Customer Reviews

Short Term Trading Strategies That Work

5 star:		(19)
4 star:		(2)
3 star:		(5)
2 star:		(7)
1 star:		(3)

 

 

This is a no-nonsense, very well written trading strategies book, with statistical back-tracing to support its claims.

There are two major messages in the book, and anything else in the book rotates around these claims:

1. Always Trust long term momentum (never buy the market when it is below its 200 days moving average) and

2. Buy short-term lows, sell short-term highs.

That's all.

I did test the statistical results and did get results that are consistent with the book. But as it is always the case, back-tracing is not a proof for future results, no matter how good the past results are.

A problem which I found with the statistical analysis, is that it completely ignores risk factors, such as standard deviation and the Sharpe ratio and also, their is no evidence for the robustness of the strategies and their susceptibility to small parametric changes.

The book is pretty close in its contents to the corresponding website:

http://www.tradingmarkets.com, which caused me to feel that the $50 spent on this book aren't justified.

Summary:

Pros:

- Very well written.

- Clear reading. Easy to implement the strategies.

- Substantial statistical backing of each and every strategy.

Cons:

- Too expensive: very similar to the web site

- Statistical analysis does not cover risk aspects

- Poor coverage for short and market neutral strategies

I am mostly a short-term trader so I buy every book I can find on the subject in search of something that will help to improve my performance. As my wife can attest...I am usually disappointed and throw them into a storage box in our den so I can sell them on eBay. Most of it is pure garbage either written by people who don't trade or who are guessing about what works merely because it looks good in back testing.

On the other hand, Larry Connors' new book on Short Term Strategies is sitting in a place of honor on my book shelf along with the small handful of books that have truly helped me in my trading over the past 20 years. What I appreciate about Larry's research is that he doesn't just look at pretty patterns on a chart. Instead, he finds edges that hardly anybody in the trading world or financial media knows about and builds strategies with simple rules that any trader can apply.

This book contains numerous stock and ETF strategies that, in my opinion, are worth thousands of dollars to any trader who will spend them to learn learning them.

Do you want to improve your trading? In my opinion this book will help you get there.

For a novice to investing, the very slim book might appear to be a letdown. Lacking experince they may not know what they have in their hands. But for the experienced trader looking for an edge or a refinement to an entry, this book is well worth it's money. Unfortunatley, the author hints at the power of combining strategies and personalizing them, but he provides few examples to guide novices. The experinced trader will take the presented "edges" and back test them on a platform like TD Ameritrade's Strategy Desk or MetaStock, and they will find they are able to verify the value of the disclosed strategies. What is presented in this book is very powerful, but it is one of many parts of the process to become a better trader. I personally have found great value in the RSI work and the simple Double 7's strategy. My first small 100 share test trade paid for the book more than three times over.

One of the distinguishing aspects in this book is that the authors provide statistical proof that the strategies presented work. As most realize, statistical studies are only valid if the population is large enough. The book's conclusions that the presented strategies work are thus based on hundreds of thousands of trades. It is possible that an average trader can execute 50 or even 100 losing trades using the strategies in this book and the arguments regarding their statistical significance will still be valid.How many average traders you know execute hundrers of thousands of trades in a reasonable amount of time?. Even individual day traders do not do that.

These facts are seen when trying to implement specific strategies in the book. I have tested the 2 period RSI strategy by picking almost 50 stocks at random and found out that the strategy fails more than 50% giving sell signal during consolidation periods or when the stock is moving higher. I also noticed that failures are greater with weekly than daily charts. In this case most often the stock keeps moving higher even though the weekly 2 period RSI is overbought.

Another issue raised in the book is that stops hurt performance.

This is true because the market makers anticipate the location of the stops and can run through them. My experience has been that this situation can be avoided by placing stops in areas where most others traders are not likely to place them.I have done tests using almost 50 trades where stops are placed near support and in this case the authors are right in that the stops are run by the market makers creating further selling and when the stops are flushed the stock moves higher. On the other hand if stops are placed in areas not predictable by market makers , this situation does not occur.

