The Trend Following Bible

Below is my book review of Andrew Abraham's
The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk (Wiley Trading)

Andrew Abraham is a commodity trading advisor who has traded professionally for 18 years. He specializes in trend following strategies and recently published The Trend Following Bible.

The author profiles successful traders and warns of false messiahs and “geniuses” in the early part of the book. Abraham clearly states the objective of the book (always the first thing I look for!), but does not do so until page 79, which makes the “introduction” lengthy and repetitive.  He promises to show readers how to have an exact trading plan, how to take low risk bets, how to take losses, how to allow profits to run, and how to develop the proper mindset of a trader. These are worthwhile topics and in short I believe he achieved those objectives despite some of the other shortcomings of the book.

His trading plan begins with a discussion of risk and capital management. He then shows how he identifies trending markets, including his use of Rate-of-Change (ROC) and MACD. He then shows precisely where he places his hard stops and trailing stops and how he takes profits.

Abraham's objective was not to sell his exact trading system to his audience, but rather his process. He encourages readers to create a system which fits his or her personality. As he states “strategies do not make good traders”.  He also notes that the tenets of trend following are simple and intuitive but in practice difficult to apply due to our own fear and greed.

Abraham repeats many trading psychology tips and tricks in an effort to help develop the proper mindset of a trader. While he repeats many of the same slogans pertaining to discipline and patience, they are worth repeating because they are so crucial to long-term trading success. Two notable points he emphasizes are accepting small losses and having and sticking to a trading plan. More experienced traders could be turned off by Abraham's repetition, but for new or aspiring traders this repetition has value.

The author concludes the book with a trade diary that is helpful for those new to trading. Abraham chronicles his trades from 2009-2011 with a detailed description of many of the trades. These descriptions became a bit repetitive, but for those new to trading it serves as a primer for what to expect as a “trend trader”.

The book was not well edited, with several mistakes that should have been easily caught in the editorial process. I also felt like Abraham had some solid ideas, but since he admittedly is a trader first and author second, there should have been better organization and layout to the chapters. The editor and publisher failed in this regard. The title of the book also over-promises.  I would not classify this as a “bible” or must-read, although it does emphasize several enduring qualities of many successful traders.

Abraham also runs a web site Trend Following Mentor and mentions it briefly in the book, but unlike many other books I have read in recent years there are not the perpetual referrals by the author to his website or material or charts on his site, which was a welcome change.

In short, Abraham does a good job of emphasizing discipline and patience. He achieves his stated goal of the book and provides insight into his precise trading strategy. The book falls short in its prose and editing and much of it is repetitive and disjointed at times. If you can look beyond some of these shortcomings, it is still a decent read, especially for those new to trading or to trend-following.