Stock Market Technique Number Two | By Richard D. Wyckoff

BOOK REVIEW

By Cam R

  

Title: Stock Market Technique Number Two

Author: Richard D. Wyckoff

Stock Market Technique Number Two is essentially the sequel to the first book, with both being compilations of a series of articles that Richard Wyckoff wrote for his magazine on Wall Street. Having read and thoroughly enjoyed the first book, I am hoping that this sequel will live up to the high expectations set up by the first one. Does it deliver? Read on below.

Packaging - 3/5

In the same format and size as the first book with the same quality of paper. Unfortunately, it also suffers from the same problem of the font being small, but I suppose it keeps the consistency between both books. One thing I do like about the book is its cover art. The pencil drawing does a nice job in adding to the old-world charm of the book. But it just struck me that the title is a little misleading through, there is really not much about the technique per se. Perhaps it would be better to call it Stock Market Stories or something along that line.

Writing Style - 3/5

The no-nonsense and dry wit style of Wyckoff’s writing is present here, so no issues on this end.

Trading Methods (Specifics) - 3/5

Similar to the first book, the Stock Market Technique books are mostly Wyckoff penning his thoughts and viewpoints on trading in general, so no specific trading methods here. However, there is a new collection of one-liners (referred to as flashes by him) here and they are equally insightful in this book too.

Some of my favourites are:

-         Only those who fail to realize the risks will risk their resources in stock speculation without first learning how.

-         To treat the stock market as one does betting on the races is to overlook one of the greatest opportunities for legitimate money making.

-         Reading all the financial news and evaluating it will avail you nothing. The market may rise on bad news and go down on good news. Then where are you?

-         Anyone can be lucky now and then, or even half the time, but persistent success is certain proof of ability. Persistent losses in the stock market are the evidence of poor judgement, bad technique, or both.

Trading Management (Soft Skills) - 3/5

There are two particularly interesting articles here. One is titled “Take a tip from the flea”, and he describes how a trader should learn from the flea in knowing when to trade. The other is called “A small trader should be a hitch-hiker”, where Wyckoff make a compelling argument for a trader to be similar to how a hitch-hiker operates. The articles are quite descriptive and he has a wonderful ability to draw similarities between trading stuff and general non-trading matters.

Here is a small except from “A small trader should be a hitch-hiker”.

“Figuratively speaking, the small trader should imagine himself as a hitch-hiker in the market. For the ordinary hitch-hiker someone else supplies the car, chauffeur, oil and gas. When he thinks the car is about to go in his direction, he jumps aboard and rides as far as he thinks the car will go. When he notices the machine has been stopped by a red light, or is about to turn a corner and go in the opposite direction, or that the car is running out of gas, or the brakes failing to work properly, he steps off and figures he has secured about as long a ride as he may expect. All he has supplied in this transaction is a modest commission and whatever brains are necessary to observe and recognize when to get on and off.”

He explains further on the pros and cons of being a small trader, but mostly it's in a positive way. Good stuff!

Trading Psychology (Mindset) - 2/5

Lean on trading psychology, but I did like a line which I felt was very instructive.

“We must look upon things as they are, and not as we would wish them to be.”

Longevity - 3/5

Comparable to the first book, which I feel would be a nice addition to any collection. I did find the first book slightly richer in content though. But both books are good for a light-hearted read at times.

Value - 4/5

A couple of the articles are refreshing and provide an alternative perspective on some stock market aspects. Definitely worth a read at least.

Things to Watch Out For -

This is probably not a book for anyone new to trading, or someone who wants an introduction to trading. There is more enjoyment to be gotten out of the book to anyone with some trading experience I believe.

Overall - 3/5

A delightful little book. If you enjoyed the first book, definitely get your hands on this one too. I highly enjoyed reading it, and hope there would be a book number three.

Score Recap:

Packaging - 3/5

Writing Style - 3/5

Trading Methods (Specifics) - 3/5

Trading Management (Soft Skills) - 3/5

Trading Psychology (Mindset) - 2/5

Longevity -3/5

Value - 4/5

Overall - 3/5

Where to Buy:

If you found the above review helpful and want to buy the book, please consider buying it through my Amazon affiliate link below. I would genuinely appreciate it, and any purchase really goes a long way in supporting this site. Thank you!

Related Books
If you have not yet read the first book Stock Market Technique Number One, I highly recommend reading it. Check my review for it for more information. (Review Here)

Wyckoff also authored a very good book on the art of reading the tape, called Studies in Tape Reading. It's a good educational resource on reading the tape, so if you need more information, just check out my review. (Review Here)


Thanks a million for reading!

