7 books for the crypto trader
Most traders consume a lot of material in the form of books, articles and forum posts when they start out. Some of these can be helpful, others are downright lethal.
The power of a good book is in its ability to help provide you with perspective and shape your thinking.
These two things can help you with the development of new trading ideas and an understanding of how markets may develop and change. It shows you how psychology shifts and evolves based on circumstances, events and innovations.
You can see how the attitudes about investing were shaped for entire generations by single events.
Bitcoin is a perfect example of a response to endless crashes and financial mistakes culminating in the Great Financial Crisis.
As you read, you can see how markets have been shaped by catastrophic events, government policy and innovation. You can gain insight into where we are in crypto and decentralized innovation and where we might be going.
There is value in reaching back to past eras when legacy markets were younger, less sophisticated and lacking much of the current regulation.
This can give you an understanding of what crypto markets might expect and why.
What most great books about trading and investing provide is deep insights into human behaviour, reactions and thinking.
Armed with a better understanding of human behaviour derived from real-world activity, you can benefit in two ways. First, by understanding how other market participants react and behave in the market. Second, by seeing your own market behaviour more objectively so you can adapt or change.
So what follows here is a list of books to help you see the world from a slightly different perspective; a way of understanding where traditional markets come from, and how innovations can grow, fail and build the foundations for the future.
Finally, and perhaps most importantly, these books help you understand how human beings behave and how that behaviour is timeless across assets.
The Daily Trading Coach: Brett Steenbarger
Dr. Brett Steenbarger is a trading psychologist, and along with Mark Douglas and the late Ari Kiev, a must read for traders.
Steenbarger came to the conclusion that trading was actually a performance activity with a whole host of implications. One was that, to perform, you needed a repeatable process designed around feedback.
That feedback might include video taping trading sessions to review responses, trading diaries, coaching and simulated trading.
This book was designed to help traders assess and develop trading expertise on their own. The author came up with this solution as coaching isn’t always accessible and mentorship can be hard to come by.
He’s covered several key areas including:
- Stress and Distress: Creative Coping for Traders
- Psychological Well-Being: Enhancing Trading Experience
- Steps toward Self-Improvement: The Coaching Process
- Remapping the Mind: Cognitive Approaches to Self-Coaching
And much more.
If you are starting out or an intermediate level trader in the crypto space, this book can help you develop your process and get your mind set up for long term trading success.
This one belongs on your desk for easy, ongoing reference.
Reminiscences of a Stock Operator: Edwin Lefevre
This book is almost always recommended in trading circles. This isn’t a one and done but rather, a read, underline and read again kind of book.
Originally published in 1923, the book gives you some insight into what markets were like as regulation was being instituted. It also gives you remarkable insight into a professional trader and his thought process.
The book was written by Edwin Lefevre although most believe it to be the pen name for the great Jesse Livermore himself.
Pay particular attention to the stories of how bucket shops work, why you should never take tips and the section on how to “manipulate a stock”.
These three sections should be required reading for every crypto trader.
Keep these sections in mind when you read anonymous “experts” on the internet…or even some so-called legit ones.
The human insights throughout the book are gold and will help you understand the mindsets of some of the market participants out there.
Take this quote on tippers on page 66:
“The amateur, or gratuitous tipster always thinks he owns the receiver of his tip body and soul, even before he knows how the tip is going to turn out.”
Another gem on pg 91:
“…you find many people. Reputed to be intelligent, who are bullish because they have stocks. I do not allow my possessions – or my prepossessions either – to do any thinking for me.”
There’s good reason this book has near legendary status amongst traders.
The Money Game: Adam Smith
Written by the other Adam Smith, the pen name for George J. W. Goodman, this book is insightful and entertaining.
Using humour, Smith takes us through the business of money, investing, trading and Wall Street generally. Throughout, you get brilliant observations about the underlying reasons people invest and trade.
For example, you will discover why you should never trade to buy things – and why rain on the window in Chicago could drive a cascade of selling in the grain markets…even though there is no rain where the grain is being grown.
Then there is this golden quote on page 72:
“It may sound a little silly to have a reminder saying The Stock Doesn’t Know You Own It were it not for all the identity fuel provided by the market these days. You could almost sell these identities as buttons: I Am the Owner of IBM, My Stocks Are Up 80 Percent; Flying Tiger Has Bought Solitron and Look at Me Now.”
Remember this was written in the 1960s…
And that passage was followed by a piece of wisdom:
“If you know that the stock doesn’t know you own it, you are ahead of the game. You are ahead because you can change your mind and your actions without regard to what you did yesterday…”
Crypto markets may be built around mathematical principles, but ultimately, they are used by human beings. And that means as long as they are traded, they will always be infected with emotion, chaos and irrationality.
This is an outstanding book and a fun read.
