Trade The Trader

I am open to new ideas. As such, I do not mind polluting myself with more investment stuff. After all, I know where to find solutions if I am over polluted. Hence, here I am with another highly pollutant stuff... LOL

Take a look at few statements as stated below and this is how I believe I was polluted when I started the first few chapters, LOL:

"Traders often believe that a set strategy should work in all environments, when in fact, the best traders alter their strategy to adjust to the environment." ~~~ In my humble opinion, I think a good trader hardly adjusting any major stuff along his trading career. Even when there is a need to adjust, the main concept will always be there. J.W.Henry is a good example on this...

"If you come into the day holding positions, you will already be biased as to the direction you desire... Holding positions overnight means that you are more than likely positioned for the previous day's trend, when the next day may be different." ~~~ By holding it means you are bias towards a certain direction? Hmm... this is a statement for those who think they can predict like a crystal ball. For those who know they cannot predict, there is no bias at all even though they are holding for certain direction.

Then, we got this lateral and angular trend line... which I think is the ultimate trend line that most technical fellows are arguing about. The author is smart... by changing or added up a certain new name, something common seems to becomes a real mystery overnight. So, if a trader digs further, I humbly believe that he or she will end up looking for just another Holy Grail.

"Blessed is the man who cannot tell the difference between his work and his passions." ~~~ This I agreed and very much on the same planet as the author. Fortunately, this is not the only statement that I agreed with him. (Otherwise, I could have problem to finish this book, LOL) The next good stuff: Ever since the author started reviewing his trade record, he always comes with same realization: He sold too early! This I am with him again as I know how important not to sell too early. Yet, I am not really in the same thinking with him in regards to his solution. Well, I went through the similar situation during my earlier part of career. As such, I know there are better alternatives than what suggested by the author.

Frankly, despite some polluted stuff, I think there are still some positive points on this book. I personally love chapter 10 on "Developing Your Plan" and chapter 12 on "Setting Stops". The ideas presented in chapter 10 were very much the problems that most traders are thinking about. Although the solution was not the best, at least the author presented a well-planned strategy. As for stops, I thought the idea of setting stops at the point where the pattern established is so practical. In fact, the author did pointed out the weakness in using a fixated stops. So, overall, this is the chapter where I very much agreed with him.

As a summary, I think this is actually not a real pollutant book as mentioned above. I thought the ideas were well presented and the author did point out enough problems for readers to think about.... However, I personally do not feel like reading an investment trading book. End of the day, it is more like sitting in a discussion room with the author, where each one of us trying to figure out the best alternatives to all the mentioned problems. At the end, I thought the author creates too much of question marks for readers to ponder about... The worse is, some question marks do not seem to bother me at all. Even if it bothers me, the author failed to provides precise answers that I am looking for. Having said that, I am not going to give high rating on this book... For a full rating of 10, I thought this book at most deserved 5 out of 10. I enjoyed reading this book. However, I just do not benefit much from reading this book... 

Trend Following

After some "animal" stuff, time to get back to human beings, LOL.... Well, same author... and same old book... except this time around, it is the third updated edition where it includes the latest 2008 sub-prime crisis...

I read this book once and this is my second visit... After went through the turtles stuff, this book suddenly crossed my mind. Coincidentally, a buddy bought me this third edition recently. As such, here I am with the refreshment on trend following.

I thought Michael Covel did well in this third edition. Latest info was added in and it makes the whole trend following more complete than ever. In fact, I remember I was still quite "amateur" during my first read on this book. Those were the days where I was busy writing codes for others. Those were the days where I was so bold that I will always search for absolute return regardless of market situation and capital in hand. Those were also the days where I enjoyed most in searching for holy grail, LOL. As such, this time around (not so "amateur", LOL), I thought I really enjoy reading this book. At the end, it is like reading my own diary. A lot of great stuff presented in the book was actually part and parcel of my career. Of course, bad stuff was there to help me grow along the way too... Hence, this book not only serves as refreshment... in fact, I think I need to fork out more time to read it more often in order to capitalize and further strengthen my good traits.

In summary; after a second read, this is still an excellent book to explore. The author did gathered as much information as possible to present the depth in examining trend following. The only setback perhaps lies with the fact that it is more like an "academically" book. At the end, it is not as interesting as the animal stuff (The Swan and The Turtles), LOL. In view of the minor setback as mentioned, I am going to rate 9/10 for this book. An excellent book to read... except that it is less attractive compares to the two animals, LOL.

