This author is one of the few that have touched upon one of the most fundamental and universal properties of almost any market. Whether your games is futures or equities, look at any chart and you will see periods of little price activity alternating with periods of greater price movement. This is the crux of this book.

Markets invariably move from stages of expansion, to contraction, and back to expansion, etc. Several other price patterns and technical analysis approaches are tested as well. However, after reading this book, you will no longer be one of those who try to "get in" on a runaway bull or bear market - only to have it turn right around on you as if it knew you were coming, but rather, you will be one of the ones who are ready when an otherwise "dead" market takes everyone else by surprise.

The main ideas in the book have to do with expansion and contraction in volatility and moves off the open (Opening Range Breakouts).

Toby is a successful hedge fund manager, having worked for Victor Niederhoffer before starting his own company. Toby's returns are good, but his risk management is far better. Toby's funds have grown primarily due to his excellent risk management skills as opposed to his returns. In layman's terms this means that he hardly ever loses money but he doesn't make much for his clients. This is actually fairly unique and he should be commended for finding this niche in the business.

Well, Crabel certainly did a good job of gathering statistics from many years of commodities data prior to 1990 and presenting it in this book.

Basically, the premise of the book is that there is a better than even probability of a trend day occurring after certain narrow range or inside days. A trend day is one where the price continues in one direction off the open and closes in that area. Narrow range is basically a contraction, so he is saying that "breakouts" or "expansion" is likely to occur after contraction. This is a 50-65% chance based on his examination of data from commodities prior to 1990.

At first glance, anything above 50% would appear to be a profitable opportunity. But this does not take into consideration sampling bias (see below.) Also Crabel mentions this does not take into consideration commissions and slippage. So any true trading potential would need to minimize the fees to a small portion of the 50-65% profit margin. An improvement on this book would be the inclusion of a real market study with fees.

Results including around 50% probabilities sometimes indicate random behavior. This includes even apparent non random probability (a "consistent" 65%) due to sampling bias. A comparitive study with today's markets would need to be done to determine whether the 50-65% results are still valid. There may have been certain market biases in his sampling period that no longer exist.

So in order to determine whether this book presents a useful trading system, the above two studies would need to be completed. Assuming favorable results of the studies, this would be a day trading system that would work as the number of iterations increases (ie the number of trades.) So probably best suited to automated, computer trading, rather than manual trading.

Price: from $425.00, collectible: start from $1,298.99

Download:

31 March 2009 22:09 | ICQ: -- |

7 December 2009 20:23 | ICQ: -- |