- Hardcover: 304 pages
- Publisher: John Wiley & Sons; 1 edition (18 February 2011)
- Language: English
- ISBN-10: 0470521457
- ISBN-13: 978-0470521458
- Product Dimensions: 16.3 x 3.3 x 23.4 cm
- Average Customer Review: 2 customer reviews
- Amazon Bestsellers Rank: #1,39,009 in Books (See Top 100 in Books)
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Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading Hardcover – 18 Feb 2011
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From the Inside Flap
Becoming a consistently successful trader is a tough job. It's a craft that requires extensive knowledge of the markets?involving a whole lot more than just finding the next great trading opportunity?and a process that addresses many aspects of both the market's, and your own, behavior.
Nobody understands this better than author and longtime trader Peter Brandt. During his thirty-plus years in this field, he has made every mistake possible and learned some major lessons along the way. He also developed a set of guidelines, rules, and practices?which he refers to as the Factor Trading Plan?that direct his trading decisions.
Now, in Diary of a Professional Commodity Trader, Brandt shares the experiences he has gained trading price charts over the years, and through a real-time journal?which spans an arbitrary time frame of 21 weeks (from December 2009 to April 2010)?skillfully shows how he goes about the difficult endeavor of trading the commodity and forex markets using classical charting principles.
Divided into four comprehensive parts, this personal and unique guide clearly reveals the uncertainty and emotions that surround trading and details an effective approach towards speculation that will give you an edge. Page by page, it:
Offers a real-time, play-by-play account of Brandt's trading activities?the good, the bad, and the ugly?during his 21-week journey, and provides valuable insights into market analysis, trade identification and selection, and risk management
Highlights the basic building blocks of the author's Factor Trading Plan and examines how his plan continues to evolve with the markets
Emphasizes the central role risk management plays in market speculation?an even more important role than market analysis or trade selection
Reveals trading as a fundamental battle to overcome your basic human emotions
And much more
Unlike most books on this subject, which try to tell you how to trade, Diary of a Professional Commodity Trader offers a rare look at the realities of this discipline and provides you with a firm understanding of what it really takes to improve your performance over the long term.
From the Back Cover
"We've all read about the high rollers who go boom and bust, but this book is different. With straightforward prose, practical knowledge and honest counsel, Peter Brandt methodically explains what no one has before: how a dedicated individual can trade for a living. If that is your destination, this is your ticket."?Robert Prechter, Elliott Wave International
"This book is insanely great. The refreshing clarity this book brings to the table is brilliant. I think this is an amazing, excellent book, one that could help a whole new generation of traders."?Jack Sparrow, MercenaryTrader.com
"This is the most honest trading book of the last decade. Peter tracks recent trials and tribulations on his path to success dating back to the 1980s. He shares numerous insights into the emotional and technical challenges of trading, right down to his track record over the years. His ultimate success reflects the importance of staying true to a process while still allowing flexibility to modify rules as market conditions change. Anyone desiring longevity in the business really needs to read this book."?Linda Raschke, trader, President of LBRGroup, Inc., and coauthor of the bestselling book, Street Smarts: High Probability Short Term Trading Strategies
"Almost every book about trading for a living is either fraudulent or boring (or both). This book is neither. Not only is it a good read for anyone seriously wanting to know what trading is really like, it is also very interesting, mostly due to its real-time, diary format. As someone who has done myself what he describes, I highly recommend it."?Robert Zellner, independent trader, former director of the Chicago Mercantile Exchange and former CEO,Citicorp Futures Corp.
"Trading is not what most people think it is, as you will find out in this real-life experience from Peter Brandt, a well-seasoned trader. You will learn what he looks for in trades, what tells him to hop aboard and how to get out. Well worth reading!"?Larry Williams, author and trader, www.ireallytrade.com
"Anyone interested in trading?and not just commodity trading?is going to cherish this book. Brandt's detailed diary is like a great novel, revealing the inner life and character of a trader, revealing the kinds of inner understanding we all need if we hope to navigate an ultimately unknowable future.?Traders would do well to try to become, as individuals, more like Peter Brandt."?Lowell Miller, President and CIO, Miller/Howard Investments, Inc., author of The Single Best Investment
"Insights, observations, and practical information gleaned from over two decades of consistently successful trading performance.? A must-read for anyone wishing to enter the world of risk."?Daniel Chesler, CMT, President, Chesler Analytics LLC
"This book is a must-read for anyone who contemplates being an effective trader.? His exquisite use of charting techniques is spot on."?Eero Pikat, President, Barchart.com Inc.
