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Trading Book Reviews

Book Review: The Secrets of Economic Indicators by Bernard Baumohl

[easyazon-link asin=”B008O7V05U”][/easyazon-link]It’s taken me about a year, but I’ve finally gotten around to having a look through the 3rd edition of Bernard Baumohl’s book [easyazon-link asin=”B008O7V05U”]The Secrets of Economic Indicators[/easyazon-link]. Now that I’ve done so, I really which I’d dug in sooner.

This book answers the question a lot of new and developing traders have in terms of what economic indicators are important and where to go to get information about them. It comprises only 6 chapters, despite being over 400 pages long in print format. They are as follows:

Chapter 1 – The Lock-Up, which looks at how indicators are released and lays the groundwork for what’s to come.

Chapter 2 – A Beginner’s Guide: Understanding the Lingo, which is a brief look at what does into economic data and the interpretation of releases.

Chapter 3 – The Most Influential US Economic Indicators is the bulk of the book (over 300 pages). It goes through each of the major releases (and not so major) with a quite thorough discussion. That starts with a quick reference on

  • Market Sensitivity
  • What Is It?
  • Most Current News Release on the Internet
  • Home Web Address
  • Release Time
  • Frequency
  • Source
  • Revisions

That is then followed by discussion sections

  • Why Is it Important?
  • How Is It Computed?
  • The Tables: Clues on What’s Ahead for the Economy
  • Market Impact

Lots of information here, for sure.

Chapter 4 – International Economic Indicators: Why Are They So Important? follows a similar pattern to Chapter 3 in looking at the major non-US data releases.

Chapter 5 – Best Websites for U.S. Economic Indicators is several pages worth of useful websites to find fundamental information and news.

Chapter 6 – Best Websites for International Economic Indicators is the same as with Chapter 5 for international data.

I can’t imagine a better, more complete resource on the subject of economic indicators. If you’re looking at using fundamentals in your trading, you’ll definitely want to give [easyazon-link asin=”B008O7V05U”]The Secrets of Economic Indicators[/easyazon-link] a look.

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Trading Book Reviews

Book Review: Bond Girl

[easyazon-link asin=”0062065904″][/easyazon-link]Got an interest in Wall Street and want some fairly light-weight fiction to read? If so, [easyazon-link asin=”0062065904″]Bond Girl by Erin Duffy[/easyazon-link], may fit the bill. It is, in short, the narrative of a young woman’s experience working on a bond sales desk at a major financial institution. Think of it as [easyazon-link asin=”039333869X”]Liars Poker[/easyazon-link] (the book that launched Michael Lewis) written from a female perspective, set in the lead-up to the Financial Crisis rather than the Crash of ’87, but without as much of the detail and with less of a moralistic undertone. Lewis was writing of his own experience specifically, but while Duffy’s is a work of fiction, it definitely has a strong feeling of realism throughout, which leads one to suspect quite a bit of the author’s own experience has made its way into the book.

Those looking for a lot of insight into the markets or financial operations on trading desks will be disappointed. There isn’t much. This is a book written by a woman about a woman’s experience trying to navigate her way in a largely male-dominated arena. Some of what the lead character (Alex) goes through would also be experienced by a male in terms of her treatment as a freshly hired analyst (lowest level of trading desk employee), but it takes on a different perspective seen through a young woman’s eyes. Most of the story involves relationships and trading room antics rather than stories about trades and deals and the like.

While I found the end of Bond Girl rather abrupt and disappointing, it did do the desired job of making the train trips I read it on go faster. If you go into it with serious expectations, you’ll likely be disappointed, but if you pick it up as a light read then you’ll probably find it fairly enjoyable.

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The Basics Trader Resources Trading Tips

More than just basic free trading advice

In the process of preparing for the review of Hedge Fund Market Wizards I posted yesterday I went back and read some of the reviews of prior Market Wizards books. I have long been an advocate of the series, and remain so with the addition of the new book, it’s worth seeing what those who don’t agree have to say. Their arguments against one or more of the books help me produce a better review.

Now folks are going to have their own opinions. I’ve got no problem when people disagree with me. I did, however, see a couple of repeated version of the following comment that I have a problem with:

I dont understand what really gets those books so many positive reviews. Seems people dont surf internet to get some basic free trading rules like “Let your winners run”, “Cut your losers”, “Dont add to losing positions” etc etc.

Its all virtually the same FREE information spoken by different people!

That one came from a 2010 review of [easyazon-link asin=”1592803377″]The New Market Wizards[/easyazon-link]. I saw similar comments from other reviewers of the different books, so it’s not just one person’s view.

Has it never occurred to these folks that the Market Wizards books are a major (perhaps the major) source for those rules? Obviously not.

Yes, there is a great deal in these books which can be called common knowledge at this point. It wasn’t so common back when the books first started coming out. Believe me. I was a new developing trader in those days. This was eye-opening stuff.

It’s a question of context, though. Reading that you should cut your losses on some website, in a forum, on in a book about trading is one thing. Getting the same advice from someone who can tell you why and provide you with vivid examples of what happens when you don’t from their own experiences is a whole different thing.