And do check back often for new or updated reviews, cheers! :)

Trading Rules: Strategies for Success / Trading Rules II: More Strategies for Success | By William F. Eng

BOOK REVIEW

By Cam R

  

Title 1: Trading Rules: Strategies for Success 
Title 2: Trading Rules II: More Strategies for Success

Author: William F. Eng

Penned by former floor trader William F. Eng, back when floor trading was in its heyday, they detail the rules that he follows for trading success. The first book must have sold decently, as he followed it up with a second book. And I have decided to review them as together as one because they are really complementary. The contents are pretty much similar across both books.

In any case, are the trading rules really strategies for success, and are they applicable for today’s modern electronic markets? Let’s find out below.

Packaging - 3/5

Slightly smaller than A4 size, both paperbacks feel sturdy in my hands. The printing and paper quality are both decent, and the cover designs are simple and uncluttered. Not snazzy by today’s standards, but they are pleasant enough and somewhat gives the sense of being a textbook.

Writing Style - 3/5

The books are structured such that each chapter corresponds to one rule. The writing style is clear enough and the explanations he puts forth are easily understandable. It feels a little like a kindly relative trying to pass on their experience to someone younger, but in a nice and approachable manner.

Trading Methods (Specifics) - 2/5

Since these are books on trading rules, there is not a lot of meat on trading methods itself. But I did find some of his general concepts on the big picture very refreshing.

Here are some of his thoughts on trade initiation and taking the small loss.

“When you place a trade, it can be turned into a long-term trade, or into a short-term trade, but whatever the final duration, the initial trade must be made with the expectation or intent of it being a short-term trade.

The essential difference between a winning trader and a losing trader is how they classify their initial short term trades. At the time you initiate a trade, you don’t know if it will turn into a profit or a loss. The lack of a strict understanding of what is defined as a loss, even though the trade is not closed, is important in causing you to trade unsuccessfully.

If you have a trade that is not closed, you have a tendency to believe that whatever it is, a profit or a loss, it isn't affecting your profitability. Nothing could be further from the truth, because the trade has to be closed eventually.”

Trading Management (Soft Skills) - 4/5

This is where the book does prove its worth however. There are actually a fair number of rules, although they are all logical and do seem to merit their place in trading after going through his explanations. Many of the things that he mentioned are also clear-cut and make sense. He also does a proper job of sounding a proper note of caution of the risks of trading.

Here’s his note of caution on learning from your mistakes:

“If you want to come out ahead, do not keep repeating your mistakes. In this way, you will eventually succeed. Remember, also, that the market always gives you a thousand and one opportunities for new errors, so be on guard.

As you progress, you must make fewer mistakes, and become more professional. This is exactly what you must do to become a professional trader who makes money consistently and frequently. You cannot allow the ease of entering this business to deceive you into believing that laxity in this business is similar to laxity in any other business. This business is not similar to other businesses and the mistakes are not forgiveable.”

By mistakes not being forgiveable, he is probably referring to the fact that the money made or lost is real. And this is probably even more relevant in the age of electronic trading, where everything seems to be just a number on the screen. It’s always good to keep in mind that behind the electronic number is real money. And that successful trading is not about making money, but about accumulating money. And he gets this point across in the books too.

Trading Psychology (Mindset) - 3/5

A couple of the rules relate to the proper mindset to have, which is always helpful. I also found him to be an encouraging voice, which is always a plus as it keeps the tone of the book positive and uplifting.

Some encouraging thoughts of his:

"When you encounter difficulties in trading, know that the problems you face are only insurmountable from your immediate perspective. Others have confronted similar ones. Some allowed the problems to waste them; others took the opposite tack by facing the problems directly and overcoming them.

You are your own profit center. No one and nothing else can make the profits for you, but with the right spirit, no one and nothing else can keep you from making those profits, except you.”

And some forward-moving pushes from him:

“You will have to and can only rely on yourself to find the answers. As it always should be. Note that human nature has a desire to empower others with control of their lives than make the difficult decision to take full responsibility for their lives. We all have to start somewhere. What better place than the beginning? At least if you start at the beginning, you have an assurance that you won’t miss anything.

However, after you have acquired the knowledge, you must move forward. All the time that you are gaining experience, you might not know what the benefit will be. But if you encounter enough similar experiences, you will know what is important enough to you that you will repeat situations which create similar experiences. That is a major clue to what you must learn to overcome any blocks in your progress to becoming a successful trader.”

Longevity - 3/5

I found myself occasionally recalling some of the ideas and rules in his books. They were genuinely useful. Definitely a helpful set of books to have on the shelf, as the rules are still very relevant for trading then and now.

