The Logical Trader

By admin • Jul 8th, 2008 • Category: Business

The Logical Trader

Publisher: Wiley
Number Of Pages: 256
Publication Date: 2002-07
Sales Rank: 40438
ISBN / ASIN: 0471215511
EAN: 9780471215516
Binding: Hardcover
Manufacturer: Wiley
Studio: Wiley
Average Rating: 4

An in-depth look at the trading system that anyone can use
The Logical Trader presents a highly effective, yet simple trading methodology that any trader anywhere can use to trade almost anything. The “ACD Method” developed and refined by Mark Fisher after many years of successful trading, provides price points at which to buy and sell as determined by the opening range of virtually any stock or commodity. This comprehensive guide details a widely used system that is profitably implemented by many computer and floor traders at major New York exchanges. The author’s highly accessible teaching style provides readers of The Logical Trader with a full examination of the theory behind the ACD Method and the examples and real-world trading stories involving it.
Mark B. Fisher (New York, NY), an independent trader, is founder of MBF Clearing Corp., the largest clearing firm on the NYMEX. Founded in 1988, MBF Clearing has grown from handling under one percent of the volume on the NYMEX to nearly twenty percent of the trades today. A 1982 summa cum laude graduate from the Wharton School of Business, University of Pennsylvania, Fisher also received his master’s degree in finance and accounting from Wharton.
New technology and the advent of around the clock trading have opened the floodgates to both foreign and domestic markets. Traders need the wisdom of industry veterans and the vision of innovators in today’s volatile financial marketplace. The Wiley Trading series features books by traders who have survived the market’s ever changing temperament and have prospered-some by reinventing systems, others by getting back to basics. Whether a novice trader, professional or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.

Review:

Good, but not great, A and C formula revealed

I will spare you from a synopsis of this book and get straight to the pros and cons of what this book is about. First of all, I want to say that I adopted the ACD method and am having some great success with it. This does not mean you will though. I have read many books on systems and have only really felt connected with this system. If your looking for others books
on par or above this check out Carter’s “Mastering the Trade,” Douglas’ “Disciplined Trader” and “Trading in the Zone.”

Pros:
-The thing that is really great about Fisher’s system is that it is very flexible. It is not for novices though. It is not a black box system, it is simply a loose structure that (after mastering) gives more freedom with trading.

-It can be applied to any trading entity. This point really cannot be pushed enough. A lot of traders do not understand how important this fact is. The ability to apply a Good C Up Through Pivot (What Fisher claims is a high probability trade) to ANY entity in trading will have you trading better opportunities more often, unlike, say, Carter’s TICK fading system that can only be applied to the main Eminis.

-The choice is in your hands. This is not a system that overrides your pyschology in an attempt to dampen your natural reactions to market events. All too often we are told that we need to eliminate fear and greed from the equation, but in reality, suppression of these emotions can create sub par results. It is only after accepting and working with your own unique psychology that you can maximize your trading (see “The Disciplined Trader”).

-You get to pick the other indicators. For example, you really only need to nab the opening range and the A values to create your own system. Instead of C values and his pivots, you could use the daily pivots like r1 r2 s1 s2, etc. Or support and resistances from other sources, or even stochastics, MACD, or anything else really that is to your taste.

-The ease with which a day trade can become a swing trade or vice versa. Because of the flexibility in this system, and the rules he lays out, it is easy to see when to take a day trade over night and when to sell it, all based on the probabilities that that day presents. This system is VERY good at showing you when you can press your bets and when you can test the waters, all with the probabilities ON YOUR SIDE.

Cons
-I think the major con that most people complain about is the fact that Fisher does not provide the ways to calculate the A and C values. If you go to his website though and read his Q&A, he tells you that when in doubt, take 25 percent of the 30 day average range of said entity. This equation is quite simple with most charting technologies (AVG30(H-L) comes to mind). I trade this system and I do not subscribe to anything of his and it works quite well. At the moment, for the QQQQ, the A value is 13 cents.

-I wish the “Macro ACD” chapter was a bit clearer. While I understand the reasoning behind it, he only really hints at what it means that a -9 or 9 day occurs; does this mean we should go long/short for the long run? Does it mean that that day will be a trending day? A chop day? should we look for a new trend to start (what I suspect)?

-The information provided in this book is not well laid out. I had to reread many sections, and between the lines to really get across what he was trying to say in certain parts. And part of the reason I was even able to discern those facts is because I have experience with other systems and trading in general, a novice would be hard pressed IMO to create a working system from this book.

Conclusion: All in all, I believe this book was worth the price FOR ME. If you already have a system that works for you, by all means, don’t throw your money at this book. It can be easily summed up by saying. Take your favorite day trading time segment (ex. 5 minute), put lines at the first bar of the day or this segment, aka “opening range,” take 25percent of that entity’s 30day average range(H-L), put lines above and below the “opening range” by this number, use all lines as support and resistance, and apply any other indicators you like to them. But then again, most really good systems are simple like that, they simply let the trader’s experience guide them. This book will have a place on my bookshelf for sure, but I doubt I would put it with “Reminiscences” like PTJ.

