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Trader Vic II: Principles of Professional Speculation by Victor Sperandeo
Excellent Book
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First published March 28, 1994
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Displaying 1 - 10 of 10 reviews
October 24, 2024
3.5 stars.
As the previous one, very good book in which you can learn some of Sperandeo's techniques. This time much deeper.
To be re-read.
As the previous one, very good book in which you can learn some of Sperandeo's techniques. This time much deeper.
To be re-read.
February 13, 2025
Even if I didn't know Victor's track record, it is clear from his book that you are hearing the words of a trader, a true practitioner. For this reason, while the content of his work is slightly detached from mine, I find his books a pleasure to comb through, if only to absorb some of the hard work and dedication he has placed into his craft. Victor also makes it clear to me that my understanding of economics is severely limited - he is very opinionated regarding this topic, and his arguments are interesting to read, but I must be careful not to let these opinions become mine, as I have not done the work to reason through them.
Key ideas to takeaway from this book:
1. The fundamental principles of a sound investment philosophy is preservation of capital, consistent profitability and the pursuit of superior returns. The order of these principles is not random. All professionals think risk-first. There's a pull in trading, and in life, to try to take the short, easy and quick way to your destination. In trading, the path to quick riches (or doom) is easy. Just abandon your stop placement, or add a zero or two to your next trade, and climb onto the wheel of fortune and see where it drops you. In many areas of life, people have reached high places in society by taking this way. On the way there, they either (#1) sacrifice their values and principles to get there or (#2) risk their financial livelihood to accelerate their path to wealth. While the world may shower these people with attention, and while they may pull you toward their own paths, let it be a reminder that this is not the way forward, not for me. I will take risks that I understand and am willing to take; I will not be spurred on by passion or envy or fear of missing out.
2. The importance of an objective, historical record. Historical records allow you to paint certain events with probability based on objectivity. When X happened over 1,500 samples in the last 50 years, there was a Y% for Z to happen and a P% for T to happen. This is a powerful tool in assessing the likelihood of events, which is an important piece of the puzzle in trading. Sperandeo had an immaculate library of such events, derived from historical price records in major indices, allowing him to tabulate odds in regular trades as well as options, and to assess trades in a far more objective manner than his contemporaries. This also begets the need for extreme hard work and interest in your own work.
3. Traders need to have a very good grasp of reality because they play a meritocratic game. Everyone admonishes the best artists and athletes for the money they make, but in reality, they are simply being paid for the quality of their services, as measured by the only thing that matters, which is how much other people are willing to pay for them. These players are paid what they are paid because their performances are measurable, scalable and consistent. Salah costs you $350,000 a week because he has provided 20+ G/As for the last 5 seasons in the toughest football league in the world; Drake costs $1,000,000 for a feature because he is guaranteed to boost your audience by 100x fold. Your long-term equity curve is a direct reflection of your knowledge and skill, period. To get paid more, get better. Unlike project managers and CEOs, you cannot hide behind the work of others. You are a player, an artist, a trader - you live and die by your own results. It's up to YOU to make that a blessing or a curse.
4. Study history, philosophy and economics.
The more I read up on people I admire, the more I see the commonalities between them. A clear commonality is how well-read they are. Your opinions about economics, society, politics, capitalism and other such important things will likely be out of touch with reality without a thorough understanding of these topics. You can begin this intellectual pursuit simply by reading, and thinking, about these topics over time. I hope to return to the epilogue at the end of this book with my own take about the morality of wealth.
A quote from the book that will stay with me:
"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited."
Key ideas to takeaway from this book:
1. The fundamental principles of a sound investment philosophy is preservation of capital, consistent profitability and the pursuit of superior returns. The order of these principles is not random. All professionals think risk-first. There's a pull in trading, and in life, to try to take the short, easy and quick way to your destination. In trading, the path to quick riches (or doom) is easy. Just abandon your stop placement, or add a zero or two to your next trade, and climb onto the wheel of fortune and see where it drops you. In many areas of life, people have reached high places in society by taking this way. On the way there, they either (#1) sacrifice their values and principles to get there or (#2) risk their financial livelihood to accelerate their path to wealth. While the world may shower these people with attention, and while they may pull you toward their own paths, let it be a reminder that this is not the way forward, not for me. I will take risks that I understand and am willing to take; I will not be spurred on by passion or envy or fear of missing out.
2. The importance of an objective, historical record. Historical records allow you to paint certain events with probability based on objectivity. When X happened over 1,500 samples in the last 50 years, there was a Y% for Z to happen and a P% for T to happen. This is a powerful tool in assessing the likelihood of events, which is an important piece of the puzzle in trading. Sperandeo had an immaculate library of such events, derived from historical price records in major indices, allowing him to tabulate odds in regular trades as well as options, and to assess trades in a far more objective manner than his contemporaries. This also begets the need for extreme hard work and interest in your own work.
