Dominic Connolly - The UK Traders Bible

The book is comprised of two main sections:

1. 1. How The UK Stock Market Works. This explains how the major trading platforms in the UK operate. This covers: SEAQ, SETS, SETSmm and SEATS Plus. The book stresses the importance of understanding how stocks trade, and why certain traders need direct market access. The section then goes on to explain how traders can use contracts for difference, spread betting and other instruments. Finally, there is an explanation of portfolio (basket) trading, and how this can affect the market.
2. 2. Trading Notes & Strategies. This starts with a detailed description of the trading day: what happens, and when. This is followed by an explanation of trading on margin. The rest of the section goes through the many market opportunities for an active trader, and describes how they can be exploited.

The website supporting this book can be found at:

www.harriman-house.com/tradersbible

My introduction to the financial markets came about almost by chance. Although I graduated in Electronic Engineering in 1988, my first job was as a systems analyst at the London Stock Exchange a decision influenced mainly by the fact that the London Stock Exchange paid a salary of 500 more than the going rate for graduates. In 1990, I responded to an advert in the Financial Times for trainee dealers at Smith New Court, the premier market maker later taken over by Merrill Lynch. I was offered an opportunity to work on the index arbitrage and derivatives desk with Gerald Freedman widely acknowledged as the pioneer of equity CFDs in the UK.

From the moment I walked into Smiths dealing room for the first time, and experienced the rush of the stock market, I was hooked. Three years later, an opportunity arose to establish a European equity arbitrage desk at the derivatives powerhouse Bankers Trust. After that, in 1999, I joined GNI, an exchange-traded derivatives broker, which became one of Londons foremost CFD providers.

My experience at a UK market maker, as a proprietary trader, and more recently at GNI, enabled me to learn at first hand how the market really works. I witnessed some incredible success stories trading accounts that were opened with just a few thousand pounds and then turned into seven figure sums and also the slow decimation of many novice traders.

I saw that the consistent winners were ex-market traders, especially those who were able to combine trading discipline with knowledge of the trading characteristics of certain stocks. A good fundamental knowledge didnt seem terribly important to trading profitability. The other successful individuals were those who brought a competitive advantage to the market. Almost without exception they would restrict their trading to a certain sector, or group of stocks that they understood. Often they had a professional background relevant to the stocks they were trading.

Those who lost money seemed to have no clear strategy and no clear competitive advantage. They approached the market as though it owed them a living. Demise was sometimes gradual through a steady erosion of capital and conversion of equity into commission or sudden, through an irrecoverable loss sustained from too large a leveraged position or poor trading discipline. There is a certain truth to the oft cited mantra at training courses that novice traders overwhelmingly lose their capital while learning their apprenticeship. Market professionals meanwhile have usually already served their apprenticeship risking an investments banks capital rather than their own.