Winner Take All: A Top Commodity Trader Tells It Like It is [Hardcover]

William R. Gallacher (Author, Preface)

Book Description

ISBN-10: 1557385335 | ISBN-13: 978-1557385338 | Publication Date: December 19, 1993 | Edition: Rev Sub

The futures industry is unique, entertaining and, for far too many people, ultimately heartbreaking. What other industry possesses such an entertaining cast of soothsayers, self-proclaimed experts and charlatans? Where else do people become fabulously wealthy simply by acting on their own convictions? And where else does the possibility of failure loom so large and so constant? No other book captures the essence of the futures industry better than Winner Take All. With a penetrating intelligence and a sharp wit, Bill Gallacher dissects many of the industry's leading lights, exposing the frauds, deflating the pompous and poking fun at the seers who believe they can predict the future. Along the way, he demonstrates why most traders lose and, most importantly, what it takes to win. Winner Take All is a book for all traders. For those who believe in easy-money trading systems, it is a sobering antidote. For those who think the markets can't be beaten, it is a work of great inspiration. And for those who are trading profitably, it is an affirmation of the trading success principles. Winner Take All is a wise and profound book. But it is also perhaps the wittiest book on trading ever written. Read Mr. Gallacher on Fibonacci numbers: "Surely the medieval mathematician would be astounded at his impact on the twentieth-century commodity man. His mathematical series was constructed from observations on the incestuous copulation patterns of rabbits. Let's see, you start with a male and a female, then you take the first female offspring and you...well, better not get into it". Mr. Gallacher, a successful private trader, questions all conventional wisdom. He exposes the false premises that underliemuch of technical analysis, and he demonstrates why mechanical trading approaches - while sometimes producing marginal profits - can never provide truly superior results. Although out-of-favor in today's computer age, Mr. Gallacher shows why fundamental analysis, if con

Editorial Reviews

From the Back Cover

Trading futures is an infinitely challenging and constantly perilous business. No other book describes what futures trading is all about better than Winner Take All. With wit and intelligence, William Gallacher debunks the conventional wisdom about futures trading and shows what it takes to win. A classic in investment literature, Winner Take All is a book for every trader. "Witty and painfully true, Winner Take All is delightful reading. Bill clearly understands the motivations and methods of all the major market players. This is fresh thinking that both newcomers and old hands can gain from." Jeff L. MacKenzie, Vice President, Director of Research, R. J. O'Brien & Associates Inc. "Intelligent, funny, and brutally homes-offers a clear psychological mirror in which to recognize-and hopefully reform-your trading flaws." Alexander Elder, Director Financial Trading Seminars. "A wonderfully witty book. It's one of our all-time favorites." Charles LeBeau & David Lucsa, Authors of Computer Analysis of the Futures Market. "The best how-to-book I've come across. His advice may not let the novice get rich quick, but at least it should keep him from getting poor quick." Financial Times of Canada.

Product Details

• Hardcover: 247 pages
• Publisher: Irwin Professional Publishing; Rev Sub edition (December 19, 1993)
• Language: English
• ISBN-10: 1557385335
• ISBN-13: 978-1557385338
• Product Dimensions: 9.3 x 6.4 x 0.9 inches
• Shipping Weight: 1.3 pounds (View shipping rates and policies)
• Average Customer Review: 3.6 out of 5 stars  See all reviews (22 customer reviews)
• Amazon Best Sellers Rank: #937,859 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

22 of 23 people found the following review helpful:

4.0 out of 5 stars A Top Rated Traders Book, December 20, 2005

By 

lyntonii "lyntonii" (Australia) - See all my reviews

This review is from: Winner Take All (Paperback)

This book should be on the essential reading list for every aspiring Trader.

Trading is an extremely difficult business. It is often difficult to identify charlatans and myth from genuine journeymen and truth. Everywhere there is someone hawking a product with the promise of an easy path to success and riches. A primary focus of "Winner Takes All" is to debunk these people and their products. The real value in this book is that it is written by an insider - someone who has been a broker but who now trades his own account. It is rare to find a writer in this business who is not pushing some personal (and often concealed) agenda. Gallacher is one of those rarities. He is not trying to improve his station or business. He simply sets out to write an entertaining book that sets straight a few solid (and, for some, unpalateable) truths.
The hardcover edition is subtitled " A Top Commodity Trader Tells It Like It Is" . The paperback edition is half the price of the hardback and doesn't suffer the unnecessary hype; instead the subtitle here is " A Brutally Honest and Irreverent Look ..." . This subtitle is much more in keeping with the spirit of the book. Gallacher makes no claims about his own "success", he merely informs us that he has been trading for 20 years and that he has never wiped-out nor has he had to send additional funds to bolster up his account. At the least this makes him a survivor, which already puts him in the top 1% as far as I'm concerned. In any event one of the things that impressed me most in this book is that Gallacher makes no effort to bignote himself.
He readily tells us that he is very conservative (12 trades per year!) and that he strongly favors a fundamental approach. Having said this, and knowing he won't win any votes, he goes on to effortlessly bring a few big-name technicians (and other vendors) down a few pegs. Remember, here is a guy who at least walks the talk.

