Trader Vic--Methods of a Wall Street Master
by Victor Sperandeo
May 2001
He shoots he scores
When I first read this book a few years ago, my reaction was one of dismay… not because I was disappointed, but because I thought Vic's stuff was so good that I hated the thought of other traders getting their hands on it!
Sperandeo strikes me as a trader's trader… the kind of guy who sees life as a fun challenge, and would happily trade anything from pork bellies to Pokemon cards (as long as the liquidity and profit opportunity is there). His credentials (10 consecutive years of 70%+ average returns) are top notch too. While those returns are well in the past now, as this book is a little dated, someone who is able to demonstrate ability that consistently can likely clean up in most any environment.
His observations on treating trading like a business are golden. The three principles (I won't divulge them here because you really need to buy this book if you haven't read it), are elegant and to the point. They serve as the cornerstone of my trading philosophy and methodology.
Sperandeo's explanation of trends is clear and succinct, and he cuts through many misconceptions of how to draw a trend line. His 1, 2, 3 method for determining a change in trend is simple and useful… so simple and useful, in fact, that it has been co-opted, doctored up and flogged to death by a certain cowboy-hatted commodity huckster. (Many of this huckster's faithful mistakenly think 123 tops and bottoms are his personal invention. Yeah right...).
The 2B is a powerful and useful tool, but one that needs to be used judiciously and in line with the overall trend (from what I can see). Rather than calling a top in a market that is trending higher, I have found the 2B more useful for calling a mini-top in a market that has been in an overall downtrend, and is finishing up a short term upside correction—precisely the time that professionals are adding to their shorts. (The opposite of this example would go for a bottom-type 2B signal in an up-trending market.)
To top it all off, this book contains a more lucid and understandable explanation of economics than you could get from most college professors, and a section on psychology and emotion that is right on the money.
The only place where I would have a small disagreement with Sperandeo is that I think he perhaps displays the trend a little too concretely. Even when a trend is drawn correctly, if a new high or low comes in the trend has to be redrawn, so I would have stressed the fluidity of shorter term trends and the notion that they are much more general guidelines than hard reference points. But that's a small quibble with an overall knockout of a book.