Here are some nice quotes to ponder about...

It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.

The wisest trend follower I know has said that every 5 years some famous trader blows up and everyone declares trend following to be dead. Then, 5 years later, some famous trader blows up and everyone declares trend following to be dead. Well, was the problem trend following or the trader?

If you can't predict the end or top of the trend, why get out early and risk leaving profits on the table? ... in trying to protect every penny of your profits, you actually prevent yourself from making the big profits.

You want no losses and positive returns every month? Well, you could have had your money with the Ponzi-scheme of Bernard Madoff... You can't make money if you are not willing to lose. It's like breathing in, but not being willing to breath out.

In hindsight, you might ask yourself why he was trading the British pound if he was losing. The simple answer is that neither he nor anyone else could have predicted whether or not the British pound would be the next great home run.

When you stop trying to please others and concentrate on pleasing yourself, you gradually become aware of what you are passionate about in life. And when that happens, all sort of people come out of the woodwork to help you achieve your goal.

The major strategic elements have never changed in almost 30 years... The market are just the markets... I know in the past 5 years a lot of competitors have purposely lowered the risk on their model i.e. deleveraging or trying to mix with other things to reduce volatility. Of course, they have also reduced their returns. ~~~ Dunn

We don't predict the future, but we do know that the next five years will not look like the last five years.. Markets change. And our results over the next three years will not replicate the last three... ~ John W. Henry

In taking a position, price orders are allowable. In closing a position, use market orders. ~ Richard Donchian.

Giving back a profit probably seems like real risk, to us it seems like volatility. ~ John W. Henry

Obviously you don't want to overhaul a program in response to one year just because something didn't work. That's when you are almost guaranteed that it would have worked the next year had you kept it in there.

Trend following appears to be too simple... Indeed, simple ideas can take a very long time to be accepted; think of the concept of a negative number, or of zero: simple to us, but problematic to our ancestors.

The illiterate of the twenty-first century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn. ~ Alvin Toffler

To be uncertain is to be uncomfortable, but to be certain is to be ridiculous.

There are a lot of misperceptions about chess... Chess players look only as far into the future as they need to, and that usually means just a few moves ahead. Thinking too far is a waste of time. The information is uncertain. Chess is about controlling the situation at hand.

The best long-term performers in any probabilistic field such as investing, sports team management and pari-mutual betting- all emphasize process over outcome.

Winning a bad bet can be the most dangerous outcome of all, become a success of that kind can encourage you to take more bad bets in the future, when the odds will be running against you. You can also lose a good bet, no matter how sound the underlying propositions, but if you keep placing good bets, over time, the law of averages will be working for you.

There is little point in exploring Elliot Wave Theory because it is not a theory at all, but rather the banal observation that a price chart comprises a series of peaks and troughs. Depending on the time scale you use, there can be as many peaks and troughs as you care to imagine.

A robust trading system, one that is not curve fit, must ideally trade all markets at all times in all conditions. If the parameter of a system are slightly changed and the performance adjusts drastically, beware.

No matter how complex and subtle a strategy is and no matter how sophisticated it might be, it has to be possible to describe that strategy in relatively simple and intuitive terms to a sophisticated investor.

The Complete Turtle Trader

After the ‘Swan', I guess it is time to revisit another favorite animal of mine.. The 'Turtles', LOL. Previously, I had read this book twice. Precisely, it was actually once with English version while another round with simplified Chinese version. Well, both versions are good. But, I think I prefer the origin work from Michael Covel. Like I mentioned in the 'Swan', I think I am "polluted". As such, revisit turtles seems to be a good choice.

This time around, I thought I really enjoy reading it. First of all, I am having a holiday with wifey and kid. Hence, I am relaxed enough to enjoy an amazing story from the author. Those days, I think I am too serious in studying this book. At the end, the joy of reading sometimes lies with relax minded and enough of understandably stuff. With my current resources, I think I understand enough the logic and senses behind the turtles. As such, the pressure in regards to academic was totally removed during this visit. Frankly, I really enjoy it!

So, after a third time reading, what is my rating for this book? Honestly, I thought the author did well in collecting all the facts about the turtles. This is not the usual investment book where author seems to promote certain stuff to attract readers. At least, I think I saw the positive side of turtles as well as the negative side of the said group. As a conclusion, I find no reason not to rate this book at 10/10. This book was published in year end of 2007 and I grab my copy in year 2008. The facts that I already went through the whole book three times proved that I really love this book. A thoroughly great read and I highly recommend this book to any traders and book lovers.

