HN Books @HNBooksMonth

I might suggest you pick up copies of the books in the Market Wizards series. A good library should have them (or could get them). It's a series of interviews with some of the best in the field, across all kinds of different types of finance. They're enjoyable reads, filled with insight, and give a good broad perspective from which you can dive deeper into areas that you think might be especially interesting to you.

[1] Market Wizards - https://www.amazon.com/Market-Wizards-Jack-D-Schwager/dp/088...

[2] The New Market Wizards - https://www.amazon.com/New-Market-Wizards-Conversations-Amer...

[3] Hedge Fund Market Wizards - https://www.amazon.com/Hedge-Fund-Market-Wizards-Winning/dp/...

FWIW this would be my list of books every investor should read, which is different from what you should read to work in finance but anyway ...

Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein. A lively introduction to the theoretical foundations of modern finance and their history, Markowitz, Sharpe, etc. https://www.amazon.com/Capital-Ideas-Improbable-Origins-Mode...

The Essays of Warren Buffett : Lessons for Corporate America by Warren E. Buffett. In his own words...you can also find many if not all online, on Berkshire website https://www.amazon.com/The-Essays-Warren-Buffett-Corporate/d...

Buffett: The Making of an American Capitalist by Roger Lowenstein. Insightful biography...The Snowball was written more recently with Buffett's approval, but would read this one first https://www.amazon.com/Buffett-American-Capitalist-Roger-Low...

Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher. It's not widely appreciated, but Warren Buffett's method is 50% Ben Graham and 50% Phil Fisher. If you can find value stocks that are also great franchises, and hold onto them for dear life, you will be rich... if you also bet big, operate companies well, don't screw up, live in a bull market era and survive long enough, maybe as rich as Buffett. https://www.amazon.com/Common-Stocks-Uncommon-Profits-Writin...

The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham. Classic introduction to value investing https://www.amazon.com/The-Intelligent-Investor-Practical-Co...

Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen. Asset allocation, and the perils of mutual funds...leading endowment investor of our time (Yale) gives his advice for individuals https://www.amazon.com/Unconventional-Success-Fundamental-Ap...

The Most Important Thing: Uncommon Sense for the Thoughtful Investor by Howard Marks. Lessons in investing... at any time, any one of them can be 'the most important thing' and so they all are jointly and severally 'the most important thing'. https://www.amazon.com/The-Most-Important-Thing-Thoughtful/d...

The Investor's Anthology: Original Ideas from the Industry's Greatest Minds (Vols 1 and 2) by Charles D. Ellis (Editor), James R. Vertin (Editor). Essays from a broad selection of writers https://www.amazon.com/The-Investors-Anthology-Industrys-Inv... https://www.amazon.com/Classics-II-Another-Investors-Antholo...

The Money Masters; The New Money Masters; Money Masters of Our Time, by John Train. Methodologies of all-time great money managers, in their own words https://www.amazon.com/The-Money-Masters-John-Train/dp/08873... https://www.amazon.com/Money-Masters-Time-John-Train/dp/0887... https://www.amazon.com/New-Money-Masters-John-Train/dp/08873...

Market Wizards; The New Market Wizards; Hedge Fund Market Wizards, by Jack D. Schwager. Interviews of successful traders https://www.amazon.com/Market-Wizards-Jack-D-Schwager/dp/088... https://www.amazon.com/The-New-Market-Wizards-Conversations/... https://www.amazon.com/Hedge-Fund-Market-Wizards-Winning/dp/...

Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger. Why good markets go bad https://www.amazon.com/Manias-Panics-Crashes-Financial-Inves...

Reminiscences of a Stock Operator by Edwin Lefevre. Fictionalized biography of a famed early-20th century trader https://www.amazon.com/Reminiscences-Stock-Operator-Edwin-Le...

A Random Walk Down Wall Street: The Best and Latest Investment Advice Money Can Buy by Burton G. Malkiel. Reality check from an efficient market theorist https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/03933...

This is a rollicking good read on links between Shannon, Kelly, Thorpe, who wrote 'Beat the Dealer' and was maybe the first hedge fund legend https://www.amazon.com/Fortunes-Formula-Scientific-Betting-C...