Value - 4/5

I had picked up quite a fair bit of knowledge from both books. Plus, some of the ideas Eng put forth are practical and applicable. Good value for the knowledge contained in the books.

Things to Watch Out For -

He was a floor trader previously, so some of the things relating to floor trading he mentions may not be relevant now. Also, there is a sombre tone somewhat at the introduction of the book, where he talks about a friend who committed suicide because he lost a huge amount of money trading.

Overall - 3/5

I can’t really remember how I came across his books, but I am grateful that I did because I do appreciate some of the ideas and rules he shared in these books. It’s probably most useful for traders at an intermediate level. Novices might not pick up much while veterans would probably already have an innate understanding of most of the rules. It’s an interesting and easy-going read nonetheless, I would recommend reading it if you can.

Score Recap:

Packaging - 3/5

Writing Style - 3/5

Trading Methods (Specifics) - 2/5

Trading Management (Soft Skills) - 4/5

Trading Psychology (Mindset) - 3/5

Longevity -3/5

Value - 4/5

Overall - 3/5

Where to Buy:

If the above review was useful to you, and you intend to purchase these books, do consider buying them from my Amazon affiliate links below. It is a huge support and motivation from you to me for this site. Thank you!

       

Thank you for for taking the time to read my review!

Do come back often as I will have new reviews up frequently. :)

Bernard Baruch: My Own Story | By Bernard Baruch

BOOK REVIEW

By Cam R

Title: Bernard Baruch: My Own Story

Author: Bernard Baruch

If you have been in trading for a while, you would probably have heard the story of financier Bernard Baruch and the shoeshine boy. Basically, Baruch was supposedly having his shoes shined one morning by a shoeshine boy. In the midst of his job, the boy was talking animatedly about the stock market and what to buy, giving Baruch a tip so to speak. Hearing this, Baruch realized that the public had stock fever, so he immediately went back to his office and sold all of his stock holdings. As he puts it: “When beggars and shoeshine boys, barbers and beauticians can tell you how to get rich it is time to remind yourself that there is no more dangerous illusion than the belief that one can get something for nothing.” A very good indicator of a market in a mania and ripe for a eventual crash.

Although a self-made trader and financier, little has been written about him or his methods. So I approached his biography (authored by himself) hoping that it would shed more light on this astute man. So let’s move on to the review below.

Packaging - 3/5

A simple hardcover without any fancy frills. The cover design is very plain, with basically nothing on it. I would think a elegant line illustration of a man having his shoes shined would be a nice allusion to the famous story. Perhaps since this was authored by him, he didn’t want to be singularly associated with that one story? Who knows. Anyway, the paper is of sufficiently good quality so nothing to grouch about here.

Writing Style - 3/5

The book comes across as a voice for his keen observations. It’s like he’s telling you about the things he has experienced and his thoughts about them. Conversations he had with others are also included in the book occasionally, which provides a nice break from the narration. The style is not particularly memorable or engaging unfortunately, but it does its job at telling his story.

Trading Methods (Specifics) - 3/5

There is not very much in the way of specific trading methods, as Baruch probably leans more towards the fundamentals. He does talk a little about how he got started in trading and the mistakes he made.

How he describes his mistakes:

“In those early days it wasn’t too difficult to figure out what I was doing that was wrong. There are two principal mistakes that nearly all amateurs in the stock market make. The first is to have an inexact knowledge of the securities in which one is dealing, to know too little about a company’s management, its earnings and prospects for future growth. The second mistake is to trade beyond one’s financial resources, to try to run up a fortune on a shoestring.

That was my main error at the outset. I had virtually no capital to start with. When I bought stocks I put all so small a margin that a change of a few points would wipe out my equity. What I was really doing was little more than betting whether a stock would go up or down. I might be right sometimes, but any sizeable fluctuations would wipe me out.”

An interesting part was how he lost the money his father gave him, and how his father trusted him enough to stake him a second time. This made Baruch determined to succeed in his stock trading endeavour. I guess this shows the power of having someone believing in you that you can succeed.

Trading Management (Soft Skills) - 3/5

Most of his trading management are by way of him talking back about some of his stocks plays. But in addition to that, he does list down some guidelines from his own experience which he hopes may be of help to others. They are as below.

“There are a number of things I have learned from my own experience which might be worth listing for those who are able to muster the necessary self-discipline.

1.     Don’t speculate unless you can make it a full-time job.

2.     Beware of barbers, waiters – of anyone – bringing gifts of “inside” information or “tips”.

3.     Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibility for growth.

4.     Don’t try to buy at the bottom and sell at the top. This can’t be done – except by liars.

5.     Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake cut your losses as quickly as possible.