But the Wizards books are about more than learning rules. They can also be a great way for someone trying to find their niche in the markets to get a broad survey of different ways successful traders approach and think about the markets, potentially giving the reader something they can latch on to for their own trading.

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Trading Book Reviews

Book Review: Hedge Fund Market Wizards

[easyazon-link asin=”1118273044″][/easyazon-link]It’s been a while since Jack Schwager has treated us to a collection of the insights and experiences of a collection of successful market participants, but he’s back with [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link]. This is the fourth installment in the series which started with [easyazon-link asin=”1118273052″]Market Wizards[/easyazon-link] in 1989, added [easyazon-link asin=”1592803377″]The New Market Wizards[/easyazon-link] a couple years later, and got market-specific with [easyazon-link asin=”1592803369″]Stock Market Wizards[/easyazon-link] as the third of the sequence. I will admit that I wasn’t blown away by the latter book, but have long rated the first two very highly. I actually interviewed Schwager back in 1992 in his office at Prudential Securities (if I’m remembering correctly). His advice to me at the time when I asked was to learn computer programming to facilitate system development and testing, perhaps reflecting his own thinking toward taking a more systematic approach to the markets at that time.

Before I get into my thoughts, I think sharing the author’s own words will go a long way toward establishing expectations for the book as I’ve found that those few folks who have panned the series have only really done so because they went into reading the books with a mistaken view of what they would get.

“Readers who are looking for some secret formula that will provide them with an easy way to beat the markets are looking in the wrong place. Readers who are seeking to improve their trading abilities, however, should find much that is useful in the following interviews.” (from the Preface)

And of course interviews is what the book is all about. There are 15 in this latest variation on the Market Wizards series, each with its own introduction and concluding summary of key takeaways. Again, we have a diverse collection of money managers represented. They are grouped in to “macro”, “multistrategy”, and “equity” categories. I wouldn’t call this as broad a set of discreet categorizations as we saw in the earlier books, but this probably reflects the way trading and money management has evolved in the 20+ years since the first book came out.

I think those who have read one or more of the prior books will find some subtle differences in this new edition. It is clear Schwager is more confident in both his interviewing and his own views on trading and markets. There is more editorializing in this book than I remember from the others. At the same time, the author isn’t shy at all about drilling down on subjects and pressing interviewees to get the most out of them. This adds to the quality of the end product.

I was actually somewhat surprised how into the book I got personally. As an experienced traders, I found a kind of affirmation from some of the interviews (Colm O’Shea especially reflected a great deal of my own thinking as it has developed over the years). There were also a few “I never really thought about it like that” moments to give me new things to ponder, which is a plus.

I think having a significant recent (financial crisis) event central to the interviews helps. It also creates the same kind of contextual linkage the Crash of 1987 had for the interviews in the first book. This common reference point for readers makes it easier to be engaged by the text. It also helps developing readers from an application perspective in terms of allowing readers to have “Oh, yeah. I see what he was doing there” type of realizations.

There are a couple of interviewees in this book who present a challenge to individual investors in that they operate in markets where no individual really can take part (there is plenty of good footnoting to support explanations and definitions of subjects discussed). Most of them, though, operate in ways largely applicable by individuals, and even those who don’t still offer insights into how they are thinking about the strategies they are employing and the way they are positioning themselves in the market.

And really that’s really the crux of what’s on offer in [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link].

It’s about hearing how successful traders think about risk, strategy, research, and everything else that goes into their efforts – getting inside their heads. There are a couple of more systematic traders in the group who don’t share much in the way of specifics, but the rest (who I would largely describe as being discretionary types) seem to have no problem at all in talking pretty specifically about the kind of technical and/or fundamental cues they look for to find good trades. If you’re after “I buy when the 15-day average crosses the 30-day” type of rules, you’re not going to find any. Most of the gentlemen interviewed (it’s all men in this one), though, are very open about the way they look for trades, manage positions, etc. For this reason, I believe there is a lot of value to be had here for new and developing traders.

Schwager ends the book with his own takeaways from all the interviews he’s done through these books. Those 40 observations alone are worth getting a copy of [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link], especially knowing from whence they came. There’s also a very good epilogue written by his son talking about his own introduction to the Market Wizards concepts and their presentation which is well worth reading.

The bottom line is I think this is a good read no matter where you are on the spectrum of market experience.

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Trading Tips

What trading books do the pros read?

A poster on Trade2Win asked the following question recently:

So everywhere I look I see the same recommended books: [easyazon-link asin=”0471770884″]Reminiscences of a Stock Operator[/easyazon-link], [easyazon-link asin=”1118273052″]Market Wizards[/easyazon-link], [easyazon-link asin=”1592803377″]New Market Wizards[/easyazon-link], [easyazon-link asin=”0735201447″]Trading in the Zone[/easyazon-link], [easyazon-link asin=”007147871X”]Trade Your Way to Financial Freedom[/easyazon-link], [easyazon-link asin=”0471592242″]Trading for a Living[/easyazon-link], etc etc etc, you all know the rest…

…but I was wondering what books do professionals read?

