Monday, December 17, 2007

Ray Barros on The Nature of Trends

Ray Barros is a trading mentor I both respect and admire. He is a successful trader and a teacher, intensively sharing his methods with students. Indeed, he only mentors a small number of students at one time to ensure hands-on skills-building. His Trading Success Blog covers a wide range of topics, including exit strategies, psychology, and buy/sell zones.

Now we have a new book from Ray, entitled The Nature of Trends. He made it clear in his introduction that one goal that has yet eluded him is the leaving of a legacy. By sharing many of his methods and ways of viewing markets, Ray takes a large step toward that goal.

Ray's book begins with a definition of trends and an emphasis upon the importance of understanding trending and non-trending on multiple time frames. His understanding is grounded in Market Profile, but includes an extensive discussion of chart and wave patterns. In this, his methods are highly visual. He uses diagrams and chart/examples to illustrate his points, as he moves from trends to discussions of trend changes and the impact of time frames.

Later in the text, Ray presents his ideas on entries and trade management, followed by risk management and trading psychology. He concludes with a section on swing patterns, which clearly is his love as a teacher and trader. I particularly like the structured questions that he lays out as a template for studying markets and enhancing one's learning curve.

I found Ray's book to be well-written and very well organized, but I can't say it's a casual read. Many of the patterns involved careful labeling and understanding within the context of the previous material. My sense is that such an approach requires considerable market observation and study, so that these patterns can stand out clearly. Their advantage is that they help organize traders' thoughts regarding trending and rangebound markets at specific, well-defined time frames. In short, this is a book to be studied, not skimmed. Those who know me well will know that this is a compliment, as well as a warning to grail-seekers.

I believe this book is of greatest potential benefit for those who trade visual/chart patterns and who wish to greatly tighten and structure their trade selection and management. While Ray's presentation is not statistical, it is far more systematic than most presentations of chart-based trading. It helps a trader turn pattern recognition into trading rules, and that aids discipline and consistency.

And, by the way, if you're interested in book reviews, the Value Blog Review has some excellent ones. I receive many, many books from publishers and authors for review purposes and will be passing along thoughts about my favorites from time to time. (Disclaimer: I do not accept promotional consideration or compensation from any authors or publishers with respect to anything mentioned or reviewed herein.)


Book Review: Markets in Profile