This book is much different than other trading books you will read. The author begins with a warning that trading is probably not for you, and that your time would be better spent pursuing an easier life path. Mr. Ritchie warns that few can handle the stress and pain that a trader will experience in search of profitability. He illustrates this by dedicating his first chapter to discussing the traders he knows who faced financial ruin, and by explaining the increased risk of suicide among professional traders. This is why I teach the importance of risk management to my students.
After reading hundreds of trading books, this book stands out as one of the best explanations of how hard it is to trade through a long term equity curve, and the mental and emotional pain of drawdowns in capital during losing streaks. I particularly liked his explanation of how difficult it is to be a profitable trader for any length of time if you are risking too much on any one trade. Mr. Ritchie explains this with mathematical examples, including how the results of a string of wins and losses is affected by percent of capital at risk per trade. His detailed explanation of drawdowns through a sequence of wins and losses, and not just losses in a row, is one of the most important things that a trader can learn because it reinforces the importance of position sizing and stop losses. It’s one of the best explanations I have ever read.
Mr. Ritchie’s directs readers to his app that simulates an equity curve based on capital at risk and a trader’s win/loss ratio. It is like a future test for your own system’s equity curve.
Ritchie is a devout Christian and writes about trading through a biblical perspective, and about the hypocrisy of many in the Christian world. The book also dives into Christian Apologetics and gives answers for his faith.
This book explains the realities of trading; the good, the bad, and the ugly. A trader that reads it and takes it to heart can take their trading to the next level. The rewards are there for those who are disciplined and focused enough to follow the right trading path.
Book Link for: The Trading Bible. Highly recommended read.