It is worth reading all the reviews because this book has elicited some extreme reactions( from 1 star to 5 stars). I believe the poor reviews tell us more about the people writing them than about the issues they raise:

The most detailed negative review is by maclee33 (1 star) who goes to much trouble to demonstrate an apparently incorrect argument in the book.

But it is the review that is fallacious, not the book, and here's why. Gallacher uses a chart from Murphy's book "Technical Analysis of the Futures Markets" (and I have this book too, so I can verify the chart) to show that Murphy's use of trendlines is after-the-fact and superficial. There is no discussion here about active and inactive contracts etc. Gallacher simply takes a chart that Murphy himself has used and shows how misleading it is to draw trendlines with 20:20 hindsight. As Alexander Elder points out it is easy to trade the middle of the chart but, in the real world, we have to trade the extreme right of the chart.

"The lesson? All examples of the alleged uselfulness of trendlines, flags, pennants etc. will, under scrutiny, be shown to be the product of hindsight, perceived after the occurrence of the events they are alleged to foresee...Chartists see what they want to see, not what is really there."

Admittedly this is a polemic statement (and I do not personally agree with it) nonetheless this was the point that Gallacher was making and I cannot see anything "egregious and inexcusable"(maclee) in that.

Another reviewer defends Larry Williams (who gets a caning by Gallacher) stating that he (Williams) " made a million in a year" not once but twice ... and then taught his daughter (how to do it)". This anonymous reviewer gave the book 1 star while pointedly overlooking the fact that Gallacher's actual criticism was based on Williams losing more than $6million in one account while "making" the so-called $1million in another account - an event for which both Williams and Robbins Trading Company were taken to court and convicted by the NFA.

Another 1 star reviewer was upset with Gallacher's harsh treatment of neural net systems. Another didn't like the criticism of Elliot.

I think all of these negative reviews miss the point which is that it is very easy to mislead people in this business and we should be thankful for good watchdogs like Gallacher.

The book is humorous, insightful and well-written. I usually prejudge a book through Amazon by how many Customer Rating stars it gets. Sometimes these ratings mislead or disappoint. In this case I think 4 stars is honestly earned.

If you read this book with an open mind you will treasure it.

15 of 15 people found the following review helpful:

5.0 out of 5 stars Must have for systems traders, January 8, 2005

By 

Gregory Smith - See all my reviews
(REAL NAME)   

Amazon Verified Purchase

This review is from: Winner Take All (Paperback)

Two hundred pages into "Winner Take All", you'll find Gallacher dissecting Ralph Vince's optimal F strategy for position sizing, pointing out the obvious ways in which it can result in dangerous levels of overtrading that can put you out of business. At the end is an illustration of a trader aiming a gun at his own head and blowing his brains out, with the caption "optimally f'd". While it sounds kind of tasteless written down this way, when I came across it the first time I was laughing so hard I had to put the book down and catch my breath for a minute.

That's the sort of work you'll find throughout this very contrarian text whose nominal focus is on commodities trading. The scathing commentary wouldn't be so helpful were it just being sensationalist, but the analysis throughout this book is spot on in addition to being extremely funny at times.

While Gallacher's coverage of commodities is solid, albeit fairly pedestrian, his discussion of trading gurus is simultaneously informative, entertaining, and controversial. Ralph Vince gets off pretty easy compared with how other revered industry fellows are lampooned. You'll find plenty of dirt on popular trading role models like John Murphy, W. D. Gann, Elliot, Larry Williams, Richard Dennis (and the turtles), Bruce Babcock, and Welles Wilder (not to mention a thoroughly deserved bashing of Neural Networks). Anyone who is following techniques proposed by those gentleman should consider reading "Winner Take All" just to make sure you're seasoning their claims with a healthy enough skepticism. As other reviews here claim, Gallacher may be doing his own manipulation on the data in order to prove his own points in this area, and you'd be wise to apply the same level of skepticism he brings to other figures to his own claims. Very interesting reading, and written in a thoroughly enjoyable style.