"A great book for advanced and beginning traders! The professional trading insights that Peter shares can help traders speed up the progress of their own trading by light years." ?Glen Larson, President, TradeNavigator.comSee all Product description
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WHO WILL BENEFIT FROM THIS BOOK:
Everyone who reads the book is not going to find it useful. You got to be a trader who makes your decisions based on charts and chart patterns to find this book useful. If you are a buy and hold Buffett style trader, you will still find this book useful to a limited extend in determining a good entry point. Also if you are a young trader, please understand that there are lots of eyes and computers looking at the same chart and has made the efficacy of charts like head and shoulder less reliable than in the past, and is being mentioned in this book as well. If you are a swing trader, day trader or an options trader, you will only find the book useful to the trading advice and opinions suggested by the author ( and less of those H&S patterns which has to be readjusted to lesser time frame)
WHAT THIS BOOK IS ABOUT :
The book is a printed trade journal about one man's trade with no ideas of what the outcome will be . Even if you find the repeating charts boring after a while, make sure to read and assimilate the first pages of every chapter. Those are general observations of a mindset of a trader who has survived the markets for thirty years.Not an easy feet. As an example on chapter 12,
"The best a trader can do is to develop trading principles and guidelines that provide a slight edge - and then attempt to exploit that edge over time."
Peter trades price,pure and simple. However if you are a newbie trader, trading price alone might get you into trouble. That is where Mind Over Markets: Power Trading with Market Generated Information, Updated Edition type approach is needed. Modern trading require Time Price And Opportunity analysis to get a mild edge over others.
It would be a disgrace to leave without his wonderful quotes peppered along the book:
"Profit cannot be the direct focus of my attention because I have no control over the outcome of any given trade"
" I a constantly studying and analyzing my trading performance".
" Just like cancer and heart diseases are the two major killers in America, doubt and second guessing are the two major killers of a sound trading plan"
" I have maintained a journal of my trading endeavors since 1981"
"Drawdowns are a way of life for a trader. Periods of capital draw down bring about tremendous introspection. When trading is going well, it is easy to think trading will never get bad again. When trading goes sour, it is difficult to remember the profitable times"
TIPS AND SUGGESTIONS:
This is a good book . If you are a beginner, read The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management (Wiley Trading) . Also, try TASTYTRADE. It is a free website by Tom Sosnoff , founder of ThinkorSwim who is giving away brilliant pieces of research analysis and advice for free after big wins in his career. He is employing Data scientists, Research programmers, tons of back testing reports etc never even imaginable for a common man and giving away everything for free. His tradable and actionable content crushes CNBC. ( Nope, I am not paid by Tastytrade). He is proving to the world `option's is not reckless. While at tastytrade never miss their segments like Market Measures, Option Jive etc.The quality of research you get is unbelievable !
A very good book, worth reading.Even if you do not read the book, become his twitter follower. You will not regret it.
The title is self-explanatory. PLB takes you with him as he trades over a 21 week period of time. You see every trade, every profit, and every loss. The book is a front row seat to the thought process of a master who’s averaged over 40% compounded returns throughout his 40 year trading career. Most famous traders you hear about have a few good years and then blow out. They’re only known for their “big calls” and CNBC appearances. But PLB has been consistently making huge profits for four decades, through every market environment imaginable. This type of longevity is extremely uncommon.
Most of us have read the Market Wizards series. The interviews are fantastic and packed with tons of useful knowledge. But in the end they are just interviews. Imagine actually being able to sit with one of the Wizards as they trade themselves. PLB provides that experience.
Throughout the book you’ll see PLB give it to you straight. There’s no sensationalism. No promise of ridiculous returns. No bulls***. It’s REAL trading. You see exactly what a professional goes through, from emotional and psychological management all the way to actual trade management.
There’s a ridiculous amount of useful information packed in this book, but a few key lessons stand out to our team at Macro Ops.
One is PLB’s focus on trade management over every other aspect of his strategy. This flies directly in the face of what most investors believe successful trading consists of. A majority think it’s all about trade identification. That’s why you’ll see them jump from indicator to indicator, looking for some holy grail that’ll find them non-stop winners.