Of course I’d add [easyazon-link asin=”047179063X”]The Essentials of Trading[/easyazon-link] to that list. 🙂

I’d also suggest looking at the list of books recommended by the contributors to my Trading FAQs book. You can see my own Top 5 Trading Books as well.

In response to the question, though, I’d make two points.

First, the poster wanted to get inside the head of trading professionals. Really, that’s the whole point of the Market Wizards books. If you want to know how they think, read that series.

Second, think about the sort of stuff a professional in any area would read. By the time you’ve become an experienced pro in any field you have already done the vast majority of the important reading you’ll do specifically related to your work. At a certain level of development you reach the point where you don’t really get all that much out of books anymore. Books are not generally written for the masters, but rather for the newbies and intermediate level learners.

At the pro level it’s about experience and keeping up with developments in the industry. This generally means doing and getting information from news and periodical type publications. And when you do need to learn something new within the field, it comes from more direct, specific sources. It tends not to include books, unless you’re looking to expand your knowledge into a new area.

I read a lot myself, but when I read books about trading the focus is more on judging the book for sharing with readers of this blog, my newsletter, etc. via my trading book reviews. The related books that I read for my own sake tend to be more economics and history oriented, reflecting some of my personal interests.

I’m interested to hear what other experienced traders have to say on the subject, though.

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Trading Book Reviews

Book Review: Currency Trading in the Forex and Futures Markets

[easyazon-link asin=”0132931370″][/easyazon-link]I’ve just finished going through [easyazon-link asin=”0132931370″]Currency Trading in the Forex and Futures Markets[/easyazon-link] by Carley Garner. This is the second of Carley’s books I have read following A Trader’s First Book on Commodities. That book, and her regular article writing, motivated me to include Carley as a contributor to my Trading FAQs book and to do an interview with her in support of that. As you will soon find out, this existing relationship has little bearing on my objectivity where this new book is concerned.

On the plus side, this book does a pretty good job of outlining the different ways one can trade the currency market (spot, futures, options, ETFs). There are good explanations of the mechanics of forex trading in its different forms, as well as the primary methods used in the analysis of the market. This includes an in-depth discussion of the Commitment of Traders (COT) report as well as a limited section on forex seasonals.

My major issue with the book is the author’s bias. She is a futures broker, which puts a major lean in her perspective. This is not unexpected, but the blatantly manipulative fashion in which she casts retail spot trading in a negative light is something I find distasteful. She does it repeatedly in the early parts of the book by presenting some of the often-discussed concerns that have come up in the spot arena over the years (mainly related to forms of potential dealing-desk broker manipulations) with full commentary about how and why this could be a risk for someone getting into the market. Then, at the very end, after ratcheting up the reader’s fear level, she finishes with a line something like, “But that almost never happens.” This is the sort of thing I come to expect from politicians, not from book authors.

The casting of spot forex in a negative light, either directly or specifically relative to futures, happens throughout the conversation. I don’t mind that she has a preference, but I’d like to see a more objective discussion with less of an outright attempt to influence the reader. (I personally have traded forex through all the markets she discusses and continue to do so in different ways based on what I’m trying to do in the markets)

There’s also something of an error of omission in the comparison of spot and futures in terms of interest rates. The author rightly comments on the whole roll-over, interest carry mechanism that takes place in the spot market at the end of each trading day. She fails (as far as I saw) to note that the interest rate differential is also a factor in the futures market as it is priced in.

For me the negatives outweigh the positives, so I’m not inclined to recommend this book, though I did like her previous one.

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Trading Book Reviews

Book Review: Buy and Hedge

[easyazon-link asin=”0132825244″][/easyazon-link]While it may be generally classified as an investing book [easyazon-link asin=”0132825244″]Buy and Hedge[/easyazon-link] by Jay Pestrichelli and Wayne Ferbert could easily be classified as a trading book because of the way it advocates the use of options. I’ll leave the reader to classify it for themselves, though, based on their own definitions of the two terms.

In a nut shell, the philosophy of Buy and Hedge is that any positions one takes in the stock market (and we’re really talking long-only here) should be hedged. Individual hedging is best, but portfolio hedging is also considered acceptable by the authors. Options are the favored tool to accomplish that hedging.

About the first half of the book puts forth the reasoning and justification for hedging. Mainly it comes down to reducing the volatility of your returns. The authors make the statement that the one thing you can control in the investing process is the risk. I’m not totally comfortable with putting it that way, but I get the point they are trying to make.

The second half of the book is focused on options and option strategies which can be used for hedging purposes. In fact, the authors go so far as to recommend strategies (though not necessarily in all cases) where no position in the underlying security (stock, ETF, etc.) is held – the position is totally created with options. This is probably something that will make traditional investing advocates a bit uncomfortable.

It should also be noted that the authors don’t have anything against a straightforward index approach. They just think that it should incorporate a hedging element.

All in all, I think [easyazon-link asin=”0132825244″]Buy and Hedge[/easyazon-link] is a worthwhile read for those who favor playing the stock/ETF market from a longer-term position perspective.

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