6.     Don’t buy too many different securities. Better have only a few investments which can be watched.

7.     Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.

8.     Study your tax position to know when you can sell to greatest advantage.

9.     Always keep a good part of your capital in a cash reserve. Never invest all your funds.

10.  Don’t try to be a jack of all investments. Stick to the field you know best.

He then goes on to elaborate on some of the above guidelines with his own experience keeping to them. They are pretty insightful and augment his points well.

Trading Psychology (Mindset) - 2/5

On the thin side here. He doesn’t talk much about his mindset. The only strong sense I get is his sense of cautiousness, which is apparent throughout the book. One gets the sense that he was also slowly but surely honing his stock market prowess.

Longevity - 2/5

This is first and foremost a biography, as opposed to a trading manual. Although he does talk about trading since he did make his fortune from his speculation skills, this is most definitely about Baruch the man, not Baruch the trader. For readers interested in Baruch, I feel a one-time reading would probably suffice. A very insightful read, but not something I would go back to time and again.

Value - 3/5

Priced reasonably for a biography and it does indeed provide a full picture of Bernard Baruch. I did come away with a fuller picture of Baruch and his life, but trading-wise, it takes second place to the story of his life.

Things to Watch Out For -

He did go into politics at the end of his career, and the concluding part of the book is indeed about his experiences during his time there. I personally didn’t find it providing much knowledge trading-wise, though that is to be expected I guess.

Overall - 3/5

A thorough and enjoyable biography. I did have a greater appreciation for Bernard Baruch after reading it, and his stories were also interesting. Anyone interested in the man would do well by reading this.

Score Recap:

Packaging - 3/5

Writing Style - 3/5

Trading Methods (Specifics) - 3/5

Trading Management (Soft Skills) - 3/5

Trading Psychology (Mindset) - 2/5

Longevity -2/5

Value - 3/5

Overall - 3/5

Where to Buy:

If you found the above review helpful and want to buy the book, please consider buying it through my Amazon affiliate link below. The prices are competitive, and any purchase is a huge vote of support for this blog. Thank you!

Thanks for reading!

And do visit soon again as I will have new reviews up!

How to Trade In Stocks | By Jesse Livermore

BOOK REVIEW

By Cam R

Title: How to Trade In Stocks

Author: Jesse Livermore

After finishing Reminiscences of a Stock Operator (Review Here) and with my interest well and truly captured by the exploits of Jesse Livermore, I went searching for more information on the man. He was truly in a class of his own, with trading skills that (to borrow an observation from a financial commentator of that era) ‘should Livermore be shorn of every dollar, given a small brokerage credit, and locked in a room with tickers and phones, he would re-emerge with a new fortune.” How cool is that?

Anyway, it was surprising to find only one other book of much significance, which is How to Trade In Stocks, that presumes to shares his formula for successful trading. Authored by Livermore himself, does it do what it claims to do? Let’s check it out below.

Packaging - 2/5

A typical paperback, with slightly rough but decent quality white paper. The cover design is fine, but I felt the title was too generic somehow. After all, it’s authored by one of the greatest traders ever. It could definitely do with a iconic or stronger title than the boring generic one it has. It makes it looks like it’s from the range of ‘Dummies guide’ or ‘Learn ______ in 24 hours’.... The packaging could certainly use some improvement.

Writing Style - 4/5

Straight-forward and no nonsense style. Livermore writes in a matter-of-fact way, as someone who is very self-aware and self-assured in his ways. I get the sense that he is putting this book out there and will be happy if someone who is genuinely interested in studying about stock speculation (as opposed to the many I imagine who approach him only interested in soliciting tips) finds some benefit in the ideas he has put forth in the book. Even if no one does, it does not bother him since he is confident in his ability.

From his pen: “I have come to the conviction, however, that larger numbers of people interested in stock-market investment and speculation would be willing to work and study to attain sensible results, if only they had a guide or signpost pointing them in the right direction. And it is for them that this book is written.”

Trading Methods (Specifics) - 3/5

Livermore does indeed disclose and fully share his method of trading here, of which includes his theory of ‘time element’ in trading, amongst others. But he does it in a big picture sort of manner. There are no specific stock examples, but the way he describes his method is easy enough to grasp.

Here is how he goes about introducing stock speculation:

“To invest or speculate successfully, one must form an opinion of as to what the next move of importance will be in a given stock. Speculation is nothing more than anticipating coming movements. In order to anticipate correctly, one must have a definite basis for that anticipation, but one has to be careful because people are often not predictable – they are full of emotion – and the market is made up of people. The good speculators always wait and have patience, waiting for the market to confirm their judgement. 

