a stock I bought gets over what I consider reasonable. I'm currently holding Microsoft and HP which are down, but both I think are way undervalued (Microsoft is extremely stable, has some upside in the way of a strong research division, and could potentially translate a hit like the Kinect into alternate input devices. HP is being treated as toxic despite owning some nice high margin businesses that most people don't think about when they think of HP, as well as a huge patent portfolio and some good assets... yeah, their management sucks lately, but who cares if a company is trading below its liquidation value? anyways, do your own research, check the financials, etc, etc)

   Anyways. Not all traders are technical traders. Fundamental analysis is also analysis, and probably easier to implement to be consistently successful. The top book on that is "The Intelligent Investor" [5] by Ben Graham, which Warren Buffets calls the best book on finance ever written (I agree).

   [1] http://en.wikipedia.org/wiki/Technical_analysis

   [2] http://en.wikipedia.org/wiki/Fundamental_analysis

   [3] “If you’re an investor, you’re looking on what the asset is going to do, if you’re a speculator, you’re commonly focusing on what the price of the object is going to do, and that’s not our game.” (1997 Berkshire Hathaway Annual Meeting)

   [4] Generally considered one of the best intro books to technical analysis. http://www.amazon.com/gp/product/0735200661/ref=as_li_ss_tl?...

   [5] http://www.amazon.com/gp/product/0060555661/ref=as_li_ss_tl?...

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