The following is a review of Robert Miner’s book High Probability Trading Strategies: Entry to Exit Tactics for the Forex, Futures, and Stock Markets (Wiley Trading). The market is a dynamic place where emotions change in an instant and having a trading strategy is no longer enough given the speed with which information reaches investors through real-time news, real-time reports and social media. You must constantly learn new skills and hone your craft, and I am always looking to add another strategy to my trading arsenal.
Too often I talk to traders who want me to look at a stock chart to see if I can tell them what went wrong with their trade and one of my first questions is, “Why exactly did you buy this stock?” Many times the answer is that they felt it was going to go up, but they didn’t really have an exit plan if the trade went against them, or if it moved in their direction. They are a little bit along the journey to see what happens. If you want to learn how to recognize optimal trading conditions, identify clear entry and exit strategies, all while learning trade management skills, then this is the book you’ve been looking for.
The Miner book is essentially divided into 4 different sections and even comes with a CD that you have to use. only after reading the whole book. The examples used throughout the CD won’t make any sense to you unless you understand your system from A to Z. Since a chart reader needs to look at a lot of charts to begin to trust a system, the CD is a tool addition to the book.
Main sections of the book:
- Four Strategies Used to Find a Trade
- Commercial management standards
- Case studies of his students applying his methods.
- Intangibles and market psychology
The crux of this book consists of the four strategies (seen below) that Robert Miner uses together to find a high-reward, low-risk trade. He would even say that these strategies are so solid that he could take just one and build a trading plan around it. The author believes that to give you the best chance of success, he should use all four factors consisting of momentum, pattern, price and time. This strategy applies to all markets and timeframes.
Market position oven dimensions:
- Multiple Time Frame Momentum Strategy
- Elliot wave pattern recognition
- Fibonacci retracements
- Dynamic time strategies
The first strategy is to use 2 different time frames determined by the person, depending on what type of trader you are, and then decide which indicator you want to use for your time signal. For example, if you wanted to use a fast stochastic move arising from an oversold condition on a daily chart, that would decide your general direction. You could then use a 60 minute chart with that same indicator to find the point at which you would execute your trade.
Having said that, there are 2 caveats to be made here.
- This strategy is used in conjunction with the others to select the trades with the highest probability of success.
- It is important to adjust your indicator settings to eliminate false saws in your trading. The only flaw I found with this book is that the author presents his dynamic oscillator that he has developed and it is part of a general software package that he can buy. That is the indicator of choice that he uses for his momentum strategy. However, he is very clear that it is just as effective using the Macd or Stochastics indicators. I just prefer that when I buy a book there isn’t an upsell.
Miner then weaves in basic Elliot Wave patterns to recognize continuation trends or potential reversal points to use in conjunction with the momentum strategy. I had to re-read this chapter as I’m not a fan of this kind of chart reading, but I can see the benefits of using these simple strategies to predict where a market is headed. It then adds a new way to use Fibonacci to decide support and resistance areas and learn the difference between inside and outside pullbacks and alternative price projections.
Perhaps the most interesting of the four that I learned for myself were the time strategies that use units of time to determine retracement levels.
Most highs and lows are made in proportion to one or more previous sections of the trend or countertrend. Time retracements are done just like price retracements, but on the time axis, and use some of the same ratios that are used for price retracements.
These time retracements use many of the same ratios that are used in the price retracement, namely the fib retracement levels, .382, .50.618, 1.00 and 1.618. So instead of looking at the lies horizontally, I would use the vertically to predict a rally or continuation.
Leading or lagging indicators?
The author points out that many traders use lagging indicators like oscillators or moving averages to base their trading strategies on. He uses a lagging indicator in his dual time frame method to find stocks that show a particular trend direction he is looking for, but the other three are forecasting in nature with predictive capabilities. If his trading plan is based solely on lagging indicators, he will be at the mercy of the market most of the time. His method, which took him more than 20 years to develop and refine, will prepare you in advance for a probable commercial condition.
The bulk of the book after the disclosure of his full trading plan shows how he ties it all together through examples and case studies from many of his students. It will take some time to learn and get to grips with his system as there will definitely be a learning curve but I think it lays a great foundation as he takes you through each strategy step by step so no matter what your level of skill you will have everything you need to get started with his methods. I even got a new perspective on how to use a couple of the indicators I use now. The author told his publisher that he wouldn’t write this book if he couldn’t have it accompanied by a Workshop CD and it’s nice that his readers have access to these examples because they really help clear up a lot of the questions you’ll eventually have after digesting this book. . I would recommend this book to anyone who feels like their current trading strategy isn’t giving them the results they’re looking for, or to the seasoned trader who’s curious about learning a new technique.