Profitable trading and investing can be more art than science, and there is no formula or “how to” checklist that can be published in a book and executed by the reader with any guarantee of success. Far too much depends on the unique skills, intuition and temperament of the practitioner; what works for one trader will often not work for another.
In financial writing, there is also a problem of authenticity. As Lund explains, “most trading books are written by authors who don’t trade, have limited trading experience, or haven’t traded in many years. Most of these authors make their money by writing about trading, giving seminars about trading, or selling systems on how to trade; basically anything but actually trading itself.”
It is as the old adage says: those who can do; those who can’t teach. And even in cases where a writer accurately tells a story—such as in a biography of a famous trader or in an account of a successful trade—there is usually a lack of relatability to the average investor.
It’s entertaining to read about John Paulson’s multi-billion-dollar score in betting against the subprime market in 2007. But few investors—and even professional traders, for that matter—have access to the credit default swaps that made Paulson’s bet possible.
Keeping all of this in mind, Brian Lund has produced a very different kind of investing book. It’s not a “how to” book, and it is certainly not a top-down diatribe of received wisdom from a demigod trading guru. Instead, it is a democratic, bottom-up collection of practical trading tips crowd-sourced from the blogs and StockTwits and Twitter feeds of real traders with real money on the line.
You won’t agree with every tip in the book; I certainly don’t. But there is a wealth of knowledge here freely shared by practitioners who—like you and me—learn more about trading and investing every day through their successes and failures.
Here are a few nuggets I particularly liked:
When I sit at my desk and trade it involves 80% controlling the psychological aspect of trading and 20% using discipline to stick with the trade. That makes for a trade that is a 100%, or A+, setup.
- Zachary A. Musso (@Zmoose12)
No one makes money in the markets all the time. If you strive for consistent trading results you need to find the appropriate method and timeframe that matches your personality. I believe that a strong understanding of market structure and risk management should be at the core of every participants approach.
- Brian Shannon (@Alphatrends)
In golf, it helps to look at a putt from both sides of the hole. Do the same thing when you trade. If you are bullish on a stock try and wrap your head around the bear case before you make a trade (and vice versa for a short)…you may see something you didn’t notice the first time.
- Tom Morton (@TheEquitiesRoom)
10 times out of 10, Traders who carry BIG losses wish they had respected their “ORIGINAL” stop. So, respect the ORIGINAL STOP LOSS, ALWAYS!
- Trader Stewie (@traderstewie) [Note: So many of my own mistakes could have been avoided by following Trader Stewie's advice...CLS]
Get good at getting out quick for a small loss. This practice of losing small, and often, is what will give you confidence when trades do not go your way. Taking small loses properly is where you as a trader score. Internalize: ‘Every small loss gets me closer to a big win.
- David Aferiat (@TradeIdeas)
When you’re trading high growth high momentum names on an intermediate to position trading time frame, it’s often the story that matters much more than the underlying fundamentals. Understanding what stage in the cycle of the story you’re at is extremely important to managing risk.
- Leigh Drogen (@ldrogen)
There are no prizes awarded for trading frequency. Don’t feel just because you’re staring at the charts, you’ve got to be in a trade – you don’t
- Anne-Marie Baynard (@AnneMarieTrades)
Don’t cry over “spilled beer”: If a trade does not go as planned, forget it and go on to the next one. Never play the “coulda-woulda-shoulda” game…. Don’t trade just for the sake of trading: Let the good trades come to you. Do not over-trade. Do not “revenge trade”.
- Brandon Hayward (@VexTrades)
Get some exercise. So many people under-estimate the positive impact working up a sweat can have – not just on your physical health which is kind of obvious, but also on your mental health. My running shoes are one of my best trading secrets.
- Jessica Peletier (@RogueTraderette)
I recommend you pick up a copy of Trading: The Best of the Best and jot down the tips you find particularly helpful. Put them on Post-It notes and stick them to the bottom of your monitor or somewhere where you can’t help but look at them. It will make you a better and more disciplined trader or investor.
Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. As of this writing, he did not hold a position in any of the aforementioned securities. Click here to receive his FREE 8-part investing series that will not only show you which sectors will soar but also which stocks will deliver the highest returns. The series starts November 5 and includes a FREE copy of his 2014 Macro Trend Profit Report.