Trading Books
Reading List
A Random Walk Down Wall Street
Key ideas:
- Technical analysis may still work because people think in similar ways, but no one consistently beats the market average
- If a price pattern is predictable (e.g., post-New Year rise), it gets priced in immediately
- CAPM as a foundation for portfolio construction
- Argues against active management for most investors
Strategic Risk Management — Designing Portfolios and Managing Risk
Authors: Campbell R. Harvey, Sandy Rattray, Otto Van Hemert (Man Group) Series: Wiley Finance
Key ideas:
- Use Beta Neutral instead of Dollar Neutral
- Volatility Targeting — scale exposure inversely to volatility
- Focus on reducing risk cheaply rather than finding alpha
- Strategic (not tactical) approach to tail risk
This book is focusing on portfolio and risk management, not trading. It uses a strategic way to reduce risk at low cost.
The Ulysses Contract
Key ideas:
- Avoid temptations — get-rich-quick schemes, speculative crypto, day-trading, market noise
- Use history as a guide — “this time is different” is usually wrong
- Long-term, low-risk strategy — discipline, consistency, patience over fast gains
- Behavioural discipline — recognize fear, greed, herd mentality; put guardrails in place (rules for when to buy/sell, risk limits)
- The “contract” metaphor: commit to good behaviour in advance so you can’t override it in panic or euphoria
Poor Charlie’s Almanack
Author: Charles T. Munger
Key ideas:
- 跨学科思维 (Cross-disciplinary thinking) — draw from multiple mental models
- 能力圈 (Circle of competence) — stay within what you understand
股市投资神器 - 指数基金 (Stock Market Magic Weapon - Index Funds)
Key ideas:
- Position sizing by market regime:
- Bull market: 满仓 (fully invested)
- Sideways market: staged buying (30% → +30% on -10% → +40% on -10%)
- Bear market: pyramid buying (10% → +20% on -15% → +30% on -15% → +40% on -15%)
- 金字塔法 (Pyramid method): split capital into 5 parts (10/15/20/25/30) or 4 parts (10/20/30/40)
- Dip spacing: 10–20% between tranches
你应该读点投资学 (You Should Read Some Investment Theory)
Key ideas:
- Inflation types: demand-pull, inherent, cost-push
- When CPI YoY > 3% and MoM > 2% for consecutive months with rising producer prices → consider consumer, food, and resource sector investments
- Reference: US CPI data
Think Like an Option Trader
Key ideas:
- Trade the Greeks, not the money — a straddle is really trading Gamma and Vega at once; each leg bends the P&L curve. Adding a put to a long call is buying negative Delta, netting a Delta-neutral position.
- Synthetic positions / put-call parity — stock, call, and put are three faces of the same thing; a covered call ≡ a naked short put, so choose by margin not intuition.
- Tenor contrarianism — retail buys far-dated and sells near-dated options; the edge is the reverse (buy short-dated, sell long-dated).
- Trading rules — know the position’s probabilities, start small, trade the logic (be able to explain it to a friend), sell high IV / buy low IV, avoid directional bets, use liquid contracts.
Trading Iron Condors (铁秃鹰)
Key ideas:
- Greeks as a horse race — Delta = the horse’s position, Gamma = its acceleration, Vega = the crowd’s excitement (implied volatility).
- Theta is a melting kettle — time premium evaporates slowly then fast into expiry; sellers get paid more for locking in longer time.
- Contrarian, defined-risk selling — sell what you don’t own; the worst risk/reward often makes the better trade. Take the credit and exit early rather than risk extra days for the last slice of premium.
- Screening for condors — many strikes, reasonably priced underlying, high open-interest/volume liquidity, and a price not prone to violent news moves.
Option Volatility and Pricing
Key ideas — the four payoff profiles:
| Call | Put | |
|---|---|---|
| Long (buy) | limited risk down, unlimited profit up | unlimited profit down, limited risk up |
| Short (sell) | limited profit down, unlimited risk up | unlimited risk down, limited profit up |
One Up on Wall Street — Peter Lynch
Key ideas — the amateur’s structural advantage:
- Take advantage of what you already know. The average person encounters interesting local companies and products years before the professionals do.
