Evolution of a Trader: Swing and Day Trading
By Thomas N. Bulkowski
John Wiley & Sons, Inc.
$75; 301 pages
This book is part three of the Evolution of a Trader series, which parallels the author’s journey from a buy and holder to position trader, swing trader and day trader. The first two parts cover trading basics; then fundamental analysis and position trading. Although the author covers swing and day trading, he indicated that his personal preference is for the former, since it better fits his personality.
Bulkowski has 30 years of experience and has penned 10 books including the leading edge Encyclopedia of Candlestick Charts and Encyclopedia of Chart Patterns. He is well known for his extensive research on determining the frequency and usefulness of candlestick as well as chart patterns, and incorporates some of those findings in each of his latest three books. His trading, investing and savings approach allowed him to retire from his day job of hardware design engineer at age 36.
The author is forthright in presenting horror stories of 10 traders who had catastrophic results. These stories are provided to drive home the point that proper preparation, rules, buy and sell criteria and other key factors need to be in place for any trader to have a chance at a profitable outcome.
The book is packed with trading guidelines and ideas, setups and viable tactics for successful trading. Many patterns are covered, including the inverted dead cat bounce, busted chart patterns and event patterns (e.g., earnings releases). The author pinpoints what chart patterns work and don’t work based on extensive research over decades.
His favorite tools are support and resistance, and trend lines which work on all timeframes. His research indicates that price typically will reverse at support and resistance, and if it doesn’t that tells you there is a change in direction. He urges traders to draw lines on charts with different time frames to see if they are signaling the same trend before making a final trading decision.
Bulkowski cautions traders never to go short in an up-trending sloping channel and vice versa, otherwise the results could be costly. He also stresses the importance of position sizing and managing the risk vs. reward outcome. His favorite swing trading chart patterns include: Flat base, congestion breakout, busted descending and symmetrical triangles and the ugly double bottom (uneven low points). The appendix provides 36 visual chart patterns.
The key points of each chapter are summarized at the end of the chapter, as well as aggregated as the last chapter to provide traders with a handy reference guide that can be referred to for re-inforcement. Bulkowski offers a detailed and widely followed website: www.ThePatternSite.com that provides traders with very useful resources including current market conditions.
In summary, this is a highly useful, information-packed and enjoyable book on trading. His coverage of swing trading is double that of day trading based on page count. In both cases, he provides detailed pattern research that will help traders use the most appropriate and profitable patterns. Traders requiring more basic knowledge than presented here or who prefer position trading will find his two other books in the series to be of value as well.
Leslie N. Masonson is a day trader and the author of Buy DON’T Hold and All About Market Timing (Second Edition). Reach him at lesmasonson@yahoo.com