Trading Book Reviews

Book Review: The Complete TurtleTrader

[easyazon-link asin=”0061241709″]The Complete Turtle TraderLast week I received from Michael Covel a copy of his latest book [easyazon-link asin=”0061241709″]The Complete TurtleTrader: The Legend, the Lessons, the Results[/easyazon-link]. Michael and I first crossed paths a couple years ago when I was the Content Editor for Trade2Win website. It was shortly after he had released his first book, [easyazon-link asin=”0136137180″]Trend Following[/easyazon-link], and he was gracious enough to do an interview for the site.

The first impression one gets from the book is quite favorable. It is an attractive format, and a pretty easy read, though well written and detailed. The primary text is about 200 pages, which I got through in a single afternoon (though I do read faster than most). And the price tag is extremely reasonable for a hardcover trading book, much lower than what you often see.

The Complete TurtleTrader definitely continues along the path of the trend trading subject of Covel’s earlier book, but does so through the story of the famous Turtles. Readers of Jack Schwager’s book, [easyazon-link asin=”1592802974″]Market Wizards[/easyazon-link], and it’s follow-up, [easyazon-link asin=”0887306675″]The New Market Wizards[/easyazon-link],will be familiar with the Turtles. They are the result of a nature vs. nurture running debate between famous futures trader Richard Dennis (a Market Wizard) and his partner William Eckhardt (profiled in The New Market Wizards). [The [easyazon-link asin=”1592802834″]audio of the Dennis chapter[/easyazon-link] from Market Wizards is also available separately.]

The Turtle program was an effort to determine whether traders can be created, developed through training as opposed to having some innate talent for it. This topic has been the subject of debates in trading circles for probably as long as there has been traders. To a certain degree, the classic movie [easyazon-link asin=”B000O59AH0″]Trading Places[/easyazon-link], which was released very near the time of the first Turtle program, has at it’s core the same theme.

In The Complete TurtleTrader, as the subtitle suggests, Covel tells the story of the Turtles from the selection process which brought together two very diverse groups of people in 1983 and 1984 all the way through to where they are today. It includes a discussion of their training program, their performance, and of course the ideas underlying the system they employed, one based on trend following. The explanation of the latter is pretty direct – definitely enough to give the reader a really good idea of the way the Turtles were taught to trade, which they did very successfully. Figures to that end are provided throughout the text and in supporting appendices. The author also includes comments on how individual traders can apply the Turtle techniques and philosophy themselves.

For someone like myself who first heard about the Turtles through Schwager’s writings, this book was a really interesting back-filling of the story. When Schwager was putting his books together, the Turtles and their instructors were very tight-lipped about the details of the experience. In this book, Covel has been able to flesh things out not just in a kind of history text sort of exposition, but one which includes a great many comments and anecdotes from the participants. It is a tale which really explores the whole perspective of life as a Turtle.

The story Covel lays out offers a great many insights. Obviously, the first one is that learning how to trade, and to make big returns, is possible. Probably the most interesting part of the narrative, though, (in terms of the  story, anyway) is what happened to the Turtles after they left the program. It will come as no surprise that the diversity of their backgrounds and personalities has been reflected in the diversity of what they have done over the intervening years. I was particularly enthralled by the discussion of the adjustments they had to make to be successful as big-time money managers, something their mentor Dennis was never quite able to do.

Overall I consider [easyazon-link asin=”0061241709″]The Complete TurtleTrader[/easyazon-link] a very enjoyable and worthwhile read. It has a lot of elements, and of course trading strategy. I actually found reinforcement of many of my own trading ideas as I was reading, seeing them in a different light. That’s not something which happens much after twenty years of trading and reading books and articles on the subject. Of course not everyone is going to find the fullness of the theory or application behind Turtle trading suitable to them, but it is always worth making an effort to learn from those who have achieved success before us, and that’s an opportunity this book provides.

Trading Book Reviews

Book Review: An American Hedge Fund

[easyazon-link asin=”0979549701″]An American Hedge Fund[/easyazon-link]If you’ve been on many trading sites recently you will almost certainly have come across mention of Timothy Sykes and/or his book [easyazon-link asin=”0979549701″]An American Hedge Fund[/easyazon-link]. 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 [easyazon-link asin=”1592802974″]Market Wizards[/easyazon-link] chapter is “Everybody Gets What They Want” (also available in [easyazon-link asin=”1592802818″]recorded form[/easyazon-link]). 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.

Trading Book Reviews

Book Review: Markets in Profile

[easyazon-link asin=”0470039094″]Markets in Profile[/easyazon-link]Here are my thoughts and comments on [easyazon-link asin=”0470039094″]Markets in Profile: Profiting from the Auction Process[/easyazon-link], by James Dalton, Robert Dalton, and Eric Jones (authors of [easyazon-link asin=”0934380538″]Mind Over Markets[/easyazon-link]). I’ve just finished reading it.

At only 200 pages, Markets in Profile isn’t exactly a hefty tome. Don’t let its length deceive you, though. This is an intellectual book which incorporates a fairly wide array of topics, including some common academic theories, in to the mix. While there are loads of graphics included to provide visual examples in support of the text, which serves to cut down the actual amount of textual content, do not expect to breeze through this book in an afternoon sitting. It delves in to the heart of trading in a way that will force you to examine how you approach the markets.

One of the things that most, if not all of us forget when we’re analyzing and trading the markets is exactly what’s going on. We see the movement of prices and fail to remember what is really happening to create that price movement. That’s the auction process. To quote the authors, “… price and volume move over time to facilitate trade in the pursuit of value.”

