Investor's
Library 
Review of
The Master Swing Trader
By Alan Farley
In The Master Swing Trader, the author, Alan Farley, gives the impression of attempting to encompass within 443 pages every rule and concept about short-term stock trading strategies that has ever been promulgated in modern literature. While he does not actually accomplish this, the text gives the impression of providing “all you ever wanted to know about short-term, technical trading”.
Rather than being limited to a description of the technique of swing trading in the way it was used by writers such as Gann, the discussion deals with the broad scope of strategies that underlie and surround swing trading, exposing the underlying activity that drives price action and provides the knowledgeable trader with profit opportunity.
This rather lengthy book's 16 chapters are roughly divided among three major sections. The first, titled The Gateway to Short-Term Trading, deals with chapters on “Trading the Pattern Cycle”, “Preparing for the Market Day” and “Understanding Time”. More than half the book is relegated to this section. In it, Farley reveals the underpinning of his approach in subsections with intriguing titles such as "The Hidden Market", "Cross-Market Analysis" (not to be confused with inter-market relationships described by previous authors), "Avoiding The Momentum Trap", "Needle In The Haystack", "Trend Mirrors", Psychotic Trendlines" and "Farley's ADA (Accumulation-Distribution Accelerator)".
The whimsical nature of some of these belies their inherent seriousness. No skip through the park here! This portion of the book requires careful reading more than once to understand the importance of the author's ideas and appreciate the interrelationships among them. Here, we find numerous descriptions of how the market works and how human players in the market game act in response to each other's machinations, causing familiar price patterns to form. Importantly, Farley points out those places on price charts where opportunities exist and the manner in which they relate to the actions of the various participants.
The author gives the nod to a number of trading tools capable of being represented visually. He is adamant about such tools being far more useful than those that rely on complex mathematical procedures, mainly because of the temporal precedence of price action. Such patterns represent market activity as quickly as it can be shown.
Within that construct, the author covers a broad spectrum of popular trading techniques, ranging from predictive indicants, such as Elliott Wave, to purely descriptive tools, such as trend lines and chart patterns -- he particularly emphasizes chart patterns. Farley's use of patterns, while possibly not unique, includes some original twists to pique the interest of the careful trader.
Also included in the first section is a hallmark of Farley's style -- the use of cross-validated, multiple time frames. Traders are well aware of the value of working across time frames. The same is true of using several tools to provide a stronger statement than is yielded by only one. Farley combines these techniques. He recommends "cross-verification", the use of several market tools to provide consensual validation of a setup or entry position, in concert with several indicants of support / resistance across time frames.
Of particular interest is the author's use of a combination of S/R levels with Fibonacci retracements. These, applied in three time frames, form a key strategy for a confident entry and are represented in examples of numerous stock trades.
The second major section of this book is titled, "The 7-Bells: Tools To Locate Outstanding Opportunities", in which a generous chapter is devoted to each of seven specific trading techniques. If the reader has been anxiously looking through preceding pages for a by-the-numbers, how-to-do-it description of market entry, he or she can find it here.
The detailed use of each indicant is described and is further amplified by advice regarding when and how to use other tools in conjunction with each of them, a hallmark of Farley's strategy. This theme is reiterated throughout the book. Its truth is proven through numerous visual examples and is also explained in the text.
The chart patterns subsumed under the 7-bell title have cute names, such as Finger Finder, Hole-in-the-Wall and Bear Hug. A quick perusal of these chapters reveals the cutesies to be well-known formations. Well, why not? Did we expect the author to have invented new market activity?
Not to be put off, we read further and find details about these well-known formations that have eluded us throughout our trading career. Furthermore, it begins to appear that the lack of this information may have been responsible for losses where there might have been profits. Take an introductory remark to the “Dip Trip”(cute name for buying a dip) chapter as an example:
Strong rallies generate sudden corrective movement to shake out weak hands. Swing traders can buy these pullbacks within a tick or two of a major reversal under the right conditions. The dip trip recognizes that many of these selloffs represent low-risk buying opportunities. But countertrends often last longer than expected, and no one wants to be stabbed by a falling knife. So, effective risk management requires careful stock selection, the right decline, and precise timing.
In the 16 pages that follow this statement, we find a method of trading out of a retracement that is specific and satisfies the author's requirements. Each of the "bells" is similarly described, with attendant instructions on trade mechanics, setup tactics, trade execution and position management. Examples are clear and documented graphically. This section is worth the price of the book.
The final section of the book deals with trade execution. While relatively short by comparison to the previous segments, it is nonetheless important, providing detailed advice about timing entry and exit. Niceties, such as the specifics of trading a pullback safely and the building of execution skills, are among those covered.
The style in which this book is written reveals that the author obviously enjoys teaching his craft. He is a voluble, articulate writer who has something to say. He presents a vast array of facts and relationships that reveal only a smattering of priority among them. To use all of these, the reader would need a prodigious memory, indeed.
One gets the sense that Farley has provided enough good tools to allow a dedicated student to select judiciously from among them and put together a well organized program of short-term trading whose rationale he or she understands and that has a reasonable chance of being profitable. This book is the kind that lends itself to multiple readings, allowing additional information to be added to the trader's bag of tricks each time.
Review by
Edward Dobson, President
Traders Press, Inc.
Greenville SC
Complete table of contents and more detailed information is available at the following link: http://www.traderspress.com/detail.php?PKey=183
