Customer Reviews

The Logical Trader

5 star:		(13)
4 star:		(13)
3 star:		(3)
2 star:		(5)
1 star:		(2)

 

 

The Logical Trader is not a "fluff" book on trading. Quite the contrary, it requires the reader to spend considerable time and effort to absorb and learn the methodology and principles provided by Mark Fisher, a master trader and teacher.

Over the last 15 years, Fisher, an independent trader, has taught his trading approach dubbed the "ACD" system to over 4,000 individuals including members of his clearing firm - which is the largest clearing firm for the NY Mercantile Exchange. Of the 1,000 traders who use Fisher's methodology, 10% make over $750,000 a year, according to Fisher. This is certainly a testament to the soundness of Fisher's methodology. Fisher emphasizes that is method can be used to trade commodities, currencies, or stocks either at a trading firm, on the exchange floor, or at home. Traders taught by Fisher have had a 40 - 50% success rate compared to around 10 - 15% for the average trader using different techniques/

Fisher peppers his books with examples, anecdotes and stories. However, the main thrust is focused on explaining his ACD system in excruciating detail with numerous chart examples, detailed explanations of the key terms and trading parameters.

The ACD system - plotting price points in relation to the opening range - requires no expensive software. The method provides reference points for trading - A and C points are for entry and B and D are stops. Using the system the trader can calculate when to go long or short. Coupled with additional indicator and measurements, layered on top of the ACD system, the trader will be able to develop a trading plan.

To use the ACD system -which is based on simple math - the trader must have certain abilities including collect and analyze information, make and implement decisions, be good with numbers, be disciplined to follow the system. Fisher describes pivot points, the daily pivot price (high+low+close)/3), daily pivot range, 3-day rolling pivot, etc. The last 30 days data are viewed to obtain the big picture of the vehicle being traded. He calls this his Macro ACD. He provides 25 chart examples to illustrate how to score each day.

After the first four chapters, Fisher has an exam with answers to make sure that the reader understands all the key concepts and calculations.

Fisher adds more meat to the ACD system by introducing the use of pivot moving average (using daily pivot price as opposes to the day's close) to determine the current trend (up, down or flat). He uses three pivot point moving averages (14 day, 30 day and 50 day) and focuses on looking at the slope of the moving average line to determine the existing trend or rate of change in the trend. Then Fisher covers exit strategies. He explains the rolling pivot range (RPR) which typically spans 3 to 6 trading days. This is the reference point for entry of the trade. The RPR let's you keep your winning position longer and gets you out of your losing positions in a more profitable manner. Fisher also calculates the price momentum of today's close compared to 8 days ago to determine the trend. He then discusses his use of the "reversal" trade set-up to exploit the market failures. Other subjects covered include the two-way swing, trend reversal trade and sushi roll (change in the direction of the market), and outside reversal week.

Fisher illustrates the effectiveness of using the ACD system using charts from the 1929 crash. It would have worked well in 1929 at the top and in 1932 at the market bottom in keeping the trader on the right side of the market.

Fisher devotes on 27-page chapter to real person trading stories focusing on risk management. Lastly, Fisher interviews seven traders that have successfully used his system with their personal perspectives.

The book contains a 10-page glossary of relevant terms, a table of 20 simple trading rules, and a 27-page compilation of sample data gathering for the ACD system.

In summary, this book requires a lot of time and study from the reader, but the potential rewards could be substantial

At first glance it seems like a great book. The author early on tells you the ACD methodology is the basis of the system. The A and C values determine the trade entries in relation to the opening range and the pivot range. The B and d values determine your stop. It all seems so nice. Guess What? The calculation of the A and C numbers is proprietary and changes with the market's daily movements. You can get these if you subscribe to the author's research material for a fee. The values for December 2001 are given in the appendix, but don't reflect today's numbers. If you use those values you will lose your money. The book is expensive, so you would expect to be given a method to at least ascertain rudimentary values. It would be an awesome book otherwise. I guess if you want to subscribe to the service all will be well.

I mostly agree with every one of the comments written above and I would highly recommend this book. There are very few trading books out there that actually discuss complete trading setups and this is one of them. However, be prepared to do your own research because contrary to the book's claim, "Fish's messianic willingness to share with the public the successful system he has developed is an opportunity to be exploited," at face value. While he does give you most of the rules he does not discuss how he calculated the "A" and "C" values for his system. They are given in the appendix in the back of the book. If you know how to use TradeStation or Metastock, then you could probably come up with something you can back-test.
For example, the values for the S&P may work fine now when the 14 day average true range is between 9 and 15 but what if it ever gets to 45 or 50? The "A" and "C" values in the appendix are going to be meaningless. Just something to think about before you spend you hard-earned money on this book.

I will spare you from a synopsis of this book and get straight to the pros and cons of what this book is about. First of all, I want to say that I adopted the ACD method and am having some great success with it. This does not mean you will though. I have read many books on systems and have only really felt connected with this system. If your looking for others books
on par or above this check out Carter's "Mastering the Trade," Douglas' "Disciplined Trader" and "Trading in the Zone."