Against the Gods: The Remarkable Story of Risk: Peter Bernstein
“The word “risk” derives from the early Italian risicare, which means “to dare.” In a sense, risk is a choice rather than a fate. The actions we dare to take, which depends on how free we are to make choices, are what the story of risk is all about. And that story helps define what it means to be a human being.” (page 8).
The late Peter Bernstein is a master storyteller taking you on a journey of several hundred years over 300 or so fascinating pages.
This is an account of the history of how risk developed, where it came from, and how it became and essential part of all aspects of modern finance.
“This book tells the story of a group of thinkers whose remarkable vision revealed how to put the future at the service of the present….The transformation in attitudes toward risk management unleashed by their achievements has channelled the human passion for games and wagering into economic growth, improved quality of life, and technological progress.” (page 1).
Understanding and managing risk is a crucial component of trading, and with this book, you can discover how this concept developed and has evolved.
Doing Capitalism in the Innovation Economy: William Janeway
William Janeway was one of the pioneers of the venture capital business.
This book is like an education in venture capital, a history lesson of Wall Street, innovation and government.
Doing Capitalism in the Innovation Economy is an example of a brilliant distillation of knowledge into a couple of hundred pages.l
- Learn about the concept of the three player game.
- See how Wall Street evolved.
- Understand how Silicon Valley became Silicon Valley.
- Learn about the essential role government plays in the innovation process.
- And see what drives innovation.
- What does he mean by the concept of cash and control.
It’s a meaty read with lots of detail. It is a book to be read over time and contemplated.
As a crypto trader or investor, and probably a technology participant and advocate, this book should be considered required reading.
Fooled by Randomness: Nassim Nicholas Taleb
Taleb is no stranger to most market participants these days. Fooled By Randomness was his first foray into writing books.
This book is a powerful account of reality and randomness in markets. Lots of ways to understand what you think you see in terms of market claims and successes.
Pay special attention to the story of Carlos the Emerging Markets Wizard. Ask yourself: how can the lessons here apply to the crypto market?
Taleb’s commentary on traders “on a roll” bears repeating. A quote from page 23:
“Likewise an increase in personal performance (regardless of whether it is caused deterministically or by the agency of Lady Fortuna) induces a rise of serotonin in the subject, itself causing an increase in what is commonly called leadership ability.”
“Randomness will be ruled out as a possible factor in the performance, until it rears its ugly head once again and delivers the kick that will induce the vicious cycle.”
Or a warning to would-be traders about relying on the appearance of success or the advice of one time big shooters. Think for yourself.
This book is engaging and an easy read. It’s entertaining and insightful and is likely to become a favourite.
The Battle for Investment Survival: Gerald Loeb
I’m sure that many believe crypto winter is over, and it may well be. However, markets, by their very nature, are volatile and unpredictable.
In this book, you get to read a story of a trader leading up to and following Black Friday 1929. Again, you get historical knowledge of what happened during the period and more importantly, how these events shaped the psychology of the trader.
Take this quote on page 32, for example:
“ It is for these reasons and especially because I personally completely convinced of the inevitability of loss when attempting to a safe secure income of small return, that I constantly suggest speculation rather than investment as a policy less apt to show a loss and more apt to show a profit.”
This one event shaped an entire generation of investors for the rest of their life.
It was the reason for many significant regulatory and policy changes that exist to this day.
The crash of 1929 provided a foundation for the actions taken during our own great financial event of 2008. The Fed Chairman Ben Bernake was a scholar of the 1929 crash and its implications.
This is a fascinating look at the time and the mentality of a man trying to work his way through these market conditions.
This is another example of the excellent Wiley Investment Classics series.
Peak Performance: Magness and Stullberg
Written by Magness, a running coach, and Stullberg, a consultant, this book is a reflection on the power of rest and time away. While not market focused, there are numerous points that crypto market participants can benefit from.
This book has a great story about Roger Bannister right before he entered running history forever. Bannister had been training hard to beat the four-minute mile, a feat considered impossible.
But instead of training hard right up into the competition, Bannister did something unexpected. He took off into the Scottish mountains to go hiking. On his return a week or so before the race he resumed some light training to prepare.
Fully rested, he ran the race of his life, becoming the first person to break the elusive (impossible) four-minute mile.
The story is about the power of rest and being refreshed. Stepping away is a real challenge for performers in all sorts of work, sport and arts including traders.
The lessons throughout this book are beyond taking a break but how to shape time off to come back stronger and more focused.
In high-pressure environments, especially when risk is involved, life tends to revolve around the activity even when you’re not in front of the machine. The long term implications of this are negative.
This book can help you see your activities in a different light and develop habits to sustain better performance.
Great books can provide ideas during periods of underperformance or when you feel confused about market behaviour. While crypto trading is relatively new, you have a rich repository of trading related books across other asset classes at your disposal.
Because trading, or speculation as Livermore called it, is as old as the hills. So use the insights and experience of the old masters to your advantage.
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