Customer Reviews

Trend Trading: Timing Market Tides (Wiley Trading)

5 star:		(6)
4 star:		(1)
3 star:		(1)
2 star:		(0)
1 star:		(2)

 

 

Systems traders have long been known to employ profitable trend following strategies in the futures markets. Applying those concepts to stock trading has proven to be difficult, although the idea of trend following in stock markets dates back at least the days of Charles Dow. In a new

book, Kedrick Brown, a former vice president at Knight Equity Markets, LP, redefines trend trading and offers readers a lot to think about, and readers of this book will find a large number of testable ideas.

Brown reviews the basic tenets of Dow Theory, and summarizes the underlying idea as, "Dow Theory thus assumes that it is only worth

owning stocks during confirmed bull markets in the major indices, and that one should be out of stocks otherwise." He also offers a straightforward definition of a trend following trading strategy as, "Any preplanned, rule-based strategy for managing open position P&L in which open profits could hypothetically grow indefi nitely under a limited

set of circumstances, while open losses are limited under all circumstances."

After developing a common base of understanding, Brown develops a relatively simple trend following strategy applying what he calls three dimensional technical analysis. In three dimensional technical analysis, traders need to consider not only price and time in a single stock, but they should expand their focus to similar information in multiple stocks simultaneously. In his book, Brown fully develops a sample strategy to trade any NASDAQ stock, such as MSFT.

This strategy, one of many in the book, relies on an objective method of defi ning a market's trend - the binary trend identification method using

Donchian bands:

1. Filter condition: Take long positions in MSFT only if the NASDAQ Composite is in an uptrend, defined as price having made a new 32-day high more recently than it made a new 32-day low.

2. Buy MSFT if it makes a new 24-day high while the NASDAQ Composite is in an uptrend.

3. Limit your losses by setting an initial fixed stop at the 24-day low at the time of trade entry.

4. If the initial stop is hit, reenter on a new 24-day high if the NASDAQ Composite is still in an uptrend.

5. Exit if the NASDAQ Composite enters a downtrend, defined by the price reaching a new 32-day low.

Buy and sell decisions in this example follow the trend of the general market. The strategy manages open position P&L by limiting losses and allowing profits to run in bull markets.

Interestingly, specific reentry points are precisely defined. This is often challenging for traders to do, and Brown points out that it is important to get back into positions after being stopped out if trend following in equities is going to be rewarding to traders.

Other trading strategies are comprehensively developed in the book, and the reader is always given a complete understanding of the underlying principles. Brown also devotes a large portion of the book to a detailed discussion on position sizing, and provides worksheets that traders can use or adapt for their personal use to develop trading plans. Overall, the book can serve as a complete "how to" manual for the beginning trader, but offers a great deal for more experienced traders.

In an interesting, but brief section, Brown addresses the institutional money manager's need to add alpha by outperforming, on a relative basis, a benchmark. Assuming the benchmark is the S&P 500, Brown notes, "If you hold a proxy for the S&P 500 at all times when not trading, you need only to outperform the proxy during the holding periods of your trades to beat its long term performance (before commissions and taxes)." The discussion and test results of this point are worth considering for all those attempting to outperform a benchmark.

This book gives you good techniques for trading that you can back-test for your self. The tecnniques mentioned are quite simple but the writer proved it in academic way. moreover, it helps you trust your decision be offering a foundation for why? when? and how. By the end of reading this book, I become able t formulate my own simple strategy, the rest is how much can stick to this strategy.

This book does not help you in selecting the right stock, evaluating it ...etc. The main focus (which is really achieved for me) is to help you design your entry and exit points scientifically with no emotions.

The only challenge I found with this book; it does not give you enough techniques for shorter term trading.

This book shows methods for trend following long term trading.

There is nothing new in it. If you have already read for example "Trade your way to financial freedom" (a much better read by the way), you will learn about nothing in this book.

The style of the book is quite academic but all presented things are extremely simple. Everything is very much detailed with obvious formulas or repeating the same stuff for the short side (exactly symmetric) after having been explained for the long side, perhaps in order to reach the critical number of 200 pages for the book.

I wonder what is the motivation for this book since there is nothing new. A result of the Wiley Trading frenzy to publish?

