If you’ve been on many trading sites recently you will almost certainly have come across mention of Timothy Sykes and/or his book An American Hedge Fund. A great many folks have slammed Tim for any number of reasons. Some of the criticism can be called legitimate. Much, though, would seem to be more motivated by jealously at the type of publicity Tim’s been receiving. Don’t get caught up by only one point of view, but instead draw your own conclusions.
For the sake of full disclosure, Tim approached me with his pre-publication version of the book to get feedback and a brief recommendation. I provided both. You will find a short quote from me in the front of the book (along with many others) and I’m happy to see that in the final version he did correct an error I had pointed out. Be aware however, that this review is in no way influenced by my earlier involvement. It is always my intent to provide honest assessments of trading related materials so folks can be fully informed and make good decisions for themselves.
As I finished reading An American Hedge Fund, I couldn’t help but recall a quote by the master trading philosopher and legend Ed Seykota. The title of his Market Wizards chapter is “Everybody Gets What They Want” (also available in recorded form). Seykota’s point of view is that we all end up getting out of the markets what we want, and that big time profitability is not always what we are really after, whether we realize it or not. My guess is that in hearing Tim Sykes story, which is what An American Hedge Fund really is, Ed would say that Tim got exactly what he really wanted out of the markets.
Now Tim has read a great many books, and Market Wizards is on that list. I wonder if he ever made the connection that seems to really stand out – at least to my mind – from his story. I won’t say what exactly that is, though. Let’s call it a puzzle for you to figure out as you read the book. 
And if you are someone just getting started in trading, An American Hedge Fund is definitely worth putting on your reading list. I’m not going to put it ahead of the likes of the first two Market Wizards books (I’m less enamored of the third), and a few others I could mention – and I’m guessing Tim would agree with me on this – but it’s certainly worth the time and reasonable price.
Don’t expect some master work of writing here. This book is not the product of an experienced, trained writer, and it shows. That’s not necessarily a bad thing, though, because it allows for a freedom which might not come through were a more practiced author involved. What Tim has produced is just a straightforward, honest account of the his trading experience. It’s an easy, fairly quick read, and tells the story efficiently. The one exception, to my mind, would be the final chapter which does ramble and repeat a bit.
My one gripe with the narrative is the fact that Tim often says he risked $X on a trade when referring to a position’s size. In almost none of these case was he really putting all that money at risk since the stock wasn’t going to zero (even in his favored microcaps). It would have been more correct, and less confusing for those who might not pick up on the difference, to have said something more like “I had $X worth of …” or “I shorted $X of …”. That’s a relatively minor point in the grand scheme of things, though.
So, here’s the skinny. An American Hedge Fund is an autobiography covering about 8 years or so of the author’s life.  It opens with a little childhood background, but quickly moves on to Tim’s high school experience getting started in trading. It then progresses through his explosive performance during college, and finally carries on into the third stage after college during which he was primarily in the fund management game.
The title of the book, An American Hedge Fund, actually belies somewhat the main thrust of the narrative. Certainly there is plenty of discussion regarding Tim’s efforts in forming and growing his own hedge fund. The majority of the book, though, involves a detailing of many of the trades Tim made along the way, with a lot of personal side story added in to allow the reader to get to know the author. This chronicle of his trading is what I consider to be the most valuable aspect of the book for someone learning about the markets.
I have read reviews of the book by others who say that no real meaningful trading methodology lessons are to be learned in this book. I contest that point of view. Tim doesn’t come out and say do this or do that, but if you pay attention to the way he talks about the trading set ups he was looking for you will grasp the approach. It’s not something proprietary or anything like that. In fact, it’s a common approach, which just goes to show that you don’t need something new and unique to make good money in the markets.
Don’t get me wrong. Tim hit the markets with the right approach at the right time and made loads of money as a result. He was playing with money he had no problem putting at risk and made much of his outsized returns taking risks many of us would never consider. Most of us aren’t that lucky. He also, though, shifted his strategy when he realized what he was doing no longer worked. Markets do change, and traders need to be flexible and able to adapt.
At the same time, Tim also demonstrates what happens to nearly all traders at some time. He ignored his trading rules on a regular basis. Many times it didn’t matter and he came out of it just fine thanks to favorable market conditions. Often, though, it cost him dearly, as it does with all of us eventually. He also learned the hard way that trading to achieve a certain goal oftentimes makes you do things that actually make achieving that goal harder.
Read this book. Learn the lessons Tim learned (or in some cases didn’t). You could end up a better trader for it. You won’t find the path to long-term trading success here, but you will find some of the key landmarks. Remember what Ed Seykota believes, though, and see if you can observe what Tim really wanted and how the pursuit of it ended up being the real reason why he stopped being the same trader he had been during his prime years. It really doesn’t have anything to do with ability or the markets changing.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
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