This book is written by a real market master. It is written by a professional trader who made high double digits returns every year for over a decade, making high 6 figures in profits each year. So you do not have to worry about him telling you personal theories or trying to advertise his newsletter or sell website services throughout the book. He was retired when this book was written and he has shared with his readers what he learned from the markets from real life experience with skin in the game.
The majority of this book will be familiar to you if you have studied other legendary traders. “…you have to trade by rules and principles that take precedence over your feelings or wishes.” “…cut your losses short.” “..when you are wrong, close your position! Don’t rationalize, hope, pray, or anything else, just get out…”
The author based his business philosophy on three principles: preservation of capital, consistent profitability, and the pursuit of superior returns. This is the Holy Grail of successful trading. The author uses Dow Theory as his main method of trading. He states: “If you know what the trend is, and if you know when it is most likely to change, then you really have all the knowledge you need to make money in the markets.” I have found that to be true in my many years of active trading. That is the only principle that makes money long term in any market. “Following the trend is the way to make money in the financial markets.” Victor Sperandeo liked to call the major tops and bottoms and take the trend reversal trade when new highs failed or new lows stopped being penetrated. He believed that “Gambling is taking a blind risk. Speculation is taking a risk when odds are in your favor.”
1. Trade with a plan and stick to it.
2. Trade with the trend. The trend is your friend!
3. Use stop loss orders whenever practical.
4. When in doubt, get out!
5. Be patient., never over trade.
6. Let your profits run; cut your losses short.
7. Never let a profit run into a loss.
8. Buy weakness and sell strength. Be just as willing to sell as you are to buy.
9. Be an investor in the early stages of bull markets. Be a speculator in the latter stages of bull markets and in bear markets.
10. Never average a loss-don’t add to a losing position.
11. Never buy just because the price is low. Never sell just because the price is high.
12. Trade only liquid markets.
13. Never initiate a position in a fast market.
14. Tips are for waiters. Trade with the trend not your friend.
15. Always analyze your mistakes.
16. Beware of “takeunders”. (Bad mergers)
17. Never trade if your success depends on a good execution.
18. Always keep your own records of trades.
19. Know and follow the rules!
“The purpose of rules is to make executions as objective and consistent as humanly possible.”
To trade well you have to:
1. Establish goals.
2. Acquire knowledge of the markets.
3. Define rules of trading that work.
4. Execute in strict adherence to the rules.
This book is packed full of trading techniques, methods, risk management, discipline, trading psychology, economics, and much more. Even though it was written many years before the internet age the contents of the book are timeless. It could make you money if you listen and follow the principles in the book carefully.