From the May 01, 2010 issue of Futures Magazine • Subscribe!

Market indicators: The best kept secret to more effective trading and investing

Market Indicators: The Best Kept Secret to More Effective Trading and Investing

By Richard Shipley
Bloomberg Press, 2009
$39.95, 241 pages

Most trading book authors that offer insight into market indicators discuss the indicators from the perspective of technical or fundamental analysis. Richard Shipley writes “Market Indicators” from a perspective that is neither fundamental nor technical. His perspective is that to understand market movement, one needs to understand how professional money managers track the flow of money through a variety of different sources. In simple terms, Shipley shows the reader how to follow the professional money. The indicators he discusses (more than 100) all relate to analyzing the massive flow of money as it moves throughout the trading world. As well, he discusses quite clearly how you, as a trader/investor, can interpret the data the indicators provide.

Shipley divides the indicators into three sets that signal market movement. The first set of indicators reveals what market participants are doing. The second set explores how traders/investors “signal” their areas of focus, feelings, and general outlook. The third set tracks the divergence between what some call the “smart money” and the money the individual trader/investor puts into the market. One important note here is that Shipley advises the reader that the indicators he discusses and their interpretive value are only “a supplement to the hard work of knowing the stocks you own.” This advice speaks to a practical tone in the book and to a relaxed writer who knows his subject and is not only comfortable discussing it but relishes the opportunity.

The book is informative, detailed, and focused, but be prepared to move from a relaxed warm style in the early part of the book to a cooler, somewhat stiffer style as he moves through explaining the three sets of indicators. Given the subject matter, it is understandable, but his stylistic switch does make the read a bit more tedious, as he reverts to the wonkish use of charts, graphs, and statistical data to make his points.

The content, however, is unassailable. For the individual trader/investor who wants to “find, understand, and employ the market information of greatest interest to professional traders,” Shipley’s book does the trick. In his thoroughness, he discusses the indicators that point to clues about the flow of money, clues hidden in the options market, institutional trading, insider activity, relative-value modeling, financial punditry, bond markets, and futures trading. His topics include credit markets, IPOs, mergers, derivatives markets, credit spreads, banking, and bond insurance. What is fascinating is his ability to demonstrate how all these distinct areas factor into his premise that if an individual trader/investor works hard enough, he or she can track the information that professional traders track as a matter of course, and in so doing, can the attain the same edge that professional traders enjoy.

Books that reveal the “secrets” of trading have flooded the world of trading. Some promise huge profits and some declare, “this is the way to success.” Shipley does neither. He simply lays out the interpretive value of specific market indicators as they relate to tracking the flow of professional money. His conclusions about the indicators derive from his experience as a portfolio manager, experience gained from decades of working in the very world he writes about in his book – the world of professional trading/investing. Certainly, this qualifies him to write about the topic. Of greater importance, though, he has translated his experience into intelligible writing that explains the value of the indicators he discusses and defines a practical application of those indicators for the individual trader/investor.

Brandon Jones is a writer by trade and a trader by choice. Although not a professional trader, he trades on a regular basis to maintain and improve his portfolio return. He can be reached at brandon@affectwriting.com .

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