Jul 312012

I’ve been reading a couple books on trading stocks since this is something I can do outside of market hours.  The first book is How to Make Money in Stocks by William O’Neil.  I’ve read this book before and used to trade stocks with the O’Neil approach until I switched to ES, but reading it again now was like someone turned on some major lights.  I guess I’ve really matured as a trader and now I’m ready for O’Neil’s teachings.  I thought I understood it years ago but I was wrong.  Just like maybe in another 4 years from now I’ll understand it even more than I do now.  I’ve heard of people reading it 20+ times.  It’s that good.  I’m sim trading some stocks while waiting for my account to be re-opened at Interactive Brokers.  So far the results are ok but it’s just for practice.  Soon I’ll be trading ridiculously small sizes with real money.  I like the fact that we can do that.  If anyone is interested in collaborating on trading stocks using the “O’Neil approach” get in touch with me.  I stopped it in 2008 when the top wiped out my gains and then some and focused on day trading.  So I still consider myself a beginner at this approach.  I’m not necessarily going to trade exactly as O’Neil (buying breakouts), but there are a lot of good ideas in that book.

The next book is Trade Like an O’Neil Disciple which is written by two of his former employees.  They made incredible gains, which the authors claim were audited and verified.  They tell how they did it.  If there was a book written by a futures trader who had his trading records audited by a big accounting firm, then I’d be very interested.  I am not aware of any such book.  Why is it that we have stock traders with verified track records but no futures traders?

This second book is really for people who have read and appreciate the first book.  It goes into detail about various stock trades.  That was the boring part.  The great part was all the little bits of wisdom from William O’Neil.  I have to be honest, I skimmed over some of the details on previous trades but I took a lot of notes on the teachings of O’Neil.

Here is an example quote:

In the end, traders must insist that they trade alone, free from distractions and interference from the outside world, whether such distractions come from business partners, the media, or any other source of external input that can throw you off your path. Remember this rule: Trade your plan, and plan your trade, and do it all with a minimum of outside influence or input, preferably remaining in the Livermorian ideal of “trader’s isolation.”

When I read that, what immediately came to mind was Twitter.  I know what I’m looking for and I have rules telling me when I can enter, where to put the stop, where to scale, etc.  So why do I need twitter?  Since I read that quote last week, I completely exited my Twitter client.  It’s hard to break a bad habit so occasionally when the market is slow and I know I don’t have a trade coming, I’ll run Tweetdeck and read the recent tweets and then quickly exit having realized I’m better off without that distraction while trading.  There are some excellent tweets from FT71 and GoldTrader, but they don’t trade like me so it’s better if I read their tweets when I’m not trading.

Two days in a row that I’ve come up empty handed in my 90 min window.  Yesterday I didn’t take any trades.  Tonight I took a shot at a long at 79 but scratched it for a tick.  That’s one reason I started writing this blog post, to keep me busy so that I won’t force a trade.

We haven’t given back any gains over the last two days so my big picture bias is still bullish.

I didn’t meet the Velocity minimum and they have not replied to two customer support enquiries about it.  So I think they’ll sock me with a 30 euro fee.  In a few minutes I’ll deactivate my platform and trade with Mirus next month.  Mirus has slightly higher commissions but no minimum and since I’ll be on vacation for most of August, Mirus makes more sense.

Good luck.


  9 Responses to “Stock trading books & Livermore’s “Trader’s Isolation””

  1. Michael,
    probably to many traders are searching to long for the Holy Grail approach to trading and even when their results are improving a lack of confidence in their edge holds them back. When they have the first drawdown they doubt the whole system and are looking to fine tune it or go for a seemingly better one – joining rooms, reading new trading books, articles etc. It is really about finding an edge, defining it, testing it with real money long enought (sample size of at least 50-100 trades) and gaining enough confidence in it to increase size. This sounds simple, but it is hard. And there is a psychological limit to the size one can trade.

  2. Accountant statement of a futures trader:


  3. Accountant statement of a futures trader:


  4. RPQ – thanks for sharing that. He has impressive results. have you read his books? Does he day trade or swing trade?

    MikeD – I didn’t know mr. Brandt had public performance info like that. I read his book a year ago and it was excellent. But I realized I couldn’t trade like he does. His compounded annual return is very impressive. So we can put Mr. Brandt down as a profitable futures trader in the swing trading column. I wonder if there are any for day traders?

  5. On the matter of swing trading – any thoughts on trading the SPY rather than eMini Futures?

  6. I think in theory (untested) SPY is a great alternative. Had I been trading only during US RTH I would have been trading SPY instead of ES for both swing and day trading. So for US traders I think it’s great. Less leverage means one can trade microscopic and slowly build up. Much more useful than sim.

    The problem with day trading SPY is one needs min $25k to avoid pattern day trading rules. So more realistic, 30k. most people don’t have that much so they trade futures, which is completely counter-productive to the intent of the pattern day trader rule (protect small accounts).

  7. Thanks for the input. What about swing trading CFDs of the SPY? Commissions of 2c per share with a minimum of $15 each way.

  8. I have been swing trading SSO, SDS for a year, I think I could apply Mr Chick Goslin method to improve my current system, kind of follow trend to trade SDS and counter trend to trade SSO.
    Thank you for sharing a lot of good info.

  9. Michael,

    I’ve read a lot about IBD and CAMSLIM O’niel strategy “O’Neil approach” (I got O’niel’s books also the other one Trade like…). We’d ticker LULU and OPEN for nice profits.
    However, I find more comfort with Phil Town’s work check out his blog to get the idea: http://www.philtown.typepad.com/

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