High Probability trading
by Marcel Link
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Book Reviews of High Probability trading
Book Review: Meat and Potatoes
Summary: 4 Stars
In the poker movie "Rounders," legendary old timer Joey Knish tries to save the hero, Mike McDermott, from the mother of all bad beats. Of course McDermott has to learn the hard way, as most all poker players (and traders) do. Marcel Link reminds me of Knish: a guy who's been around the block and pretty much seen it all. A grinder, trading to make a living... not going for the glory, just going for consistency. Bringing it home, month after month, and putting food on the table.
This book is the next best thing to having a brother, cousin or close friend in the business. Link is someone who knows the angles, has taken the bad beats, and can tell you the tricks of the trade and the mistakes to watch out for.
Right off the bat, wannabe traders are hit with hard facts: "In my opinion, to be realistic and have a fighting chance to succeed one should have a minimum of $25,000 to $50,000, a 3-year horizon, and a very understanding spouse." In the intro, Link also explains how his own personal 'tuition' period lasted seven years. These are tough numbers for a tough game, and I respect Link for not pulling any punches. Many books on trading, if not most, tend to gloss over harsh realities in order to keep the dabblers and daydreamers interested. Not this one.
This book will not make you a great trader, but that's not the point. It's more like a thorough recap of the fundamentals--the basic movements and processes that make up a trader's mindset. I wish I had a book like this when I was starting out. The road wouldn't have been any easier, but some of the key lessons might have 'sunk in' faster.
If you are experienced in the markets, or even just competent, you won't find much of anything new here. It's pretty much all meat-and-potatoes type stuff. You might find it refreshing, though, to have such a comprehensive reference of the 'basics' packed into one volume.
One caveat is that most of Link's examples are geared towards short-term trading, i.e. intraday, and are intentionally kept simple. So if you are a swing trader, more comfortable with longer timeframes, or looking for fancy moves, you might feel the book isn't geared to you as much. The basics are still the basics though, regardless of your time frame: core concepts like volatility, risk management, position sizing, reaction to news, and so on.
To become great, or even just good, you'll need to go well beyond the scope of "High Probability Trading." But before you can be either of those, you have to lay a rock solid foundation. Link just might be the guy to help you do it.
Book Review: solid
Summary: 5 Stars
This is probably one of the most realistic books on what it takes to trade professionally. The author starts by correctly stating how difficult it is to trade successfully. He gives a time frame of 3 to 5 years, although he states it took him seven years to be consistently successful (he refers to himself as a slow learner).
He also discusses unrealistic expectations of beginning traders, who typically open accounts of $10,000 to $25,000, and expect to make a living trading such accounts. The author notes that the best fund managers on Wall Street, who can consistently return 35-40 percent, command salaries in the seven and eight figures. Even if a beginner could produce such returns their first year (extremely unlikely), could they live on 40 percent of $10,000? When Wall Street investment firms want to hire a trader, they go to the best business schools, recruit the top graduates, pay them maybe over $200,000 their first year just to sit in training classes for months. They tell these trainees they do not expect them to make any money for at least two years, and these are individuals who have access to some of the most experienced traders on Wall Street. When they do finally start trading, they are closely watched and given only modest amounts to trade. Would you be surprised to know that the average professional trader is successful on only approximately 50% of their trades? With some futures trading systems, it is closer to 30 percent. This is why taking losses quickly is the single most important aspect of successful trading.
The book also covers the basics of trading systems, including indicators, stops and exits, typical trading system characteristics, backtesting and system writing.
While he also touches on trading psychology, this is the weakest part of the book, and is mostly biased towards his own hurdles, which were taking too large a position in too many different markets. He refers to this as "overtrading", although I would define overtrading differently. For those looking for a book on trading psychology, try Mark Douglas' books, such as "The Disciplined Trader", and "Trading in the Zone".
Finally, the book is interspersed with anecdotes about real trades and traders, which are invaluable about how not to trade, and are often hilarious. One example, the author stated he once held positions in 15 different futures markets at one time on a $5000 account, although this seems impossible, if one was to meet the margin requirements of each market.
Book Review: One of the more honest trading books
Summary: 4 Stars
This is one of those more honest books than many trading books out in the mainstream considering the price. I agree that most seasoned traders won't necessarily find anything new in this book. When I first read it after reading couple of stock-picking books, it helped me quite a bit. It does shed quite a bit of light if you have been reading only stock-picking books which I don't find that useful anyways.