I read this book over Christmas break, initially thinking that I had picked up yet another tome that amateur traders would find entertaining, but which would contain little useful information about the actual details of trading.

I quickly realized that Trend Trading was no ordinary book. It is literally packed with trading details, from its in-depth explanation of trend trading and money management tactics to its exposition on the psychological experience during different stages of trading.

What a privilege for us that Kedrick took the time to write this book after 8 years in the markets. A truly worthwhile read

There is more in this book than a simple presentation of theories and formulas. The author presents technical tools in a human context and walks the reader through the process of becoming a trader in the mind, in the heart and in practice. I would suggest this book to those wanting to slowly work their way to a successful career in risk taking. For those already there, I would suggest it as a framework to contrast and enrich their own styles.

Too academic and nothing new to add to material that is already out there.Not that practical from a swing trader's point of view.

This is a well put together book and I believe achieves what the author may have intended.

I quite agree with the balanced review of "Ahmed R. Al Shalaby" above, whereas I believe that the review by "Joe" is misleading and very unfair although given his other reviews, more is revealed about him than the various people he appears to have a need to be critical of.

I have "Trend Trading" and I also have been able to use it to assist in adding to my own trading strategy. As for the style being academic, since everybody has their own style I try to look beyond that as I guess the author could only have written in a way that reflects himself.

For me, this is a very good book that I would recommend.

Intradias, scalpers, swinger, ventajistas, reversores a la media, buy and holders, arbitrajistas, contrarians, spreaders, vendedores y compradores de volatilidad, fundamentalistas, adoradores de elliot, buscagiros, bottom pickers, cost averagers, dividenderos, seguidores de sistemas automaticos, y por fin, trend followers.

Despues de mucho leer y probar cosas, esta es la filosofia de trading a la que mejor me adapto o, por decirlo de otro modo, en la que mas creo.

Por eso, llevo una temporada estudiando a los grandes del Trend Following y buscando por ahi nuevos autores que puedan ir apareciendo.

Este libro que comento hoy, es uno de ellos.

En si, el libro no aporta gran cosa si ya has leido sobre el tema. Quiza recuerda algunos conceptos interesantes como son:

1) El aplicar una estrategia de seguimiento de tendencia NO DEPENDE de la manera en la que entremos al mercado, sino en como manejemos los stops una vez que estemos dentro.

Esta es la idea que mas me gusta de todo el libro. Hace ya tiempo que venia pensando en algo parecido. Y es que por mucho que lo queramos complicar, esto de invertir siguiendo tendencias es muy facil: busca un mercado que vaya hacia arriba, entra y dale suficiente holgura a tu stop para surfear la tendencia y que no te saque en cualquier retroceso. Fin. No hay mucho mas.

2) Eso si, tambien nos recuerda que esto de seguir tendencias, tambien consiste en aguantar los retrocesos que todo mercado alcista tiene y en no desfallecer cuando venga el drawdown de nuestra curva de equity.

Luego presenta una serie de herramientas, mas o menos utiles y su manera de usarlas para el seguimiento de tendencias, que a veces difiere de la manera tradicional de usarlas: canales de donchian, Stocastico, %R, Bandas de bollinger, medias.

Aporta alguna idea curiosa, como el tema de considerar las acciones en parejas a la hora de entrar en lugar de individualmente (al estilo Livermore) o el tema de entrar y salir de los valores no siguiendo su precio sino siguiendo el precio de otro valor "piloto".

No es un libro de sistemas, en tanto en cuanto no cuenta un sistema de trading, sino que es un libro mas bien generalista que puede darnos alguna que otra idea para usar en nuestros propios sistemas

El libro esta bien, le doy 3 estrellas. Estoy harto de puntuaciones de 5 estrellas para libros mediocres.

Mi escala es:

1* MALO, a evitar

2* NORMAL, no cuenta nada nuevo

3* BUENO, sin ser una obra maestra esta bien

4* MUY BUENO. Hay que leerlo

5* OBRA MAESTRA. Imprescindible

This is truly a cutting edge trading book. Unlike most "trend" books, this author has the distinction of having been a VP at Knight Trading giving him unique insight into how the market really works. Highly recomended!

A great book - thank you Kedric for helping me understand the subtleties of the market!