Trading books

[Iron]

My research has been based on what I read.

The book Trend Following by Michael Covel presents backtested trading systems, along with the results of various trend following firms. When you consider that trend following firms make average annual profits of about 20% (and have done for years), it's hard to argue against trend following.

I also like trend following because it's philosophy appeals to me. When you sit down and ponder the question 'What do I know about markets? Indeed, what is knowable?', the answer to both questions (at least for me!) is 'Not very much!'. Markets are chaotic beasts, which means most of the rules people expect it to follow will be broken more often than not. People think they see recurring patterns, but IMHO that's usually a trick of the mind (and one I've fallen for plenty of times myself!).

After much soul searching, I realised that pretty much the only generalisations I could make about markets is that they go up, down and sideways, and those movements are the result of participants whose fear and greed causes them to make irrational decisions, where they follow the herd rather than reason. Trend following exploits those qualities, and cuts out needless complication.

Jeff

Doesn't matter if you have actually traded them, I was just keen to see some examples, a bit of after timing at its best so to speak

Or have you not researched it on historical prices?

[Iron]

BTW, you might like this ebook on cognitive biases: http://www.trendfollowing.com/whitepaper/decisions.pdf

Although not aimed at traders, traders and gamblers make the mistakes described in it IMHO.

Jeff

[andyfuller]

Cheers for the info, is that ebook worth popping in the book thread?

Not sure if what you said you would also apply to sports markets but if it is there most certainly are recurring patterns in sports markets. People often react in the same way time and time again, not every time but it is a percentage game.

From what I have read where you talk about sports markets and your trend following I would say you stick to a to rigid view point and need to be more flexible with it.

I don't care what the reason behind a trade is, only thing I care about is making some money from the trade. It could be a trend I am following but a second later I could be in a trade because of a spike or it could be to take advantage of some manipulation that is going on or it could be reacting to some news. I don't stick to any one set of rules and am open to everything and happy to exploit any advantage.

A jack of all trades excuse the pun

[Iron]

Re: The ebook - Not sure which thread you're referring to, but feel free to put the link there.

From what I have read where you talk about sports markets and your trend following I would say you stick to a to rigid view point and need to be more flexible with it.

On the contrary, I keep an open mind. To cut a long story short, I believe trend following has its limitations, and I certainly won't be using pure trend following when trending the financials.

And if someone can show me why trend following doesn't work, or convince me that there's a better method out there, then I'm all ears. But as there are several billionaire trend followers who have been using simple trend following techniques for years, I doubt I'll come across anything they've missed.

I don't care what the reason behind a trade is, only thing I care about is making some money from the trade.

Agreed. But long-term, if the maths isn't on your side, you'll lose money. Clearly, the maths is on your side, as you profit consistently. However, when you trade intuitively, all you are doing is exploiting market irrationalities, even if you don't know why what you're doing works (and that's not to belittle it - it's more than I've managed to do!).

BTW, Betfair is different to the financial markets inasmuch as it's possible to scalp for a 1 tick profit, and to scratch your trade for a net zero position. So that creates possibilities that don't exist in the financials, in that you can engage in market making as well as swing trading.

Tell me, what is your answer to the question: 'What is the nature of the markets on Betfair?'

Jeff

[mulberryhawk]

theres a pretty comprehensive reading list on the right of the link here. http://www.proptraders.net/free-prop-trader-training/

[Photon]

Extreme Money: The Masters of the Universe and the Cult of Risk

I haven't yet read this but can't wait.

http://www.amazon.co.uk/Extreme-Money-M ... 460&sr=8-1

I have read Trades, Guns & Money from the same author and I thought it was a really good read:

http://www.amazon.co.uk/Traders-Guns-Mo ... pd_sim_b_1

[superfrank]

thanks for that Photon. 'will give it a go.

“an idiosyncratic yet withering analysis of how 30 years of financial alchemy and excessive credit have plunged us into what feels like a slow-motion depression… addresses, one by one, the overarching themes of the great credit boom and bust of the late 20th century.

Black humor is Das’ natural medium, and he gave me a rueful chuckle every few pages. You know that a writer is hard to pigeonhole when the advance praise compares him to both Candide and Hunter S. Thompson. I prefer to view Das as a modern-day Ishmael with an attitude, a weathered seaman who has witnessed firsthand the crazed hunt of hedge-fund captains for alpha, the great whale of superior investment returns.

… I could only endorse the conclusion. “There is no simple, painless solution” to the fix we’re in, Das writes. “The world has to reduce debt, shrink the financial part of the economy, and change the destructive incentive structures in finance. Individuals in developed countries have to save more and spend less.”

[superfrank]

One for the investors out there...



The Invisible Hands: Hedge Funds Off the Record - Rethinking Real Money
http://www.amazon.co.uk/Invisible-Hands ... YLGO5A807V

[andyfuller]

"Bets and the city" by Sally Nicoll. Funny, sassy and takes a lighter look at the serious side of trading.
luck to you all
Groovy

Just read this - took about 2 days (which is very quick for me). It is more of an entertaining book as said above. I picked up a few things and it got my mind thinking which lead to me looking at various other things but other than that it I found it more of a fun book to read just before bed.

Can't see her ever making it (Maybe she has) she just doesn't seem to have the mindset for it. She did a trade where she chased her way out of a loss to a profit just so she could post a profit and wrote that she had done something correct by doing this which just looked like chasing to me.

I got it from Amazons Used Books section for just under £3 but it was Brand New as far as I could tell.

[Iron]

Can't see her ever making it (Maybe she has) she just doesn't seem to have the mindset for it.

I actually sent Sally Nicolls an email a while back, and I got the impression that she is now succeeding with spread betting.

Jeff

[andyfuller]

I actually sent Sally Nicolls an email a while back, and I got the impression that she is now succeeding with spread betting.

Is there anyone you haven't emailed

Fair play to her if she has - she must have made a good bit out of this book as it seems to sell well.

[Iron]

In my neck of the woods, it's the closest thing to intelligent conversation I'm going to get!

Jeff

Is there anyone you haven't emailed

[andyfuller]

Has anyone had any experience of this book:

Japanese Candlestick Charting Techniques: a Contemporary Guide to the Ancient Investment Techniques of the Far East

http://www.amazon.co.uk/Japanese-Candle ... =8-3-fkmr0

[Iron]

It's the classic book on the subject, but there's a school of thought that says that candlestick analysis is pure bs.

Jeff

[andyfuller]

there's a school of thought that says that candlestick analysis is pure bs.

I would say there is a school of thought on just about everything that says such and such is bs. Best just to find what works for the individual I guess and keep an open mind as otherwise you risk missing out on things.

It's the classic book on the subject

Have you read the book at all Jeff?