Also note that on page 130 in the authors interview with the navy seal (MACH), the interviewee stresses on the necessity of using stops to help you reach your trading goals by avoiding destruction by a few bad trades.This seems contradictory to the authors earlier comments regarding stops.

I decided to purchase this book after having read a great article that was co-authored by Larry Connors in the February 2008 issue of Technical Analysis of Stocks & Commodities that I thought was well done. When Connors' book finally arrived my first impression was disappointing. The book is about as thick as a magazine and it is written on 8x11 sheets of paper with 12-point font and generous spacing. After having just spent $50, the 125-page book seemed somewhat of a letdown. As I flipped through it I noticed that on several pages there were only three paragraphs of writing and sometimes a page with only a giant chart on it, not to mention several blank pages inserted to give the book a little more fill. It actually reminded me of a high school term paper that stretched one page of information into three just to make it look big.

But I know not to judge a book by its cover or how many words fill a given page so I sat down and gave it a read. It only took me an hour or two to finish and when I put the book down I felt that I had learned a few interesting ideas worth further testing but overall, I also felt that there were a lot of holes in the content.

The key points:

- Buy pullbacks (repeated over three chapters)

- Trade with the trend as per the 200 period ma

- Use RSI

- Use the VIX to help time trades

- Don't use stops

- Trade at the end of the month

- Hold trades overnight

- Don't quit

Ironically, Connors magazine article, which covered one of the points in his book, the "Double's Strategy" was better than the book itself.

In summary, I would recommend this book for anyone just starting in the trading business and/or the trader who can't seem to trade profitably with any sort of an edge. The book will serve as a starting point and nothing more. An experienced, profitable trader should pass on this book, as you are sure to be disappointed.

About a year ago, I decided (either boldly or foolishly) to set a goal for myself to become a full-time trader. The stress of my job was getting to me. To reach my goal, I absorbed every trading book I could get my hands on and took a number of high priced courses ranging $3,500 to $10000. After about eight months into my journey, I was experiencing only spotty success in my endeavor and I was getting frustrated.

No...I'm not going to say that "Short Term Trading Strategies That Work" was the magical turning point. But I will say that reading it and applying it enabled me see the following:

1) My success in trading cannot be based on me trying to subjectively interpret patterns on chart. Through this book I found that it was possible to trade using crystal clear, unambiguous rules.

2) Being profitable on a daily or weekly basis does not require a complicated methodology. Mr. Connors strategies are surprisingly simply and they are brilliant in their simplicity. I could teach them to my 12-year daughter.

3) I don't have shoot myself in the foot because of errors cause by my emotions. With this book there is no interpretation and there is no wiggle room for me second-guessing the clearly presented rules.

To sum it up, while this book played a big part in helping me to trades stocks and ETFs successfully, from a bigger picture standpoint, it also helped me to understand that process of trading successfully no different from excelling at a sport. You learn the technique and practice it over and over again. It's not complicated at all.

I bought this book and Connors' newer one on ETFs, which covers some of the same ground and a few new elements. The techniques are easy to understand and easy to program into your analysis program.

First, I tested the techniques in a practice account and had reasonable results: there were more winners than losers, although the average profit per winner was less than cited in the books. No problem with that... I would just need to trade often.

I back-tested on a portfolio of about 300 US and Canadian ETFs and about 100 Canadian stocks. On a risk/return ratio, US ETFs much outperformed Canadian ETFs - I don't know why. The Canadian stocks had high RR ratios, although drawdowns could be dramatic.

When I took the techniques to live trading, running daily scans on 8 of Connors and Alvarez's pullback techniques, I again had modest success... for a while.

When the correction kicked in at the end of April 2010, the pullback techniques all started firing a blizzard of buy signals, so many it was hard to weed through them to pick buys. But this was no pullback, it was a full-fledged correction (that's still going on as I write this). Having taken the advice in the books that stops would dampen performance, I then got to experience the queasy ride right through where stops would normally be placed. Steady on, I told myself. Prices have been trending up for a year and are all safely above the 200 day SMA. There has to be a bounce here sometime soon. It's June 8 today, there's still plenty of fresh blood on the floor, I'm down more than I'm comfortable with and there's no bounce in sight.