Last but not least, some nice quotes to ponder about...

Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.

The thing that worked best were rules. The majority of the other things that didn't work were judgments.

A good friend of mine was employed as a reporter by the largest commodity news service... One day, his major story is about the sugar... I asked, 'how do you know all of this?' I will never forget his answer; he said, 'I made it up.'

A bad month, a bad quarter, or even a bad year does not mean much in the grand scheme. The most important thing was to have a sound trading approach tested in the real world.

To add to a losing position was like being the kid who's been burned on a hot stove once already but puts his hand back on the stove just to prove it was the stove that was wrong.

It's not about the frequency of how correct you are; it's about the magnitude of how correct you are.

The market 'gurus' who pretend that a complex approach must be used to make money want the equivalent of quantum physics for trading rules. That kind of thinking is mental masturbation, or as trader Ed Seykota calls, it "math-turbation".

No matter how good you get you can always be better and that's the exciting part. ~~~ Tiger Woods

It's possible to train people to perform to a certain level... but if this training does not promote self-education and a philosophical attitude, then the trainees will be little more than performing seals.

He was always worried about 'skid'... and for a man who taught logic and the scientific method to his students, it was amazing to hear that he worried too much about arguably inconsequential issues.

Some investors probably walked away from what could be perceived as his arrogance, but many were smitten by Rabar's "take it or leave it" attitude. There is a fine line between confidence and arrogance and Rabar walked it with great success.

"Rich always said that you can't pay attention to books, articles or papers. If it was worth knowing, the people will keep it for themselves and trade." ~ Jerry Parker

Just because I don't understand it doesn't mean I'm not going to bet on it.

The Black Swan

I have this habit... whenever I feel I had been polluted by tons of investment books, I know I need to reread two books... namely, "Fooled By Randomness" or "The Black Swan". This time around, I choose to go for the extraordinary swan. Reason? Well; I always thought Nassim Nicholas Taleb produced a better book in "Fooled By Randomness". To me, both books are equally good. However, relatively... I still think the first book beats easily the second book. As such, I am always looking forward to challenge my very own "black swan", LOL. Furthermore, I think I had enough with his first book. Meanwhile, this is only my second read on the swan.

So, after another round of scratching head on the swan; do I still insist that first book is better? Honestly... YES, LOL! Ok, the swan was still too prolixity to me. End of the day, I still think there are a better way to express the swan. After all, I think some readers may not want to dig that further into the swan... especially when "Fooled By Randomness" had showed its randomness with simple yet understandably wordings...

Well, please do not get me wrong... I actually love this book. After a second read, I still think this book deserved a rating of 9/10. The only point being deducted was due to its complexity (which I think can be avoided) when compares with the first book. Every reread on this book serves as a good reminder as well as some refreshment to my career. After all, I deal with black swan now and then...

Here we are with some of the quotes that I found useful... Obviously, there is a lot of differences compares to last read. Maybe I had improved... or maybe, I had accepted that I am actually one of the extraordinary black swans too... LOL.

"One death is a tragedy, a million is a statistic." Statistic stay silent in us.

Readers would not pay $26.95 for a story of failure, even if you convinced them that it had more useful tricks than a story of success.

It is why we do not see Black Swan: We worry about those that had happened, not those that may happen but did not.

The more detailed knowledge one gets of empirical reality the more one will see the noise and mistake it for actual information... listening to the news on radio every hour is far worse than reading a weekly magazine, because the longer interval allows information to be filtered a bit.

These "experts" were lopsided: on the occasions when they were right, they attributed it to their own depth of understanding and expertise; when wrong, it was either the situation that was to blame, since it was unusual, or, worse, they did not recognize that they were wrong. 

We attribute our successes to our skills, and our failures to our external events outside our control, namely to randomness... this causes us to think that we are better than others at whatever we do for a living.

Perhaps the wise one is the one who knows that he cannot see things far away.

So, why on earth do we plan? Some people do it for monetary gains, others because it's their job. But, we also do it without such intentions - spontaneously.

We have a natural tendency to listen to the expert, even in fields where there may be no experts.

We are made to follow leaders who can gather peoples together because the advantages of being in a group trump the disadvantages of being alone. It has been more profitable for us to bind together in the wrong direction than to be alone in the right one. 

