Better Stock Trading: Money and Risk Management

Rating:
Summary: Read this before you trade!
Review: I traded for over a year before I read this book. My bookshelf is full of books on technical analysis, day trading, swing trading, candlesticks, etc., but none of them are all about money management. As the author demonstrates, with charts, graphs and examples, how you manage your trades is more important than the accuracy of your technical analysis. Various entry and exit stratagies are compared graphically to show you the dollar results obtained for the same trade using different stratagies. I highly recommend this book, to the beginning trader and to the experienced trader whose portfolio contains a number of losing positions.

Rating:
Summary: deserves to be on your shelf next to tharp and elder
Review: The book really starts out examining how risk management can affect a system with positive expectations. The main point he is making is that your average profit should be greater than average loss, which is true enough. Unfortunately, there is an implied assumption in this section that suggests you can change the stop without impacting the probabilities of success -- i've found this not to be true in my own trading. I would certainly liked to have seen some mention of this in the book, but that's a bit of a nitpick to be quite honest.

In the book, Mr. Guppy uses the 2% risk model Elder uses. However, there are bits missing. For example, he has no real way of limiting risk. He has a model whereby through diversification and position limits, he will limit outstanding risk to 20%. However, from my brief reading of the book (I plan to go over it more thoroughly later), there is nothing stopping you from entering another 20% worth of positions, and another 20%. Stopping your entire portfolio out several times. Sure, I hear you say, this could never happen to a top trader -- however, if it happened to Steve Walton , I suspect it can happen to you.

Overall, I think this is an excellent book, and I learned quite a bit from it. Mr. Guppy's writing style may not be quite as polished as some writers, but I think it's still quite good. If you are a position trader, i'd highly recommend this book -- if you opt for the swing or daytrading timeframes, I think you might be better off with Elder or Tharp -- although it certainly does no harm to study all of these authors, as they each have a lot of really good things to say about this topic. I think this book may indeed be destined to be in fine company, alongside Elder and Tharp. This work is much stronger and generally more useful than his earlier work, Market Trading Tactics.