Rating: 
Summary: an entertaining polemic
Review: When a book bills itself as "brutally honest" you are usually in for some interesting reading. Gallacher wastes no time in taking on a moral tone, exposing the idiocy of emotional losers who shouldn't even be in the markets and commodity broker crooks who add no value to the process and are good at nothing other than fast talk and sales techniques. While these opening observations are based on truth, they don't seem all that necessary. Do we really need to hear that there are a lot of dummies in the markets who shouldn't be trading or that there a lot of dishonest / incompetent brokers out there? Maybe I am off base to assume this is common knowledge. This book is at its most interesting in uncovering the fallacy behind some highly esteemed mythical legends. Elliott, Gann and Fibonacci, when it comes down to it, have no real substance behind their methods, and Gallacher does a good job of exposing that fact. He also shines some sunlight on the seemingly ubiquitous Larry Williams, painting him as a clear and complete fraud. While not touching the subject of Williams' legitimacy, I have always wondered who would believe in the trading abilities of a guy who sends out mass mailings once a month telling people how they can make ten grand a month in 30 minutes a day. In otherwords, I see Williams as dangerous only to the people mentally slow enough to believe his "share the wealth" claims, and thus not really worthy of book treatment. Gallacher is neither totally wrong nor totally right in his methodical destruction of technical analysis. What he overlooks is that fundamental analysts and many technical analysts actually have a similar problem: attempts to profit from predicting the future ultimately prove futile because the higher the probability that you are right, the lower the probability that you can make money off that knowledge before others do. Pure fundamental analysts are worse off then pure technical analysts, because it is impossible to get all the hidden factors right and not get hit by surprise developments along the way, whereas a pure technical analyst will at least have a graphic representation in chart form that makes use of all traders' and analysts' opinions. The true way to use technical analysis is not to try to predict the future, but only to measure probabilities of an event occurring, and then to place bets only when probability shows conditions to be favorable. That is to say, if event A happens under certain conditions, then the probability of profitable scenario B occuring, while still uncertain, may have increased enough to make the trade a worthwhile risk. Many chart patterns only follow through 50% of the time- but they can still be used profitably because rewards reaped can exceed risk taken through proper money management. This understanding that trading is a game of probabilities in which it is impossible to win 100% of the time is why good traders aren't bothered by routine losses. When Gallacher says "deliberately preparing for a loss is perverse, pessimistic, unnatural, yet correct," he shows me that he has a personal stake in being right and does not understand that trading is above all an odds game. Is it "perverse" or "pessimistic" for a poker player to expect not to win every hand? There is also the argument against Gallacher that technical traders have experienced much more high profile success, while 90% of employed research / fundamental analysts are inept at trading and could not trade their way out of a paper bag. Gallacher says "All the big winning plays I have seen in the market can be traced to a correct call on economic fundamentals." He must not read much. Take Richard Dennis, for example, who turned a few hundred bucks into hundreds of millions as a pure technical analyst, or Marty Schwartz, who was a failure as a fundamental analyst for 9 years but became one of the most consistently profitable traders of all time after making the switch to TA, or Ed Seykota, who turned 5K into 15 mil with a purely mechanical system.... and so on. Last of all, Gallacher leans on technical analysis himself near the end of the book. If he were a true fundamentalist, he would continue holding a position that was going against him until he was convinced that the fundamentals have changed. If the fundamentals haven't changed as you know them and you get out of a market only because the price is moving sharply the wrong way- guess what, you're using technical analysis whether you meant to or not! In conclusion, I have to say that most of Gallacher's beef with technical analysis is a straw man. He actually attacks poor trading habits- overtrading, risking too much on a trade, not taking losses etc., that are the hallmarks of bad trading, not technical analysis as a method. An entertaining book but one in which emotion was given a little too much free reign.
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