This is not the way a professional operates. As PLB explains early on:
“I will explore all of the trading components I believe are necessary for consistent success later in this book, but trade identification is the least important of all. In my opinion, learning the importance of managing losing trades is the single most important trading component.”
“Consistently profitable commodity trading is not about discovering some magic way to find profitable trades.”
PLB understands that identifying a trade is only 10% of the process. The other 90% is managing the trade once you’re in it. And when it comes to management, PLB knows that the name of the game is risk control. PLB again:
“Consistently successful trading is founded on solid risk management.”
The ability to keep your losses small will bring you success in the long-run. Avoiding that one big mistake that’ll permanently take you out of the market is key. As the old saying goes, the best offense is a great defense.
PLB continually displays this reality throughout his book, especially when considering his number of winning trades versus losing trades. PLB’s long-term success rate for individual trades is only around 30%. That means that 70% of his trades wind up losers. So how is he still so profitable year after year? Strict risk management. The losses he takes are very small. His few winners more than make up for all of them.
With a strategy like this, where a majority of your trades are losers, a focus on process is of utmost importance. As PLB explains:
“Successful trading is the process of doing certain things over and over again with discipline and patience.”
“It is possible to be profitable over time even though the majority of trading events will be losers. “Process” will trump the results of any given trade or series of trades.”
It’s not easy psychologically to have 70% of your trades fail. Most traders wouldn’t be able to handle it. But PLB can because he’s so focused on process. He can have 8 losers in a row and still follow his plan. He knows that it’s not the next trade, or the next 10 trades, but the entire cycle that needs to play through. His hand is not only steadied by years of experience, but also by a true understanding of his own strategy.
For example, PLB knows the exact average number of trades he should take each year. Not only that, but he also knows how many of each type of trade he should be taking. The number of major pattern trades. The number of minor pattern trades. He understands how each portion should play out within his broader strategy.
In total he’ll experience about 235 trading events in a year. Only 75 (32%) will be profitable and just 20 of those 75 will make his bottom line. By bottom line he means the trades that are mainly responsible for his profits that year. Most of his winning trades will only serve to cancel out the losers. But 20 of them will be big winners that’ll significantly move his P&L.
Understanding his strategy down to the number and types of trades gives PLB the ability to continually execute through any market environment. Strategies work in cycles, just like the market. They go through periods of major gains while also experiencing times of drawdown. The trick is to keep executing through both periods to complete the full cycle. If the strategy is sound, the net result should be positive, or in PLB’s case, extremely positive.
PLB’s thorough comprehension of his strategy gives him the confidence to know when it’s working and when it’s not. As he explains:
“I am constantly studying and analyzing my trading performance for two major reasons: to determine if my trading plan is in sync with the markets and to determine if I am in sync with my trading plan.”
This introspection allows him to make the right decisions throughout each cycle. It also comes in handy when evolving his strategy over time. Many traders tend to switch their strategy too often, basing it off the last few trades. PLB on the other hand is very careful to make changes because he realizes the folly of over-optimizing to one environment or another.
But even though he’s very cautious when it comes to switching things up, his careful study and analysis helps him make a change when it really counts. For example, price breakouts are not as reliable now as they were a few decades ago. PLB has been able to adapt his strategy accordingly. But you’ll never see him make the mistake of adjusting his strategy based off some temporary drawdown. That’s the advantage he’s earned from developing a full-cycle mentality in regards to his strategy.
The other interesting thing about PLB is that he’s a pure chartist. He relies solely on price and nothing else, and with price alone he’s been able to achieve his superior trading record.
PLB has a deep understanding of what price actually is and the proper way to use it. He explains that there’s nothing magical about chart patterns. They don’t predict the future. At anytime, he says he really has no idea where price is going. Charts are just used to develop a process. To establish targets, define risk, and determine broad direction. Nothing more.
This falls right in with what we believe at Macro Ops. Price is really just a way to simplify the extreme complexity that markets create. It takes infinite amounts of information and distills it into one simple reading. Price isn’t magic and shouldn’t be used as such.
The lessons learned from PLB’s Diary are priceless. Though we run a global macro strategy at Macro Ops, you can still see PLB’s influence in everything we do. He’s one of the best mentors out there and we strive each day to be as disciplined with our process and ultimately as profitable as him in the markets. If you want a master class in REAL trading, then Peter Brandt’s Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading is for you.