The ART of Trading - McDowell

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I was browsing Amazon.com one day for some new trading books to read and this book appeared on my search. I am always interested in other people’s trading techniques because there is always a chance that I can learn something new to make my trading better. Even if I only learn only one new idea from a book, that book was worth every penny.

I just finished reading The ART of Trading by Bennett A. McDowell. I have to admit that every time I see a software CD included in a book, I immediately think that the book is probably crap because they are making more money on the software subscription than on the technique itself.

On top of that, ART is actually an acronym.  It stands for Applied Reality Trading.  That’s cuter than an elephant in a tutu. Strike two.

Oh don’t lie, you are thinking the same thing!

That being said,

I opened this book anyway.

Let me start by saying that this book is pretty comprehensive and well organized. It starts off by covering the basics of trading like money management, treating it like a business and psychology, pretty standard stuff for a trading book.

After the author dispenses with the formalities, he gets into the nuts and bolts of the ART System. As soon as I started reading about the technique, I grasped the concept immediately.

It’s not that I’m so smart or anything. In fact, I’m pretty thick headed. So for the method to make sense to me so quickly is a testament to its simplicity. Don’t let the simplicity of the method fool you into thinking that it is a bad system however. I haven’t actually traded it yet, but often the simplest methods are the best.

The basis of this method is centered around pyramids. Before you start chanting and smoking something out of a pipe or thinking that you have to get your down line to buy more laundry detergent, this is what the books means by pyramids:

It is the formation that is caused by the normal ups and downs in the market. There are several techniques that the book uses to combine these pyramids with other chart patterns to go long, short or exit. If you haven’t figured it out already, you basically go long above the triangle, I mean pyramid, and short below.

Of course it isn’t quite that simple, but you get the idea.  You will have to read the book to figure out when you can do this (to make money).  The biggest question being of course, where do you draw the triangle, I mean pyramid?

The method is actually quite practical and another way of interpreting price action. I am going to have to go over this book a couple times to get the hang of it, but as far as I can tell so far, the pyramids are great points of reference to enter and exit trades, as well as to add more to an existing position. Even if I don’t end up using this system in its entirety, this will be yet another tool in my arsenal.

I would suggest you check it out, it gave me quite a few great ideas to test. But I’m still not going to open the software CD.  Sorry, I just can’t do it.

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1. Beat the Odds in Forex Trading (Toshchakov)
2. Millionaire Traders