In the author's opinion, you need at least $50,000 in tuition and at least several years of intense trading experience to succeed. I don't necessarily agree with him on this point, because $50,000 is quite a bit of money and trading is an extremely stressful job. After all, it is all about gambling.
When you get into trading business, skills of trading matters more then stock picking based on fundamental analysis or recommendations. And don't necessarily rely on technical analysis all the time, because it is not supposed to work 100% of the time.
Some of the most important rules and advice include
Think in terms of risk/return rather than return only.
Don't rush in or rush out. Buy and sell a little at a time.
Do not buy into rumors or news.
Avoid the spike and sharp sell-offs.
Do not deal with fundamentally troubled entities.
check out variety of asset classes. don't just limit yourself into stocks, but also check out etf's, bonds, commodities, precious metals, etc.
This is my opinion, but I personally try to avoid derivative markets (CDS, leveraged etf's, options, futures, etc) since they are way too volatile and you take on much more risk.
Avoid mainstream financial news coverages. Try independent blogs such as
Max Keiser or Daily Reckoning.
You also need to know the nature of the Federal Reserve and our monetary system. Read the following books too
The Creature from Jekyll Island: A Second Look at the Federal Reserve
Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books)
Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free
Book Review: Terrific
Summary: 5 Stars
I liked this book a lot. It was clearly written. It covers a surprising array of trading aspects. The author doesn't come across as condescending. The author doesn't provide the reader with an unrealistic expectation of success or failure. The author has a lot of different experiences with trading that he uses to create a wonderful work. The book is organized well, and all the information contained in the book is relevant to traders and long-term investors alike.
The author has a lot of experience trading. He's traded in the pits of exchanges, traded other people's money, traded his own money, and has seen incredible blow-ups of his own and of his clients as a broker.
The book is organized well. The chapters are dense with information. Each chapter stays relevant and doesn't lose focus. The resulting effect is a high-quality work that hammers the nail right on the head.
The author doesn't provide the reader with unrealistic expectations. When you read this book, you'll read so many stories of people blowing their accounts up, that you'll come to understand success in this game is the exception, not the norm.
No book is perfect, so I will include a criticism of the book. It is redundant. It is redundant. It is redudant. But that might not be a bad thing if that's how you learn. But if you hate redundancy, avoid this book.
If you're looking for a book as a brief intro into financial statements, try "Rule #1 Investing" by Phil Town.
Appendix
The following works/books were mentioned by the author inside this book as recommended reading:
1) Reminiscences of a Stock Operator
2) The Inner Game of Tennis
3) Extraordinary Popular Delusions and the Madness of Crowds
I bought this book from a dealer off Amazon and it came in perfect condition. Try eBay if you're looking for best price. This book is a must as a primer for talking with traders.
Book Review: Not worth reading
Summary: 1 Stars
I didn't like this book at all. Clearly it is aimed at beginners and it tries to cover technical analysis, money management, trading psychology, and system testing. Just too much to be able to cover anything in depth. However, the author seems honest in his approach of trying to tell the reader a bit about everything he has learnt himself. Honesty is unfortunately not sufficient to write a good book.
This book would have been better by cutting down the amount of text, especially the sections that state the obvious, for instance the 30 odd bullet points that end each (!) chapter. Come on what was the author thinking?
I bought this book due to the high rating on amazon, but clearly the author has a fan-club that raises the book to the sky. Lot's of reviewers have only reviewed this one book.
Don't buy this book. For the beginner I would recommend Miner's High Probability Trading Strategies: Entry to Exit Tactics for the Forex, Futures, and Stock Markets (Wiley Trading). That book doesn't tire the intelligent beginner with loads of different things. That books is also very valuable for non-beginners. When it comes to psychology read this book The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist (Wiley Trading).
I have written several short reviews on trading books. The best way is to compare the score on the books I've read. Many reviews on amazon.com are just glorious 5 star reviews. I use all five categories; sorry but everything isn't "great". Books rated 5 are very good. Books rated 4 are good solid books well worth reading. Books rated 3 can be bought by some people who read a lot or have very specific needs. Books rated 1 or 2 I would not recommend buying or reading. Naturally all in my humble opinion.