BarroMetrics Views: Education and the Trader
In some ways newbie traders of today are pretty lucky - they have access to a relatively large number of educators who deliver great value for money and some provide their services for free: John Foreman, Pride Educators, Denise Shull in the first category, Brett Steenbarger in the second. And, these are but a few, there are quite a few others.
But in other ways, modern newbie traders are unlucky. The Internet places a powerful tool in the hands of marketeers offering products of little value.
This week, I decided to see what was on offer in cyberspace and took up an e-book offer for US$97.0.
Before I begin, I should mention that when buying e-books off the net that offer instant success, I do so with the idea that I won’t learn anything. That way, I don’t feel let down when the book falls short of its promises. Occasionally I am surprised but not very often.
In reviewing this e-book, let’s put aside the unrealistic promises and focus on what it delivers.
- The basic pattern is the Darvas Box. I first read about the many years ago in a book written by Bruce Gould. I later read Darvas’ book when it was reprinted.
- But rather than take a breakout trade like Darvas, the e-book author prefers to take the ‘retest of breakout’. You have read about that pattern here and in my Forum , probably ad nauseam. So far so good but then the subject matter starts moving downhill:
- Unlike Darvas, there is no clear definition of what constitutes the setup pattern - apart from an admonition that the support and resistance lines must be touched at least twice. The examples shown have overthrows of thickly drawn lines and no explanation is given why the author chose some extremes and not others.
- The same problem occurs on the pullback. I take pains to specify my pullback zone but there is no attempt here to delineate the zones the author uses as example. He defines a pullback as a retouch of a breached support or resistance. That seems clear enough- except in his examples of entry, some fail to reach his zone and others penetrate.
- The stop is ‘x’ pips below an extreme of ‘y’ bars. The problem with this is it fails to take into account the volatility of the instrument. Let’s say you set a 5 pip stop below a 5-day swing low. Now which is more likely for the stop to be hit? An instrument with a 20-pip range or an instrument with 200-pip range? Obviously the latter.
I have other issues with the presented plan but the above will be enough to give you an idea of my reservations.
So what does this mean for newbies?
My advice is until you have learnt to tell the difference between sound and unsound advice, leave e-books alone - whatever they may promise. Do your research - the net can be a blessing. See what info your due diligence reveals about the author. Learn from the best. Acquiring your education in this way, in the long run, you will pay less tuition fees.
Refer this blog post to a friend or colleague…
