Timothy Sykes sent me an advance copy of his new book, “An American Hedge Fund”, which came out on October 1st, 2007. The book is about real life trading experiences and the journey of setting up a hedge fund.

Timothy started out with $12,000 and turned that into $2,000,000 trading tocks from 1999 to 2002, then went on to start his own hedge fund. He has also starred in a documentary about traders called Wall Street Warriors.

Now on to the book review. I found An American Hedge Fund to be an compelling and easy read containing many experiences that most traders can relate to, in one form or another. Most of the book is devoted to Timothy’s journey trading micro cap stocks and recounts crazy stories of $100,000 up and down days.

The other prominent story featured in the book is Timothy’s struggle to start up his hedge fund and attract capital. This gives readers a glimpse into the behind the scenes aspect of the business.

Overall I found this book quite interesting although at times it did drag on when recounting trades. If you like real life stories about this business than this one should be on your ‘to read list’.

Here is a link to an interview done with Timothy Sykes by Million Dollar Journey.

The Little Book That Beats the Market is written by Joel Greenblatt, a hedge fund manager and adjunct professor at the Columbia University Graduate School of Business. The Wikipedia page on Greenblatt states that he started the hedge fund Gotham Capital with 7 million and in the 10-year period from 1985 to 1995, the fund achieved a surprising 50% annualized return (before fees were taken out).

In my mind, this gives Greenblatt and his book some creditibilty. I say this because any time I hear about some “magic formula” (which is the actual name for Joel’s system), I immiediately become skeptical and usually read the rest of the book with one raised eyebrow.

Another thing that suprised me is the fact that the website that is based around the book, magicformulainvesting.com, is free and does not requre any membership fees. When I first went there I did expect the website to be an “upsell” type of scheme that so many financial book have these days.

Now, on to the book itself. The foundation of the system talked about in the book is based around value investing (buying companies at a discount based on return on capital & earnings yield) and using the power of time to compound your returns. The book is written in a very simple manner which, as the author states, a sixth grader could understand.

Personally, I did not really find this book all that interesting. I thought the author’s humor came off as “trying too hard” and it didn’t really play towards mine. However, I did see the book as a good beginner’s primer on investing and, as such, it would be something that I would give my children to read so they could learn about the way the stock market works.

That being said, when I do give this book to my children I will definitely make it a point to tell them that while a “magic formula” sounds good on paper, the markets themselves are much more complex than that. It would also be wise to educate your children that many finance books play off gimmicks and systems that are designed to only make the author rich. Even if that may not be the case here.

So in conculsion, this book wasn’t really for me but I could see the it being useful for children or beginner investors.

Click here to find the lowest price on The Little Book That Beats The Market.

The full title of this book is “Trading for a Living: Psychology, Trading Tactics, Money Management” and the book does a wonderful job of explaining what it takes to be a trader. While I found s some parts of the book outdated and a little boring, I really enjoyed when Dr. Elder delved into the psychological aspect of trading.

Who is Dr. Alexander Elder?

Dr. Elder is a professional stock trader who wrote this book in 1993. He was born in the Soviet Union and entered medical school at the age of 16. By Age 23, he was working as a doctor on a Soviet ship in Africa when he defected and received political asylum in the United States.

Key Takeaways From The Book

One of my favorite quotes in the book is “Trade not for money but to hone your skills”. When you take away the money aspect of trading there is just trading. If you perfect your trading style and your discipline, the money will take care of itself.

The psychological aspect of trading that Dr. Elder touched on were definitely the highlights of the book for me. Things like “your feelings impact your equity”. The author talked about that if you are fearful/upset/arrogant you will suffer. Stop trading when you feel a “gambler’s high” or feel fearful of trading. You need to control your emotions. The top traders are like robots who, if you saw them, you would not know whether they were up big or down big on any given day.

Another key point was that you have to take responsibility for your trades. Only you decide when to buy and sell. Don’t fall into market temptations of greed and fear. Stick to your plan as deviating from your rules leads to self destruction. Many traders have a rags to riches to rags story because they don’t take responsibility for their trading and their emotions, they instead blame outside forces.

Overall this book was highly influential and it has to rank in the upper tier of all time stock trading books.

Click here to find this book at the lowest price available.