3. Traders need to have a very good grasp of reality because they play a meritocratic game. Everyone admonishes the best artists and athletes for the money they make, but in reality, they are simply being paid for the quality of their services, as measured by the only thing that matters, which is how much other people are willing to pay for them. These players are paid what they are paid because their performances are measurable, scalable and consistent. Salah costs you $350,000 a week because he has provided 20+ G/As for the last 5 seasons in the toughest football league in the world; Drake costs $1,000,000 for a feature because he is guaranteed to boost your audience by 100x fold. Your long-term equity curve is a direct reflection of your knowledge and skill, period. To get paid more, get better. Unlike project managers and CEOs, you cannot hide behind the work of others. You are a player, an artist, a trader - you live and die by your own results. It's up to YOU to make that a blessing or a curse.
4. Study history, philosophy and economics.
The more I read up on people I admire, the more I see the commonalities between them. A clear commonality is how well-read they are. Your opinions about economics, society, politics, capitalism and other such important things will likely be out of touch with reality without a thorough understanding of these topics. You can begin this intellectual pursuit simply by reading, and thinking, about these topics over time. I hope to return to the epilogue at the end of this book with my own take about the morality of wealth.
A quote from the book that will stay with me:
"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited."
January 29, 2025
Trading with the intermediate Trend: By knowing the direction of the intermediate- term trend, the trader can use this information to trade within the short term or minor trend. this works on everything that moves.
No. of Downdays Odds of Next Day Being Up
1 60.00 percent
2 85.9 percent
3 94.4 percent
Ayn Rand: The symbol of all relationships among (rational) men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws.
Did the stock or commodity...
1. Make a higher high or lower low than yesterday?
2. Open up or down on the day?
3. Close up or down on the day?
4. Close in the upper 50 percent or the lower 50 percent of today's range?
5.Close above or below today's open?
6. Make a higher low or higher high than yesterday?
7.Close above yesterday's high or below yesterday's low?
You would score a point for each item that is bullish and subtract one for each that is bearish. Bullish are:
1. Make a higher high than yesterday.
2. Open up on the day.
3. Close up on the day.
4. Close in the upper 50 percent of today's range.
5.Close above today's open.
6. Make a higher low than yesterday.
7.Close above yesterday's high.
Trader Vic's rules for Options trading:
1.Keep trades small: 2 to 3 percent of your risk capital.
2.Trade only when odds are in your favour
3.Trade only when potential payout is at leats 5:1
4. Never buy just because the price is low;never sell just because the price is high
The gap rule is simple; when you have a gap above or below a trend line, it indicates an important change( news and/or fundamental) and points to a change in trend
Four day corollary: after a long move of intermediate proportions, when you have a 4 - day or longer sequence in the direction of the trend, the first day in the opposite direction often signifies the top or bottom and a change in trend.
The four day rule: when the market has a reversal, in the form of a 4 - day up or down sequence from high or a low, after an intermediate move has taken place, the odds of the trend having changed is very high
Using 200 day moving average :
1.If the 200 day MA line flattens out following a previous decline or is advancing, and prices break out through the moving average on the upside, then these events constitute a long term buy signal
If the 200 MA flattens out followiung a previous rise or is declining, and prices penetrate the MA on the downside, these events constitute a major long- term sell signal.
There are three trends:
1.the short term trend, lasting from days to weeks (usually<14 days)\
2.The intermediate term trend lasting from weeks to months
3.The long term trend lasting from months to years.
No. of Downdays Odds of Next Day Being Up
1 60.00 percent
2 85.9 percent
3 94.4 percent
Ayn Rand: The symbol of all relationships among (rational) men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws.
Did the stock or commodity...
1. Make a higher high or lower low than yesterday?
2. Open up or down on the day?
3. Close up or down on the day?
4. Close in the upper 50 percent or the lower 50 percent of today's range?
5.Close above or below today's open?
6. Make a higher low or higher high than yesterday?
7.Close above yesterday's high or below yesterday's low?
You would score a point for each item that is bullish and subtract one for each that is bearish. Bullish are:
1. Make a higher high than yesterday.
2. Open up on the day.
3. Close up on the day.
4. Close in the upper 50 percent of today's range.
5.Close above today's open.
6. Make a higher low than yesterday.
7.Close above yesterday's high.
Trader Vic's rules for Options trading:
1.Keep trades small: 2 to 3 percent of your risk capital.
2.Trade only when odds are in your favour
3.Trade only when potential payout is at leats 5:1
4. Never buy just because the price is low;never sell just because the price is high
The gap rule is simple; when you have a gap above or below a trend line, it indicates an important change( news and/or fundamental) and points to a change in trend
Four day corollary: after a long move of intermediate proportions, when you have a 4 - day or longer sequence in the direction of the trend, the first day in the opposite direction often signifies the top or bottom and a change in trend.
