This time around, I found it better. First of all, it is due to the original language and no flaws on the translation. Those technical items are surely easier to understand compares to the Chinese version. Secondly, I felt it smooth while reading this version. Having said that, the Chinese version actually did remarkably well in terms of translation. However, readers will definitely prefer the original version. This is the power being a Malaysian since we are trilingual in nature.
As times goes by... trading world had changed dramatically thanks to the introduction of algorithm and robotic trading over the years. As such, certain point are not so relevant today. For example, we are no more in the situation where slippage easily occurred unless a trader is still a "manual" trader. Secondly, due to the fast moving speed in internet, market trending seems get crowded and as a result, we see shorter trend these days. Hence, what the author mentioned on the day trader's edge over the position traders may not be relevant giving current market situation. Come to think about that... it will be nice if "Phantom of the Pits" can come out with the revised version of this book. Well... provided the so called "Phantom of the Pits" really exist in the first place, LOL!
This time around, I spend quite a lot of time in digesting this book. First of all... since there is no revise version to counter current market's situation, I need to brainstorm the idea of this book in response to the current trend less market. As we all know, market trending is not as great as last time. David Herding mentioned umpteen times that the market is simply overcrowded with trend following method. Hence, this book actually provided some limelight and alternative to the old school trend following style. For a full rating of 10, I am going to rate this book at 9. On the Chinese version, I rated it at 10/10. This time around, I reduced 1 point due to two reasons. Firstly, I found it quite annoying when the book ended with tons of articles by the author (not "Phantom of the Pits") which is not related to trading. Secondly, as I moved into old and bold trader (compares to 3 years ago), this book is not so inspiring. The quotes below tell the whole story. In the Chinese version, I managed to list out tons of quotes. This time around, the quotes selected not so much. Having said that, this book is still one of the best trading books I read. Thumbs up!!!
You must be larger when correct on a position than when your position is wrong. Each add onto the original position should be done in smaller and smaller steps.
It all depends on your trading plan. One correct way for a day-trader is to see that the position is proven correct and then add at a proper retracement. This will not be the case for trend trader. Trend trader would most likely have at least one add at a breakout or breakaway gap. Your method of adding must be validated by your trade plan.
Day traders will have problem with Rule 2 unless they position properly and understand that their adds must only be made correctly. Day traders are in for quick profit so it is hard to have a good add plan. Their best trader is to put all positions on at once and use Rule 1 to take them off unless or until proven correct. This is the proper probability in a loser's game like trading.
Trend traders will get larger when they are correct, but day traders will start larger and get smaller when they are wrong. Day traders can be large when they are wrong, but trend traders will never be large when they they are wrong. This is due to the nature of a loser's game for day traders. By reducing your positions when wrong, your exposure is not extreme for a day trader.
Rule 2 must be used if you expect to make money in long run. Your validation of how you add is according to your trading plan.
Day trading plan is certainly going to be geared for the quick profit, so why shouldn't you have your biggest position to work with from the start? Right or wrong, you are going to use Rule 1 to protect all cost.
This is your enemy... to love to be right. You will become the best trader you can be by being wrong small, not right small.
Most of your trades that don't confirm within a logical time frame are usually going to look bad sooner or later. Why not take the sooner?
Most traders look to remove their positions just as soon as they prove them right. They forget what their true purpose in trading really is. It is not only to make as much money as possible, but to make it in the least amount of time.
You could use day traders to your advantage in trading by knowing that they would have to get out by close.
You expect to be wrong if you are thinking and trading correctly.
Our thinking must become adult in trading. As a child, we often don't need a reason but just the rule. As an adult, to be effective in trading, it is important to know why and not just the rule.
The most critical time of a trade is immediately after you have just entered the position. This is the time you must be most sensitive to news and events.
If you using point and figure charts, you can see the 45-degree line of support and resistance.
Look for a system that back-tests data currently. What I mean by this is that it must be current in the last six month or so. What good is the system if it takes the last 50 years into consideration but not the current six months that reflects current market conditions best.
Compare both the long term and six month sets of data. If they conflict, you must refine the system somewhat to a better signal generator. If your can't refine it better, then use both set of signals and throw them out when conflict.
