Winning the Day Trading Game: Lessons and Techniques from a Lifetime of Trading [Hardcover]

Personal to the point of being colloquial, Tom Busby's new book gives you the sense that you're sitting across the table from someone over coffee, someone who is willing to share the hard-won insights and knowledge of a successful lifetime trading career. No less methodical or comprehensive for being informally written, not be mention being relatively brief (about 175 pages), you won't get through it in a day or two-or at least you'd short-change yourself if you tried. I usually highlight key passages in books like this for later review; but I stopped half way through the 3rd chapter since I was essentially turning the entire book yellow. Fortunately the "information" sections are interspaced with frequent examples, some from the markets and some from Busby's personal life. You won't find any fluff here.
Busby begins his book with a brief story of personal loss, the Crash of '87, in which he was both financially and psychologically ruined, and of his subsequent epiphany and redemption, the successful trading method he developed and parlayed into an even more profitable trading career. The description and explanation of this method forms the basis for the remainder of the book.
After the personal introductory narration he begins by describing the three core elements of his method, which he calls Time, Key Numbers and his Indicators, which he has collected and coded in software called the RoadMap. This is not, however, a self-congratulatory vanity "infomercial" from someone who is trying to sell a product. Except for a couple of specific proprietary indicators which he developed and only occasionally mentions here, everything Busby describes is essentially generic and off-the-shelf in almost any trading software product. What he repeatedly emphasizes and what lies at the heart of his method is a conceptual understanding of the global structure of the marketplace, its habit-driven repetitive nature, the importance of identifying the "Big Picture" and of correctly aligning yourself within that ("Long, Short or Out?"), the recognition of certain key numbers that are repetitively "favored" by the market (you'll have to read the book) and the necessity of follow-through support by other markets and market internals. He tells you, in specific practical ways, how to pull all of these things together, or at least how he does it. Yes, he'll do it better than you or I. But the book is aimed, it seems, at the "generalist" trader and trading student, who might benefit from a unified, comprehensive understanding of market activity and how he or she can profit from that knowledge.
Busby doesn't neglect or disparage "accepted wisdom." You'll find here all of the time-honored truisms that have been expounded by other trading teachers and coaches down through the decades. What Busby does, and does so well, is to integrate those first order principles into the logic and design of his trading method itself. Trade the method, he seems to say, and you will, by design, "trade what you see, not what you hope for," "take what the market is willing to give" and, first among equals, "cut your losses short and let your winnings run."
What I liked most about the book is Busby's emphasis on money management; if you were given a nickel for every time you read "Don't trade without a stop," you could just about pay for the book (it becomes sort of a running joke between the author and reader). Money management really does form the core of Busby's method. Don't look for a specific chapter on this subject. Instead it is so intrinsic to his method of trading that it is discussed throughout the book as it relates and is integrated into whatever specific area is being discussed. He identifies and describes how each of the method's core elements of Time, Key Numbers and RoadMap Indicators are designed specifically to facilitate capital preservation, foster risk management and help guard against the worst consequences of greed, fear and arrogance. The method itself seems to be a systematic embodiment of that honored trading maxim: Mind your losses and your winnings will take care of themselves. Except for Dr. Van Tharp, who writes primarily about money management and its psychological consequences, I can't think of another recently published author who has so successfully integrated money management into the very structure of his trading system.

I enjoyed Tom Busby's book on trading so much that I wrote a review for my Trader's U e-letter (found at investmentu-dot-com).

Here are some exerpts from that review.

Tom Busby is an experienced trader who has a lot to teach us from his years of trading. And I'd like to highlight three great lessons from his book that all traders and investors can apply.

Tom Busby has had extremely useful experiences in his 25 years as a trader. He went from booming success to painful crash, and back to booming success.

The progression that Tom took as a trader is a familiar one for those of us who have read the stories of other top traders - he paid his dues to learn the ropes of the trading game and became very successful.

But his successes led to complacency, especially with regard to risk management. And on Black Monday (October 19, 1987), he had a huge unhedged option position that eventually cost him everything he had - house, car, the works.

Busby bounced back, both psychologically and materially, from that blowout loss. Even by itself, the story of how he regained his confidence to trade makes his book worth reading.

Fortunately, there are other good lessons in the book as well.

Three Valuable Investing Lessons from Tom Busby

1. Manage risk first, and the rewards will come. I know that we have talked about this many times in Trader's U. But Tom's poignant personal stories help drive home the point and etch it in our brains. Since his Black Monday collapse, Tom has incorporated a wide range of risk management tools in his own trading and recommends them for his students. There are some standard, well-known tools, like using protective stop losses, but Tom also has some twists on managing risk.

2. Importance of the yearly opening price. Busby puts a lot of emphasis on the yearly opening price for any instrument he trades, whether it's an index future, a commodity or a stock. When an instrument is trading above its yearly opening price, this is bullish in the big picture. And when the price is below the yearly opening price, this is a bearish indicator.


3. Study a market and know its characteristics before you trade or invest in it. This is a very common sense item, but it is amazing how many people ignore this simple rule. Many people act on a piece of news and never even look at the key points about the stock or commodity before buying it. Some great questions to that Tom asks are:

What is the daily range? Is this a volatile or well-behaved instrument?
What moving averages does this instrument "respect"? In other words, what moving average does it follow in up-trends and down-trends?

Despite the fact that it is a day trading book, I recommend it for all traders and investors because:

It allows us to peer into the mind of a successful trader
It has many concepts that are useful regardless of your trading time frame
In the strategy section, it has useful tactics for managing your mutual fund portfolio and longer-term trades in stocks, gold and oil futures, and other investment vehicles.

Busby has done a fine job in taking his 30 plus years of trading experience and presenting everything in easy to read, story- like fashion so that the book is enjoyable and understandable from cover to cover. Rather than the lugubrious numbers and analytics which so many 'trading books' bore us to tears with, this book uses metaphor to teach, which we all recognize as a better way to learn.

As a trader of several years, with a fair library, this is the first time I have asked my wife to read one of my 'trading books' so that she might get a better underestanding of what goes into trading and into a trader's mind. She also loved it . Now, I am anxious to begin my second time through the book so I can pull even more 'pearls of wisdom' from it.

At first glance, it looks almost too thin and too easy to be as powerful as it is. Do not let the enjoyable story within its cover keep the message from hitting home and soaking in...here is someone that has "figured it out", on a day to day basis, and is willing to share it with, and teach it to his readers.

Already, I have taken sigificant lessons and translated them into profits. Specifically, I have isolated certain times in the GLOBAL trading day that allow me to concentrate my daily efforts to maximize when the markets will give me the best opportunity for a move.

The best way for me to explain how imoprtant I believe this book is for traders of all levels is to tell you that it gets a definite 5 Stars in my mind!
John Atkins

› Go to Amazon.com to see all 39 reviews  4.2 out of 5 stars