These techniques therefore have shown me in my own lost dollars that they have two serious failings.

First, no stops. Connors and Alvarez tell you to use them if they make you feel comfortable, but that you can expect reduced performance. Even today, Connors has a new article on the [...] website entitled, "Best of the Battle Plan: Stops Hurt". Well okay, Larry, but what do you do when the price just keeps going down? The books don't say.

Second, the techniques offer no discrimination between a pullback and a correction, so, like me, you could think you're trading a pullback when it's really the change of trend into a correction. It's possible that these techniques could be helpful in combination another indicator to twig traders that a correction might be in the offing.

However, I'm not sure that the [...] people have a grip on this either. They let visitors to their website try their subscription PowerRatings for free. When I sampled a stock that I'd bought based on a buy signal from one of their systems, the PowerRating favouring a buy was an impressive 8 out of 10. That stock has gone from $121 to $101 in the month since. It's going to take a long time - months maybe - and a heck of a bounce to turn this "buy" around.

I can see that there's some value in pullback techniques, but the limited info between the covers of these books does not offer a risk-controlled standalone system. I expect more from Connors and Alvarez, since they seem to know more than they're telling here (i.e. they're selling it by subscription). By all means, gentle reader, explore these techniques, but be aware that risk can be controlled (according to Connors) only through small position sizes or the use of options.

I don't normally write reviews. But I have to respond to some of the criticisms I'm seeing here. This book ranks as one of my favorite books on trading. The reason for that is simple this: The strategies are easy to use and they make money. I don't care how many pages the book is. In fact, if some can condense the content of this book on one sheet paper, I will gladly pay $50 or $500 for it. I trade the SPYs and Larry has a strategy on page 84 that has exactly three rules. And guess what? It's 84% correct and my experiences are pretty much in line with Larry's research. Wake up! Richard Dennis' legendary Turtle strategy which launched the career of many highly successful money managers could probably fit on a few sheets of paper. At the same time, there many trading books which will drivel on for many hundreds of pages about esoteric theories along with pretty lines drawn on charts -- leaving you with nothing but questions about "Where do I enter and exit?" Larry Connors has written a book, though, in which you are given steps to follow. You follow the steps. You make money by having more winning than losing trades. As such this book is worth many times what you're paying for it.

I was moved to write this review after reading Stan B.'s negative take on this book. On the one hand, I understand Stan's disappointment. Yes, the book is sparsely written. It is only 144 pages long and could easily have been much shorter if a smaller font and less white space had been used. And, yes, I agree with Stan that the presentation of Connors' Double 7's Strategy was actually better in the article he published in Technical Analysis of Stocks and Commodities--probably because he had some editorial assistance from the magazine on that occasion.

But, to me, these are minor quibbles. We are all conditioned by modern book publishers to expect every worthwhile nonfiction book to be at least 200 to 250 pages long and to follow a certain flow and format. In practice, what that often means is that publishers take a manuscript with a few good ideas and insert 100 pages or more of fluff and filler to get the page count up to 250. This book has none of that and I think is the better for it.

Each chapter has a lean but adequate description of one of Connors' strategies. There are strategies for trading individual stocks and strategies for timing the overall market. What there isn't is a lot of arcane "rocket science." Maybe that was another thing that disappointed Stan. These are strategies are fairly straightforward and doable by most people. Straightforward does not necessarily mean predictable, however. Connors has some extremely provocative thoughts on stops, for example.

And don't let the simple presentation and straightforward strategies fool you. The book is the result of more than a decade of exhaustive computer testing. It is not, as so many books on the market are, based on seat-of-the-pants theorizing.

I have not checked the TradingMarkets Web site, so I cannot speak to the charge that the book merely duplicates what is on the Web site. But I welcomed the opportunity to have so many of Connors' best stock market ideas in one volume.

I just finished reading through the strategies and can't believe some of the information. I've been trading for several years now and there's one strategy in here that I've already started to use effectively. The Double 7's strategy seems easy to follow and I have already noticed my profit margin increase.