We grossly overestimate the length of the effect of misfortune on our lives... More likely, you will adapt to anything, as you probably did after past misfortunes. 

Our problem is not just that we do not know the future, we do not know much of the past either.

Avoid the big subjects that may hurt your future: be fooled in small matters, not in the large. Do not listen to economic forecasters or to predictors in social science (they are mere entertainers), but do make your own forecast for the picnic.

American culture encourages the process of failure... America's specialty is to take these small risks for the rest of the world. Once established, an idea is later "perfected" over there.

People are often ashamed of losses, so they engage in strategies that produce very little volatility but contain the risk of large loss... People hate volatility, thus engage in strategies exposed to blowups.

If you know that you are vulnerable to predictions errors because of the black swan, then your strategy is to be as hyper-conservative and hyper-aggressive as you can be instead of being mildly aggressive or conservative. 

If venture capital firms are profitable, it is not because of the stories they have in their heads, but because they are exposed to unplanned rare events.

You have high risk on one side and no risk on the other... the average will be medium risk but constitutes a positive exposure to the black swan. 

Invest in preparedness, not in prediction.

Trading may have princess, but nobody stays as a king.

The people you meet on the way up, you will meet again on the way down.

We are quick to forget that just being alive is an extraordinary piece of good luck... So, stop sweating the small stuff... Remember that you are a Black Swan.

The Profit Magic Of Stock Transaction Timing

Some said this is a true held in high esteem by serious technician that gives valuable guidance on the use of cycles... Some said this is the original source of research on various technical analyses such as moving average, envelopes, etc... Some said J.M. Hurst is simply the genius in cycle calculation... After reading through the whole book, I think I am not right one to comment on this. Reason? I actually did not absorb well on the knowledge of the said "magic", LOL.

To me, this is a tough book to digest. After all, it is a "magic" as according to the author. As such, I found myself understand some, yet confusing at some... End of the day, the most difficult thing is; I cannot verify the validity of the said "magic". Well, it could turn out to be one of those technical analysis stuff; where it works at times, but surely not all the times... Even when I browse through the said information via google, I found very little details on it. In fact, I think there was a course being presented by the author many years ago. With that course, perhaps I can have a clearer understanding on what I read.

Since I mentioned that I understand some, while completely confuse on some; I think I am not the right person to rate this book. However, I do not see myself wasting time on reading this. At least I know something new.. and at least, I know there is still something for me to explore further... End of the day, raising right question is awakening; getting its answer is stimulating... But, nothing better than the best is finding the right answer to the right question. 

Techniques Of Tape Reading

Vadym Garifer, a Russian (Soviet Union) who migrated to Canada and... choose to become a trader since he could not find better alternatives in a new country. Hence, this is not only a book about trading. It is somehow part and parcel of biography for Vadym Graifer too...

Well, I actually remember reading this book few years back when a friend borrowed me. However, a buddy mentioned to me recently and I just could not recall what I read before, LOL. As a result of this, I decided to reread this book. Sometimes, a second read can deliver different perspectives. Furthermore, we tend to appreciate more on what the author wanted to present in the first place.

This time around, I thought I have a better understanding on this book. Well, like I said above; there is a biography part at the beginning of the book. The reason why the author was "forced" to venture into trading serves as a good reminder to us. How lucky we are compares to immigrant like this. Take myself as example; I was lucky enough to choose what I want to do. I love my job and I was so fortunate to be able to stay in this job for more than 10 years! Overall, the biography part was simply awesome. I like biography.. especially biography about a trader. That is also why I enjoyed so much with "Reminiscences of Stock Operator".

But.. Ah-ha, the "but" part, LOL...Apart from the beginning part about a trader's journey, the rest of the contents failed to attracts me once again. Well, I do not belong to the author's school of thought. As such, I have problem adjusting myself to enjoy what he wrote. End of the day, those are the things that I rejected for so many years. Hence, I find no reason to enjoy it now... Having said that, I must clarify that this is all due to my very personal acceptance on certain school of thoughts. I am not complaining about the writing skill and any pieces of information that was revealed by the author. Put my personal preferences aside, I thought this is a nice book to explore. After all, I can see how the author sharing his thoughts without hiding... But, since it is not my cup of tea, my personal rating for this book is not going to be high. Out of 10, I am going to give a rating of 6. The truth is: I ONLY enjoyed the beginning part (biographical stuff) of this book.

Listed below are some of my favorite quotes ... Thumbs up to the author for sharing this piece of valuable advice!

