Top 10 Books On Crypto Trading: Part 2

In our second installment on useful books for crypto trading, we examine five more worthwhile texts. Topics range from interviews with leading professionals in the industry to applying the Golden Ratio to trading stocks. Though each of the different tactics and ideas discussed may not work for everyone, they still all contain important tips and strategies that any new crypto trader would do well to examine.

The New Trading For A Living By Dr. Alexander Elder

First up we have The New Trading for a Living by Dr. Alexander Elder. Dr. Elder is a professional trader as well as psychiatrist, teacher, and author with a number of books in print. Originally Published in 1993 with the updated text released in 2014, this book has become a modern classic that has been translated into over a dozen languages and is still used as an educational text to this day. This newly updated version builds upon his previous work with a more in-depth analysis of the original text while updating the content for the changes in the landscape over the past twenty years.

In his book, Dr. Elder offers a well-balanced approach to trading based around his three pillars of successful trading: psychology, trading systems, and money management. Finally, Elder uses the practice of thorough and honest record-keeping as a means to tie all of these different aspects together.

The Impact Of Psychology On Trading Crypto

Given his background in human psychology, it is no surprise that Dr. Elder begins his book with an examination of the human psyche regarding trading and risk. Dr. Elder examines the different mentalities that can either hurt or help a trader deal with market fluctuation. He uses gambling as a metaphor and warns against trading as a profession for people who are unable to look at trades and markets objectively. Dr. Elder also examines group psychology and the dangers of following the crowd when playing markets. He utilizes historic examples, like the “Tulip Mania” in 17th century Holland, where a rise in prices and popularity eventually led to the collapse of the entire market.

Dr. Elder continues his lesson with an emphasis on understanding bar charts and the different things they can tell you about markets. He also examines different factors that can further illuminate market fluctuations like resistance and support. Elder also addresses volatility and liquidity to provide a general understanding of market features.

Dr. Elder also provides a recommendation on ways that beginning traders can minimize risk: his 2% and 6% rules. In short, these rules state that no one single trade should risk more than 2% of total trading equity and traders should stop making any new trades when their monthly losses reach 6% of total trading capital. These rules help prevent novice traders from overextending themselves and can increase the chances of longevity. Finally, Dr. Elder emphasizes the importance of diligent and honest record keeping and how keeping a trade journal can help in maintaining a measurable record of your trading history.

With his proven track record and an emphasis on the basics, The New Trading for a Living is a great book for any novice trader to look into. Dr. Elder’s deep understanding of human psychology and the role it plays in markets—whether they be stocks, futures or cryptocurrencies—make this a book that anyone with an interest in trading professionally should read.

Mastering The Elliot Wave: Presenting The Neely Method By Glen Neely & Eric Hall

First published in 1990 by Windsor Books, Mastering the Elliot Wave: Presenting the Neely Method by Glen Neely & Eric Hall examines Elliot Waves and how they can be used as indicators of market trends. Elliot Waves are a concept developed by R.N. Elliot in the 1930s and at its most basic can be thought of as a way to predict the psychology of large groups of people.

R.N. Elliot developed his wave theory in response to the prevailing idea of the time that stock markets were chaotic, random and unpredictable. Elliot argued people actually traded in repetitive cycles and that his formula could demonstrate the patterns inherent in these systems. Despite some of his detractors’ unease with the intuition involved in his method, Elliot made detailed, accurate predictions of market movement.

This lack of a systematic understanding was one of the arguments against the Elliot Wave method. In this book, Glen Neely and Eric Hall lay out what they claim is the first step-by-step, scientific approach to Elliot Wave analysis ever developed. The authors, through years of market research and utilization of Elliot Wave theory, have laid out a guide for beginners to explore this method for market prediction.

Finding Patterns When Trading

Simply put, within the Elliot Wave model, there are a series of waves that move in relation to market trends. There is an impulse wave, made up of five separate movements in the direction of the main trend. These are followed by three waves that form a correction moving in an opposing direction. This is a gross over-simplification: a true understanding of the method takes years and a deep knowledge of mathematics and market trends.

