Archive for the ‘review’ Category
Book review – How to Make Money in Stocks
Leave a commentIt’s been a while since my last book review – trading has been a bit quiet over the last week. In the next week I am looking to close down some of my stagnant positions – they looked good when I entered, but I am really only losing interest on the money by not being in cash – or better positions.
The run up in Gold made me a few dollars on the side, as did the movement in the AUDUSD, but I don’t profess to have much in the way of consistent results in those markets. As I get more used to those markets they may get more attention in this blog.
“How to Make Money in Stocks“, 3rd edition, by William J. O’Neil.
ok – so I am writing here about the third edition, a tad annoying as I had only had the book in my hands about two days before the fourth edition hit the stores (doh). Apparently the fourth edition is updated to take into account the 2008/9 financial crisis.
The subtitle to the book is ‘A Winning System in Good Times or Bad’, a good reflection of the content of the book. The author talks in terms of investment consisting of managing investments for the long term, by keeping a close eye on the markets in the short term and having a method to deal with it in its various stages.
The book has has the same basis as many books in the financial market – it talks about share selection and making money (seems pointless saying that really!) – but the book is really putting a share investment strategy in your hands. In other words, if you read the book and follow the instructions it contains you will have in your hands a full trading selection system for entries and exits. I must say there’s not as much about money management as I would have liked to see.
The book talks about the CANSLIM method of share selection and investment. Chase up the google searches above to find information about the methodology. The method involves combining fundamental investment ideas to select shares, with technical aspects to assist with your timing of entry or exit. The system is claimed to have been built from examining shares that have made dramatic increases over the last 100 years in the US market.
If you have trouble exiting stocks -read chapter 10 ‘When to Sell and Take Your Profit’. Then when you have done that – read it again!
Whilst the book is educational in its own right, and can be read by anyone wanting to get into share investment, it is largely a vehicle for promoting the services supplied by investors.com ‘Investors Business Daily’. The book tells you how to do calculations to determine the stocks they deem most likely to rise dramatically, and the website makes available to you the results of those calculations. In other words do the calculations yourself – or purchase the results of the calculations from the author by a subscription.
For those financially minded, and if you are not you probably aren’t reading the blog, I have to say its very reasonably priced ($12 USD on Amazon, which is terrific), and I’m off to buy the fourth edition to see what he has to say about the GFC.
In summary – inexpensive book, packed with information, suitable for beginning to intermediate level investors, and well worth a purchase. In fact you’d spend the $12 for the chapter on “When to Sell” alone.
(text updated 14-9-09, phasing only)
today – pna close – book review
PNA: closed my long PNA position today for a 1% gain. I entered this position nicely on 28/4/09 bouncing from a support line. I then pyramided in at a high price, only to see the position deteriorate. My exit was triggered last friday on a close below a support line, however my exit position was not filled – my fault really as I tried to be clever and tune the exit, when I was not in a position to actually do that – leaving me to sit through the weekend with a half open position.
When a stop is hit – EXIT!
As I look at the US market starting today, the S&P500 is down more than 2% and can’t help but be reminded of the recent losses – and yet I know from my records there’s been some good gains over the last couple of months. This article is a reminder – Its ok to lose money! I know I lost money when I started when around me others were making it. Over the last year I’ve lost money – but not as much as some others have. Come July I review the annual stats – then I’ll have to go read that article again!
Following is the next installment in my reviews of trading books from my library.
“Getting Started in Chart Patterns“ by Thomas Bulkowski.
The title suggests ‘Getting started’… this book can be picked up by a beginner who has an interest in the art of reading charts. Don’t confuse this comment as one that suggests the book is for a beginner – many beginner books talk about how to place trades, differences between types of instruments and so on – this book assumes you know that.
The book specifically talks about chart trading of equities, however the concepts are obviously portable to other markets – with some care, due to his use of probabilities as they relate to his research against equity charts. Thomas’ books are valuable to me because he has done A LOT of work analysing charts and quantifying what he sees. When he talks about (for example) a Head and Shoulders pattern, he talks about the expected profit, as well as the percentage chance of getting that profit in bull and bear markets – great information! Further to that, he gives a point form list of ‘requirements’ that a chart pattern must exhibit to be classifed correctly in a particular manner.
The author remains focused throughout the text on his trading via the use of charts. A couple of times he may mention an MACD divergence or other indicator related metric – but then suggest the reader refer to other books to follow that idea through – the book remains firmly focussed on charts.
The book is written a bit conversationally in places, as the author uses simulated discussions between two traders as a tool to convey points regarding trades. Looking at the price, I must say its one of the less expensive books of its type. Whilst not to the detail of his other texts (which I’ll review at some later date) this is an excellent beginner to intermediate text.
The best thing I learnt from this text? I’ve got to say looking at ‘busted patterns’. Whilst I have been aware of them for some time, looks at the statistics – I’ll be looking for ‘busted head and shoulders’ more often!
Books to read
I have built quite a collection of books on trading that I have purchased over the years, find a brief overview of them here. This text will continue to be updated over time.
“The Bear Book – Survive and Profit in Ferocious Markets“ by John Rothchild.
The linked version is newer than mine – I have an old (well 9 years old) hardcover version which I lend to friends occasionally who think that the bear market we have now is the end of finance as we know it (and I am assuming they’re wrong!). The book is relatively easy to read, talking about recognising bear markets and dealing with them. Understanding the players in the bear market, and where to invest. Whilst this text had not specifically addressed my trading methods, it has factored strongly into my view of the longer term phases of the markets. It reminds me why I construct a plan. If reminds me about cycles, and it reminds me why I seek to manage risk. I have enjoyed this book.
Further reading:
I found this list here interesting, and I struggle to disagree with any of his descriptions – for the books I have read. I’m off to buy a copy of “Basic Economics – A Common Sense Guide to the Economy”.
tradersams blog 