$ £ ¥
¥ £ $

Book Review: Diary of a Professional Commodity Trader by Peter L. Brandt

Diary of a Professional Commodity Trader by Peter L. BrandtThere are many very positive reviews of Peter Brandt's book on Amazon, and rightly so. Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading turned out to be a rather unique book in a way that it is the only Forex book that is based on real-time trading experience rather than on a review of previous charts and past performance. Although the events described in the book are in the past for a reader, they were added into the book on the go as they appeared. The book is worth reading just because of this particularity.

It is difficult to rate it as high as Trade Your Way to Financial Freedom by Van K. Tharp or Fooled by Randomness by Nassim Taleb, but this doesn't mean that the book is bad of course. It is full of things to learn and old trader's wisdom to gain.

Although it is written in the form a diary, there are some learning chapters that clearly make more or less universal statements regarding Forex/commodity trading. From those statements one could prioritize the following theses:

  • It is difficult to be profitable as an intraday trader. That is why long-term trading should be employed.
  • Long-term traders should pay little attention to charts after they have detected their patterns and have set their pending orders. Constant chart watching may lead to overtrading and other stupid errors.
  • It is impossible to forecast the markets using chart patterns. Chart patterns in a union with sound money management rules just provide some small edge to a trader. (Of course, it could be argued that the edge of a strategy is the same as the ability to forecast; otherwise, the chart patterns would be useless.)
  • It is better to have a 30-to-70 chance of winning each trade than a 70-to-30. It is difficult to agree with this. Brandt offers three paragraphs of explanation of his point, but it doesn't make sense much sense. This statement is wrong just because it deals only with the probabilities rather than trade expectancies.
  • Months or even years of losses are normal to trader's account history.
  • A trading system should be adjusted to meet current challenges, but it shouldn't be optimized to fit the curve of the latest market events.
  • Keeping a trading journal is a good way to find disadvantages of your own trading strategy.

The book possesses a short list of quite strong advantages that are worthy of mentioning here:

  • The author (Peter Brandt) has almost 40 years of experience in commodity and Forex trading. 30 of which were overall rather successful.
  • Detailed examples of chart pattern trading with a lot of useful info regarding various patterns' reliability factors.
  • Useful trading ideas (trailing stop rule, hikkake patterns, etc.)
  • A complete set of steps for developing a successful trading plan with detailed explanation of each step.

Unfortunately, the book isn't as good as it could be. It had several flaws:

  • Some dubious statements. (See the list of theses above.)
  • One of the trading techniques mentioned is the money management stop-loss, which is basing your SL level not on your technical or fundamental analysis of the current situation but on the amount of money you can afford to lose. Needless to say, employing such a stop-loss technique is a wrong way to trade as it ruins the trading system.
  • Not much details are given regarding the author's choice of using trailing stop or other exit strategies for specific trades.
  • The emphasis of the Diary may seem too long-term for many traders, with some example patterns spanning for years.

Diary of a Professional Commodity Trader won't impress you, it won't give you a profitable trading strategy, it won't offer you anything extraordinary, but it will definitely make you start looking in the right direction and will ease your strategy development process with so many valuable trading ideas.

PS: The Kindle version of the book was full of errors. Perhaps the paper version is also ridden with them, but we haven't had an opportunity to compare the two.

If you have any questions, comments, or opinion regarding Diary of a Professional Commodity Trader by Peter L. Brandt, feel free discuss it on our Forex forum.