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2 Must-Read Books That Will Help You Win the Stock Market Game

Jesse Livermore is the Michael Jordan of stock trading.

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BY Quora - 08 Jun 2018

PHOTO CREDIT: Getty Images

What are some recommended books for beginners to learn about finance and Wall Street? originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by John Roberson, stock trader, on Quora:

I've been a successful professional stock trader for about a decade, and there is one book that may well have been read by every single trader in the world. Here's how I learned about it.

When I started trading, the best trader in the office was this guy Marshall. What a character! Maybe 5'1" (1.55 m), 100 pounds soaking wet (45.4 kg). Hated to drive, so he bought a ridiculously nice car so that he could get other people to drive him around just so they could drive his cool car.

Marshall was originally a pretty middling trader, but he left town for a summer and returned an absolute machine. As in, he made a million dollars in a single day more than once. He retired by age 30. Needless to say, as a new trader, I was eager to hear just how he had turned the corner!

What did you do that summer, Marshall?

I read every trading book I could find.

And what did you learn?

I learned how people think.

That's it. That's what trading is really all about. It's not about fancy mathematical models or keeping up on your CNBC viewing. It's about people.

Stock trading is 80% psychology and only 20% strategy.

The question is, of course, Which people? For one, we can segment market participants: Mom & Pop, pension funds, M&A arb groups, swing traders, and so on. But before we even get to that we have to know how good traders think. This brings us to a book that you can use to start a conversation with any trader you ever meet:

Reminiscences of a Stock Operator

Jesse Livermore is the Michael Jordan of stock trading. He made a fortune by calling the stock market crash of 1907, then lost it in a choice "learning experience," built up a massive stake in the bull markets of WWI and the Roaring Twenties... and correctly called the 1929 Stock Market Crash.

Remember that time we decided we figured out how to square the circle, that we're smarter than God, that this time is really is different? Y'know, the housing bubble, the tech bubble, and so on? Well, back when people barely even knew how to use words like "bubble" and "market crash," Jesse Livermore was calling them. "Nobody could have known." Livermore laughs. "We can't know better than the market, so let's just blindly trust it." Livermore might have a few choice words again.

This book, Reminiscences of a Stock Operator, is a fictionalized biography of "The Boy Plunger" (as they called him) written by Edwin Lefevre on the basis of tell-all interviews with Livermore himself.

Revealing interviews with traders are an uncommon thing. You see, celebrities hire PR people to enhance their brands and sell more records or sneakers or whatever, but traders aren't selling anything. CEOs talk to the Financial Times to build confidence in their companies, but again, traders aren't selling anything. Either you produce market profits or you don't, end of story. Traders have nothing to gain but plenty to lose: you may ruin your trading psychology with a big ego, or arm your competitors with the knowledge they need to beat you out of the market. In this book not only do we get an interview with a trader, we get an insider account of the greatest trader ever. This is the definitive all-time-great trading book.

"Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes." - Jesse Livermore

You Asked For Books, Not One Book

Market Wizards

This is the most helpful book I've ever read. Granted, the title is a bit "on the nose," but this is Reminiscences all grown up. Instead of one trader it's dozens. They've spent decades thinking about everything Livermore said and putting it into practice in new types of markets, so they've got a rich repertoire of insight and experience to impart. Simply stunning. My trading career can be summarized as this:

  1. Read Market Wizards.
  2. Fail in the stock market a whole bunch.
  3. Actually do everything they said in Market Wizards.
  4. Profit.

P.S.: Schwager put together a few sequels, also recommended:

The New Market Wizards

Stock Market Wizards

Hedge Fund Market Wizards

P.P.S.: Livermore himself wrote a book:

How to Trade In Stocks

Best wishes!

This question originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

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