Thursday, April 25, 2019

Murphy, Way of the Trader

It’s been a while since a mainstream publisher released a book on trading, especially trading with a human face. Ian Murphy’s Way of the Trader: A Complete Guide to the Art of Financial Trading (Harriman House, 2019) is a welcome addition to the literature. Not only does it offer sound advice, but it does so in a way that does credit to the Irish tradition of great storytelling.

As an active member of, a group of traders led by Alexander Elder and Kerry Lovvorn, Murphy reprises some of the themes in Elder’s works. One is the critical importance of keeping good records. For instance, in delineating some of the differences between traders and gamblers, Murphy writes: “Honest and accurate records are what separate trading from gambling. The floor of a bookmaker’s office is littered with crumpled papers, each one cast aside by an unlucky punter. Every piece of paper is a written record of a financial transaction. This carpet of losses is conveniently trampled underfoot, allowing the customers to ignore the reality of their situation. But the bookmaker doesn’t throw away his records. That in itself speaks volumes.”

The book’s chapter titles show its breadth of coverage: “Is Trading a Job or a Business?,” “A Trader and The Market,” “The Preservation of Capital,” “Keeping It Simple,” “Trend Following, Swing Trading and Day Trading,” “The Attributes Which Support a Successful Trader,” “The Path of a Successful Trader’s Career,” “The Psychological Tools of a Successful Trader,” “A Look at the Records a Trader Should Keep,” “A Comprehensive Pre-Trading Checklist,” “Selecting Which Stocks to Trade Using Filters,” “An Introduction to Technical Indicators and Orders,” and, finally, three trading strategies: “The Tidal Strategy,” “The Wilde Strategy,” and “The Help-Up Strategy.”

Among the book’s nuggets of wisdom, here are a random few.

“Some people believe 10,000 hours spent on a topic makes them an expert. That’s not the case in the market. Sooner or later, ‘trading experts’ become complacent and predictable, and that’s when the market snaps them back to reality. The renowned Japanese teacher Shunryu Suzuki-Roshi tells us: ‘In the beginner’s mind there are many possibilities. In the expert’s mind, there are few.’ Anything is possible in the market and every day is essentially the first day—therefore a true market expert always sees themselves as a beginner.” This advice is akin to Jeff Bezos’s passion that Amazon remain a “day one” company.

“Trying to trade someone else’s ideas is like trying to comb our hair while looking at their reflection. Ultimately, we are our own opponent when we trade, so mimicking the actions of others is pointless.”

“For many of us, our smartphone has become a digital pacifier which we instinctively reach for when an anxious thought arises. We don’t need to know every market event as it happens, just as we don’t need to constantly monitor our pulse to know we are still alive. If we’re continually checking the market it can feel like we’re truly on top of things, but we’re just subjecting ourselves to a deluge of distraction and frustration. Considering the temperament of the market, do we really want her whispering in our ear 24/7? Traders need to be smarter than their phone and put a limit on their market interaction.”

Murphy’s book has value both for the beginning trader and the more experienced trader with a day-one mindset. As a bonus, it’s fun to read.

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