As only the second book I’ve ever read on trading, Brian Shannon’s Technical Analysis Using Multiple Timeframes was perfect for me because of where I’m at now in my learning. I believe it’s a great tactical handbook for any trader no matter your strategy. Focused on practical tools, with not a lot of macro history or theory, the ideas in the book can be used in day or swing trading as well as longer term investing. Like in his videos on alphatrends.net, Brian is not offering a complete trading system with his book, but instead he provides an analytic lens and tons of specific tactics to understand and profit from the markets. In a nutshell, his approach can be summarized as follows:
* Stocks cycle through four distinct stages; only two of these phases are ideal for engaging in trades.
* For best results, always trade with the trend, and confirm that trend through multiple timeframes.
* Reduce risk and maximize profit through price analysis, position sizing, using varying types of stop orders, etc.
I liked the way the chapters were logically organized, including on specific important topics such as trends, volume, and moving averages. There are several “how-to” chapters on how and when to buy, sell short and exit trades. I personally really learned much from the sections on short squeezes and how to factor in news and fundamentals while maintaining a technical analytical approach. The way Brian explains the meaning behind technical indicators is the best I’ve encountered so far, for example, he translates what may be behind price action in regards to the psychology of crowds participating in the market as well as the actions of major institutional players. He gives some good nuggets on how to read Level II windows as well as how not to get ripped off by hidden broker fees.
One good thing is the tone of the book – Brain speaks with the authority of someone who knows what he’s talking about but he doesn’t spend all the pages trying to demonstrate how brilliant he is, which I think is a problem with some of the other trading books I’ve skimmed through. Like in his daily market analysis videos, Brain does tend to repeat himself often. You will likely find yourself reiterating in your mind phrases like: “Only Price Pays” or “Risk Management is Job Number One”. Whether you find that annoying or helpful (which I do), this is a matter of individual preference.
The price of the book is $75 from his website, and to be honest, that did make me hesitate at first. In comparison to the $20-$30 typical cost of investing books at a commercial bookstore, it seemed high – but the majority of those are not practical enough for the realities of trading nor are they usually written by a trader for traders. On the other hand, other accomplished well-known traders charge much more for their books, DVDs, and website access – so in some regards the price could be considered a bargain.
The book is hard-cover and the charts are in color, unlike most. While only about 200 pages, this is actually a good thing because the author is direct and concise and there are not filler paragraphs, sections or appendices just to make you feel like you are getting your money’s worth. Also, though I picked the cheapest shipping rate at $7 – the book got to my doorstep quickly. I made the order late on a Wednesday night and it came in the mail on Friday by priority less than 48 hours later– no lollygagging in processing. In the end, I felt it was a great deal, in part because when purchasing the book he gives access to a bonus section on his website with extra video on trade ideas and educational lessons. Most of all, after reading the book, I understand Brian’s daily videos much better – not because he is cryptic in his narration, just the book gave me the overview to really tie a lot of things together as well as to start viewing the markets in some of the ways he does.
I can’t find much to quibble about the book. On occasion, I was frustrated as it seemed like the text of every chart he was illustrating was always on a different page, so you have to flip between the explanation and the chart. Like in his videos, Brian’s price bars are skinnier and more crunched together then I prefer. With the videos on his blog, I have countered this by pulling up my own charts to look at them the way I’m used to – which ends up being more educational anyway.
How will this book make me a better trader? Too many ways to count likely, and too soon to know now. Brian does make the case to not pick a random position size like 500 or 1000 shares to trade with, rather advocating an increase or decrease in your size based on risk, opportunity and stock volatility. For now, I’m going to stick to simple lots of 100 or 1000 but eventually I may follow his advice. He is a big proponent of scaling in and out of positions, rather than “all in” and “all out” with entries and exits – this is something I want to continue to try to practice. The book also makes the argument that any moving average crossover means market indecision and should be a signal to stay out of a stock – this contradicts the Muddy signal of the 10/60 SMA crossover on the 5 minute chart. This suggestion I’m just making a note of at this point.
Is this book for everyone? No, if you are an advanced trader or have an excellent grasp of technical analysis, this may not break a lot of new ground for you, though I bet you likely won’t find a book with all this same information in one handy text. If you are beginner, I highly recommend it. And if you find yourself with continuing losing streaks or your charts are littered with dozens of tech indicators or you are a vet who wants a back to basics course – this book may be one for you.
