You make a fair point. I bought his first book soon after it came out, and returned it shortly thereafter for a refund. If memory serves, I read about 100 or 150 pages, give or take. More recently, I even had a look at a couple of the video presentations Brooks has made available on the Internet. I managed to only endure a portion of each of those videos. (I now know why Ferris Bueller took the day off.) And so, I confess I did not read his book from cover to cover, or watched any of his videos from beginning to end.
However, I did manage to form an opinion on the material to which I had been exposed and which I did my best to digest. (Over an admittedly brief period of time, but in my defense, I've been around for a while). Here is where I have a problem with the overall premise of his approach. As I understand it, Brooks is a discretionary trader. He appears to have numerous guidelines, as evidenced by his mountain of material, and he picks and chooses at crunch time which of his guidelines he will adhere to, as circumstances warrant in his opinion. Got that? Depending on the number of guidelines one choose to have at his disposal, that can be a lot of information for the prefrontal cortex to juggle in the short amount of time available to react to short-term intraday price activity. Information is important and more information is better, but there comes a point where additional information (however configured) can potentially become detrimental to your decision-making. Too much overhead. This is a judgment call that we must each make for ourselves, dependent on our processing capacity and the nature of our chosen game.
Personally, I think Brooks has too many guidelines, some of which may or may not conflict with one another depending on other moderating criteria. And so, he might buy at Point X because of A, B and C, but he might not if D occurs unless it is offset by E. You get the idea. I do not know Brooks and I do not mean to smear him in any way. However, employing a discretionary method with a multitude of overlapping and potentially contradictory guidelines (of either a high or lower order, so the combinations can be endless), allows one to draw any conclusions he wants after the fact. That provides very fertile ground for someone who would want to exploit the naiveté of others. Iâm not in any way saying Brooks is doing so, but the general observation should be made.
My own approach is largely systematic, and completely so when it comes to entry and initial protective stop. My discretion is largely limited to scaling in and out, albeit with very few and specific guidelines. Personally, I find it very liberating to travel light. It is what works for me, and it is what I prefer. Therefore, it is only natural that I would have a bias against an encyclopedic discretionary approach. Evidently, it works for some people. Given my bias, however, I wonder to what extent their trading would be just as profitable, if not more so, without quite all that overhead. A person with properly functioning legs can use crutches, but I wonder how much more efficiently he would walk without them.
Another point of contention I have is that, if memory serves, Brooks relies to some degree on measured moves or some derivative thereof. I think this is nonsensical regardless of how many people swear by them. It is flat out predicting. And while some people regard all trading as one manner of predicting or another, we should at least make the distinction between lower order âpredictingâ such as when to enter a position at perceived low risk, and the much higher order outright prediction of foretelling how far a move will go. By way of one trader as an example, read âDiary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Tradingâ and judge for yourself. The author, Peter Brandt, advises at the outset that he will limit his trading to reacting rather than predicting, and then, counterintuitively, often relied on price targets. Interestingly, and although I donât recall his drawing this conclusion in his book, I found that his reliance to, or consideration of, price targets cost him money, either actual or by way of opportunity cost, in the aggregate. If you read the book you will see that he holds positions after they show decent profit but have not yet reached target, and then some of these positions get stopped out at a loss. In other trades, he exits at his predetermined price target for no other reason than because it was reached, only to watch the price continue on without him. Bottom line: I think his adherence to âmeasured movesâ and âprice targetsâ were an expensive diversion. If you do read his book you will see it for yourself. I donât think his experience with targets is unique. One observation Brandt did specifically make is that diagonal lines (trend lines) have rather limited trading value. Iâm surprised it took him so long to figure it out. All in all, however, I would heartily recommend Brandtâs book for your reading pleasure. The thing is, he made money over the course of the exercise that comprises the book. My view is that he was profitable despite the profit targets and trend lines rather than because of them. Judge for yourself. Again, his is only one traderâs documented experience over a limited period of time, but I doubt it is unique. Can you see the parallel I am trying to make? Again, I am expressing nothing other than an opinion. My own.
