Tuesday, May 18, 2010

Books on Stock Trading - 3 Must Reads to Learn to Make Money Fast

Three must read books on stock trading are (in no particular order) Liar's Poker, The Economics of Money, Banking, and Financial Markets, and Multinational Business Finance. While it may seem out of place to recommend three books that don't mention stock trading in their titles as great books on stock trading. That is understandable. I think you will come to agree that understanding what makes markets move is more important for a day trader (and less well understood) than what any individual security is doing on a given day.

The Personalities Matter When It Comes to Stock Trading

Consider the benefits learned in reading these three must read books on stock trading. The first book, Liar's Poker, describes in very personal detail the experiences of a bond salesmen in the biggest bond trading firm of the 1980s, Salomon Brothers. The book provides rich descriptions of the personalities and characters within an investment banking firm. It also describes in great detail the amount of pressure employees are under to produce profits (from you as a client), and the lengths some will go to to make money at your expense. This book without question teaches the caveator emptor (buyer beware) rules of the investing world.

Understand the Role of the Federal Reserve and Monetary Policy

The second work I recommend is The Economics of Money, Banking, and Financial Markets. While this is specifically used as a college text-book in graduate level financial management courses, the concepts within are simple enough for the average trader to understand. Among the most important concepts discussed is the role of the Federal Reserve Banks of the United States. Understanding how currency mechanics works is important to interpretting the impact of monetary policy, the money supply, and forecasting economic activity (the invisible hand which guides investment results).

Learn the Dynamics of Forex

The last book on stock trading I suggest you read is also a college text, called Multinational Business Finance. While the first book talked about the people and psychology of market participants, the second book talked about the God of the U.S. market (the Fed). This book has important sections on how the currencies and policies of other Gods (central banks) relate to each other. This will influence how you think about global events and their impact on surrounding economies and ultimately down to individual stocks.