Wednesday, February 16, 2011

Recommended books for the New Global Macro Trader

For those starting out on Global Macro Trading I'd highly recommend a few books

The first 2 are written by a mathematician while he is not involved in the financial markets(He is a gambling expert), those are excellent works on HOW TO THINK. He helps you understand common logical fallacies people tend to commit, he also points out how probabilistic thinking works.

Probabilities are a important area of any serious trading plan and a good trader needs to be educated on that. Furthermore the parallels between gambling(And beating the house) and trading are quite big. Contrary to popular belief it IS possible to beat casinos but that can only be done in certain games, during certain periods with large amounts of study and discipline(Like in the markets). The first book is a required reading at Susquehanna

The last 2 are books of interviews with macro traders, they help you understand the thought process of a macro trader, how to come up with ideas for trades, do research, manage risk,etc. Its ironic given that the crisis and its aftermath have bankrupted or lead to the effective failure some of the traders interviewed(Siva-Jothy, Peter Thiel, Anderson), nevertheless lessons can be drawn from their failure as well.

The last one is a bit controversial because its written by a trader who made millions but went broke twice. Despite his failures Victor Niederhoffer is a knowledgeable guy and his statistical approach to the markets is a key part of trading based on evidence as opposed to guesses or faith, he is very good at "myth busting"(Debunking common held belifs about money making opportunities in markets and showing what actually works)
Furthermore his failures give an invaluable lesson with regards to position sizing(When in doubt be conservative)