Technical analysis is one of my passions, so here we go with another recent release of a book focusing on that topic. Given the recent advent of the online trading platforms (e.g the MetaTrade 4 or MT), trading has ecome much easier than a few years ago. In the same time, it has become also much more dangerous, since the easiness of trading is simply translated into a greater risk for the trader. And risk means the possibility to have huge profits in a short time, but also the possibility to be wiped out from the market very quickly. Being wiped out from a trading platform means loosing all the money you deposited as a leverage (your trading capital, of course).
This is why I appreciate a lot the job that Sylvain Vervoort and other technical analysis gurus do – by putting their experience a t work. The book reviewed here, “Capturing Profit with Technical Analysis: Hands-on Rules for Exploiting Candlestick, Indicator, and Money Management Techniques” does an excellent job in this respect. It is well structured and addresses the main challenges a trader faces when going live with his/her own trades in such a wild market.
What is the book about?
“Capturing Profit with Technical Analysis”: Hands-on Rules for Exploiting Candlestick, Indicator, and Money Management Techniques” is the author’s complete trading system “LOCKIT” in a book. Yes, there is a system, and quite a complicated one described in the book, which means that you will have to be patient whilst going through it. The LOCKIT trading system might take you several weeks to understand and to apply, but as you probably already found out there is no other better way to succeed on these volatile markets.
The book starts easy. It explains you the basics – what are the candlestick patterns used in trading, what are their basic setups, what is an Elliott wave, in what shapes do these waves come, how are they signaling what is going to happen in the market. Nothing new until here, most of the modern technical analysis books do that from the very beginning. What I really liked in Vervoort’s book was the presentation – he shows you the charts and he also anticipates a bit what will be presented later, by throwing you hints. If you are a beginner, well, you might not react to the hints, but no worries – these will be clarified later. If you are already an experienced trader and want some horse power to propel you faster, you get a glimpse on what is coming in the later chapters.
The practical approach is very important. As the greatest technical analysts do, Vervoort presents a complete system. It does not only show you the basics, but also how to effectively trade in the reality. What Vervoort says on his website is quite true:
“I learned from my mistakes and wrote down some rules to help you avoid making these same mistakes over and over again. You will actually find specific answers to the all-important “where to open” and “when to close” questions in this book. And, to spare your precious time and to speedup the learning process, I am limiting the text to the bare essentials—what you really need to know. The best part—all of the techniques discussed will be illustrated with an application example.”
As mentioned above, Vervoort uses a LOCKIT system. This technical analysis acronym comes from:
– Long trend finding, in order to understand the context of the traded equity and the entry points for your trades;
– Open a trade (you need to start somewhere, of course);
– Close a trade(when to close your position opened earlier);
– K-factor, which quantify the ratio between risks and your trading capital and profits/losses;
– Initial and trailling stops, which help you limit the risk and take your profits at the most appropriate times.
The LOCKIT system is not entirely new. But as Martin Pring mentioned (together with many other technical analysts I read in the last year), a system needs to be simple and trusted, not new and complicated. The more complicated and strange a system looks, the more probably it will falter big time on the market. In this respect, Vervoort offers a reliable and constant trading system based on oscillator and other technical indicators, not a quick path to the riches in one month. If you want such things, you should be warned – you can do it only by yourself, since no respectable technical analyst is going to present to the trading masses such a promise. And it is very risky, so be careful…
Leaving the jokes aside, Vervoort does a fine job in this book. “Capturing Profit with Technical Analysis” is full of examples and the web companion does even a better job in throwing in more examples. I personally tested the indicator SVAPO (Short Term Volume And Price Oscillator) for some equities I trade and I got interesting results – some of the trades were quite successful, some of other made some losses for me. Of course, the purpose of SVAPO is NOT to be right every time on every trade – this would be unrealistic. And maybe I did not calibrate well enough this indicator on my tested equities characteristics’. So be careful and test the system before you go live (which anyone should do with any system). The beauty of SVAPO is that it is easy to understand and easy to apply constantly. And another advantage of it is that it considers the volumes traded into the market, which again not so many trading systems do.
Why is it important that the volumes traded are considered when you open and close a position? Well, it is easy and you probably know the answer already – the higher the volumes, the better the chances your trade will be closed on the targeted closing price (be it for short or long positions). A low volume also indicates an undecided market, therefore it is a good idea to combine the price and volume oscillators, as Vervoort did.
Vervoort also continues to keep the reader up to date after the publication of his book, which is a fine thing and shows some trust into his own trading system (testing it alter). Although the LOCKIT trading system is a bit too general for my taste (thus generating average profits, not exceptional ones), it is a good tool for the traders who are not patient enough to trade for a couple of years and create their own exceptional money making system. You can also look at “Capturing Profit with Technical Analysis” like this – it can be an excellent starting point for your own trading system, refined again and again by yourself. So why not giving it a try?
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