Books on "Day Trading"

[CardMinger]

Hello...

I dont know if day trading per se is exactly what I am looking for (hence the "'s).

I want to find some books on buying stocks as a relative short term investment. I am reading the Intelligent Investor (which I plan to finish) but so far it seems like it is recommending buying for the long term.

I guess I just want to play the market like poker.....can that be done? If so can anyone recommend any books or online reading on what I want to do?

Thanks a lot!

[littlerayray]

I like "how i made 2,000,000 in the stock market" by Nicoloas Darvas

[Dan Mezick]

It sounds like what you really want is swing trading-- making plays that last from 3 days to 3 weeks.

The best book for that is the MASTER SWING TRADER by Alan Farley.

The Master Swing Trader, by Alan Farley (http://www.amazon.com/exec/obidos/tg/detail/-/0071363092/qid=1105664999/sr=8-1/ref=pd_csp_1/104-1415801-1048701?v=glance&s=books&n=507846)

He's got quite a website also.

http://www.HardRightEdge.com (www.HardRightEdge.com)

I also highly recommend these books on/about Jesse Livermore, one of the greats:

How to Trade in Stocks (http://www.amazon.com/exec/obidos/ASIN/0934380759/qid=1105665139/sr=2-1/ref=pd_ka_b_2_1/104-1415801-1048701)

Reminiscences of a Stock Operator (http://www.amazon.com/exec/obidos/ASIN/0471059706/qid=1105665172/sr=2-1/ref=pd_ka_b_2_1/104-1415801-1048701)

[Aceshigh7]

I believe this is the best book on trading. Quite pricey though...

Trading for a Living: Psychology, Trading Tactics, Money Management by Alexander Elder (http://www.amazon.com/exec/obidos/tg/detail/-/0471592242/qid=1105692460/sr=8-4/ref=sr_8_xs_ap_i4_xgl14/104-4657121-4269564?v=glance&s=books&n=507846)

[RunDownHouse]

Notice you haven't heard much about day trading since the tech bubble burst.

Keynes: "Investing is the activity of forecasting the future yields of an asset. Speculation is the activity of forecasting the psychology of the market."

Graham: "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."

Buffet: "Consciously paying more for a stock than its calculated value... should be labeled speculation (which is neither illegal, immoral, nor - in our view - financially fattening)."

[DesertCat]

[ QUOTE ]
I guess I just want to play the market like poker.....can that be done?

[/ QUOTE ]

Nope. Can't be done. Oh, there are people who've beaten the market in the short-term, but there are also people who've won money at the roulete wheel. 95% of Daytraders are broke within a year, the rest were the result of short term variance, i.e. lucky.

[MarkL444]

[ QUOTE ]
[ QUOTE ]
I guess I just want to play the market like poker.....can that be done?

[/ QUOTE ]

Nope. Can't be done. Oh, there are people who've beaten the market in the short-term, but there are also people who've won money at the roulete wheel. 95% of Daytraders are broke within a year, the rest were the result of short term variance, i.e. lucky.

[/ QUOTE ]

Is this the same as swing trading? Is it possible to be successful with 2-4 week investments?

[goodedesign]

[MarkL444]

when you say short term trading, what kind of timeframe are you talkin about?

if i was to make an investment for ~2.5 months, would that be "trading"?

[goodedesign]

[RunDownHouse]

[ QUOTE ]
an investment is when you want to become a part owner in a company.

...my investments on the other hand are buy stock in 10-12 well run strong companies diversified through sectors with the intention of NEVER selling.

[/ QUOTE ]

It shows that you've read a lot of Buffet.

In the quotes from my post above, "speculator" can be equivalent to "trader," obviously. I wouldn't say that only intending to hold a position for 2-3 months makes you a trader by definition, but as a practical matter it most likely does. If, for instance, you have material reason to believe that the market's expectations for a company will change drastically in the next 2-3 months, then you're making an intelligent investment with your position.

However, I would venture to say that nobody outside of the profession would (legally) be able to meet those requirements even rarely.

[OrangeCat]

I don’t know if day trading per se is exactly what I am looking for (hence the "'s).

By definition, a day trader is one who never holds positions overnight or between sessions. Everyone else who is buying or selling is a position trader. Some might hold those positions for years. Swing traders hold for days to weeks.

