The TRENDadvisor Guide to Breakthrough Profits
By Chuck Dukas & T. Parker Gallagher
John Wiley & Sons Inc.
198 pages, $60
To succeed in the stock market, investors need a logical trading methodology with specific rules that they can execute. To help achieve that goal, this book’s authors have written an easy-to-read, intelligent approach to investing that focuses on determining the market’s trend by using various indicators to track prices. A trading plan and specific methodology is provided.
The authors review a technical analysis toolkit they use to discern market conditions. They illustrate and explain their indicators. They used daily and weekly data. The key determinants of when prices enter a new phase is based on the relationship of the price to its 50- and 200-period moving average.
The heart of the book focuses on the authors’ “TRENDadvisor Diamond Methodology.” An overview is introduced and then each of the six components is covered in more detail.
The diamond is divided into two halves with a buy side and a sell side. Each side is further separated into three phases of price behavior. The price of securities, mutual funds and commodities move through each phase of the diamond in a continuous progression from bull market to bear market and back again. A detailed explanation is provided as to how to use the indicators.
On the buy side of the diamond, the three phases include the recovery, accumulation and bullish. Likewise, on the sell side the three phases include the warning, distribution and bearish. The technical indicators are used in conjunction with the moving average indicators to assess whether a security should be bought or sold or whether a position should be added to or reduced. Daily and weekly charts of stocks, mutual funds and commodities are used to show how the methodology is applied. One excellent feature of the book is the large size of all the charts with their indicators.
Considering Dukas is president of TRENDadvisor.com and a principal in a hedge fund, and Gallagher manages a hedge fund, it was surprising they did not provide any performance data on how their methodology works. It would have been instructive to see how well their methodology performs.
The authors provide a thorough explanation of their trading methodology and provide sufficient chart examples to understand the concepts and tools presented. Readers looking for a viable step-by-step methodology will find it here. The only shortcoming is the lack of aggregate performance data using this methodology to confirm its feasibility.
Leslie N. Masonson is president of Cash Management Resources, a financial consulting firm, and author of All About Market Timing and Day Trading on the Edge. E-mail: lesmason@frontiernet.net.
