Book Review > Guppy Trading- Essential Methods for Modern Trading

Daryl Guppy, the author of “Guppy Trading”, believes that modern financial markets have changed and cannot be analysed and managed with the techniques and theories developed over half a century ago. To this end, Guppy’s latest book is a compilation of 23 of the most important chapters from all of his previous books, revised and updated, together with 10 new chapters covering the modern trading world, analysis, managing risk, trading methods and international markets.

Part one begins with a discussion on the modern trading world and how the financial markets have changed since the global financial crisis began in late 2008. He stresses that success for an individual trader does not require you to imitate the methods of institutional traders and discusses what he believes are eight significant areas of difference. Following this, Guppy provides two short chapters on crowds and behavioral finance, and self-sabotage. Part one ends with 13 enduring rules to stand by, that Guppy believes offer protection in an evolving market, but are not “shark-proof”.

Part two is a section on analysis where Guppy provides the reader with a toolkit of 11 different methods for analysing the market. The methods he provides range from simply eyeballing charts to identifying trends and support and resistance levels, to using moving averages and indicators, as well as using probability, volatility and patterns of opportunity. Also included in part two is a chapter on dark side trading analysis in which Guppy discusses dark pools and the nine main impacts of dark pool trading. Guppy advises the reader that irrespective of the analysis method used, what is important is the process of finding and eliminating opportunities.

Guppy stresses to the reader that “understanding risk management is the absolute foundation of trading survival”, thus part three of the book is devoted to risk management. Traditional risk management tools such as the “2% rule”, working out the stop-loss execution price before placing a trade and risk-reward ratios are all discussed. Guppy acknowledges that while markets have become more volatile, the world of risk has not changed – it’s just that there is no time for hesitation with modern market volatility.

Moving on from risk management, Guppy then discusses various trading methods in part four of his book. Guppy reminds the reader that analysis (covered in part two) is not trading, although the two are sometimes entwined. Nine specialist trading situations such as managing volatility, parabolic trends, gaps, market depth, short selling and arbitrage trading are covered. Additionally, Guppy devotes the final chapter of part four to discuss the use of derivatives to intelligently boost returns using ordinary analysis.

The final part covers globalisation and how this has changed market mechanisms, regulation, structures and opportunities. Also included is a discussion on using exchange traded funds to trade world markets and diversify local portfolios as well as the additional risks that traders need to consider when trading international markets.

While the book runs at over 400 pages, Guppy has maintained the same easy-to-read style that has been a feature of his previous works. It has been well written with lots of charts and other tables which make it easy for the reader to understand the point he is trying to make. At under $50, I feel that “Guppy Trading” would make a handy addition to your trading library.