I want to find some books on buying stocks as a relative short term investment. I am reading the Intelligent Investor (which I plan to finish) but so far it seems like it is recommending buying for the long term.

That book is 50+ years old. It’s a classic but a lot of things have changed since then. Broadband has made possible direct market feeds for individuals. Market data used to be prohibitively expensive for the little guy but now we can get the same data the big boys for a very reasonable fee. Commissions are much, much lower than they used to be. These two factors have fundamentally changed the markets, especially NASDAQ and index futures.

I guess I just want to play the market like poker.....can that be done?

Not really. In poker everything is right there in front of you. The players, the cards, the chips – that’s all there is. I’m not minimizing the complexity of poker or chess; it’s just that all there is to those games is in your head and on the board. In the market there are many things going on at once, most that you cannot see or will ever be aware of. There is no such thing as getting a read on the market like you get a read on another player. Technical analysis is a close equivalent to reading the market but even that can be overrun by external events like a pipeline explosion in Iraq or a misinterpreted fomc report. There is no such thing as a list of good starting hands in the market. Yesterdays AA might be todays 72o.

If so can anyone recommend any books or online reading on what I want to do?

The books by Elder, Farley and Douglas recommended by other posters are very good. “High Probability Trading” by Link is very good. If you want to get deep into technical analysis, “Computer Analysis of the Futures Markets” by LeBeau is good and can be applied to markets besides futures.

Ask yourself how much time you want to spend on investing. If it is a few hours every few months you are best off buying ETF’s for the major indices (SPY, DIA, IWM, MDY, EWJ, etc…). If it is a few hours a week, then look into investors business daily. They have some good info and a system that works most of the time. Or follow the swing trading methods from the Farley book. Or maybe come up with a combination of things that work for you. If you want to make a career out of it, be prepared to spend a lot of time and money on computers, books and studying. Like any other high reward profession, it takes a great deal of effort to be successful.

- OC

[gvibes]

[ QUOTE ]
[ QUOTE ]
I guess I just want to play the market like poker.....can that be done?

[/ QUOTE ]

Nope. Can't be done. Oh, there are people who've beaten the market in the short-term, but there are also people who've won money at the roulete wheel. 95% of Daytraders are broke within a year, the rest were the result of short term variance, i.e. lucky.

[/ QUOTE ]

Thank you - finally some sense on this board. For a book expounding on the vagaries of variance, please read Fooled by Randomness. It's sweet, and an easy read.

Personally, I'm not going to try to beat the stock market. I am going to take my 11% (average stock market return since 1928) to the bank upon retirement in year 2040 or whatever.

Actually, I won't be entirely invested in the US stock market. More something like 25% bonds, 45% US equities, 20% international equities, and 10% real estate. Lower variance in a highly diversified portfolio.

[crazy canuck]

I am going to take my 11% (average stock market return since 1928) to the bank upon retirement in year 2040 or whatever.

According to the equity premium puzzle the expected return is only 3% higher than the risk free rate instead of 6% higher than the risk free rate over the last 100 years (in the US). The theory says that the US had a good century and 11% return is unsustainable. I always cringe when I see financial planners who use 10-11%.

[gvibes]

[ QUOTE ]
I am going to take my 11% (average stock market return since 1928) to the bank upon retirement in year 2040 or whatever.

According to the equity premium puzzle the expected return is only 3% higher than the risk free rate instead of 6% higher than the risk free rate over the last 100 years (in the US). The theory says that the US had a good century and 11% return is unsustainable. I always cringe when I see financial planners who use 10-11%.

[/ QUOTE ]

I guess I should note that in planning my own retirement, I am hoping to save enough to live comfortably assuming a 6 to 7 percent return.

I agree that any CFP who throws out a 10-11% number is optimistic at the least.

[crazy canuck]

[ QUOTE ]
I guess I should note that in planning my own retirement, I am hoping to save enough to live comfortably assuming a 6 to 7 percent return.

[/ QUOTE ]

That's good to hear...never hurts to be conservative.

Also, many of the financial planners assume constant 10-11% return. The reality is that the return in one year may be 20% and 0% in the following year. So even if the average return is 10%, this is not equivalent to constant 10% growth. It's a little like poker. Just because you earn 1BB/hour on average doesn't mean you will earn 5BB-s if you play for 5 hours.