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Tom Dorsey's Trading Tips
A Playbook for Stock Market Success
Thomas J. Dorsey
With “Tom Dorsey’s Trading Tips,” Mr. Dorsey
accomplished two things: he wrote a great brochure for his money
management/investment advisory firm, Dorsey, Wright, & Associates, plus
he imparted some excellent investing advice along the way.
His background as Director of Option Strategy at Wheat,
First Securities, and his long-time professional work with point &
figure charts combine to give the seasoned investor an excellent playbook
for approaching the stock market with enough education to come out a winner.
This is an excellent book not only for the work Dorsey
has done with point and figure charts (his bread and butter), but also for
the insights he gives on sector investing, relative strength, momentum, and
options.
His discussion of the logic behind relative strength is
second to none, and morphs nicely into sector rotation. This is the way the
stock market basically works, and investors would do well to listen closely
to Dorsey’s well-reasoned explanations.
Point and figure charting is vastly superior to bar
charting from the point of view of finding congestion (support and
resistance) areas. If you can take the time to learn P&F charting, you
will be rewarded by being able to observe the stock market from a much
simpler and realistic standpoint.
Additionally, there is an extended discussion of
options, with an emphasis on buying rather than selling, although he does
acknowledge, “Time is the silent killer of all options.” He even adds in
a little story of how in his earlier days he was right about a stock but
still lost money buying its calls.
He correctly advises not to sell calls against stock
you don’t want to let go – “closet uncovered writing,” he calls it.
But very little space is given to covered option writing, which could be
argued is the best investment strategy available to the public investor.
By the time you’ve consumed Dorsey’s thoughts and
observations, you will have gotten your money’s worth, and hopefully
plenty of useful advice on how the market really works.
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