I keep an eye out for good books and there are times when I will pick up a trading book and skip forward to the chapter on the author’s trading system and see what s/he is up to.
That stuff is still very interesting.
But the vast majority of trading books out there are targeted at the beginning trader. They pretty much repeat the same old trading maxims, ad nauseam.
“The trend is your friend” (not always true), blah, blah, blah.
Add to the fact that a lot of books out there may or may not be written by actual traders.
However, if you are just starting out, I do recommend that you read as many trading books as you can get your hands on. It’s just that I have read so many already (probably in the neighborhood of a hundred fifty, or so), that there is definitely a point of diminishing returns.
I am pretty jaded when it comes to reading more trading books. That is one reason why I stopped doing book reviews.
I prefer to read biographies of successful people and books related to psychology, health, travel and personal development. But once in awhile, there are trading books that come along that are worth talking about.
One such book is The PlayBook: An Inside Look at How to Think Like a Professional Trader by Mike Bellafiore. If you have never heard of Mike before, he is one of the partners in SMB Capital and runs the outstanding SMBU trading blog.
They primarily trade stocks and options, but don’t hold that against them. Like he says in the book, trading is trading and the master trader can trade anything.
Here are the top three reasons that I recommend this book…
Reason #1: It Is Not About Trading Setups
One of the best trading books that I have ever read does not have a single trading setup in it.
It was really refreshing to read a book without a trading system. With entries and exits out of the way, it makes it much easier to concentrate on the principles that the author is trying to communicate.
The PlayBook is similar. It concentrates more on the psychology of trading and daily processes that are required for success.
There are a few charts in the book, but they are there only to illustrate a point, rather than to teach a complete trading method. I feel that this is way more valuable than just learning entries and exits.
Reason #2: It Is About Processes
Again, I must emphasize again the importance of focusing on the psychology and setting up a feedback loop in your trading. I feel that this is where most trading books fall short.
Sure, other authors talk about journaling trades.
But it is like water off a duck’s back to most traders. This is because it is hard to really understand how important it is, without learning it first hand, or hearing specific stories.
The other thing that is talked about a lot is how to setup a PlayBook. This is another concept that I have not read about much in other trading books. Again, if another author does mention this principle in their book, it is only in passing.
Most other authors are more interested in teaching their favorite method. That is great, and there is a place for that for sure, but I believe that processes are much, much more valuable than systems.
Reason #3: It’s About Real Experiences
The most important reason to read The Playbook however, is because it shows you trading principles in action. It goes through numerous, specific situations where a trader did the right thing and benefited.
Of course there are also many examples of how traders didn’t follow the rules and paid the price.
More than anything else, this will give you an inside look at how some of the elite traders in the world got to where they are. There were several times when I would have loved to be at the trading desk when some of those things were going down!
Final Thoughts on The Playbook
I can blog about the value of journaling your trades, finding other traders to be accountable to and keeping a playbook of your own until I am purple in the face.
But unless you read stories in this book, it is really hard to communicate the value of such activities properly.
Bottom line…that is the value of this book.
Yes, there were some downsides to the book. The book was a little long winded, at times. But it all served the purpose of telling a story, so stick with it.
Hope you are trading well…