The four day rule: when the market has a reversal, in the form of a 4 - day up or down sequence from high or a low, after an intermediate move has taken place, the odds of the trend having changed is very high
Using 200 day moving average :
1.If the 200 day MA line flattens out following a previous decline or is advancing, and prices break out through the moving average on the upside, then these events constitute a long term buy signal
If the 200 MA flattens out followiung a previous rise or is declining, and prices penetrate the MA on the downside, these events constitute a major long- term sell signal.
There are three trends:
1.the short term trend, lasting from days to weeks (usually<14 days)\
2.The intermediate term trend lasting from weeks to months
3.The long term trend lasting from months to years.
January 17, 2021
I came across 'Market wizard' Victor Sperandeo through Linda Raschke's reading list.
Victor's approach to markets takes into account both fundamental and technical analysis, with emphasis on economics. In this book, the author talks about how he thinks in these areas and how he plans his trades. Personally as a short term trader, some parts were inapplicable for me, but it did instill the importance of looking at the bigger picture, especially on the fundamental/economic aspect regardless of your timeframe (with the exception of scalpers perhaps).
It also amazes me that a trader in 1994 could be so data centric. You will find a ton of figures and tables in this book dating back to the early 20th century which i personally think is redundant to include in this book, but it does makes you realise just how much work it took back then to retrieve,track and analyse these data. Throughout this book, you can see the author's view of trading, which is essentially all about the odds based on data.
What you get out of this book will depend on the individual as it is relatively dated. The 2 main technical patterns discussed are still very much applicable today. The author calls them the 1-2-3 rule and the 2B, which are both reversal patterns. These patterns are not new as it is described in much greater detail in other technical classics such as Schabacker's.
The gem in this book for me was the last few chapters on psychological aspect of trading and the character and personality of a trader. It is essentially about the psychological and knowledge requirements of a successful trader. One of my favourite excerpt :-
"To make things worse, impulsive people are handicapped by a lack of balance in their lives. They usually have no outside interests or indeed any goals beyond the immediate satisfaction of winning today. They don't give much thought to family, to friends, to community activities. Their ability to maintain rewarding personal relationships is shaky at best, and they have little or no involvement in cultural, intellectual, or ideological issues. Thus, when their work life starts to fall apart (as it usually does), they have nothing else to sustain them. "
The author also goes into detail and even dedicated the epilogue to explain the importance of our view towards money.
Overall a great read, the content itself is dated but the mindset, approach and certain principles is still very much relevant today.
Victor's approach to markets takes into account both fundamental and technical analysis, with emphasis on economics. In this book, the author talks about how he thinks in these areas and how he plans his trades. Personally as a short term trader, some parts were inapplicable for me, but it did instill the importance of looking at the bigger picture, especially on the fundamental/economic aspect regardless of your timeframe (with the exception of scalpers perhaps).
It also amazes me that a trader in 1994 could be so data centric. You will find a ton of figures and tables in this book dating back to the early 20th century which i personally think is redundant to include in this book, but it does makes you realise just how much work it took back then to retrieve,track and analyse these data. Throughout this book, you can see the author's view of trading, which is essentially all about the odds based on data.
What you get out of this book will depend on the individual as it is relatively dated. The 2 main technical patterns discussed are still very much applicable today. The author calls them the 1-2-3 rule and the 2B, which are both reversal patterns. These patterns are not new as it is described in much greater detail in other technical classics such as Schabacker's.
The gem in this book for me was the last few chapters on psychological aspect of trading and the character and personality of a trader. It is essentially about the psychological and knowledge requirements of a successful trader. One of my favourite excerpt :-
"To make things worse, impulsive people are handicapped by a lack of balance in their lives. They usually have no outside interests or indeed any goals beyond the immediate satisfaction of winning today. They don't give much thought to family, to friends, to community activities. Their ability to maintain rewarding personal relationships is shaky at best, and they have little or no involvement in cultural, intellectual, or ideological issues. Thus, when their work life starts to fall apart (as it usually does), they have nothing else to sustain them. "
The author also goes into detail and even dedicated the epilogue to explain the importance of our view towards money.
Overall a great read, the content itself is dated but the mindset, approach and certain principles is still very much relevant today.
October 7, 2017
На удивление легко читается, интересная концепция о сроке жизни тренда
February 22, 2018
Not the best Sequel
March 17, 2018
3.5. some tactics are hard to digest.
June 9, 2018
Parts of this book are a five, and other parts are "meh"......I reread this just to keep myself updated on certain techniques he uses.
January 20, 2021
Not as good as the first trading book from Vic Sperandeo.
September 13, 2020
I like that the author is well versed in his Austrian school and uses that to inform his trades. This book was more of a skim for me after just having read his first book. A lot of the same ground is covered, and some of the material is not as relevant to me personally. But there were some interesting statistics and I enjoyed reading more about his approach and story.
Displaying 1 - 10 of 10 reviews