Public Glossary

Review by Nick Radge
Reminiscences Of A Stock Operator by Edwin Lefevre

Reminiscences probably doesn't need much introduction. This is a great story apparently about the great Jesse Livermore who I reviewed in another post here. His story is presented under the pseudonym of Larry Livingstone. This particular book has attained cult status within the investment circles and so it should. The secret of this book lies with the many many lessons that are hinted at or appear between the lines. I have read this book over 20 times now and still get something different from it each time. Read between the lines and try and visualise the lessons he's getting across. They are everywhere. First written in 1923, I can assure you that the many lessons are still well and alive in today's markets. A must read.

Review by Nick Radge
The Investor's Quotient: The Psychology of Successful Investing in Commodities and Stocks
by Jake Bernstein

This book is a great start to the psychological issues confronting the new trader. Its very hands on and concise with all chapters well laid and fully explained. As opposed to the more "long winded" explanations of Mark Douglas text's, this is more straight to the point and very trader orientated. My personal book is worn and full of comments and scribbles...

If you haven't jumped into this side of the trading equation (and you should) this is the place to start. The book is not expensive and easily obtained.

Review by Nick Radge
Inventing Money: The story of Long-Term Capital Management and the legends behind it
by Nicholas Dunbar

Well, this is a good read for those who believe that theory will always be correct. Trading is a sure fire way to let you know where the holes are in your theoretical concepts and hence the realisation that papertrading should always be taken with a pinch of salt.

This spiel starts with the boys of Black & Scholes option pricing fame and takes us through their history. You get a good look inside of the Salomon dealing room which seems to produce lunchtime legends en-masse (Liars Poker et al).

It's a story of real-time greed, ego and theory. These guys could do no wrong...on paper and quietly forgot about a small issue called liquidity which, when trading size, tends to make a minor difference to one's results. To Joe Average we know this as slippage and even the learners herein realise that an element of slippage should always be priced into a theoretical model. Not so for these lads I'm afraid, they seem to have overlooked that part of the "trading in real-time" manual.

As we all well know, this saga ends in tears and the big ego's are left floundering but apparently it wasn't their fault and they will be back. You see, it was a one in a century event that seemed to unfairly occur 4 years after they began. Never mind. It was only a 17 standard deviation event that took them out of the game. The 1987 crash was a 20 standard deviation event and it only occurred a short time ago as well, but how quickly they forget.

Review by Nick Radge
Trading Systems That Work: Building and Evaluating Effective Trading Systems
by Thomas Stridsman

Another book that has a deceiving title. This is a book about testing the validity of trading systems using Excel and TradeStation. The context of the book is actually appending data from TradeStation into Excel and doing more extensive work there. The book is well explained, although some may find it a little over their heads as a starter and unless you are right into systems testing then you may not get value for money here. Whilst you may not have TradeStation, he does show great insight into Excel which I did learn a lot from. That said, I also learnt, very quickly, the limitations of Excel. I would say that Access would be the better program to use for larger portfolio testing. I was able to collapse the Excel program at 4000 rows and 160 columns...I think!

He discusses a few systems but nothing really standout. The book is really about the reading into the numbers of the system testing and getting a better idea of the results. For a new trader trying to do some portfolio work I think there is certainly value here, but an experienced trader looking for serious portfolio testing ability will fall well short using Excel.

I contacted Stridsman on several occasions to get further explanation on some of his coding. I did find one or two errors with it, but he happily answered away. He is a prolific writer for a few magazines and in fact I think he is the Editor for a trading magazine called Active Trader.

Review by Nick Radge
The New Options Advantage, 2nd Edition by David Caplan

If you wish to take options trading seriously, this is THE book. Caplan shows extensive strategies that are realistic, hands on and non-complicated. He skips the major math surrounding normal options texts and makes his explainations simple and understandable.

He introduces extensive strategies that again are realistic and very easy for an amataur trader. The book also includes a full chapter dedicated to an options trading plan and system evaluation.

At 239 pages, this book is jam-packed with reality information and represents one of the best purchases I've made. Add this book to the Ken Shaleen book I've already written about, and you have the makings of an extensive options arsenal to really make money using these instruments.

Review by Nick Radge
Trading in the Zone: How to create a state of mind that eliminates the fear, stress and anxiety
by Mark Douglas

This is the follow up to his first text "The Disciplined Trader" which has become a very well known publication. His books aren't easily digested in one read, but then again, all these books continue to teach me after many many readings.

The real between-the-lines lesson here is "being in the zone". We've all been in the zone for one reason or another at some stage and this text is getting across the message that it can be done in trading and in fact should be pursued. He freely admits that one cannot get oneself into that mind set just by thinking about it - it just happens. Chapter 6 is the crux; discussing the "now" moment and acting to any given scenario without fear or emotion, in other words just acting automatically.

Many a trader attempts to create a mechanical system to alleviate the stresses that come with the process of trading, but they will still doubt their ability and quietly fear the outcome regardless. I believe this text has been helpful with respect to my ability to place a trade without any concern for the outcome whatsoever. It is a difficult journey to get to this point, but the ability to just place a trade without fear, anxiety and stress is quite an overwhelming experience. This then starts to flow into other areas of your trading, even simple things such as anxiety when opening your trading statements. I have no interest in my account balance anymore. It just is. It just appears each day and I have no need to know the equity swings or the losses or the profits. I simply monitor it at month end and move on.

Another aspect and a very important learning tool is to accept what the market is telling you without regard to what you think or what your position may well be. This is an over-riding part of my courses now.

Lets use an example. Say you get a buy signal from a bullish pattern that's in your trading toolbox. Looking closely at your charts the next day, you see a bearish pattern that is also in your trading toolbox. What to do? Most will remain long with the current open trade. They are attached, emotionally, to this trade. They have a personal interest in it being successful and can picture the stock moving higher over the next few weeks even though the market is telling you that a bearish scenario may well occur. Mark Douglas points out that "being in the zone" is about taking all the information in that chart and reacting to that without bias or even a second thought. The picture of the stock moving higher is not present because its not in the "now moment", or hasn't happened, so how can it possibly play a part in your decision making process? Yet this is what many people do; they allow their thoughts or mental pictures to dictate their trading decisions even though the market is clearly telling them that their current position may be incorrect.

Not a cheap book and again, probably not one for the newbie to get started with, but worthwhile to compliment a serious traders arsenal. This has been an invaluable lesson to me.

Review by Nick Radge
How I Made $2,000,000 in the Stockmarket by Nicolas Darvas

Thanks to the guys at moneybags.com.au for giving me a copy of this book. I must admit that I would not have bought a book with a title such as this. I naturally thought that it would be a story of some jock who got lucky on some of the tech stocks recently! Don't judge a book by its cover is the adage I believe!

I was presently surprised at the K.I.S.S content and yet again reinforced the truisms of trading that many people fail to see. Darvas was a trader in the late 1950's and started from scratch to make a fortune. His major attribute was in following the the trend, which I might add started with a breakout. He included volume in his analysis which adds weight to the argument. Once on the trend he would add to the position as it confirmed itself. His stops were always very tight and therein lies the simple truth of trading (and my harping on the matter) that trends will occur in any market and at any time, you just have to get on and stay on until they turn.

The wonderful thing about his technique is that he did it all by hand, used weekly charts, learnt from his mistakes and had that total burning desire to make profits regardless of setbacks. Something that is continually referred to in the Market Wizard books in more recent times.

A good easy read and perhaps the reinforcement of this technique can change the way some people view their own trading. Highly recommended for a motivating holiday read.