Be a little more patient, as it will likely be soon before the market tells us if it wants to bottom...
Winning the Trading Game
07/01/2008 12:00 am EST
Noble Drakoln has written several trading books including Futures for Small Speculators, and his new book, Winning the Trading Game, is clearly the largest in scope. In the preface he states that “The purpose of this book is to end the cycle of gambling in futures and forex trading by getting to the heart of speculation. Each investor will learn how to transition from gambling with futures and forex to speculating and then become a full-fledged professional trader on their own terms.” This is clearly a lofty goal for any educator, and one that definitely made me read on.
The first part of the book is titled “More Life at the End of Your Money” and while it was interesting I found it somewhat out of place in a book on trading. In this section Noble talks about the need for additional income that we will now need to retire as well as his view on what the major investment or mega trends will be in the coming years.
The second section was titled “Why 95% of Investors Fail at Futures and Forex”, and this really caught my eye. The first few chapters in this book cover some of the basic information on futures and forex that should be useful for a beginning trader. In addition he reviews some basic investing/trading concepts and then tells the reader why they do or do not work in forex or futures.
One sub-section that I really liked was in chapter seven, entitled “Are You a Sucker or a Speculator?” The exercise included in this section is designed to make you realize that if you have a bias as to where a market is going, not a trading or analytical bias, it can be one of the reasons that you, along with many others, fail at trading. This section concludes with the three keys to success: money management, technical analysis, and risk management.
The third section of the book is titled “Seven Lessons for Trading Success”. This section reviews some of the common myths of trading and why you need a trading plan. Noble then reviews some of the basics, such as margin requirements and tick value, that one should use to isolate the markets that are suitable for trading. In Chapter 9, entitled “Lesson Two: Preparing to Speculate”, Noble reviews many of the psychological pitfalls that sabotage traders and shares his suggestions on how a trader might overcome them. The next chapter deals with choosing your technical indicators, which begins with a comparison of fundamentals with technical trading, and also includes a cursory review of some of the more popular technical indicators and analytical methods. For the person who is just thinking about trading for the first time this chapter might be useful but would likely be too general for those who have started trading. Noble concludes with the methods that he uses. The discussion on entries and exits includes horizontal support and resistance, moving averages, and Fibonacci, ending with the author’s ten key candlestick patterns.
The final four chapters of the book deal with understanding your opponents in the market, managing risk, building confidence, and Noble’s suggestions on how to get started. More advanced concepts are covered in these chapters and while valid, many I feel are only appropriate for intermediate to advanced traders. One point I do strongly disagree with is his opinion that one should protect positions not with protective stops but through “nine tactics that can give you much greater control of your losing trades.” Part of his reasoning for this stance seems to be his belief in the adverse affects of slippage, but the example he uses I feel is an extreme and not a normal case. Since it is part of the title, and mentioned throughout the book that 95% of traders lose, I would believe that a good percentage of those who fail at trading do so because they did not use a stop. Furthermore if you are hedging a position with an option, one of the alternative strategies, it means that the trader needs to make two decisions, not just one. Also it should be pointed out that these nine tactics cannot be used by most traders in the spot forex markets. On the plus side his 10 mistakes that traders make does cover most of the bases, and he frequently reinforces the importance of a trading plan, trade worksheet, and a trading journal. The seven lessons are a good place for anyone to start trading, and his three-month plan should give the beginning trader some good ideas on how to get started.
Though there is a considerable amount of good information about trading in this book it seems to be disjointed when read cover to cover. In the early sections the book seems to be geared to someone who is considering a trading career while latter sections, in my opinion, are more appropriate for someone who is considerably more experienced. If you are looking for a reference resource that might help improve your trading performance then I think you will benefit but if you have not traded yet, this I feel would not be a good book to start with.
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