For instance, analyse in your own mind the effect, marketwise, that a certain piece of news which has been made public may have in relation to the market. Try to anticipate the psychological effect of this particular item on the market. If you believe it likely to have a definite bullish or bearish effect marketwise, don’t back your judgement “until the action of the market itself confirms your opinion.” The effect marketwise may not be as pronounced as you are inclined to believe it should be. Do not anticipate and move without market confirmation – being a little late in your trade is your insurance that you are right or wrong.”

He then goes on to talk more about other stuff he watches and monitors, along with an extended explanation on how to judge the ideal timing in which to get into and out of the stock. The end of the book also has the Livermore market key, which basically shows he keep tracks of key price changes, or pivot points as he terms them, in his notebook.

The content is rich and probably deserves a 4 rating. However, the book had a commentary by a man called Richard Smitten. I have no idea who he is, but the body of the book had him trying to explain his interpretation of Livermore’s method. Frankly, it is unnecessary and not in the least bit useful. I’m not even sure if he can actually trade. I didn’t find much value in Smitten’s portion of the book, and would advice readers to just skip it.

Trading Management (Soft Skills) - 4/5

Again, Livermore explains his thinking behind his management of the trade in a big picture manner and also stresses the importance of patience.

How he makes a compelling argument for the necessity of patience:

“The point I would emphasize here is that after forming an opinion with respect to a certain stock – do not be too anxious to get into it, Wait and watch the action of that stock for confirmation to buy. Have a fundamental basis to be guided by.

Say, for instance, a stock is selling around $25.00 and has been consolidating within a range of $22.00 to $28.00 for a considerable period. Assuming that you believe the stock should eventually sell at $50.00 and it is 25.00 at the time, have patience and wait until the stock becomes active, until it makes a new high, at around $28-29. You will then know that marketwise you have been justified. The stock must have gone into a very strong position, or it would not have broken out. 

Having done do, it is altogether likely that it is starting a very definite advance – the move is on. That is the time for you to back your opinion. Don’t let the fact that you did not buy at $25.00 cause you aggravation. The chances are if you had, you would have become tired of waiting and would have been out of it when the move started, because having once gotten out at a lower price, you would have become disgruntled and would not have gone back in when you should have.”

Wise words indeed, and he goes on to elaborate further on the above.

It also drives home again that the price of the stock does not really matter. Before I traded, I found the statement inexplicable to say the least, and maybe readers who are non-traders may find it so too. Perhaps it might help to think of it in this way. Imagine if you are interested in buying an apple which costs $1. You go back the next day and see it is at $2 now. Most people would not buy it because the price has increased by $1. They will only buy it if the price goes back to $1, because $1 is anchored in their mind.

But to a trader, the original price at which the apple was at is not as important as the question of whether the price will continue to increase with a high degree of probability. Whether the apple is bought at $2 and sold off at $4 the next day, or bought at $50 and sold at $52, you will still get the same $2 profit in both cases.

Instead of the typical 'buy low, sell high' mantra, it would be more useful to think of it as ‘buy high, sell higher’, (or ‘sell low, buy lower’ for shorting). Emphasis on the exit price. I think this was probably one of Livermore’s key ideas that he shared amongst his many insights. And it comes through more in this book.

Trading Psychology (Mindset) - 3/5

Livermore’s interest in psychology, though not explicitly stated in the book, comes across quite strongly when he talks about speculation. And there is a nice chapter where he talks about the human traits of being hopeful and fearful. He definitely has a very keen insight into human psychology, and he does share his insights and recommendations in here.

Longevity - 2/5

Very grounded in the practical basics. I find myself occasionally flipping back just to reread some of his practical advice.

Value - 4/5

Well worth a read through. Some of the examples are fresh, and the introduction at the beginning about his ‘eccentricity’ at the bank was interesting to say the least. It would be interesting if someone actually does it in this time and day.

Things to Watch Out For -

His exact market key probably won’t be of much use in the modern markets of today. And it could probably do with a reissued version that has just the original text of Livermore and none of that Smitten commentary.

Overall - 3/5

Very educational book about stock trading, though it is probably not as widely cited as Reminiscences. This is likely due to its more factual tone. Think of Reminiscences as the guided tour while this is the blueprint. They are for different audiences, but I do feel this makes a nice supplement to anyone who has read Reminiscences. Livermore’s aim was to act as a signpost for anyone wanting to learn about speculation, and I think he does a mighty fine job here.

