Thursday, September 6, 2012

Morris, Fly Fishing the Stock Market

I learned more about fly fishing than trading in this book. I don’t mean this as a criticism of Stephen Morris’s Fly Fishing the Stock Market: How to Search for, Catch, and Net the Market’s Best Trades (Wiley, 2012). After all, I went fishing only once in my life—a fish story best left untold, and I’ve been involved with the financial markets and literature about the markets for many years. Moreover, unlike most metaphors that fail after a chapter or two, the fly fishing metaphor is rich enough to go the distance. And it requires a lot of fleshing out for those of us who are unfamiliar with the intricacies of fly fishing.

Dr. Stephen Morris, a practicing orthodontist in Idaho, is not only an avid fly fisherman but one of the top performing traders of Alexander Elder’s SpikeTrade Group. Morris readily acknowledges Elder as his mentor, so it is not surprising to find the impulse system and the force index in Morris’s “tackle box.” But Morris has developed his own catch and release trading system, which includes the weathervane, the weather station, matching the hatch radar screen, the strike indicator, and the drag system. On his web site,, he sells TradeStation programming for this system.

Fortunately Morris describes his indicators in sufficient detail that anyone with even a modicum of programming skills should be able to reproduce them for use on his own trading platform. The weathervane, for instance, combines the weekly VIX and S&P 500 along with an eight-week EMA for the VIX. In a separate panel is Martin Pring’s market seasons indicator—the weekly S&P 500 MACD. This weathervane chart provides buy and sell signals. (I’m not divulging the rules here, but they’re pretty simple.) For shorter-term forecasts (daily, intraday, hourly) he uses the VXX and SPY, going down as low as ten-minute charts.

Morris illustrates his ideas with ample color bar charts printed on heavier than usual stock.

Fly Fishing the Stock Market is a relatively elementary book, but it is certainly not a primer. It describes a complete trading system with specific strategies matched to particular patterns and market conditions—entries, exits, and trade management. The trader who is looking to make sense out of chart patterns and to keep his trading rules simple is offered an excellent model here.

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