Customer Reviews

Dumb Money: Adventures of a Day Trader

5 star:		(5)
4 star:		(8)
3 star:		(3)
2 star:		(3)
1 star:		(1)

 

 

If you are considering daytrading, or need some comic relief to ease the pain from your daytrading losses, read this book.

An easy read, this one portraits daytrading for a living as it really is. There are plenty of books about how wonderful trading life is. It sounds too good to be true and it is.

I've always been partial to authors who have real life experience. This one does, you couldn't make this stuff up!

Read it. Considering the potential losses in money and sanity, it may be your best investment yet.

The book is an interesting combination of one person's odyssey into and out of day trading, as well as a solid history of day trading. I thought that the joint perspective of the two authors was very helpful in conveying both how it used to be easy to make money in day trading (as SOES bandits hitting old bids and offers from market makers) and is much harder now.

The reality described here is that almost all new day-traders can expect to lose a lot of money in the process of learning day trading (perhaps 30-50 percent of the inital stake, and some will lose more), and even those who make money will do so in a minority of the trades. This means a lot of psychological pressure on the day trader as loss after loss occurs.

This pressure was beautifully described through Joey Anuff's relating a typical day while he was day trading. Since he lives on the West coast, this means getting up early . . . often followed by sleeplessness if he made big mistakes (like when he carried a large Oracle position overnight before a disappointing earnings announcement). The moments in between were often filled with tedium (listening to too much CNBC) and self-doubt (why didn't I hit the buy button in time?).

For those who are not skeptical enough, the book provides a lot of insight into the motives of those who profit from there being more day traders (brokerage firms, market makers, those who sell tips and educational services, information providers, financial networks, etc.).

The tone of the book is funny without overdoing it. Money is, after all, serious business to most people. In fact, it seems that most day-traders dream of becoming wealthy from this activity. Some will find the routine of a day-trader to be intriguing and exciting. Some will find it more than they want to handle.

Anuff has a series of epiphanies that guide his journey. He is an early entrepreneur on the Internet, and is excited about its potential. Day trading looks like another way to cash in -- and he does on eBay. However, he later realizes that if he had just held his eBay rather than trading it, he would have met his financial goals. Reading about past market bubbles makes him concerned about an overpriced market, and leads him into becoming a day-trader (to avoid the risk of holding stocks overnight if the market melts down one day). He doesn't realize the other risks he is taking on until later.

The essential fact of stock trading is that there has to be a loser for every winner except with IPOs. If there is a lot of dumb money out there, you can make money at their expense. Anuff likes that concept at first, but becomes uncomfortable with it when he realizes that he is sometimes the dumb money for someone else's profit. The loss of money and the ego blow are hard for him to take.

Whether or not you are a day trader or considering being one, this is an entertaining book about one of the newest and fastest growing professions in the New Economy. Banish your misconception and disbelief stalls about what is involved by reading this interesting first hand account!

This is a quick read, as breezy as the sports page and as agreeable as a six-figure income before you're thirty. But beware. Underneath the adrenaline rush lie material angst and emotional depression. After reading this you may take a certain delight in writing yet another line of boring code or in picking up that phone and punching in the numbers as you puff yourself up for a cheery hello. You might even walk outside and admire the scenery, realizing that perhaps day trading is its own peculiar hell, the kind of thing the gods do to you when they grant your dearest wish.

On the other hand this book might psyche you up to take the plunge or recharge you enough to catch the open tomorrow morning. If so--if you hear the siren call of the market or feel that passion for action--then this is a good book to read for what you can learn about how some day traders buy and sell. (They will be part of your competition.) There's a lot of insight here into what works and what doesn't work, or I should caution, what worked and what didn't work. It's clear that what day traders like Anuff do is follow the trend while working very hard to find a way to (glory be!) ANTICIPATE the trend. The incidental information on the significance of spreads, of just who you are playing against (add brokers and market makers to day traders) and how this passion may take over your life is perhaps the best of the book. Noteworthy is Anuff's description of the three-monitor layout and the software he used and the sites he visited while ensconced in his Frisco apartment glued to CNBC, whistling their theme song.

Essentially "dumb money" is nonprofessional money. What Anuff learned in his experience as a day trader is that the market makers and the brokers and other professionals still have a big advantage. Although the playing field has leveled considerably in recent years, you still have the spread against you and your information is stale and second hand. Anuff says nothing about insider trading, but it doesn't take a genius to realize that it happens all the time. Note, if you will, prior to an earnings announcement, which direction the stock in question takes. Nine times out of ten the direction will anticipate the tenor of the announcement. If it sells off, you can be nearly certain that the news is not so good. If it inches up, you can bet that a rosy report will follow. How can this be? Could it be that insider knowledge leaked out ahead of time to selected individuals who traded accordingly, and that such action was in turn noted by market makers, brokers and others close to the scene who took advantage? Yes, it's against the law, but so is speeding on the freeway. Also not mentioned is the action ahead of a broker downgrade or upgrade. By the time you hear about it, the stock has already popped or taken a haircut. As poker players say, you're chasing.

Anyway, Anuff, founder of Suck.com and Gary Wolf take us on a blitz tour of the day trader's world. They throw in a little painless history, share experiences, drop some Wall Street and Internet biz whiz names, spin some anecdotes, wax nostalgic and generally just lay wide open the human psyche of greed and fear so palpably that once or twice I had the urge to tell Anuff to go take a shower. They do this so well and with so much color and verve delivered in an apt tone of irreverence, that I promise you'll take delight.