And maybe something on technical analysis, but not really sure what to recommend...a lot of people view it kind as mumbo jumbo, but I kind of think fundamentals are like playing your poker hand, technicals are like playing the opponents' tells...the chart gives you an idea of who owns it at what price, what levels might make people rethink positions. Maybe this one as an easy intro, dumb title notwithstanding https://www.amazon.com/Stan-Weinsteins-Secrets-Profiting-Mar...

I once set down this path but stopped.

Your big problem is that the future market doesn't look like the past market. There is a statistical error inherent in excessively curve fitting past data. You could develop a system which says you'll return 25% per year and then lose 100% in he he first six months. So don't fall into that trap of excessively back testing.

What you should be spending time is your money allocation algorithms - the very same set of trades can return high amounts or wipe you out depending on what % of your trading equity you allocate. This is something you can test - by simulating actual trading returns - both upside and downside.

I'm not sure if you're looking for trading advice or development advice, but I woudo recommend these books while you are doing system development:

- http://www.amazon.com/Trade-Your-Way-Financial-Freedom/dp/00... - trade your way to financial freedom by Van Tharp

- the entire 'market wizards' series (http://www.amazon.com/Market-Wizards-Jack-D-Schwager/dp/0887...) - there are three (or four?) books in the series, all are worth reading.

The final problem is designing a system which you truly understand, which you are sure gives you an edge. And which you are willing to stick with if there are periods of high drawdowns.

Also remember you are up against people with very deep pockets and huge computers and phd guys working on there same thing.

It's a great intellectual puzzle and a worthy challenge, but make sure you know what you are getting into.

⬐ nikhilsaraf9

Thanks for the advice. I will definitely err on the side of caution and not get caught up with the backtesting and over fitting. Allocating resources (funds) will probably play an important role to manage risk in the system.

At the end of the day, I'm trying to answer the question: can you make money in the stock market with a low-touch (eventually no-touch) approach with the help of advanced software and analytics. Hopefully the answer is yes ;-)

⬐ brc

You can, but really should you bother? There are funds which are done with automated trading, they're not the sort of thing you'll see on TV but they are about. I've had one for over ten years and it has returned about 15% pa since then. In the early days it was over 20% but the system started to lose its edge and 2008 killed it, it has been coming back, but has a ways to go.

This type of approach is far better than trying to build your own, unless, 'your own' has an edge you have come up with. I stopped when I realised I had no edge, no unique method or insight.

I still believe you could still develop a neat system that deprioritised the entry signal - and focussed just on letting winners run and cutting losses. That requires a very low cost transaction model however.

⬐ lmgtfy

>> At the end of the day, I'm trying to answer the question: can you make money in the stock market with a low-touch (eventually no-touch) approach with the help of advanced software and analytics

The answer to this has been a resounding "hell yes" for decades across IB/HFT/AlgoTrading shops. The only thing this exercise achieves is whether "you" personally can make money with a low-touch approach using software.

⬐ gaius

I don't know if you've ever worked in a HFT shop but I am pretty sure those guys aren't just goofing off while the robots print money for them.

⬐ lmgtfy

Well, they're usually revising/improving their models while the robots print money today to ensure that the robots can print more money tomorrow. The frequency and depth of the human input varies based on the kind of strategies employed (macro/statistical arbitrage etc). Moreover, successful models take competitors' potential models into account which (like everything else) is a moving target.

⬐ rl3

This is spot on.

Like the parent commenter, I was also on the same path and stopped. Despite diving into the topic for over a year, I came to the sobering realization that I had insufficient starting capital to properly manage risk.

Standard commission fees will eat you for breakfast trying to exercise a 1% (position) risk model on an insufficient amount of capital. Things like Robinhood[0] unfortunately didn't exist back then.

As far as books, Trade Your Way To Financial Freedom cannot be praised enough. Though I usually refrain from mentioning it because the title has this get-rich-quick vibe, it's nothing of the sort. Van Tharp was (and for all I know, still may be) the world's premier trading psychologist. The book drives home the concept of risk management in automated trading systems like no other, especially remarkable considering when it was written.

The Market Wizards books, at least the first two, are pretty much required reading.

The only book I might add to the list would be Reminiscences of a Stock Operator[1]. While admittedly I didn't find it as useful as the other books, it's still a good read and widely considered to be the seminal book on trading.

[0] https://www.robinhood.com/

[1] http://www.amazon.com/Reminiscences-Stock-Operator-Edwin-Lef...