In fact, it is just this level of complexity and time required that the majority of detractors point to their opposition to the theory. There is no doubt that this method of analysis has its issues with complexity. Neely has a portion of his forward dedicated to this: “The degree of detail covered in this book will significantly increase the number of important rules and guidelines that have to be memorized to properly apply the Theory. Most people feel there are already too many rules associated with Elliot Wave.”

The time and energy required to make full use of this method do not mean it is not a worthwhile pursuit. Since publication Neeler has remained at the forefront of market trends, using his understanding of Elliot Waves to prosper. Almost 30 years on and Mastering the Elliot Wave: Presenting the Neely Method continues to attract novice and experienced traders looking to gain an edge and make more accurate market predictions.

Fibonacci For The Active Trader By Derrik Hobbs

Our next book is Fibonacci for the Active Trader by Derrik Hobbs, published by Trading Markets Publisher Group in 2003. Hobbs, a co-portfolio manager and financial analyst for a publicly-traded mutual fund examines the ways that the Fibonacci sequence can be used as a tool to examine market trends.

Hobbs introduces the reader to this mathematical concept developed by Italian mathematician Leonardo De Pisa in the 13th century. There are earlier examples of Phi, but De Pisa introduced it to the Western Scientific world. The Fibonacci Sequence, in its simplest form, can be represented as a series of numbers in which each subsequent number is the sum of the previous two numbers: 0, 1, 1, 2, 3, 5, 8, 13…etc. This sequence can be carried on ad infinitum and has some very interesting qualities.

De Pisa originally came up with the sequence as a representation of how many rabbits will be in an enclosure after 12 months, starting with only 1 original pair. While it was originally conceived to chart bunny mating habits, the Fibonacci Sequence occurs in practically every natural environment imaginable. If any of the numbers are divided by the previous number you get a new number: 1.61803398874… This is called the Golden Ratio, or Phi, and it has been documented in the natural world in surprising places. The human body incorporates this ratio, as well as sunflowers, roses, mollusk shells, and tree branches. Even the Parthenon, the Mona Lisa and distant spiral galaxies in outer space exemplify this pattern.

Fibonacci In Crypto?

Hobbs explains the way that this sequence is used in trading in a clear and concise manner, making this text great for new traders, or anyone that has never incorporated the Fibonacci Sequence into their approach. Hobbs lays out the basics of different tools such as projections, extensions, and retracements and the role the Golden Ratio can play in their implementation.

Throughout Fibonacci for the Active Trader, Hobbs explains the different aspects of these concepts in a measured and thorough way that allows readers to fully absorb each of the models before moving on. It is well-paced, making it an excellent introduction for anyone new to these ideas. Hobbs also incorporates a number of charts that complement the text and further clarify how the Fibonacci Sequence can not only help visualize market action but allow better predictions to be made.

This is a great book for anyone interested in the way this mystical mathematical sequence can act as a predictive tool for market movements, including crypto markets. Hobbs has done well to write a user-friendly guide to a mathematical principle that can easily leave newcomers feeling out of their depth. Fibonacci for the Active Trader is definitely worth further examination.

How To Make Money Trading The Ichimoku System: Guide To Candlestick Cloud Charts By Balkrishna M. Sadekar

This text, published by Vision Books in 2015, examines the Ichimoku system of trade indicators. In a clear style, Sadekar lays out the basics of this complex system in a user-friendly way. While there are other guides to this system, How to Make Money Trading is a great book for any new trader looking to understand this interesting trading tool.

Ichimoku Kinko Hyo, or the Ichimoku system, was first developed by Japanese newspaper reporter Goichi Hosada in the 1930s. Translated it means “One Glance Balance Chart”. Hosada was looking for the ultimate trading indicator and a charting method that would allow users to glean large amounts of market data from a single chart. While this method has been popular in Asia since its initial publication it did not gain notoriety in the West until the 1990s. Since then it has been favored by many in the industry.

