Tuesday, April 22, 2008

Active Value Investing: Making Money in Range-Bound Markets, Book Review

This book provides little value as Vitaliy Katsenelson displayed limited knowledge of the financial markets, due to either lack of experience in actual trading, or simply book-selling ruse. The ideas unoriginal and largely convoluted, readers could potentially end up performing worse.

Questionable Theme

Simply put, Katsenelson suggests that if you apply his wisdom, while if and ONLY if the said market happens to move within a range, i.e. if the volumes of initiated buying and selling orders remain roughly equal, you can “invest” profitably. So basically if you happen to guess correctly about the future market movement (it is “range-bound” roughly 1/3 of the time according to him), you can make money (roughly 1/3 of the time).

What the hell is that? Making money infrequently, and losing your shirt most of the time sounds like a bad deal. The markets could only move up, down or sideways, even a plain old guess could provide a winning rate of 33%. The content within the book revolves around the above theme, and therefore do not offer any substance of value.

Not Recommended Reading

Books like these offer deception rather than enlightenment. The concepts mislead as they create the impression that traders only profit in “right market conditions”, which implies a heavy role of luck inherent in successful trading, and if you depend on luck instead of actual relevant skills to trade successfully, you are no better than a losing gambler.

1 Reflections:

Anonymous said...

You obviously have not read the book. I think before you criticize someone else work you should probably read it first. I summarized my book Active Value Investing in this article http://contrarianedge.com/2008/04/20/is-it-a-bull-bear-or-cowardly-lion-market/