Warrior Trading: Inside the Mind of an Elite Currency Trader
By Clifford Bennett
John Wiley & Sons Inc.
172 pages, $45
REVIEWED BY ART COLLINS
Warrior Trading doesn’t break much new ground, but it is pretty smart about the terrain it does cover. The author is in tune with what works and why, as well as what constitutes deceptive or useless “noise” that almost inevitably leads to losses.
The main themes include the difference between the consensus view of an economic environment and the more relevant underlying forces; the idea that unsuccessful traders follow the pack, which invariably is wrong and that the triumphant warrior follows the road less traveled. Contrarianism is an important factor in trading success and it manifests itself in every facet of trading.
Another recurring subject is that of “reductionist theory,” which is the distillation of something down to its most elemental parts. Bennett contends the technique is overused in markets, resulting in people trying to fit an unknowable future into a model based on the past; the arguable implication being it’s a futile exercise. The alternative is the reliance on intangibles, something that works for some, but is not easily translatable to the reader
Still, Bennett is largely successful at conveying his points. His breakdown of trader types, for example, is readily identifiable. A “swordsman” is primarily a range trader looking for numerous opportunities to buy low and sell high. An “archer” is more of a trend follower who waits for just the right opportunity before letting his arrow fly.
He also outlines some concrete trading opportunities, such as in the immediate aftermath of government and earnings reports. He convincingly explains how the outcome often tends to be decided before the number even hits. You get circumstances, for example, where people are already long, expecting wildly bullish reports. The market sells off anyway, because there was no one left to buy. On the other hand, if the news is bad, so much the better for short positions. You therefore have a potential win-win situation.
A related section discusses ways to time market reaction to front-page news. Predictably, the market is going to fade the headlines. Bennett lays out probable time trajectories that are not nebulous and therefore accessible to even the least intuitive among us.
Admittedly, there are some instances where my mechanical sensibilities cannot give Bennett a pass. You can quantify most anything in testing, including a system that recognizes and acts off of very recent patterns while eschewing what has occurred in the more distant past. As attractive as the idea is, it doesn’t work throughout time. The discretionary dictate of getting in tune with the market “here and now” is dangerous.
For the most part, his book provides some thought-provoking information, theoretical and otherwise, from which an astute reader could well benefit.
Art Collins is an active, long-time trader. He is the author of When Suptertraders Meet Krypytonite and more recently Market Beaters. E-mail: firstname.lastname@example.org.