Book No. 3: The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb (Source: Amazon.com) The Black Swan spits in the eye of conventional analysts and economists. If you don’t like your previously held beliefs about the market challenged, then we don’t recommend this book. However… if you are like us and are always looking for the cracks in the dam to start spreading, this book is for you. Traders have often overlooked Taleb’s book in favor of his other classic, Fooled by Randomness (which we also recommend if you haven’t read it yet). Both books show how our psychology can conspire against us to make us blind to the most significant risks and opportunities in the market. If you hear a “prominent” economist using the word equilibrium, or normal distribution, do not argue with him; just ignore him, or try to put a rat down his shirt. Taleb makes a strong case that traders tend to overprice small changes in the market and underprice risky-but-rare catast
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