28 of 30 people found the following review helpful:
2.0 out of 5 stars
Covers the bare bones. There's no meat at all., July 8, 2008
This review is from: The Essentials of Trading : From the Basics to Building a Winning Strategy (Wiley Trading) (Hardcover)
I purchased this book for the purpose of learning more about stock trading. While the author suggests that his text is just as applicable to stocks, his entire focus is on currency (forex) trading. He spends a great deal of the book explaining the software of his favorite forex game platform (which turns out to be irrelevant during the remainder of the text). I can only assume that Oanda subsidized his book. I would not have purchased this book had I known that.
While I am glad to know a bit more about forex trading, some of the "logic" behind doing so is faulty in my opinion. One of the premises behind trading currency is the much smaller set of investment vehicles to analyze as opposed to the thousands of stocks available. The trouble with this premise is that one currency in and of itself takes an entire economy to create its value as opposed to a stock which is a microcosm of one sector of an economy. What you end up trading with forex is not just one economy but TWO! To trade the currencies effectively, one should know what's driving the value of both entire economies. The scope of your fundamental analysis is therefore not more limited, but dynamically multiplied.
However, that being said, this book only covers the most basic concepts of trading, and in very broad generalities. He gives practical "homework" assignments, such as track market reactions to economic releases, keep a journal, write down your goals, define your strategy, stick to your strategy, don't drink and trade.
Where this book falls grossly short, for me, is in the details of his "methods". The subtitle is "From the Basics to Building a Winning Strategy". This should be interpreted as reaching only to the upper resistance area of the Basics. The window left between the Basics and the theoretical Winning Strategy is quite large. There is NO bullish breakout into the Winning Strategy trading area.
He basically says, "go create a strategy", then "test your strategy". Then says, "choose a strategy" without a single word of advice as to how to do that with any reasonable or practical sensibility. There is no discussion of the multitude of components that might make up a strategy other than "there's other books written on the subject". His homework assignment in this one area would leave the book on the shelf for years while you figure it all out yourself.
He provides a few basic testing examples, but emphasizes that they were created for the purpose of walking through a fictitious test and are not intended to provide any usable results. There's no list of things that might be testable, what indicators are available, or what variables to use, what formulas to use or how to apply any of his suggestions to the wide expanse of reality. Speaking of formulas, he throws out a great deal of quantitative results, but doesn't provide the math used to back it up. This is akin to saying, "X=10, please go test for X, and make your choices based on the results." I'm just supposed to grab these formulas out of thin air I suppose?
The few formulas that he does provide are either basic math (sell price minus purchase price equals profit), or include variables that aren't explained at all (i.e. R sub f = risk free rate of return). If you don't know what Risk Free Rate of Return is, don't worry neither do I and I've read the book.
He doesn't point you in any direction whatsoever! There's a big world out there, go invent your tests and your formulas yourself, then test all the possibilities before using real money to trade. While at the same time says that it's unreasonable for a novice to understand more than one trend indicator at a time. I'm sorry, that's just not practical advice. If I can only understand one indicator, at least point me in a somewhat limited direction and explain it to me.
He also does not give any advice as to how to find a broker, just says "find one that suits your goals". What?! Mind telling me how to do that? Never once mentions how to research their credentials, or what scams might await. How are they regulated (or not)? What should you look for as a reasonable spread? Are there hidden fees to consider? What about those bogus interest rate rules some brokers have? And absolutely nothing he suggested actually related to stocks or stock brokers at all as far as I'm concerned.
Many of his charts are illegible, or incomprehensible due to lack of explanation as to what he's charted. There are many grammatical and sentence structure errors which make portions of this text difficult to get through. His overview of the technical indicators is slack at best. He merely suggests that "there are many books that already cover that topic in great detail". In fact he makes similar statements on various topics throughout the book.
