Victoria Tanner’s recommendation: If it can only be one book – required reading for traders and investors.
It’s rare to come across a book about trading and investing that argues so convincingly and clearly that it immediately inspires you. It was all the more exciting to see the authors in person at their book launch at the IG Bank in Zurich at the end of August 2024.
As a former finance lecturer and FX trader, I was impressed by how the authors have turned their years of experience and analysis at the forefront of trading into an engaging guide to building and managing an active trading and investing portfolio.
Where does the money go?
The first reason for this title is surprisingly simple and lies in the name of the book. Investors should always keep an eye on where the money is going in the wholesale markets. This principle is reminiscent of the well-known investigative journalism motto “Follow the money,” which became popular during the Watergate scandal in the USA. For example: Which asset has attracted the most capital since the beginning of the year? Interestingly, it is cocoa whose futures prices have risen from just over $4,000 at the beginning of the year to over $7,000 at the end of August.
- Simple portfolio management: The authors, both executives of IG Group, present a simple model for the continuous allocation of assets within a portfolio. This visual aid and accompanying recommendations show investors how to effectively diversify and adjust their portfolios over time.
- Proven success: The authors have a proven track record of identifying trends and exploiting them profitably. They explain the thinking behind their strategies and share their sources to enable readers to achieve similar success.
Active and diversified asset allocation
Trading, investing and asset allocation are not a secret science, even though they can come with high costs. Private bankers often talk about portfolio allocation, but for those who are not ultra-high-net-worth individuals, there are usually only standardized recommendations based on expensive ETFs. Cheaper alternatives such as apps offer similar services, but the underlying algorithms are often opaque. As a result, many investors invest too heavily in a single asset class, typically ETFs, and miss out on the benefits of true diversification.
The right time for entries and exits
Many books explain why a balanced trading and investment portfolio is important. However, this work goes further and describes not only the optimal allocation, but also when changes are necessary.
The authors’ top-down approach is presented in a clear diagram. What follows is one of the clearest guides to selecting asset classes by region, sector and value. Additionally, they show how metrics are used to determine which assets to acquire and how information is quickly aggregated to evaluate potential investments. One approach is to compare relative performance over different time periods (for example, one week versus three months).
Detailed analyzes and practical examples
All of this is covered in the first 50 of 150 pages. In the second part, the authors delve deeper into the technical analysis methods and various asset classes. If you have ever been interested in chart formations such as shoulders-head-shoulders, this section explains their practical application in trading. The third part reinforces the key points with concrete examples. Developing the right habits is critical to success, and the authors support this with regular blogs and podcasts to help stay on track.
Establish trading and investments as a routine
Education, research, and risk management tools like stop-loss orders are essential in any trading book. However, this book stands out for its practical advice and proven strategies. If you only read one book about trading and investing, this should be it – and put the lessons it contains into practice!
