Day Trading for Dummies by Ann Logue
A DummySpots Book Review
The reactions I got when people saw me reading Day Trading for Dummies were very telling…
“Trying to get rich quick?” No, I know better than that.
“Maybe I’ll give that a try” Here, have a look. (After which they thumb through the book and give it back with a confused harrumph.).
“That stuff is just gambling… it’s impossible. I know because I tried it back in the 90s.” Mmm-hmm. If you decided to ‘try’ flying a 747 without any training and failed, would you declare that ‘impossible’ as well?
After all these years, Day Trading’s reputation as the gambling playground of young hotshots and rich middle-aged men looking to make millions overnight is still completely intact.
But in Day Trading for Dummies, Ann Logue has taken a refreshingly different approach from the typical “get rich quick” theme of many trading books, which are all so heavy on hype and light on substance. Ann approaches Day Trading in the only way it should be approached, which is as a real business, whether full- or part-time.
Day Trading for Dummies is the most comprehensive overview of the Business of Day Trading I’ve seen. This yellow book is printed in a smallish font that fits it into 335 pages, but I guesstimate that it contains about 140,000 words, which at a “typical” 250 words/page would make it 600 pages long. Those pages are chock-full of good information, and in them Ms. Logue addresses virtually every facet of Day Trading.
Between the Covers
There are 20 chapters and a few hundred sections and sub-topics. The chapters include things like:
- Investing, Trading and Gambling - These are in fact varying shades of the risk/return ratio; how to tell the difference.
- Setting Up Your Accounts and Office - From the importance of a good chair and redundant computer systems to comparisons of various brokers, including direct-access, web-based and software-based services.
- Taxes for Traders - Trader status, deductions, CPAs vs. tax lawyers, wash sales, etc.
- Short Selling and Leverage - Managing margin, choosing shorts, short squeezes and other risks, assessing risks and returns from Short Selling and Leverage, losing your money, losing your nerve
- Managing Your Money and Positions - A very informative treatment of things like Risk of Ruin, Opportunity costs, and various money management styles
- Managing Stress - Cautionary tales of alcoholism and suicide, advice on controlling your emotions and following a trading plan.
And as Baloo said in “The Jungle Book,” there’s more, lots more!
In Evaluating Your Performance, Ann includes descriptions of various methods of calculating your returns, including simple Percentage Return, CAGR, the Modified Dietz Method, Time-Weighted Average Return, and more. Ever wonder what your true return was when you were making frequent deposits and withdrawals from your account? Now you can know.
There are also some of our most beloved money management/ position-sizing formulas, as well as some that even experienced traders may not have seen: Fixed Fractional, Fixed Ratio, Gann, the Kelly Criterion, Martingale, Monte Carlo simulation, Optimal F… they’re all here.
An entire section of Day Trading for Dummies called Trading Strategies is devoted to strategies based on fundamental and technical analysis. For experienced Day Traders, this section is one you’ll probably flip through (you know your Fibs and your dojis already), but it will be quite informative to less-experienced traders.
There’s also a chapter called The World of Arbitrage in which Ms. Logue (also the author of Hedge Funds for Dummies) demonstrates her prowess in the world of “trading the differences.”
Top Tens
Towards the back of the book are some great “Top Ten” lists, such as:
- Ten Reasons to Trade- I like this one: “You like to eat what you kill”
- Ten Reasons to Avoid Day Trading- Includes “You want to get rich quick”
- Ten Common Day Trading Mistakes- “Switching systems” in search of the Holy Grail is one all experienced traders can relate to
One of my favorite sections of the book (besides the position-sizing formulas) is a section called Ten Alternatives to Day Trading. This section gives some great ideas for those who decide (hopefully not too late) that Day Trading isn’t their cup of tea.
For Further Information…
Ms. Logue strikes a very good balance in Day Trading for Dummies between the number of subjects she addresses (I think she covers just about all of them) and the space she devotes to each subject. An author could easily spend 600 pages just on “Accounting and Taxes for Traders,” or how the various asset markets work, or (as we Old Dogs know) probably 50,000 pages on technical analysis alone.
Ann’s approach is very effective: She introduces and explores each topic very well, but then goes the extra mile (a little lagniappe as we say in Louisiana), and provides a huge number of references to other relevant books, articles and websites for further reading and education.
The Bad and The Ugly.. What I Didn’t Like
The tear-out “Cheat Sheet” in the front of the book is a waste of paper. Unlike something like “cutting proper dovetail joints,” the subject of Day Trading is far too broad for such a gimmick. I suspect this was something the publisher came up with.
The covers of the book are littered with sayings like “Know the tricks to trading the markets and make money from home!” and “Buy and sell like the pros!” and “Leverage limited capital“, all no doubt also marketing ploys of the publisher which cater to the Get Rich Quick mentality, and all in stark contrast to the excellent work Ann has done between those covers.
There’s a sidebar about halfway through the book which explains “Bulls vs. Bears”… I doubt there’s anyone who’s read that far for whom this explanation is necessary.
Finally, I wish the book had addressed more thoroughly a couple of points I feel are extremely important: Adequate Capitalization and Prior Trading Experience for anyone who even dreams that they can be a successful Day Trader. The person who tries to start Day Trading with debt money or without significant experience would, to me, be nothing more than fresh meat for the professionals, and a disaster waiting to happen. (Ask me how I know).
Conclusion
I thoroughly enjoyed this book, and am proud to have it as a reference. The “for Dummies” moniker may have caused me to overlook it at first, as some books in that series are overly simplistic. But the fact that this work is part of that series is also why it will likely find its way into more hands, which is a benefit to both the readers and the author.
Ann Logue does a wonderful job of combining “how to do it” with a healthy dose of the caveats and pitfalls of Day Trading, which most authors conveniently overlook.
I highly recommend Day Trading for Dummies to anyone considering making the leap (I will be giving copies as gifts in the future), as well as to my more experienced friends who will find it a great reference and will find that even they can still learn a thing or two, despite the fact that we’re all convinced we already know it all!
Cheers, and best of luck with your trading!
[Note: Ms. Logue provided me with a copy of “DTD” for this review, with no preconditions as to the outcome. The Amazon links above are not affiliate links. You may enjoy the lighter side of Annie in this YouTube video with “Dr. Magic”.]