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Readers reviews of Snap Shot Trading

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Review by Australian Investors Association February 2003

Snapshot Trading is a reasonably priced book on the Australian share market by Daryl Guppy who has made significant contributions to the education of Australian share traders through his books and seminars. This is a book for the trader who is prepared to be active in the market; someone taking intraday trades or trades of up to 5 days. While some of the techniques may also be of interest to the position trader, this is not a book for the investor.


Snapshot Trading is not an entry-level book to short term trading and assumes that the reader is already familiar with the terminology and procedures of the Australian share market. It is also assumes that the reader is computer literate and has access to charting software and appropriate data.


Snapshot Trading is divided into five sections:

Trading time:
Examines the myths of insiders and their influence on short term trades and emphasises that “day trading and short term trading are built around the idea that a fast ride ends suddenly but we control when we get on and off.” Success depends on skill and knowledge and not insider information. His detailed analysis of the recent Enron debacle provides a good example of this.


Opportunity:
Identifies the different opportunities that exist in short term trading, emphasising that the “best short term trades are taken by those who prepare and wait for the opportunity to emerge”.


Producing profit:
Focuses on the use of leverage as the key to profitability in short term trading. Guppy says that with short term trading “how effectively we shift money from the market into our bank depends to a significant extent on leverage”. He discusses two forms of leverage, price leverage where the trader uses the low prices stocks, which comprise the bulk of the Australian share market and the use of derivatives. His discussion of derivatives emphasises the use of the market inefficiency of warrants. The subject of options is not covered but reference to sources of information on option trading in the Australian market is provided. There is no reference to Australian share futures presumably because they have very low liquidity and remain a very minor part of the Australian market.


Lethal weapons:
In this section Guppy discusses chart patterns including volatility, different types of gaps, flags and triangles. He examines ways in which these patterns may be traded as well as techniques for managing trades.


Taking profits:
Covers the mechanics of trading which are so essential to success in short term trading. These include data forms and brokerage services. There are now many books on trading available which discuss trade entry as if it was the key to profitable trading. In fact, exits are much more important and with short term trades profitability is critically dependent on the exit. His analysis of how broker services contribute to trader success with entries and exits is important and needs to be understood by all traders.

Guppy’s comments on stockbroker services are noteworthy. Guppy says that the most essential services a stockbroker can provide are rapid execution of orders and allowing the trader the prerogative of placing stop loss and contingent orders in the market. He emphasises that discount brokers who do not have straight-through processing and/or will not allow placement of stops in the market, may in fact provide a very expensive service, since the poor execution of an entry or exit can cost many hundreds of dollars in a single trade. If enough traders heed these comments then pressure may be brought to bear on the broking fraternity to provide better services in this regard.

The index is a minor annoyance with this book. There are a number of instances where an index reference does not exist on the indicated page. In another situations the index refers the reader to a page where there is only passing reference to an item while pages which cover the item in detail are not mentioned in the index.

In his books Guppy makes frequent use of analogies to topics such as fishing and mining etc. Snapshot Trading is no exception. In this book he uses the analogy of the sharpshooter who needs to take careful and rapid aim to hit the target. While his writing style may not appeal to everyone, he is effective in getting his message across. Part of the Guppy style includes the frequent use of case studies - a good clear technique, particularly when the examples are of actual trades taken from the Australian market. The charting software most frequently referred to is Metastock and Guppy includes the code for a number of Metastock explorations of interest to the short-term trader.

This is one of the few books that address short term trading for the Australian share market. Anyone with an interest in short term trading will certainly find something of value in Snapshot Trading.


 

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