Score Recap:

Packaging - 2/5

Writing Style - 4/5

Trading Methods (Specifics) - 3/5

Trading Management (Soft Skills) - 4/5

Trading Psychology (Mindset) - 3/5

Longevity -2/5

Value - 4/5

Overall - 3/5

Where to Buy:

If the above review was useful to you and you want to buy the book, please consider buying it through my Amazon affiliate link below. The prices are competitive, and any purchase goes a long way in supporting this site. Thank you!

Related Books
If you have not yet read the biography of Jesse Livermore titled Reminiscences of a Stock Operator, be sure to check it out. It's a marvellous book. My review has more information, and the link is here for your convenience. (Review Here)

Thank you very much for reading!
And do check back for new and updated book reviews, cheers! :)

Studies in Tape Reading | Richard D. Wyckoff

BOOK REVIEW

By Cam R

Title: Studies in Tape Reading

Author: Richard D. Wyckoff (Rollo Tape)

When one talks about the subject of reading the tape, it seems the name of Richard Wyckoff is always mentioned together with it. I first came across his book Studies in Tape Reading when I was starting out in trading. Having no awareness of what ‘the tape’ actually was, I read the book and frankly didn’t really get much out of it. It was also probably more of the instrument I was in at that time (FX). Once I was exposed to Futures however, this book suddenly took on a different light and back to it I went.

------------------
*Readers aware of the difference between FX and Futures, please feel free to skip the simple explanation on the difference between FX and Futures below.* 
FX is an over the counter market, so there are no centralized volume figures – the bids and asks you get depends on whatever is provided by whichever broker you are using. 
Futures is an exchange traded market, so there is a centralized volume figure for the futures product in question – and usually referred to as the ‘time and sales’ on the trading software.
As an analogy, think of FX like the money changers you change money at if you go abroad for a holiday. There is no centralized rate, you cannot know specifically how much others have exchanged where and when. There are no centralized volume figures.
Whereas in Futures, everything goes through an exchange, such as the Chicago Mercantile Exchange in the U.S. or Eurex in Europe. So every single transaction (be it 1 contract or 1000 contracts) will be recorded and shown on the time and sales. Therefore, it is possible to monitor the volume figures, aka read the tape.
I should probably add if your primary trading vehicle is FX, this book might not be of much benefit to you. But if you are in Futures or Stocks for that matter, then it is likely this book will be of interest.
------------------

So does it deliver on the subject of tape reading? Just read on below.

Packaging - 2/5 (Cosmo Classic Paperback Edition)

A small, compact and light book, it fits nicely in the palm of my hand. Paper is of relatively good quality, it should stand up to frequent handling. However, the font is rather minuscule, I had to squint a little at the start before my eyes got used to it. It's probably because it’s like a book within a book. It would have benefited from someone retyping out the book so they can adjust the formatting for modern eyes (This version is actually available which I will review later), as opposed to the simple reprint which seems to be the case here. There is plenty of space at the margins although instead of getting the urge to write, I think the publisher should have just fill up the space with a bigger font.

Writing Style - 4/5

The writing style is clearly from the 1920s. It feels slightly archaic, but there is that certain charm to it. Modern readers need not worry though, the explanations are very logical and concise, and whatever Wyckoff is attempting to explain comes across clearly. He also supplements it with the rare illustration that makes everything even clearer. I wish most writers would write as clearly as him actually - simple, clear and with all the unnecessary words trimmed off.

Trading Methods (Specifics) - 5/5

Wyckoff attempts to explain tape reading, and he does it extremely well here. He first differentiates between what tape reading is and what it is not, and also the advantages and disadvantages of it.

How he compares a pure tape reader to a fruit seller:

“The tape reader is like a vendor of fruit who, each morning, provides himself with a stock of the choicest and most seasonable products, and for which there is the greatest demand. He pays his cash and disposes of the goods as quickly as possible, at a profit varying from 50 to 100 per cent on cost. To carry his stock over night carries a loss on account of spoilage. This corresponds with the interest charge to the trader.

The fruit vendor is successful because he know what and when to buy, also where and how to sell. But there are stormy days when he cannot go out; when buyers do not appear; when his wares are scattered aboard by a careless trackman. All of these unforeseen circumstances are a part of trading and life, in general.

The vendor does not hope to buy a barrel of apples for $3 and sell them the same day for $300. He expects to make from nothing to $3 a day. He depends upon a small but certain profit, which will average enough over a week to pay him for his time and labour.”

Wyckoff then goes on to explain in detail how to tell from the volume figures the probability of a stock’s movement. This is probably the part where the essence of reading the tape is conveyed. Following that, he further illustrates with the proper example of what he actually sees to trade a stock, so it is quite clear what he is explaining. He also talks about the opportunities in dull (slow in modern terms) markets as well as fast markets and such. All in all, the age of the book aside, the general principles and theories he has shared here are definitely applicable to modern markets. Full marks here!