A great deal of effort is expended by market participants to determine value. Fundamental stock market analysts spend hour upon hour trying to come up with a figure that represents the worth of a company based on earnings, book value, and other factors. That is all fine and good, but it is the market, in the end, which defines value. And it does so on a running basis.

The problem we market participants have is that we focus too much on price, which the authors indicate is merely the advertising side of the auction process. They demonstrate how price is just a way for the market to seek value. There’s an important distinction here. Price is not value. It is just a way for the market to find value, which is defined as the price area where volume is generated because buyers and sellers meet in agreement.

To help us understand that process, the authors use some easily understood examples to define the basic mechanisms of the financial markets. They are the same as in other markets, after all. The process might operate faster and on a broader scale, but otherwise it is the same. Sellers are trying to receive the highest possible value in the sales price, while buyers are trying to minimize the price they pay in relation to the value the expect to receive. When there is disagreement between the two, little trading takes place. When they agree, lots of trading happens. It doesn’t matter if the product is automobiles, bananas, or stocks.

About the first half of Markets in Profile is laying the kind of mental groundwork needed for really getting in to the analytic method known as Market Profile. Market Profile is the technique the authors use to identify the levels where the market has found value and when the market is in search of value. It is an approach first developed by Peter Steidlmayer (see [easyazon-link asin=”0471215562″]Steidlmayer on Markets[/easyazon-link]) at the Chicago Board of Trade (CBOT) for the futures market, and which they spent considerable time defining and outlining in their previous book, [easyazon-link asin=”0934380538″]Mind Over Markets[/easyazon-link].

On the surface, Market Profile appears to be just another way to present price history in graphic form. The authors, however, demonstrate how the Market Profile distribution patterns put “market-generated information” to excellent use in identifying value and the market’s pursuit of it.

Using numerous examples, the authors explain in detail the ways Market Profile can be used to identify what they refer to as “asymmetric opportunities”. These are market set-ups where not only do the odds more favor a move in one particular direction, but the situation is such that a move in that direction is likely to be substantially larger than were the market to go the other way. Think of it as you would a trading system that has a win rate in excess of 50% and a high average winner to average loser ratio. That’s a pretty good combination!

This is a book that can make a huge difference in the way you look at the markets, and by extension, the way you trade, but only if you let it. The authors challenge quite a few elements of trading. Some readers may put up walls where that happens. The open-minded reader, though, will find themselves thinking along completely new paths and gaining massive insights in to the way they see price action.

(For the record, years ago, when I was a professional analyst focusing on the futures market, I used Market Profile extensively and with considerable success. In the intervening years I fell away from it when I shifted market focus, but I’m now making a move back.)

Trading Book Reviews

Book Review: Enhancing Trader Performance by Brett Steenbarger

It’s been a few weeks now since I first received Brett Steenbarger’s new book [easyazon-link asin=”0470038667″]Enhancing Trader Performance[/easyazon-link]. At that point I was able to go over the first chapter, which was amazing. Until this weekend, though, I didn’t have the opportunity to progress any further. Over the last couple of days I finally gave it the attention it deserved. Now I’m wishing I’d just read it cover to cover when I first got it!

[easyazon-link asin=”0470038667″][/easyazon-link]First, to keep things totally above board, let me state for the record that Brett Steenbarger wrote the forward to my book, [easyazon-link asin=”047179063X”]The Essentials of Trading[/easyazon-link]. He and I became acquainted through my editorial work with Trade2Win. When my book was near completion, I asked Brett to give it a look knowing that he was involved in trader training and development. The foreword followed from that.

Brett’s new book, [easyazon-link asin=”0470038667″]Enhancing Trader Performance[/easyazon-link], is his second, following on the heels of his extremely successful and worthwhile initial release, [easyazon-link asin=”0471267619″]The Psychology of Trading[/easyazon-link]. I would not, though, call it a sequel. While the latter part of the new work does bring in major elements of what the first book covered, the majority of it has a quite different focus

Enhancing Trader Performance is primarily about developing trading expertise. As someone who has spent his fair share of time teaching and coaching on a variety of levels and in different theaters of pursuit, some of which were extremely competitive and performance oriented, I was immediately grabbed by Brett’s presentation. And it never let me go – literally pages of notes later.

This book may not be for everyone. It clearly has a bias which leans more toward the full-time and/or short-term trader than someone who traders longer-term and/or on a more part-time basis. This is a natural function of Brett’s work helping professional traders with their development and to overcome performance hurdles, along with his own personal efforts in the market, which are short-term in nature as well.

That said, there is still a ton of extremely useful material for any trader, new or experienced. [easyazon-link asin=”0470038667″]Enhancing Trader Performance[/easyazon-link] provides a sort of road map toward developing trading expertise. This isn’t about the mental part of actually making trades and managing positions. Rather it is more a discussion of how one becomes more than just a competent trader.

Coaching is a major theme, with Brett clearly being a proponent of traders having coaches who can assist them in their development similar to the way they would an athlete. I personally tend to disagree with the way he uses “coach” and “mentor” interchangeably as I consider the two to be different, but that does not detract from the overall message. Importantly, since it can be difficult for the individual trader to get in to a good coaching relationship, Brett shares plenty of tips and advice for how a trader can be their own coach.

The one major carryover from [easyazon-link asin=”0471267619″]The Psychology of Trading[/easyazon-link] is the use of the stories of actual people – either real or composite. They really help to drive home the points Brett is making, and in a fashion easily relateable by the reader.

In short, read this book if it is at all your objective to excel at trading. More than that, take your time and really absorb it. Read it once, then read it again. I know I will.