I am a firm believer in the maxim that all traders, to be successful, must have a concept -- a mental framework -- providing insight into what their trading vehicles really are and how they really work. In the markets, as in the world, things are not always what they seem.
Stocks are often described as representing ownership of a company, but a private trader's influence on how the company is run is precisely none. The CEO and the board will do as they please, whether I like it or not.
A more realistic and useful view, in my opinion, is that held by the leading American long-term strategist Warren Buffett, whose sees stocks as a kind of bond. That idea has the advantage of placing stocks within the broader context of investment instruments.
So my first reading recommendation is a 1999 book Buffettology: The Previously Unexplained Techniques that Have made Warrent Buffett the World's Most Famous Investor by his one-time daughter-in-law Mary Buffett.
Mary Buffett talks some about specific methods of analyzing stocks but she was writing in the days before the Internet became a widespread presence. The field of available information is so much richer today.
A useful survey is Fire Your Stock Analyst!: Analyzing Stocks On Your Own by Harry Domash. I find it to be entirely pragmatic, concise and precise about analytical tools and techniques and how they can help traders.
Stocks, of course, are nothing without charts. When it comes time to trade, the first move is always to pull up a chart and see what the price is doing now compared to the past weeks or months or years.
The best book on how to read a chart and use it in trading is Technical Analysis Explained by Martin J. Pring. The title links to the most recent edition, a pricy behemoth. An earlier edition is just as good, in my opinion, for one-fifth the price.
And of course there are tons of information about stocks and trading online. Wikipedia is always a good place to go for understanding concepts, as is Investopedia.
My short reading list just scratches the surface, of course. Private trading is the gateway to a rich world of risk and reward, of study and analytical thinking, of intuition and self-knowledge. Most of all, I find that world to be interesting and fun.
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.License
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Based on a work at www.timbovee.com.