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Deep Posts News & Updates

Yield Curve Madness!!!

I had to share this with you. It’s a snapshot of the US Treasury market as of approximately 8:30AM Eastern time. Notice in particular the first digit of the yields on the 2 years out to 30 years – 1, 2, 3, 4. As I understand it, what you see there is the lowest yield in the T-Bond since like the 1950s.

Snapshot of US Treasury yields

End of day update: All those big negative numbers ended up turning positive in the 2s to 30s by day’s end. Not that they went as far positive as they had been negative, mind you, but what had been a sharp steepening of the yield curve became a flattening when the dust cleared.

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The Essentials in China

I received a note the other day. It was from my editor at Wiley informing me that they had agreed with a publisher in China to produce a Chinese language version of The Essentials of Trading. That’s pretty cool. It’ll most likely be several months before this new edition is in print. Even still, I’ll be quite interested to see what it looks like.

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Book Reviews for The Essentials of Trading

I had been noticing a lot of recent buying activity in The Essentials of Trading lately. I figured something must have come out, and with a little searching I found that indeed is the case.

Both Technical Analysis of Stocks & Commodities and SFO have both featured the book in their July editions. Here is what they had to say.

Stocks & Commodities (July 2006)

“Buy low. Sell high.” It sounds easy, but the reality is very different. Changing market trends can make for turbulent trading. Lack of concentration can lead to costly mistakes. This book is written for those just beginning their journey into trading and provides a base of knowledge from which you can develop trading methods, systems, and techniques that suit you best. From the basics of analyzing a stock and placing a trade, through trading plans and risk management to the building of trading systems, this is your source of practical advice.

SFO (July 2006)

The Essentials of Trading is no $200, 600-page B-School text, but its writing style and format – yes, there’s homework – probably make this book a better fit for aspiring traders that thrive in a classroom structure: in this case, a self-directed course that tucks into a gym bag or bedside table drawer.Author John Forman packs into these nine chapters the best of his students’ struggles and breakthroughs on their way to profit. But lest anyone feel a pre-finals cold sweat coming on, it’s important to stress the efficacy of this approach. After all, Essentials is meant for novice, do-it-yourself investors willing to put in the time to learn the ins and outs of more complex markets. Forman gets the reader quickly from theory to practice with his emphasis on journal keeping and his dozen or so assignments throughout the book, including calculating win/loss ratios and following detailed steps for several dry runs on a mock trading platform.The theory portion of the book centers on psychology and risk-taking, understanding the mechanics of markets and the anatomy of a trade, plus determining what factors influence prices, and reading and analyzing price patterns.Those who learn best by example can rest assured that the author’s experience isn’t exclusively academic, and neither is his book. Forman has readers begin with elementary steps like recording market reaction to major economic indicators, court decisions or merger announcements. Readers soon advance to building their own trading strategy: how much can they risk; when and for how long will they trade; what are their expectations? They’re next directed to develop a risk management plan: tackling stop-loss trades, hedging and calculating value at risk (VaR), which is loosely defined as a portfolio’s stress limit over a given time frame. Forman helps readers make sense of fundamental analysis, technical analysis and the blend of both in quantitative analysis.

In the final chapters, those soon to graduate to live trading develop and test at least three systems to find the best match to their strategy. In simpler terms, students are setting up a series of pre-determined rules: go long if/when …; exit long if/when …, etc. Determining trade size and measuring performance round out the final pages, while the appendixes offer sample systems of varying complexity.

Forman seems to hinge new traders’ success on their dedication to journaling and review about as much as he emphasizes practice trading. That’s well-meaning advice likely to resonate with anyone who’s ever tackled a new pursuit steeped in theory. At the same time, some readers, particularly those kept busy with their day job or a family, may feel overwhelmed to keep the kind of thorough diary entries that the author recommends.

Clearly, the book is meant to be paired with the author’s analytical and trader community websites, given its several references to both. And Forman’s step-by-step walk-through of mock trading is limited to just one site — Oanda’s foreign exchange platform, called FXTrade. The author explains there’s no particular endorsement here for Oanda or any nod given to forex over other markets. (In fact, his sample system in the final pages is for stock and stock options trading). Forman says Oanda differentiates itself with its unlimited trade duration on its demo sites and its variable trade sizes, among other features, and the 24-hour currency market means neophyte traders can practice any time they want. Oanda’s prominence in The Essentials of Trading isn’t meant to discourage readers from perusing the fast-changing world of Internet trading for other practice platforms.

As with most how-to trading books, this one is rich in charts and tables. Even skimming eyes are quickly drawn to the gray-highlighted text boxes that offer anything from trading term definitions to a quick review of the equation for calculating moving averages, to anecdotes from traders’ blogs. This feature makes the book a handy reference to leave near the monitor well past the practice days.

Equal parts lecture and lab, The Essentials of Trading will help those contemplating hands-on investing to determine whether they’re cut out for the perilous and profitable world of global financial markets. If they proceed, Essentials will have armed them with the tricks for discipline and risk management. From there, the real lessons will come from trading.

Can’t complain too much about that!

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Amazon ‘Top Seller’

Thanks to a fantastic book launch celebratory promotion, The Essentials of Trading became an Amazon.com Business & Investing ‘Top Seller’ on Thursday.

Very cool! 

My publisher is super pleased, naturally, and it’s a lot of fun to be able to say that The Essentials of Trading is a best seller.  The fact that my book stood shoulder to shoulder with some of the major titles on the market today is amazing!

So what’s next?

Hopefully a few days of rest, first.  I’ve got some very interesting projects in the works, though.  Check back on Monday to see what’s in store.

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Welcome!

Welcome to the new blog for traders and investors of all kinds. Whether you are new to the markets and looking to learn, or an old hand just trying to pick up a few tricks here and there (and maybe share with others), you’ve found the right place. This blog will feature posts and articles about investing and trading, and commentary on the current state of the markets. I hope it will become a worthwhile resource for everyone involved. Comments and questions are both welcome and encouraged.

John Forman
Author – The Essentials of Trading