The Ichimoku system builds upon candlestick charting and is made up of several different factors that allow it to provide multiple data points in a single, dense chart. First, there is the Kijun Sen, or standard line, and the Tenkan Sen, or trigger line. These represent the high and low points for the past 26 and 9 periods, respectively. The Chikou Span, or lagging line, represents the closing price time-shifted back 26 periods. Finally, the Kumo, or cloud, is comprised of two factors—Span A and Span B.

Learning To Read Candlestick Charts

How all these different factors overlap and interact with each other can indicate which direction the market may move. Despite its intricacy, this system has gained a large number of followers.

If all this sounds complex…well, it is. However, in How to Make Money Trading Sadekar explains the different components of the Ichimoku system in a way that is not overwhelming for someone new to the method. His clear explanations, as well as dozens of real-world examples and charts, make this book a great introduction for anyone interested in the Ichimoku system. While not for everyone, this system has its merits and can be applied to crypto markets. This book is a great place to begin.

Market Wizards: Interviews With Top Traders By Jack D. Schwager

This book, first published by Harper Business in 1989, and reprinted in 1993, has been recognized by many in the financial industry as required reading material. Jack D. Schwager is a verifiable expert in the industry and has a track record to prove it. He has served as a partner in the Fortune Group, a London based hedge-fund advisory group, and as the Director of Futures Research for some of Wall Street’s biggest firms, most recently Prudential Securities. Market Wizards is just one of his acclaimed works on finance.

Market Wizards is Schwager’s attempt to understand what makes a good trader and what separates them from great traders. What better way than to ask the best in the business?

Organized as a collection of interviews with some of the leaders in the financial industry, Market Wizards delves into what has allowed these individuals to survive and prosper in a business so riddled with failure and disappointment. His interviews with heavyweights like Bruce Kovner, with a net worth of $5.5 billion USD and a career spanning 5 decades, provide real insight into the strategies and mental attitudes that made this success possible.

Tips From Top Traders

The story of Tom Baldwin’s success is an interesting one. Originally a meatpacker working in Ohio with a Master’s degree in agribusiness, Baldwin moved to Chicago to start trading on a tip from a friend, eventually earning his place as a full member of the Chicago Board of Trade. His rise with the inflation of the 1980s and the treasury bonds that many traded at the time, illustrates the possibilities of what a clever individual can do. In 2009 he was inducted in the Futures Hall of Fame, and institution established to commemorate major contributions to the industry.

Schwager’s interview with Ed Soytka is another interesting gem in this book. Following his graduation from MIT, Soytka went on to develop some of the first computerized trading systems that revolutionized the way markets are analyzed. His work in the 1990s with “The Trading Tribe” examined the ways that psychology and emotions can often overrule logic and detrimentally affect trading strategies. According to Schwager, his “achievements must certainly rank him as one of the best traders of our time.”

Market Wizards is well written. Full of anecdotes and useful advice, it is interesting and easy to read. Like all of Schwager’s books, the information and guidance here can be readily applied to real-life scenarios. Whether trading bonds, futures, or exploring the crypto market, this text can provide valuable insight, while still being a pleasant read.

Finding Useful Books For Crypto Trading

This collection of books is quite varied in subject matter: from Renaissance age mathematical formulas to Japanese trading patterns to educational interviews. However, their unifying characteristic is that all of these books are able to provide information to be utilized and incorporated into each person’s individual trading strategy. Every person is on their own personal trading journey, and one of the most important ways to find what works best is exposure to different ideas and tactics. All of these books contain powerful information that can influence a person’s development as a crypto trader and all should be examined by anyone interested in the industry.

 


 

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References

Chen, J. (2019, June 10). Elliot Wave Theory. Retrieved from: https://www.investopedia.com/terms/e/elliottwavetheory.asp

Elder.com. (2019). Education For Intelligent Traders. Retrieved from: https://www.elder.com/

Grant, M. (2019, June 27). Understanding Basic Candlestick Charts. Retrieved from: https://www.investopedia.com/trading/candlestick-charting-what-is-it/

Jackschwager.com (NA). About Jack Schwager. Retrieved from: http://jackschwager.com/about-jack-schwager/

Wikipedia. (2019, September 17). Fibonacci Number. Retrieved from:  https://en.wikipedia.org/wiki/Fibonacci_number

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