- Look for what Wall Street hasn’t discovered or certified — companies “off the radar scope.”
- Invest in companies, not in the stock market. Ignore short-term fluctuations.
- Don’t overestimate your own skill and wisdom.
- Invest in a house before you invest in a stock.
- Both large profits and large losses are available in common stocks — symmetric warning.
- Predicting the economy is futile. Predicting the short-term direction of the market is futile. Long-term stock returns, by contrast, are relatively predictable and far superior to bonds.
- Holding a stock is “like playing an endless stud-poker hand” — you must keep up with the company.
- Common stocks aren’t for everyone, nor for every phase of a person’s life.
- An edge is what makes money; in the market, one in the hand is worth ten in the bush.
Unknown Market Wizards (不为人知的金融怪杰)
Author: Jack D. Schwager — fourth in the Market Wizards series, eleven interviews with independent, largely unknown traders.
Key ideas:
- Nearly all of them blew up an account first. What changed afterwards was risk management, not market insight — see Trading Discipline and Loss Management.
- The stop loss is the entry fee — 一个人只有到学会止损的那一天，才真正走出了职业投资的第一步. Place it where the thesis is wrong, never at a money amount you’re “willing to lose.”
- 10–15% of trades produce 100% of the profit. Bargh’s whole 2017 came from two weeks in June and one day in December; Dhaliwal’s from 10% of trading days.
- Asymmetry over accuracy — Sall is right 30–50% of the time and wins 8× what he loses. A winning trade can be a bad trade.
- 自洽 (self-consistency) — the method must match your personality, values, and worldview. Brandt: 3 years to understand trading, 5 to reach a level, 8–10 to identify his own edge.
- The trading journal is called the single most effective self-improvement tool a trader has. Dhaliwal scans his for two keywords: “fear of missing out” and “frustrated.”
- Dhaliwal’s cut ladder — over 5% drawdown cut half, over 8% cut half again, over 15% stop trading entirely.
- Chasing consistency backfires — monthly profit targets are unrealistic because the market doesn’t supply opportunity on your schedule.
Laughing at Wall Street (嘲笑华尔街)
Author: Chris Camillo — also interviewed as Ch. 8 of Unknown Market Wizards.
Key ideas:
- Information arbitrage / social arbitrage — trade consumer and cultural trends you notice in daily life weeks before they reach a financial statement. Full method in Information Arbitrage (Social Arbitrage).
- Three steps — notice the change, spot the niche→mainstream crossover, find the listed company that benefits most.
- Enter on information asymmetry, exit on symmetry. Once the trend is common knowledge, sell.
- Only what you know, but still verify solvency and production capacity. Avoid mega-caps — a single hit product can’t move them.
Themes Across Books
| Theme | Books |
|---|---|
| Long-term holding beats trading | Random Walk, Ulysses Contract, 指数基金 |
| Behavioural discipline | Ulysses Contract, Poor Charlie’s |
| Risk management > return chasing | Strategic Risk Management, Random Walk |
| Position sizing matters | Strategic Risk Management, 指数基金 |
| Cross-disciplinary thinking | Poor Charlie’s |
| Forecasting is futile; ignore short-term noise | One Up on Wall Street, Random Walk |
| Edge comes from what you already know | One Up on Wall Street, Poor Charlie’s, Laughing at Wall Street |
| Cut losses; asymmetric payoff beats win rate | Unknown Market Wizards, Ulysses Contract |
| Method must fit your own personality | Unknown Market Wizards |
| Trade structure & the Greeks | Think Like an Option Trader, Trading Iron Condors, Option Volatility and Pricing |
Related
- Portfolio Risk Management
- Options Strategies
- Options Greeks
- Trading Discipline and Loss Management
- Information Arbitrage (Social Arbitrage)
- Trading and Finance
Source References
- One up on Wall Street - Peter Lynch
- 不为人知的金融怪杰 (Unknown Market Wizards)
- 嘲笑华尔街 (Laughing at Wall Street)