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I read Roberts book through several times, and I have a different take on
its value. It's funny too, because one thread on RT comes back to
simplifying the approach to trading in order to be successful. As in Tom
Alexander's recent post. And another recurring theme has to do with
channel breakout systems and "buy double bottoms, sell double tops."
The book is so wordy that it takes a while to weed out the fundamentals,
but the basic proposition is that each contract has one highest high price
and one lowest low price. In looking for tops and bottoms uses the 1-2-3
formation to confirm a possible top or bottom. It uses 50% retracements to
evaluate profit targets and risk/reward of a trade. It instructs you to
trade long in uptrends and short in downtrends. And it teaches that narrow
sideways channels eventually break up or down. This method, if followed
with proper money management and stop loss discipline, should capture
major moves profitably. Roberts essentially teaches people to screen
trades to give a high probability of being long in uptrends and short in
downtrends. I find it hard to fault that. I think computer aided
technicians mistrust the simplicity of a trading system that doesn't
require a computer to trigger a trade, and I think brokers hate a system
that undertrades. I also think that this strategy, if executed properly,
would capture profits from the big moves.
For example, Roberts system would have been short CLH8 from 2075, long
USM8 about 116, would have kept you out of gold and copper but looking
for a bottom to form and be confirmed. This is all pretty basic stuff, but
from what I've read, correctly understood as to what Roberts says to DO
and NOT to do, it is one of the most conservative, least gambling
approaches to trading commodities in print. Compare this to the system
that goes long on a close above the high price of a pivot low, and short
on a close lower than the low price of a pivot high: you can see that type
A traders won't tolerate being flat most of the time because there is not
enough ACTION.
Well, that's my 2/32, I'll just push return and visit the fire
extinguisher for a mug up.
Inflammably,
Michael
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