Pros:
-The thing that is really great about Fisher's system is that it is very flexible. It is not for novices though. It is not a black box system, it is simply a loose structure that (after mastering) gives more freedom with trading.

-It can be applied to any trading entity. This point really cannot be pushed enough. A lot of traders do not understand how important this fact is. The ability to apply a Good C Up Through Pivot (What Fisher claims is a high probability trade) to ANY entity in trading will have you trading better opportunities more often, unlike, say, Carter's TICK fading system that can only be applied to the main Eminis.

-The choice is in your hands. This is not a system that overrides your pyschology in an attempt to dampen your natural reactions to market events. All too often we are told that we need to eliminate fear and greed from the equation, but in reality, suppression of these emotions can create sub par results. It is only after accepting and working with your own unique psychology that you can maximize your trading (see "The Disciplined Trader").

-You get to pick the other indicators. For example, you really only need to nab the opening range and the A values to create your own system. Instead of C values and his pivots, you could use the daily pivots like r1 r2 s1 s2, etc. Or support and resistances from other sources, or even stochastics, MACD, or anything else really that is to your taste.

-The ease with which a day trade can become a swing trade or vice versa. Because of the flexibility in this system, and the rules he lays out, it is easy to see when to take a day trade over night and when to sell it, all based on the probabilities that that day presents. This system is VERY good at showing you when you can press your bets and when you can test the waters, all with the probabilities ON YOUR SIDE.

Cons
-I think the major con that most people complain about is the fact that Fisher does not provide the ways to calculate the A and C values. If you go to his website though and read his Q&A, he tells you that when in doubt, take 25 percent of the 30 day average range of said entity. This equation is quite simple with most charting technologies (AVG30(H-L) comes to mind). I trade this system and I do not subscribe to anything of his and it works quite well. At the moment, for the QQQQ, the A value is 13 cents.

-I wish the "Macro ACD" chapter was a bit clearer. While I understand the reasoning behind it, he only really hints at what it means that a -9 or +9 day occurs; does this mean we should go long/short for the long run? Does it mean that that day will be a trending day? A chop day? should we look for a new trend to start (what I suspect)?

-The information provided in this book is not well laid out. I had to reread many sections, and between the lines to really get across what he was trying to say in certain parts. And part of the reason I was even able to discern those facts is because I have experience with other systems and trading in general, a novice would be hard pressed IMO to create a working system from this book.

Conclusion: All in all, I believe this book was worth the price FOR ME. If you already have a system that works for you, by all means, don't throw your money at this book. It can be easily summed up by saying. Take your favorite day trading time segment (ex. 5 minute), put lines at the first bar of the day or this segment, aka "opening range," take 25percent of that entity's 30day average range(H-L), put lines above and below the "opening range" by this number, use all lines as support and resistance, and apply any other indicators you like to them. But then again, most really good systems are simple like that, they simply let the trader's experience guide them. This book will have a place on my bookshelf for sure, but I doubt I would put it with "Reminiscences" like PTJ.

95% of the info in this book is useful. Fisher himself recognizes the fact that the more people apply his method, the more potent it becomes - and that is the logical conclusion of a trend-folllowing breakout system. So, for those weary of reading books in that they think any advantage has attenuated at the time of publication, fear no more.

I'm a daytrader and here is how I've applied the Fisher method(s) to my trading.

1. The Opening Range. This is the only statistically significant data point in the trading day. This is the centerpiece of the Fisher System. I had a programmer automate e-signal for me so that the first 15-minutes are marked by bold yellow lines across the chart. This has made me so much more money, it's hard for even me to believe.

2. The Daily Pivot Range. This is the daily area of support and resistance. There are some nuances to it, so I'll leave you to the book for it, but all of it is stuff that can be done in MS Excel, if not in your head. I had a programmer automate e-signal for me so that the daily pivot range is shaded in blue across the chart.

3. 30-day rolling pivot score. Fisher believes that there is a statistically significant correlation between what will happen today and what happened 30 trading days ago. An example will show how well this works. Today is March 13, 2006. We had a sharp rally in the DOW on Friday (+104 pts). This is when I would normal fade and get short. However, combining the Fisher Daily Pivot Range and the 30-day Rolling Pivot Score, I came up with a net Bullish bias in all my stocks, for the DOW, and the S&P. I made money today, when I would have otherwise lost trying to get short. This day paid for 100 copies of the book..

Incidentally, combining the daily pivot range and the 30-day rolling scoring method has proven successful more than 80% of the time for me.

Thanks Mark. This is the only book out there worth reading. Nothing else even comes close.

That said, his guidance on stop placement is not ideal for me. So, I'm not a complete toady. I'd rather buy something in the middle of the opening range if I feel it's a long.