It's easy to relax when you watch someone else trade... I found my way: I detached myself from my emotions enough to not act under their influence... Does this all sounds crazy? Sure, it does, but trading is a crazy business. It requires an unusual state of mind, so that unusual tricks are justified. 

Trading what I saw, not what I thought...

"If I can't make money using it, I can make money selling it."...Fortunately, I learned to trade without having to pay for something from someone that wasn't proven reliable. I paid the market for my education instead, and what a great teacher it was!

The most successful students are those who find their own slant on the approach they are being taught. They apply their personality to the system they study and produce their own version of the system. That's their edge and comfort zone.

Does TA work? The answer depends on what you expect TA to do for you? If you want TA to tell you what the future will bring, then no, it does not...TA has no predicting value. 

TA doesn't offer predicting value... but, it provides structure and favorable odds.. TA works as long as you read them to your advantage and do not expect them to tell you what to do. They are your tools. Tools does not work by themselves. 

Traders who expect TA to do their trading are similar to musicians who expect their pianos to play music. 

Trader Vic On Commodities

"As we know, there are known knowns. There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. There are also unknown knowns, the ones we did not know we know." 

"More importantly, you should find yourself able to lose more than win and still remain profitable overall. Learning to accept, deal with, and minimize losses is the most important factor.."

"So, you lost because something changed - an unknown... In effect, your lack of emotional discipline was itself an unknown unknown... The market are strong or weak for a reason, but you may not know why - a known unknown..."

Well... The known and unknown stuff as mentioned above did enough to attract me to continue with this book... After all, I thought the author, Master Vic talked sense and there is certain logical to the theories as mentioned.

However, the attractive part did not last long... In fact, there is only about 20% (perhaps less than that) of logical and senses... Eventually, it was followed by 80% (perhaps more) of promotional tool for the commodity index that Mr. Sperandeo devised! End of the day, the title itself is misleading... I just did not get what I want and what I expected!

Frankly, I thought publisher need to stop doing this... To me, this is not a proper way to market something... Having said that, my rating for this book definitely would not be high. The fact that I spend only less than 24 hours (perhaps less than that) to finish this book did enough to justify my rating. Well, I gain something... perhaps 20% of excellent information. Other than that, I really do not find anything interesting. Rating wise, I am going to rate 2/10... Exactly the 20% that I gained for the past 24 hours... LOL

The Greatest Trades Of All Time

This is a collection of so called "the greatest trade" by Vince Veneziani... I said "so called" as I think the author missed out some of the real "greatest" trades that are not mention in the book. In my humble opinion, since it is a about greatest trades, legend like Warren Buffet should not be miss out. I honestly think the world richest trader should have more than one greatest trade throughout his career. At the same time, I sincerely do not think some of the player as mentioned in the book deserved to be classify into the category of "Greatest Trades". End of the day, what is so special when the so called "Greatest Trades" happen only once in a lifetime?

Further to this, I thought the author's opinion in regards to each case as discussed seems too general for readers to digest. To make the thing worse, the author seems to get confused on whether he is profiling various well-known traders or whether he is writing about their trades. In fact, I am very familiar with stories about James Chanos, Paul Tudor Jones II, John Templeton, Jesse Livermore (Still my all-time favorite), John Paulson, George Soros and Martin Schwartz (My Idol... LOL). As such, I thought the "Top Traits" as pointed out by the author seems inadequate and very much misleading. I understand the technique of writing a book. After all, it is pretty safe to do so... especially when a writer needs to write something unfamiliar...

Having said that... I actually love the idea of "recreating trading strategy" at the end of each story. The author did his best to connect the said trade to current situation. Well, although some of his opinions seem not practical; at least the author did put some effort to conclude each trade. As such, this is actually a well-planned book. At least the structure in building up the stories and the summary to end each stories are good enough.

Overall, this is an average book in my humble opinion. . Detailing wise; well, it is so inadequate! Educational wise; since I personally do not agreed with some of the advice given by the author, I could not comment much! In fact, I think the author does not really understand the world of trading (No offence though)...Perhaps, that is the reason why some of his personal opinion does not seems appealing to me at all.

Well, please bear in mind that this is a book of "Collections" (Collections of greatest trades). As such, it is more like a summary rather than details digging... As I am quite familiar with 80% of the trades as mentioned, this book at least serves as a good refresher. Rating wise, I am going to rate 3/10 for this book. Although incomplete in details, I do really need this kind of book on my shelf...