Review:

Logical Trader–Its very logical

In the course of 25 years, I’ve traded on the floors of the (3) major exchanges (stocks, options, and futures) as well as trading upstairs for a leading “prop trading house”, and for my own account.

Suffice it to say I’ve interrogated and/or tested out a wide variety of ’systems’–and the fact is Mark Fisher’s approach is actually one of very few that have merit. For (4) very logical reasons.

Reason #1.
When followed properly, the ACD Method can work for just about any actively traded product. Stocks, futures, and some fixed income products–as long as you have access to real-time data, a good charting package, and the ability to execute in quick fashion…

Reason #2. Fisher has incorporated a quantitative approach that involved significant back-testing..Pretty straight-forward thinking–every product trades based on trends. And the trade date speaks for it self..Its understanding how to interpret it without overthinking it.

Reason #3 Perhaps the most important–”Fish” has been using this system since he first developed it at Wharton 25 years ago. Its commmon knowledge within the New York and Chicago trading floor markets that he’s one of the most consistently profitable traders in the industry—and explains why Trader Monthly Magazine included him in their Top 5 Best of The Rest listing–(their poll is apparently based on rumored annual earnings)..Each of his prop traders–(rumor is that more than 50 are managing capital that he’s put up} are required to use this approach…I’ve asked around…most have been with him for 10 years or more, and those that have left have simply done so because they made so much money, they decided to set up their own prop trading businesses.

The “system” as he explains in the book, is a function of the user embracing a disciplined approach..Hitting singles, riding profits, and taking loses without any emotion is the most fundamental aspect of successful trading..If you don’t embrace that, there’s no system in the world, including Fisher’s ACD Approach, that will work.

Reason #4. When you read the book, you’ll want to read it twice–you need to appreciate some basic mathematic principles, and you need to be able to understand how to follow a variety of diagrams (he makes it easy…ACD Method is available on a daily basis via a subscription service over a website.)..

There’s never a guarantee when it comes to trading…but between the approach, and the philosophy that Fisher imparts on the reader, this is really very logical.

Review:

Full of high sentence but a bit obtuse

At times almost ridiculous.

No really…Using the opening range as a basis for trading works. I do it every day. But Fisher makes it all into a highly ideosyncratic dance to which he holds a magic key. The value of A and C.

TO me the book is poorly written and makes much more of things than need be.

If you doodle around with Tradestation and do a little thinking you can find your own way of trading the opening range and it will probably be a lot more flexible than Fisher’s. And you won’t need to worry about computing the magical numbers.

Fisher is from the ‘pivot’ school and says the calculated pivot ranges are ‘more powerful’. I don’t believe it, and he offers no proof.

I’m from the support/resistance school and think that the pivot calculations are purely arbitrary with no logical basis. The only reason they sometimes work is the number of other ‘pivot people’ out there who also think they work.

Review:

This Works!

I too was disturbed by the proprietary nature of the A and C numbers, and the somewhat sloppy omission of a few things in the appendices, but there is a lot of good stuff in this book. I have been doing very well trading 5 day rolling pivots in stocks, which only requires the high, low and close for the last five days. There are other usable methods one can apply without the A and C numbers. If you wish to use the ABCD method, I would suggest exploring various volatility measures, especially Toby Crabel on “the stretch” in “Playing the Opening Range Breakout” in STOCKS & COMMODITIES mag. Sept. 1986 (purchasable online). Many books on trading are a waste of time and money; if you have an open mind and are willing to do some work, this book is pure gold.

Review:

The Golden Sauce

95% of the info in this book is useful. Fisher himself recognizes the fact that the more people apply his method, the more potent it becomes – and that is the logical conclusion of a trend-folllowing breakout system. So, for those weary of reading books in that they think any advantage has attenuated at the time of publication, fear no more.

I’m a daytrader and here is how I’ve applied the Fisher method(s) to my trading.

1. The Opening Range. This is the only statistically significant data point in the trading day. This is the centerpiece of the Fisher System. I had a programmer automate e-signal for me so that the first 15-minutes are marked by bold yellow lines across the chart. This has made me so much more money, it’s hard for even me to believe.

2. The Daily Pivot Range. This is the daily area of support and resistance. There are some nuances to it, so I’ll leave you to the book for it, but all of it is stuff that can be done in MS Excel, if not in your head. I had a programmer automate e-signal for me so that the daily pivot range is shaded in blue across the chart.

3. 30-day rolling pivot score. Fisher believes that there is a statistically significant correlation between what will happen today and what happened 30 trading days ago. An example will show how well this works. Today is March 13, 2006. We had a sharp rally in the DOW on Friday ( 104 pts). This is when I would normal fade and get short. However, combining the Fisher Daily Pivot Range and the 30-day Rolling Pivot Score, I came up with a net Bullish bias in all my stocks, for the DOW, and the S&P. I made money today, when I would have otherwise lost trying to get short. This day paid for 100 copies of the book..

Incidentally, combining the daily pivot range and the 30-day rolling scoring method has proven successful more than 80% of the time for me.

Thanks Mark. This is the only book out there worth reading. Nothing else even comes close.

That said, his guidance on stop placement is not ideal for me. So, I’m not a complete toady. I’d rather buy something in the middle of the opening range if I feel it’s a long.

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