The most amazing thing is that he spends the entirety of the book explaining trading via forex. But then the trading system he shares with you in the appendix is for stocks! And not only that, the system presented completely digresses from his proposal to pick one or two trading vehicles and thoroughly back test them to develop the optimum system for that vehicle. It is the ultimate in inconsistency! Due to the number of errors in the book, there's no way I'd trust his "sample system" at the end of the book without confirming it against several other sources.
If you need someone to tell you that you need to do your homework, apply yourself to ongoing research, and plan properly prior to trading then I've just done that. No need to buy the book.
However, if you're looking for practical advice on how to find workable tools, strategy evaluation methods, or any caveats to watch out for which are prevalent in the industry, I suggest that you seek to purchase one of those other books that he alluded to.
The subtitle really should be "From the Basics and up to (but not including) Building a Winning Strategy".
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44 of 50 people found the following review helpful:
5.0 out of 5 stars
An Essential Resource for Developing Traders, April 22, 2006
This review is from: The Essentials of Trading : From the Basics to Building a Winning Strategy (Wiley Trading) (Hardcover)
Rarely does a week go by in which someone in the trading world does not ask me to endorse their website, product, or publication. I politely decline 90% or more of the time. The sad truth is that many trading texts are written by individuals who are not truly experts in their domains. When I had the opportunity to review John Forman's book "The Essentials of Trading" prior to its release, I not only gave it my endorsement, but consented to write its Foreword. I would only do that for an author who knows his stuff and for a work that I am proud to be associated with.
What John has accomplished is, to my mind, the best general-purpose introduction to trading I have yet encountered. Having run a training program for aspiring professional traders at a proprietary trading firm, I know the questions that new traders ask and the lessons they need to learn. John has clearly addressed these in "The Essentials of Trading". He begins with trading mechanics: the nuts and bolts of executing and managing a trade. His discussion is accompanied by real examples, with screen shots of order tickets and trading screens. This is no academic, theoretical treatise, but a hands-on introduction to trading basics.
Later chapters take up the important topics of trading plans and risk management, followed by methods for analyzing markets and designing, testing, and optimizing trading systems. Once again, practical examples abound, with clear illustrations of actual markets, positions, and systems. A nice touch are the text boxes throughout the book highlighting key concepts. Many of these are comments from traders and the lessons they've learned.
Overall, I found John's writing to be clear and concise. He has served as content editor for the Trade2Win community site, and his writing experience shows. When I endorsed the book, I said that it was the text I wished I had when I started my training program. I stand by that comment: this is a great introduction to the trading world.
Are there weaknesses to the book? Those will depend on readers' interests. Two full chapters are devoted to trading systems, but only part of a chapter to technical analysis. Valuable insights regarding trading psychology are scattered through the text, but there is no dedicated chapter to the topic. Conversely, the bonus sample trading system included in the appendix is worth the price of the text alone, providing an illuminating example of a trading methodology.
In sum, I highly recommend "The Essentials of Trading" for new and developing traders. From execution to planning to risk management to market analysis, it covers the basics in a clear, engaging style.
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14 of 18 people found the following review helpful:
5.0 out of 5 stars
Designed for the Individual Trader, June 6, 2006
This review is from: The Essentials of Trading : From the Basics to Building a Winning Strategy (Wiley Trading) (Hardcover)
Trading in the stock, foreign exchange, or other markets used to be a game played only by the experts on Wall Street or at a minimum sitting in a brokers office watching the ticker go buy. News dissemination was slow and poor. All of this has changed. The web now allows everyone the world over instant access to the same information and instant access to on line trading.
This book starts with the very beginning, opening a trading account. From there he moves to the development of a trading plan and tracking that plan using the 'demo' or test account at an on-line traders. The development of a plan that suits your needs, your own level of risk. In describing how to create your own plan, he goes over the primary ways used by the pros to analyze markets: Fundamental, Quantitative or Technical Analysis. Strangely enough, he doesn't seem to have a favorite as most authors do.
On the whole, you couldn't ask for a better introductory to the subject.
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