Trading Management (Soft Skills) - 4/5

The examples he cites does very well in explaining how he reads the tape to manage a position, though it’s more of a big picture context. But understand the big picture, and many things become obvious. What I especially like was his wonderful illustration of the ‘line of least resistance’, a phase made famous by Reminiscences of a Stock Operator.

A wonderful explanation of the line of least resistance:

“Walk into the hilly country and you will find a small river running quietly on its way. The stream is so tiny that you can place your hand in its course and the water will back up. In five minutes, it overcomes this resistance by going over or around your hand. You fetch a shovel, pile dirt in its path, pack it down hard and say, “There, I’ve dam you up”.

But you haven’t at all, for the next day you find your pile of dirt washed away. You bring cartloads of dirt and build a substantial dam, and the flow is finally held in check. It is the same with an individual stocks or the market. Prices follow the line of least resistance.

If Reading (Reading in 1920s is a big stock on the exchange, somewhat akin to a Apple or Microsoft now) is going up, someone may throw 10,000 shares in its path without perceptible effect. Another lot of 20,000 shares follows; the stock halts, but finally overcomes the obstacle. The seller gives another order – this time 30,000 shares more are thrown on the market. If there are 30,1000 shares wanted at that level, the buyer will absorb all of the 30,000 shares and the stock will go higher; if only 29,900 shares are needed to fill all bids, the price will recede because demand has been overcome by the supply.”

Trading Psychology (Mindset) - 2/5

He goes a little into the mindset required for trading, which he terms as mental poise. There are a few other items he mentioned that a tape reader needs to keep in check emotionally, but the mindset part is not expanded very much in this book.

Longevity - 2/5

Although I think this is an excellent book, the reason I have rated it low is because once you have absorbed or learn whatever you are able to from this book, I don’t really see a need to constantly go back to the book. It’s sort of like riding a bicycle, once you know the basics, you can just cycle away, you won’t keep falling over. It is the same with tape reading.

Value - 5/5

Fully worth its price if you want to learn about tape reading. The book is priced so reasonably (in fact it's probably cheap since it's about $10 for a new copy) for the knowledge that it is imparting. In actuality, good books on tape reading are few and far between. There are (to me) only two books I would wholeheartedly recommend for anyone wanting to know about reading the tape. One is this book, and the other is by Tape Reading and Market Tactics by Humphrey Neill. These are the only two books you need to understand the concepts, the rest is just practice and more practice.

Things to Watch Out For -

The stocks he cites as examples are from his time, such as Reading, Union Pacific, Anaconda etc. Modern readers should probably think of these stocks as the Apple, Google or any big active moving stocks currently. Also, he talks about the stock moving 1/8 of a point, which was the smallest increment of a stock moment way back. A stock would move say from 35-1/8 to 35-1/4 to 35-3/8 and so on. Whereas now, a stock would move in much smaller decimals now, say 0.01 to 0.02 or 1/32 to 2/32 as in the Treasury futures, so it's just something to keep in mind when reading the book.

Overall - 3/5

Highly recommended book on tape reading, if you are interested in it. It’s probably more geared towards daytraders though. Pure chartists or traders with a longer term outlook might not find this book useful, but anyone interested in the fluctuations should take it for a read.

Score Recap:

Packaging - 2/5

Writing Style - 4/5

Trading Methods (Specifics) - 5/5

Trading Management (Soft Skills) - 4/5

Trading Psychology (Mindset) - 2/5

Longevity -2/5

Value - 5/5

Overall - 3/5

Where to Buy:

If you found the above review helpful and want to buy the book, please do consider buying it from my Amazon affiliate link below. The prices are competitive, and any purchase goes a long way in supporting this site and as a small motivation for me to continue working on this resource for you. Thank you!

Related Books
If you are interested in learning more about the art of tape reading, then Tape Reading and Market Tactics by Humphrey Neill is also an excellent book to seek out. (Review Here)

If you are interested in Richard Wyckoff, I would also strongly recommend his other book, Stock Market Technique Number One (Review Here) and its sequel Number Two (Review Here). They contain his observations and musings on the stock market in general with lots of rare insights. And both books are very entertaining reads too.

Thanks so much for reading!
Do check back often, I update frequently with new reviews, cheers! :)

How I do my Book Reviews

I figured I should do a quick and simple rundown of how I structure my book reviews, along with a brief explanation of each category. So here you go below.

Goal

My basic aim is to keep everything concise and consistent, making it a reliable benchmark for comparison and archiving purposes.