I've read the book, backtested the strategy with Tradesation and concluded: the ACD method works.

For the reviewer Bobby from New Orleans, instead using the proprietary numbers to figure out A and C, use some variables of ATR (Average True Range).

For the reviewer 'The Collector' from Greenwich, CT.: Sorry to burst your bubble, but the markets are not random. Take a look at the Hurst Coefficient for the S&P 500 (it's not 1/2; if the markets were random, it'll be 1/2); take a look at the kurtosis and skewness - it's never zero (if it were random, they would be zero); the market's price distribution does not conform to a normal/Gaussian distribution but to a Stable Pareto-Levy distribution. As a result, the markets are 'predictible' in the short term but not in the long term - that's why Mark Fisher's ACD method works. The math/facts can't lie.

Overall, this is book provides some execellent insights into the thinking patterns of a successful daytrader.

My complaints:

A) On many occasions, Fisher refers the reader to "the Appendix" for further details and examples. Well, some of the information is there, and some of it is missing. At the price Wiley is charging for this book, they could have had an editor clear up those dangling references.

B) A more serious issue is that Fisher's ACD trading system depends on a number of market-specific time and price parameters, which the author says are calculated using his firm's "proprietary methods." So, if you want to use the trading techniques he describes in this book, you'll need to get some historical intraday data and do a little number crunching of your own to fill in the missing information.

It is interesting reading the various reviews on this book. Most users love it, and a few don't. It is probably safe to say that those who didn't were looking for a single book about how to trade. If that is the case, I wish them luck. Please let me know when (or should I say if) you find it.

For the rest of us looking for greater insight and input from those who have gone before us, The Logical Trader is highly worthwhile. Only when you consider that Fisher runs a trading company in New York that employs 75+ traders who rely on his ACD system to make their daily bread, can its full value be appreciated.

I have had a ball with this book and have just finished my third article in which I test a few of the ideas he discusses. I have found that with a little work and using some common sense that his techniques work quite well indeed. But like any good indicator or system, it is a pipe dream to think that it will work on any and every equity. It takes time to find those on which it works best. Fisher's ACD system is no exception. The payoff comes when the reader takes the time to search out volatile candidates and then finds them.

The book is straight forward and a relatively easy read. The proprietary A and C point values that he discusses can be more or less extrapolated by either eyeballing the security in question or by employing the Average True Range function in your favorite charting program. If you get stuck, he offers book customers a free trail to his website where the values are provided.

Those who are new to trading will find this book a good introduction into what is possible in trading even if the methods may take a while to grasp. Those who are experienced should find the ideas discussed refreshing and very useful if they are looking to employ some new trading ideas.

All in all the book is well worth the money. I have adopted the attitude that if I pick up one good new trading idea, the book is worth the price. This one has given me many so far with more to go. It is a book that should be in the library of every serious trader.

Matt Blackman - Technical Writer/Reviewer
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I am a market professional and as such have read 100s of books on investing and dozens of books on systems & systems design.

This is an excellent book. One of the other reviewer's pointed out that as the biggest energy trader on NYMEX and as someone who built a very successful clearing firm, Mark Fisher is a "Michael Jordon" of his field. His bona fides cannot be questioned.

The fact that Paul Tudor Jones' recommends this book to his traders as a must read (as PTJ points out in the foreword) should also be noted.

Mark Fisher describes in great detail his approach to trading - the ACD System. This is a very robust system that works across markets and time frames. It has also held up well for > 20 yrs.

As Fisher points out in the book most of his traders adapt the ACD approach to their own styles. This is something I have done as well. I have tested this methodology and it unquestionably has merit.

The main question one should ask is - does one have the discipline to follow the system without hesitation? Discipline (or execution or psychology - whatever one calls it) is a huge determinant of investment returns. Some people cannot make $ even if they are presented with a high expectancy system because they are constantly second guessing the signals. The importance of discipline is magnified when one is dealing with an intra day system.

Bottom line, this is an excellent book from a market master whose methods have been proven across many markets by 100s of people over decades. If you have the discipline to follow a pretty active system (mutiple times per week) w/o hesitation and stick with it through drawdowns then you can profitably use the ACD system.

This book provides a methodical approach to trading using the opening range as a base. By all means not a new concept but Fisher`s structured ACD method employing this is educational for any trader.

Admittedly the exact ACD figures for the various markets are not provided. It is likely that the only way the ACD figures for each market can be obtained is through computerized back testing with parameter optimization; in my opinion no guarantee of future success. The exact figures are not important as the concepts this book emphasizes of opening range break outs; reversals; stop placements; trading methods in differing time frames and the discipline that the ACD method instills. This book is not about a "black box" system.

The most important matter that this book has provided is the concept of time. Time is the least understood and studied parameter in trading. It only takes one important concept for a non fiction book to provide to make it outstanding and Fisher's book is worth its weight in gold to highlight this factor of time for further study and incorporation into ones' trading system.