I don’t know about you but I haven’t read a decent trading book in over a year. These days I can’t stand to read any trading book that doesn’t incorporate volume analysis – how can you possibly use price alone to predict price?
As a case in point, I’ve had Robert Miner’s latest book, High Probability Trading Strategies, beside my bed for 2 months. I’ll read a couple of pages and look at the charts and say to myself “but what about the volume?”. His charts don’t even include a volume histogram!
So instead of trading methodology books I’ve been seeking out trading history and Great Depression books. Which brings me to “Devil Take the Hindmost: A History of Financial Speculation” by Edward Chancellor.
A spectacular book about stock market bubbles from Tulip mania in 1637 to the Long Term Capital Management hedge fund bust in 1998. I couldn’t put this book down – it is a triumph. There are two reasons why I highly recommend this book.
You are part of a long tradition of financial speculators
If you’re a futures trader, you’re a financial speculator. You’re different from a buy-and-hold, long-only investor. You recognize that markets go up and markets go down – and you can make money in both directions.
Markets are driven by fear and greed. The Professionals sucker the public in, convincing them to buy at the top and sell at the bottom. It happens over and over again, and this has been going on for centuries!
Reading Devil Take the Hindmost made me feel like I was part of a long tradition of market speculators. Speculators that took advantage of market volatility, didn’t believe that markets had to be rational and honed their craft.
Being a good trader is not an accident – it takes dedication and practice. Being a financial speculator is a worthy goal to aspire to and will only be achieved by those few that dedicate their lives to it.
We are making history right now
“Devil Take the Hindmost” spends a chapter on each major stock market bubble:
- Tulip mania (1637)
- South Sea Bubble (1720)
- Canal Mania (1792)
- South American Mining Bubble (1825)
- Railway Mania (1845)
- Western Blizard Crash (1857)
- US Civil War Boom (1861-1873)
- The Great Crash (1929)
- Black Monday (1987)
As you read the history behind each of these bubbles and crashes you start to see patterns emerge. There is almost always a new technology involved (canals, railways, radios, automobiles – even Tulips where this was the start of the “cut flower” market). And there is almost always too much debt involved. I was surprised to read how trading on margin has been around since the 1700s!
And these same patterns are visible today with the Tech Wreck of 2000 and the Sub-Prime Collapse of 2007. We are witnessing history – history that will be written about in decades to come and as important as the Great Depression. We are witnessing history in the making and as speculators we are uniquely priviledged in being able to see the day-to-day gyrations of the futures market.
Just two criticisms
Edward Chancellor draws heavily from original material and quotes extensively from newspapers, diarists, etc. This is great and gives a real feeling of authenticity. But because the language of the 1600s is difficult to relate to, the first chapter is very hard going. After the first chapter though, things get much easier.
Second criticism. There are no stock market charts in the book. My solution was to photocopy a long term chart (1700 to 2000) from Robert Prechter’s “At the Crest of the Tidal Wave”. This allowed me to “follow along” with the history and see the ups and downs of the stock market.
For more trading book suggestions, check out my list of Best Trading Books.