Fly Fishing the Stock Market:
How to Search for, Catch and Net the Market’s Best Trades
By Stephen Morris
John Wiley& Sons, Inc., 2012
$75.00; 280 Pages
This book’s title reminds me of another book titled “Flying the Stock Market” by Franklin G. Reick. Both are similar in that they use the authors’ fishing and flying experience, respectively, to explain how they trade in the stock market based on technical tools. Although both authors provide a solid technical view to profitable trading, they use different approaches.
Morris believes that successful trading and fly fishing both require three critical psychological traits: Persistence, passion and patience. The author stresses the importance of focusing on price as the key variable because stocks have specific behavioral price patterns that repeat over time.
To interpret the price behavior, he uses technical indicators and chart patterns. The first step is to focus on the general condition of the market using several tools and time frames. Morris explains that a trader needs to first analyze the market to determine its rhythm and cycles. Then he suggests looking at sectors, industries and groups to come up with suitable buy candidates. Morris recommends that individuals trade only a few securities, rather than focusing on too many.
The author uses a building block approach to explain his trading methodology. The first subject areas covered are the basic chart types, patterns and indicators. He introduces a handful of indicators including the 8-, 21- and 50-period exponential moving averages, MACD and histogram, Force Index and Bollinger Bands that can be used on daily and weekly charts. According to the author, when a buy or sell signal occurs simultaneously or near each other on a number of these indicators, then there is a greater chance of a profitable outcome. He introduces two unique tools — the Weather Vane and the Weather Station — that are reviewed in detail with colored charts with indicators.
The stock market has various seasons when stocks behave differently, just like the weather, and they require different trading approaches. Morris introduces the Weather Vane, which superimposes a weekly chart of the volatility index (VIX with an 8-ema) on top of the S&P 500 Index (coupled with an MACD) that is used to forecast potential market moves on a daily, intra-day and hourly basis.
Morris illustrates chart patterns that deceive traders and how to avoid geting caught in those traps. Moreover, he shows how to trade various market patterns and technical breakouts. In a chapter titled “Trophy Room,” the author reviews his best trades by providing trade analysis, trade management and the results of the trade. To be honest, he also provides the trades that he missed and the mistakes he made in another chapter. Throughout the book there are many high-quality color charts explaining the author’s trading methodology.
This book is highly recommended for traders who are comfortable using technical analysis with a time-tested methodology. It is laid out in a logical fashion, and the chart examples with detailed notes provide a self-paced learning experience. The author’s years of experience and expertise are self-evident based on the book’s content and writing style. He provides a high-quality companion website that provides free updates to his trading tools and market outlook.
Leslie N. Masonson is the author of “Buy Don’t Hold” and “All About Market Timing.” He can be reached at email@example.com.