The centerpiece of the book is one of the most real-world discussions of an working trading system I've found. A standard trend-following breakout system is presented and shown to make 385% annually; pretty good, right? It's then shown rather realistically how commissions, slippage, and stop order issues will eat into that. Then, he analyzes the real capital required to actually run that system through its expected drawdowns. When
it's all done, that magic winning system is lucky to hit 17% across the amount of capital actually required to run it. Having built multiple trading systems myself with multi-hundred percent per year predicted results that actually lost money once the entirety of actual trading and money management was factored in, I'm shocked that more books on trading systems don't cover this topic. Note that some of the things that really bash the profits in the examples down are specific to commodities (like the limit down/up problem), but stocks have their own issues that are of equal magnitude (in my own systems, I've noted that the bid/ask difference on stocks going through a breakout on volume are dramatically higher than any model I've ever seen suggests).

In short, those looking for a healthy dose of anti-holy grail trading advice might do well to read "Winner Take All", and those building any sort of trading system should consider it essential. You won't get much advise on what to do unless you're specifically looking for information on trading commodities on fundamentals, but there's a lot of solid material on what to make sure you don't do.

13 of 13 people found the following review helpful:

3.0 out of 5 stars An entertaining polemic, April 24, 2001

By 

Mercenary Trader - See all my reviews

This review is from: Winner Take All (Paperback)

When a book bills itself as "brutally honest," you are usually in for some interesting reading. Gallacher wastes no time in taking on a moral tone, exposing the idiocy of emotional basket cases (who shouldn't be in the markets in the first place) and commodity broker crooks who add no value to the process (and are good at nothing other than fast talk and sales techniques).

While these opening observations are based on truth-seeded stereotypes, they don't seem all that necessary. Do we really need to hear that there are a lot of sad sacks in the markets who shouldn't be trading, or that there a lot of dishonest / incompetent brokers out there? Maybe I am off base to assume this is common knowledge.

The book is at its most interesting in uncovering the fallacy behind some highly esteemed mythical legends. Elliott, Gann and Fibonacci, when it comes down to it, appear to have little substance behind their methods, and Gallacher does a thorough job of exposing that fact. He also shines some sunlight on the seemingly ubiquitous (at the time of this writing) Larry Williams, aggressively painting him as a fraud.


Gallacher is neither totally wrong nor totally right in his methodical destruction of technical analysis. What he overlooks is that fundamental analysts and many technical analysts actually have a similar problem: attempts to profit from predicting the future frequently prove futile because the higher the probability that you are right, the lower the probability that you can make money off that knowledge before others do.

The best way to use technical analysis (in this reviewer's opinion) is not to try to predict the future, but only to measure probabilities of an event occurring, and then to place bets when probability assessment shows conditions to be favorable. That is to say, if event A happens under certain conditions, then the probability of profitable scenario B occurring, while still uncertain, may have increased enough to make the trade a worthwhile risk. Many chart patterns only follow through 50% of the time (or less), but can still be used profitably via proper understanding of reward to risk.

This basic understanding--that trading is a game of probabilities in which it is impossible to win every time--is why good traders aren't bothered by routine losses. When Gallacher says "deliberately preparing for a loss is perverse, pessimistic, unnatural, yet correct," he shows that he has a personal stake in being right, and does not fully understand that trading is above all an odds game. (Is it "perverse" or "pessimistic" for a poker player to expect not to win every hand?)

Gallacher says "All the big winning plays I have seen in the market can be traced to a correct call on economic fundamentals." He must not read much. Take Richard Dennis, for example, who turned a few hundred bucks into hundreds of millions with no fundamental input, or Marty Schwartz, who was a failure as a fundamental analyst for 9 years but became one of the most consistently profitable traders of all time after making the switch to TA, or Ed Seykota, who turned $5,000 into $15,000,000 with a purely mechanical system.... and so on.

Last of all, Gallacher leans on technical analysis himself near the end of the book. If he were a true fundamentalist, he would continue holding a position that was going against him until he was convinced that the fundamentals have changed. If the fundamentals haven't changed as you know them, and you get out of a market only because the price is moving sharply the wrong way against you... then guess what, you're using a form of technical analysis whether you meant to or not!

In conclusion, I have to say that most of Gallacher's beef with technical analysis is a straw man. He actually attacks the poor habits (overtrading, risking too much on a trade, not taking losses etc.) that are the hallmarks of bad trading in general, not technical analysis as a method.

An entertaining book, with some good food for thought, but one in which emotion was given a little too much free reign.