Warrior Trading: Inside the Mind of an Elite Currency Trader (Wiley Trading) To say this is a great book is an understatement. I have just finished reading this book and was totally absorbed throughout the entire book. Is this book good for newbie traders, I don’t think so. The concepts and the analogies that Clifford uses are much more suited to some one with at least some trading experience. I noticed that on Amazon the reviews were very mixed and I would say this has some bearing there. I personally think this is the best trading psychology book I have ever read. I know a lot of people refer to Van Tharp’s Trade Your Way to Financial Freedom as the ultimate book in this field and previous to reading this book I would have agreed, but after reading warrior trading my opinion has changed completely.
This guy really gets right inside the mind of a trader and conveys it in such a way as to really make you think about just what is going on in the market and how you can benefit from that. This is not a book that says wait for this indicator to do this and wait for that type book. What this book does is really challenge your mind into thinking on a much deeper level about market structure and what others are thinking and WHY they are thinking it. He conveys this through analogies which I found made it even easier to relate to and understand. This book was a real eye opener for me and I definitely gained a lot from it.
Clifford not only looks inside the mind of traders but also delivers strategies and ways to assess the market and then capitalize on this information. He delves into both fundamental and technical analysis and describes how when they are used in conjunction can be an extremely effective tool. Reading this book opens up your whole mind to a complete new perspective on the market and is a book that I will read again and again.
If you have not yet read this book then I recommend you get yourself a copy today and start reading, I can assure you you won’t regret it.
I am not going to go into to much depth about the history or design of the candlestick chart. Just Google candlestick charting and you will be inundated with information on this style of charting. Here is a link to a site I feel defines it quite well so feel free to peruse this page before reading the rest of this post. Candlestick Charts
Just on the subject of color, with today’s charting packages you can change the colors of the candles to anything that takes your fancy. I generally use red candles to define a bear candle (sellers are in charge) and blue, green or white to define a bull candle (buyers are in charge). I tend to change these colors regularly as it just changes the appeal of the chart. It can get a bit stale looking at the same colors all of the time.
I primarily look at candlesticks to identify reversals in price. Preferably I like to see price retrace against the trend and then form a reversal at a significant level. This I feel is an ideal place for me to enter a position because it identifies two things for me.
Firstly it identifies a turning point in the market
Secondly, as I am assuming this is a market turning point, then it also gives me an ideal place to place my stop loss order. I generally place it 10 to 15 pips below the lowest point of the reversal pattern.
I have two patterns that I use consistently that I have found to be reliable enough to use as additional indicators in my weight of evidence strategy. I say this because I don’t use any one indicator in a vacuum as such. What I look for in my trading is multiple key indicators to line up at the one time. These indicators then complement each other and reinforce my decision to take a trade. The two patterns I prefer are:
The first, I refer to as twin towers because this is what they look like to me. It is where one candle is the same size as the previous candle or completely engulfs the previous candle. What I am really looking for is a complete reversal of control. For example, a large bull candle indicates the bulls are in charge, but if this is then followed by an equally large bear candle, this signifies that the bulls have completely lost control and the bears are now in charge. Here are some examples on a chart to help identify these patterns.These are not complicated patterns and are very easy to identify. Just pull up any candlestick chart of any instrument. Pick a time frame and observe for yourself, just how reliable this pattern is and then form your own conclusions. For me it is a no brainer.
click image for larger view
The second pattern has a lot of names, it can be called a pin bar, a lwc (long wicked candle), a shooting star, a hanging man and the list goes on. I like to call them pin bars because that is what they look like, A PIN. This is a single candlestick pattern whereas the twin towers is a multiple candlestick pattern. Both these patterns signify the same thing, the transfer of control from the bulls to the bears or vice versa. I use this pattern exactly the same way I use the twin tower pattern so I will insert a chart depicting this particular pattern.
I prefer the wick of the candle to be at least three times the length of the body and negligible on the other side, candles 1 and 4 are great examples of this.
These are the only two patterns that I regularly use in my trading. There are literally dozens of candlestick patterns and no doubt all very effective used in the right way. I try to keep my trading as simple as I can and thus limit myself to just the two of these patterns.
Candles do play an important role in a lot of traders trading and therefore are definitely worthwhile further researching. Some books that are definitely worth a read are:
Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets
This is the first book I would recommend to a new trader or anyone considering trading. I would especially recommend it if you are inclined toward technical analysis. By the same token though, it is a definite read even if you are a fundamental trader.
Through Stan’s stage analysis and the use of his simple moving average, anyone could have been spared exposure to the financial crisis that the world has just been through. Don’t worry about the age of the book, these methods are as true today as they were 50 years ago. I use a lot of Stan’s methods in my trading everyday. I find them extremely simple and yet very effective.
This book is the first building block in a foundation for technical trading. Stan provides everything from where to place your stops, to when to take profits. The only thing I find that it lacks, is adequate money management strategies for the likes of day traders. But to be fair to Stan this book is not targeted at day traders or swing traders so the content is relevant.
To pursue the style of trading I do, you have to have some strict position sizing rules which I will go into another time. Stan’s book is systematic and well organized which allows you to plan your trades in a easy and efficient manner. This book makes long term trading look simple and to be honest, it is using these method.
I highly recommend this book to every trader and would-be trader as it is enjoyable and easy to read. *****.
