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Dear RTs:
Imagine my surprise when I discovered that a recent letter fired off to
Gary Smith, the technical writer at TheStreet.Com, had been posted for
the world to see. It was in regards to a question received from a
subscriber regard Tom DeMark's work and his new book.
Here's my response to the issue:
Gary --
Just to follow up on your comments in the Technical Analysis Q&A Section
appearing recently on TSC. I recently purchased Tom DeMark's book "New
Market Timing Techniques" and, speaking as someone who's read probably
150-200 books on technical analysis and trading, I have to say that this
book is probably one of the most poorly constructed tomes I have ever
come across.
To find out why, let's check out an excerpt from his chapter on TD
Lines:
"To construct a TD Line, level 1 TD Points should be selected first.
This process includes the connection of the two most recent level 1 TD
Points. Although this is not a requirement, nor is it essential since at
times it limits the number of TD Line opportunities, in order to define
the overall market environment as either uptrending, downtrending, or
netural, some higher-level TD Line should also be constructed (e.g.
level 5,8, 13). Provided that the upside breakout objective of the
higher-level TD Line is greater than the price objective of an upside TD
Line level 1 upside objective, you should be trading in the direction of
the prevailing trend, which in this instance is up." (New Market Timing
Techniques, page 172).
After reading a paragraph like this, I suspect that the book's publisher
may have inadvertently substituted instructions on how to build a
washing machine for DeMark's trading secrets.
What's ironic is that Tom DeMark apparently has a strong following in
the trader community, especially among futures traders. Like you, I have
no doubt that his methods work for him and for those traders to which he
can properly communicate his ideas.
However, his new book is written like one long sales pitch for Tom
DeMark -- I have never seen someone use as many (TM) symbols in one
paragraph. Let's take a look at some of the strategies he proposes to
teach us in this book: Tom DeMark Combo, Tom DeMark Sequential, Tom
DeMark Retracements, Tom DeMark Lines, Tom DeMark Moving Averages --- do
you see a trend here, and one that is not very tradeable? I do - the guy
just loves to put his name on very conventional trading techniques!
Also, the number of qualifications he imposes on his methodologies
render them very difficult to evaluate and follow (as we see in the
excerpt above). Finally, a significant number of the ideas presented in
his book are not even very innovative -- I mean: Rate of Change? Moving
Averages? Trend lines? Retracements? Come on! This stuff has been
covered in much better detail by other authors years ago ... this is
supposed to be "new"? Also, the largest section in the book is devoted
to his TD Sequential method which was apparently covered in his first
book.
DeMark should take a few lessons on how to write a book on trading from
Larry Connors, Linda Raschke and Jeff Cooper: make it easy to
understand, keep it simple and make it testable. Needless to say, I was
extremely disappointed by DeMark's book, and I strongly discourage other
traders from buying it.
Michael Strupp
Chicago, IL
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