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Stocks on the Move: Beating the Market with Hedge Fund Momentum Strategies Paperback – June 10, 2015
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From the Inside Flap
Gregory L. Morris, author of Investing with the Trend, Candlestick Charting Explained, and The Complete Guide to Market Breadth Indicators. Greg writes a blog for StockCharts.com called Dancing with the Trend.
- Item Weight : 11.8 ounces
- ISBN-10 : 1511466146
- ISBN-13 : 978-1511466141
- Paperback : 286 pages
- Product Dimensions : 5.5 x 0.65 x 8.5 inches
- Publisher : CreateSpace Independent Publishing Platform (June 10, 2015)
- Language: : English
- Customer Reviews:
Top reviews from the United States
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However, in terms of innovation, this book presents relatively little new information that hasn't been published on the internet before in various places. It's another, similar take on asset rotation strategies incorporating momentum, and has similar performance, in that it saves your bacon in corrections, and has similar performance to the market in bull runs aside from 2011, when it eats the dip, but doesn't recover the bounce.
To this book's credit, there are some logical innovations regarding a somewhat more elegant way of ranking momentum with an adjustment for volatility, along with addressing turnover (that is, the system is actually path-dependent until it goes fully flat). I am also not sure if I agree with the naïve risk parity weighting scheme (aka inverse risk to each stock in a vacuum, as opposed to computing a covariance matrix, whether using shrunk values or sample), especially because in a bull run, I'd argue that you don't want to diversify away "good" volatility (think about it--in an uptrend, with the price always being away from the moving average, you'll have higher volatility than in sideways markets).
Essentially, I'm withholding one star for the following reasons:
1) The system's performance isn't vastly different from a lot of free systems out there. It gets hurt in 2011, keeps up (if that, will have to reread more closely) in the 2009-present bull run, and saves your bacon in the large corrections.
2) Every-asset-in-a-vacuum is easy to understand, but there was no mention of minimizing the correlation.
3) I never felt the book made the distinction between good vol (this stock is on a tear) and bad vol (this stock violently bounces around).
4) Stemming from the above, do you really want to spread your bets out and put more weight into low-vol stocks in an uptrending environment? I'd argue no.
In any case, a solid book, but I was hoping it'd present more things that were more new to me.
This time, the author has chosen another fascinating topic - momentum investing. This is in my opinion the best way to go about the process of making money with stocks (individual issues, not indices). When it comes to mechanical trading, which is the approach explored here, I think momentum strategies have a better chance to beat the market than value investing ones. This is particularly the case for the strategy presented here, which incorporates rules to keep you in or out of the market conveniently.
The author is truly a professional. He’s smart, he writes well, and he presents the evidence and details behind his strategy very clearly. This is a high quality product. Unfortunately they do not have a hardcover version, otherwise the book would be perfect.
In my opinion, the gem of the book is the formula he uses to rank momentum stocks. It’s based on a simple regression equation, but there’s a really creative tweak to it. That alone is worth the price of the book.
Even though you might not use the exact same strategy as described here, it is the thought process put behind it that can spark other ideas in your head. That to me is the biggest difference between good and regular books.
Finally, the book is rather short, which I like. It could also be considered a long research paper. So, if you like reading papers, you’re definitely going to enjoy this book.
The Not so Good: This is not a simple trading strategy the average person could implement. I was rather surprised there was no mention of fees or transaction costs anywhere in this book which seems strange given the methodical way the author went over every other little detail. Given this strategy sometimes requires buying/selling and re-balancing up to 50 stocks on a weekly or bi-weekly basis, I have to wonder just how much excess returns are possible after all the fees.
Bottom Line: I am glad I bought the book and learned a lot which I may try to combine or implement with other strategies. I personally don't think the strategy outlined in the book is suitable for the average retail investor paying $4.95 commission per trade with 100s of trades possible every few months. There are many cheaper and easier to follow strategies being published (see for example Gary Antonacci's Dual Momentum book) which seem to perform better than this strategy with a lot less work and a lot less transaction costs. It may be interesting to combine Gary's with this one.......
Top reviews from other countries
For me, the gold is in the latter of this book. the year to year performance by the fund and the honesty given throughout.
His year by year analysis of strategy performance, similar to his prior futures book 'Following the Trend' once again puts the reader in the driving seat of emotionally how it would feel to be trading such a strategy, the hits, the misses and all of the psychological pitfalls. Incredibly valuable.
Highlights personally included:
- how to start building a strategy from the basis of an underlying theme, or logic
- the reasoning behind volatiility adjusted position sizing
- examples of how to rank and decide between the hundreds or thousands of options available in the equity universe chosen
- the year by year strategy performance as described above
- the unique way he challenges many retails trading lores like stop losses and triple digit return expectations
- addressing survivorship bias which is something I had dealt with recently myself and seen the resultant inflated back testing performance
On the downside I think the editing seems a little off in places, the book does seem to repeat itself at times where it doesn't seem it was intended, but that is a more a technical production issue rather than a reason to mark the content down in this review. Another potentially negative aspect which should be pointed out is that those who are trading only one instrument or a couple and/or aren't interested in systematic trading systems and/or are purely discretionary might not see the value enclosed due to its primarly focus on a systematic/algorhythmic/quantitative trading methdology (or whatever you'd like to call it).
Once again a quality product and highly recommended.
Although I've not traded before, I have read about it a lot but never really found the right information to help me get started with a systematic approach.
This book has changed that.
For a dry subject its actually a very enjoyable read and it provides everything you need to know on how to start trading stocks using the momentum approach in a structured, disciplined way.
Highly recommended for fledgling 'retail' traders ( I think that means the regular guy in the street like me! ) looking to start out with a logical system to guide your journey.
Many thanks Mr. Clenow!
I work for a professional services firm and therefore restricted by personal independence. The approach described in the book works well for me, because any stock that is top ranked for purchase but I cannot due to independence restrictions, I just move to the next one. I would say it is in my top 3 of investing/trading books, mostly because it is clearly written and can be implemented very readily.
The best part for me was also the second part of the book where the author walks through how the strategy worked year by year. This really brought it to life.