Sunday 23 March 2008

Trading Book Review: Unlocking Wealth - Secret to Market Timing by John Crane

Just in case anyone missed it, I posted a long article on Friday - Easter Chart Bonanza. The article has 10 charts, including the latest Commitment of Traders results, that illustrate my current Emini medium-term forecast.

This weekend I'd like to do something different and review the latest book by John Crane - Unlocking Wealth: Secret to Market Timing.

This is the follow up to John Crane's first book "Advanced Swing Trading". I thought the first book was great but this one is even better. Unlike other traders-come-authors, John Crane does not switch tack with this book and discuss some new and different ways of analyzing the market. No, he sticks to his original theories, expands on the methodology and does a much better job of explaining and illustrating it. The only thing I didn't like was the title - too "get rich quick" for me.

John Crane's market timing approach is one of the most elegant futures trading methodologies I've seen. It focuses on market structure and using impulse and reaction swings to identify entry and exit points.

Reaction Swing C-D (July 2004 Silver)

The chart above illustrates a basic component of the methodology. The Reaction Swing (C-D) is a counter-trend move that is used to confirm the new down trend and then identify a low risk entry point. Not revolutionary, but then John Crane uses the count back to swing point A to forecast the turning point E. Now that is new!

So the Reaction Swing gives you a trend continuation entry point. The count back gives you an projected exit time. John Crane then goes on to show how the exit can be further refined with price projections. Lastly, a methodology for identifying and entering at trend reversal is discussed. This last part was missing in the original book "Advanced Swing Trading" and now with this, the methodology is complete.

The book is packed full of swing and day trading examples from both the futures and stock markets - and the accuracy of this timing technique is uncanny. His website has another 50 videos that further illustrate the methodology.

As I read the book I couldn't help think that the rules could be programmed in TradeStation EasyLanguage or any other charting platform. However, instead of creating charting software John Crane has decided to provide a web-based, end-of-day signal service (Reversal Tracker) for the futures, equities and FX markets. Open trades are accompanied by an annotated chart to explain the setup.

The Reversal Tracker results appear solid with a steadily rising equity curve and profit factor of 1.69 for all futures markets over the last 18 months. The system is designed to catch large trend moves and, therefore, needs to be traded with a basket of futures. Percent profitable is 46% and average winner to loser is 1.97 times. You can check out the Reversal Tracker details here.

Good luck next week with your Emini trading.