I read a couple articles from John Carter that were very interesting, so I thought his book – Mastering the Trade might give me a better glimpse into how he conducts his trading. I found two main aspects of Mastering the Trade that made this book a worthwhile read. First, Carter thoroughly covers how the small speculator is regularly on the wrong side of the markets and is frequently exploited. Secondly, he runs the gamut of everything you need to do in order to trade for a living.
Small Speculators - The Amateur Traders
I have to say Mastering the Trade
is one of the best books on explaining how the markets really work. Many inexperienced and stubborn traders often chase the markets and make the same common mistakes in the commodities and stock markets for decades. The professional traders prey of these naïve individuals and make a good living off of them.
Carter explains that the professional traders are usually positioned ahead of many market moves. Once prices have moved high enough to get the attention of the main stream trader (retail trader), the professional traders are already starting to unload their positions and the move then fizzles out. Then, the stop losses from the retail traders start to get hit and the move in the other direction gains momentum. These patterns repeat over and over. Before you place a trade, it is imperative to learn the intricacies of the markets.
John Carter's Trading Strategies
I had mixed feelings when it came to the trading strategies in Mastering the Trade
. Many of Carter’s trading strategies are fairly simple and he discusses them chapter-by-chapter. The trading strategies are not overly complicated, which is a good sign. Some are actually too simple and they do not work in the real world as they are explained in the book.
In the chapter on market internals, Carter has a trading strategy using the NYSE Tick indicator. The Tick measures the latest up or down ticks of NYSE stocks. He explains in the book that he just sets an alarm when the Ticks hit extreme levels of + or – 1,000. Once the alarm sounds, he places a trade in the opposite direction to fade the extreme move. I back-tested this strategy and it does not work with his profit and risk parameters. You have to pick up additional pieces throughout the book where additional filters are used on this strategy to make it more effective.
There are many good trading strategies throughout the book, but I would recommend that you don’t follow them blindly.
The Trading Plan
Mastering the Trade
contains an excellent discussion on the need for a trading plan and how to construct one. If you want to be successful in trading stocks or commodities, you need to have a formal trading plan. A plan will include the markets you will trade, trading capital, trading strategies, profit objectives, risk parameters and even taking time off when trading is going poorly or too well. Carter provides a nice outline of a trading plan and even has a sample plan from one of his students.
Carter goes above and beyond as he even explains how to setup computers, monitors, software and everything else you need for your own trading office. If you have ever traded full-time from home, you are probably aware that there are many distractions throughout the day. It is essential that you are able make trading a top priority during the day and put other things on hold or your trading could suffer.
Recommendation of Mastering the Trade
There are many references to Carter’s website throughout the book, which is a bit excessive on the marketing side. However, Mastering the Trade is an excellent book on the whole package of trading for a living or even part-time. It should help put you in the proper frame of mind to trade. John Carter outlines some good trading strategies, but make sure you know under which market conditions to use these strategies. There are few quality books that cover the whole aspect of trading as well as Mastering the Trade. New and struggling traders should consider this book a must read.