From the September 01, 2009 issue of Futures Magazine • Subscribe!

Book review: The Swing Trader's Bible: Strategies to Profit from Market Volatility

The Swing Trader's Bible: Strategies to Profit from Market Volatility

By Matthew McCall and Mark Whistler
John Wiley & Sons, Inc.
$70; 220 pages
Reviewed by Leslie N. Masonson

According to McCall and Whistler, this book’s goal is to give swing trading strategies that provide consistent profits for beginning investors and traders of all levels. The authors point out that common sense is critical to success. Moreover, investors need good money management skills to be profitable. The most successful trader uses a combination of technical and fundamental analysis, but for short-term trading, fundamental analysis can be ignored. Also, they emphasize that one indicator should not be used alone, but that several indicators should be used to confirm to make buys and sells.

Interestingly, the authors state up front that the book’s contents have been intentionally simplified. However, they went too far and do not provide sufficient subject knowledge, thereby resulting in a superficial overview of all the subjects covered. This is a shame, considering their credentials and current positions in the investment community. Unfortunately, this book does not contain any new insights for traders. If the authors had provided some sample complete trading strategies, such as case studies, readers would have been better educated.

For example, in presenting their 17 trading strategies, the authors have separate chapters on covered call options, return on assets and return on equity, and an option primer. The chapters are all only four to five pages long and do not provide sufficient knowledge to make trading decisions with a high degree of success.

The short chapter on candlesticks provides about a dozen patterns without providing sample candlestick charts of ETFs or stocks as examples. These patterns need to be shown on daily or weekly charts with other technical indicators mentioned for confirmation, but that was not shown by the authors. Also, there are no Web site resources provided for learning more about candlesticks and no candlestick books listed in the bibliography.

In reality, this book focuses on providing different technical tools and a few fundamental ones for investing and trading, rather than focusing on specific detailed swing trading strategies. For example, the RSI indicator, MACD and Stochastics are reviewed. But the authors incorrectly refer to these indicators as strategies. These tools are applicable to trading any timeframe, not just swing trading, and by themselves are not strategies.

One viable and time-tested strategy that they present is buying the strongest stocks contained in ETFs that are outperforming the market, as measured over the past three and six months. Surprisingly, the authors do not provide any Web sites, of which there are many, to obtain the ETF performance information. (Readers of this review can go to www.etftrends.com for this information).

There are chapters devoted to options covering covered calls, straddles and bull and bear spreads, but like the other chapters, the discussion is too brief. Options trading strategies require a separate book in most cases.

Sector rotation is mentioned briefly, as well as the “Best Six Months” strategy (developed by Yale Hirsch), and the four-year presidential cycle. The Dow Theory is briefly covered but without any trading advice. There is no trading guidance offered on the best ways to use these situations.

There is a bibliography, but no appendix listing any Web sites. This missing information is not only unacceptable in the age of the Internet, but also unexpected and disappointing. Hopefully, the second edition of this book will remedy its numerous shortfalls.

In summary, based upon the authors’ years of experience, it was disappointing to see the superficial attempt at providing swing trading insight. Unfortunately, this book fails to deliver on the details necessary to execute successful trades. A more accurate title would have been “An Overview of Basics for Beginning Traders.” Based on the book’s contents, it is a primer at best, with no in-depth swing trading strategies.

This book is best suited for novices who have no knowledge of the markets and who are considering trading for the first time. On a positive note, the authors’ writing style and explanations are clear and easy to follow. The book is easy to read, and contains good quality charts from stockcharts.com to bring home the key points

The more knowledgeable and advanced investors and traders should look elsewhere for insight into specific subjects covered such as John Murphy’s books on technical analysis, Marvin Appel’s books on ETFs, and Greg Morris’s and Steve Nison’s books on candlestick charting.

Leslie N. Masonson is author of “All About Market Timing” and “Day Trading on the Edge.” Reach him at lesmasonson@yahoo.com

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