The Electronic Day Trader: Successful Strategies for On-line Trading by Marc Friedfertig and George West.
If you can judge a book by its cover (you shouldn’t) you can easily tell that this book is already quite old, and indeed it is. The book was written in 1998 when online (without the – please) trading was in its infancy. Stocks were still traded in 8ths! This makes some of the contents in this book irrelevant or plainly outdated for today’s world (at least at the time of writing this post in October 2017). But don’t let this minor issues stop from reading a really good book that explains market’s internal machinery.
For the first time is clear in my mind why stocks and markets go up and down as they do, forming a saw-like chart. Why markets pullback. Who are the players in the market and what they want out of it. What happens when you place a buy/sell order. Hint: If you think that another trader seating at his home/office is the one selling/buying your order you are quite wrong about it!
I will not publish here any of the contents of the book as you shall read the whole book to fully understand the concepts discussed, but I will leave you with few of the key concepts that have already made a difference in me:
- “The only reason there is money in the markets is that other traders put it there. The money you want to make belongs to other people who have no intention of giving it to you.”
- “We have reached the 3rd degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be” – Lord Keynes
- “Day Trading requires extreme concentration and discipline. If you concentrate 100% of the time you will be 100% effective. If you concentrate 95% of the time, you will be 90% effective. If you are concentrating 90% of the time, go home.”
- “A day trader’s most valuable asset is concentration. Focusing on the market maker game* has been the secret to many highly profitable day trader’s success.”
- “Winners, and even losers, will use technical analysis to help them to identify entry points. Whether these entry points are good or bad is far less important than what the trader does, and how he or she reacts to what happens after entering the position. A winner will ask him/herself: “How much am I willing to risk?”. A winner will actually stick to this amount if things do not work out. A loser will ask himself: “How much money can I make?”. If and when this amount is attained, he or she will reconsider what the original amount was, believing more can be made. When things eventually turn, he or she is reluctant to make only half a point in a position when he or she should have and could have made a full point. Before long, a loser trader turns his/her winner trades into losers.”
- “The best rules that you will develop will come from keeping a diary of your own trading. Write down what you do when you trade well, and what you do when you trade poorly. In time, you will recognize what works and what does not work, and it will be up to you to have the conviction to follow these rules.”
*The book spends a good quantity of time discussing specialist and market makers interests and strategies to make money. Understanding the market makers will change forever the way you look at the markets. This is the main take away from this book.