Some of the fun comes from chat room adventures at Silicon.com, Yahoo, etc., as the ragers tout, diss, pump and dump, and otherwise scream their lungs out trying to mislead a gullible public. You'll learn why day traders always close out their positions before the bell (rather than climb walls). You'll learn what you can do about the gap in the morning, which is close to nothing. (You can try bleary-eyed to rescue your position in the before-market session, but most likely it's too late.) You'll learn why after a breaking news story the market sometimes goes one way, hesitates and then goes the other. Anuff and Wolf explain on page 152 that some quick-fingered traders, anxious to beat the pack, initially misread the news. You'll learn why technical analysis, with its "resistence" and "support" levels, works, despite the fact that any fundamentalist can prove it's a voodoo science. The authors explain it on pages 147-149 as a "self-fulfilling prophecy" that people believe. They don't explain why fundamental analysis seldom works, even though it's real science, but I will. One, a fundamental analysis of a company's true value vis-a-vis the marketplace is usually too complex to get right; and two, a significant percentage of buyers and sellers trade on emotion, ensuring that psychological factors predominate in the short run. Yes, Virginia, in the long run fundamentals will out. But you know what John Maynard Keynes said about the long run.

Here's my favorite bit of colorful writing from page 154. The authors are talking about a stock flying up in the after hours: "All the previous day's losses had been erased, and tomorrow the shorts--if there were any left--would be squeezed until their little piggy eyes popped out of their heads."

Best joke: In a greedy moment Anuff has decided to hold a position overnight. "There are seventeen and a half hours between one day's close and the next day's open, and that is a long, long time to be on your knees, hands clenched tightly, looking up at your twenty-four-foot ceiling, praying that if there is a God, he isn't just."

Firstly don't write a review about a book you havent read--duh (like the guy above did).

Secondly--I greatly enjoyed the book. I am not a day trader but I am intrigued by it. I learned a great deal about the history of the stock market during the last 15 years. I am less "dumb" for reading this book.

The main morale I got from this book was not whether to day trade or not, but rather how the average online investor is being taken by the brokerages, CNBC interviews, and market makers.

This book is worth the read for those thinking about daytrading or just begining the process and losing money. It is well written and flavored with great phrases. It is not a tech book but shows the development of a day trader. It can be very helpful in developing the correct mind set. It was a fun read.

This book is a really fun read and tells it like it is. It strips away the glamour of day trading and shows the real story of the life of a manic day trader. Between Dumb Money, Monkey Business and Liar's Poker anyone could get the real scoop of what trading and banking are all about and be as well educated as any Harvard MBA in the ways of Wall Street.

I found the book fun to read and somewhat entertaining. If you are inexperienced and looking for a quick summary of how the market works and some evolutionary history of wall street, Anuff and Wolf have done a reasonably good job of describing it. There are some very funny stories about Anuffs' experiences that I can relate to. I have been day trading for about 4 years and have had similar experiences.

I am not a "Day Trader" and do not desire to be one. But this book gives you some basic information about what a day trader does, how she/he does it and the emotional stress involved in such a job choice. Even a person who has only recently begun to trade using the computer online or otherwise can really associate with the feelings described in the book. Recently, some stock prices have shot up and crashed down in the same week or even in the same day. Living and dying on such a rollercoaster has got to take it's toll.

This is not a "How To" book and I'm sure there are better technical books out there or historical bios on some of the main players. But this was also a really funny book. It was a book that even people who are not regular reads of the Wall Street Journal or Barrons (like me) will really enjoy reading. It will also make you feel better that you have a nice, steady, borring job that pays you on a regular basis and lets you sleep pretty good at night. That is a pretty rare commodity for "Day Traders".

In the spring of 1999, I graduated from college, voluntarily made myself unemployed and lived the author's life. Reading the first three chapters of the book was like reading my biography this past year and I found myself grinning like an idiot at the boneheaded things we both did. I would recommend this book to anyone who traded in 1999 just for the description of the emotional madness and insanity experienced by the day-to-day trader. I am sure you will quickly identify with the author.

Unfortunately, I think he loses sight of his target audience after this point. It is unclear whether he was intending this book be written for experienced traders or those who haven't yet taken the plunge. The obvious answer is "anyone who will buy the book" but the problem is the book fails to satisfy both.

Prospective traders may soon find themselves mindboggled by the introduction of a large number of tools whose importance is unclear, plus technical jargon that is largely unexplained save for a glossary in the back. Experienced traders will quickly be going "ho hum" at yet another Jesse Livermore and Harvey Houtkin history lesson. He does include some interesting interviews from some famous traders like Ken Wolff, Rev Shark, and Tokyo Joe. I think he could have made the book even more interesting by interviewing some who didn't make it.

Personally, I don't think I was as aggressive a daytrader as the author. My impulses to jump into the POS's were largely tempered by an even stronger desire to control my losses (although I had a soft spot for trading Nasdaq IPO's - the fastest moving and most ridiculously stupid trades you can make.) I was fortunate enough to quit while I was ahead and go to work as a trader for a capital management firm. I now make money consistently and without even a fraction of the risk I was taking in 1999. I have learned how much daytraders really are, in fact, "dumb money."

To summarize, if you are looking to take the plunge you may want to get this book for his honest and insightful introspection. It is the life you will be living, and it's probably not what you think. Experienced daytraders may find themselves skipping through a third of the book, but laughing through the rest.

I just checked out this book from my local library, read chapter one thus far - and It's a great book.

Casual, yet informative at the same time.
Great read for all day traders.

---lawrence lugar