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D. Murali

LARRY Williams's Long-term Secrets to Short-term Trading, published by Wiley (www.wiley.com), has been around for sometime now. Yet, for shy investors and doubtful traders, Larry's work has much to offer.

"Value, like beauty, is in the mind of the beholder," he would say in the intro. "As a trader, the lesson is never to second-guess what value really is: it is what the market will pay." It is futile, therefore, to fret that market is not moving in the direction you wanted it to.

"Value is ephemeral," as Larry puts it, "it can be anything". For him, market is god; it does not deny, but it can delay going in the direction you thought it would. But why is god so merciless as to wipe out whole fortunes? Answer lies in two sins: "Placing too large a bet on a trade or holding on to a losing position too long." What about people who make their living looking into crystal balls? They are "destined to eat a lot of broken glass." Future is not in our hands, despite what prophets and soothsayers may claim of their indicators.

The word `speculate' does not share its origin with `gamble'; it comes from the Latin specular, `to observe', points out Larry. "The art of speculation requires one part observation tossed together with one rather large dose of preservation."

Does positive thinking that you learnt about from those heaps of motivation books help? Belief systems are "the scriptwriters for our play of life" and if you want to be a trader, you need to start with "a powerful and profitable belief system" that reads: "I believe the current trade I am in will be a loser... a big loser at that." That is because if you were too optimistic, you would hold to undue risk, but then don't blame the market for failures.

Larry, whom the blurb announces as "the all-time top winner of the Robbins World Cup Championship in Futures Trading, taking $10,000 to $1,100,000 in less than twelve months", got hooked into markets when he asked someone what the `most active' list of stocks in the newspaper meant and heard the answer. He has been restless ever since, and he believes that "great big chunks of unrest seem to be an important asset for a speculator."

Fasten your seatbelts before launching yourself into chapters that would teach you how to make order out of short-term chaos, explain the real secret to short-term trading, give you tips on separating buyers from the sellers, paint special situations, offer thoughts on the business of speculation, and hand you with the keys to the kingdom through money management.

The author talks about his failed ambition of becoming a lawyer, which he thought meant being in court and "saving people's lives". After working for a lawyer, he understood that it meant in reality "collecting money from judgments, finding deadbeats, and representing bums and outright criminals. It was not like trading." A clue, that is, for accountants who are looking for a more peaceable life.

Doses of theory in the book are down-to-earth. For example, "any time there is a daily low with higher lows on both sides of it, that low will be short-term low." The opposite is a short-term high, and the market swings from such highs and lows. "We can actually measure market movement in a mechanical and automatic way," assures Larry. "No need for complex chartist talk."

Play the market for the long haul, because "it takes time for profits to grow". A maxim to remember always is to set a stop-loss point. "Losers hold on to losses, winners don't."

A book losers can hold to turn into winners.

BookValue@TheHindu.co.in

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