Scoring

Scoring is from a low of 1 to a max of 5, with 5 being the best.

Categories

There are eight categories as below, with a quick description of what each category is for.

1) Packaging

- Cover design, quality of paper, anything relating to the physical presence of the book.

2) Writing Style

- The book's language and style, whether it is accessible to read like a fiction work or as dry as an academic thesis.

3) Trading Methods (Specifics)

- Whether the author shares any trading method or methodology broken down into specifics or just a generic mantra such as trade with the trend.

4) Trading Management (Soft Skills)

- Management of the trade, be it entry, in progress or exit; does the author give details about how he actually manages a trade with examples.

5) Trading Psychology (Mindset)

- The mindset of trading. Is there any focus on the behavioural and emotional aspects of trading.

6) Longevity

- Will you re-read the book, one day from now, one month from now, one year from now?

7) Value

- Is the knowledge or content of the book worth the purchase price? Will you learn anything educational or new from the book?

8) Overall 

- My overall rating of the book after considering all the aspects above.

That's it. 

Hope it makes everything neat and open. I welcome plus appreciate any constructive comments or feedback, so feel free to let me know what you think. Thanks for reading! :)

Trading in the Zone | By Mark Douglas

BOOK REVIEW

By Cam R

Title: Trading in the Zone

Author: Mark Douglas

One of the most highly regarded books on trading psychology, and a book in the collection of many successful traders. A book also on the recommendations list of many traders as one of the premier books in the field of trading psychology. I remembered this book kept popping up when I was searching for books on trading psychology in the past, and finally decided to read it.

Was the book worth the read and its high praise? Let’s find out below.

Packaging - 4/5 (Hardcover Edition)

Nice sturdy book, printed on good quality white paper. Cover design is nice and easily remembered. Font is easy on the eyes. I would have liked more margin space in order to be able to jot down any ideas, but that is a small issue. The hardcover edition would make a nice addition on the shelf, so overall the packaging is pretty good.

Writing Style - 3/5

Written in a direct and straight-forward manner, the book is very easy to pick up and delve straight into. The language is also simple and easily understood. I felt that Douglas had taken great care to make his book accessible and clear, and to his credit it is. The only thing I feel is that he has a certain tendency to repeat the same ideas in different ways, which makes the book slightly repetitive.

Trading Methods (Specifics) - 4/5

As this book is on trading psychology, there are no specific trading methods per se. So a better measurement would be to gauge how detailed are his methods on trading psychology. In this regard, it is presented very nicely in the book. Douglas does a very good job building up the case on the merits of a new thinking methodology and after he manages to sway you (and his argument is indeed convincing enough), he then lays out to you the steps needed to learn this new methodology.

Trading Management (Soft Skills) - 3/5

He mainly tells you the why of needing to change your thinking and then gives you the how in changing your thought process. As to the managing of the change process, it’s mainly up to you to sustain and keep at it. Although I do think the exercise towards the end of the book to measure the current thought process is a pretty useful.

Trading Psychology (Mindset) - 5/5

Definitely 5 out of 5 on this. I can understand why this is one of the highly regarded and recommended books on trading psychology. It’s almost like a short cut to the ideal trading mindset, if there’s such a thing as a short cut in trading. The examples he cites are also easy to grasp, and strongly supplements his argument.

Longevity - 4/5

An excellent book that is a must-read for all traders. Unless you were born into a successful trading family or by some lucky fate have the correct trading mindset, there is definitely a lot to take away from this book.

Value - 5/5

Well worth the cover price, and probably more. I have read more expensive market trading books with lesser content that comes up much short of what Trading in the Zone offers. Fantastic content for the value.

Things to Watch Out For -

This book is on trading psychology, which is a very important part of trading. But one part does not make the whole. Read it but keep in mind that having a profitable methodology and the execution skills are also crucial to successful trading. To make an analogy to golf, all the correct mindset in the world can’t help you to hit a golf ball properly if you do not possess the skill or your body cannot execute the technique to hit the ball where you want it to go.

Overall - 5/5

One of the best books on trading psychology, and one book I would highly recommend to anyone interested in trading the markets.

Score Recap:

Packaging - 4/5

Writing Style - 3/5

Trading Methods (Specifics) - 4/5

Trading Management (Soft Skills) - 3/5

Trading Psychology (Mindset) - 5/5

Longevity -4/5

Value - 5/5

Overall - 5/5

Where to Buy:

If you found the above review helpful and plan to purchase the book, do consider buying it through my Amazon affiliate link below. I really appreciate it and any purchase will genuinely go a long way in supporting this site. Thank you!

Thanks for reading!

And do check back for more reviews. :)