Contrarian Ripple Trading: A Low-Risk Strategy to Profiting from Short-Term Stock Trades

Here is a trading book that does not promise the world to the reader, but rather speaks frankly of how a system can help in taking advantage of unlikely opportunities in the stock market. It takes a contrarian and a very confident person to begin a book with the statement that these authors began with. Where so many find buying opportunities when everyone is flocking to the same stocks, these traders found a way to recognize the real value of stocks that others seemingly have abandoned. Additionally, this book encourages the use of discipline and an actual engagement with the stocks as keys to success. Instead of peddling a product that tries to convince the buyer that they can make money in stocks with doing hardly nothing at all, the authors advocate basic understanding, engagement, and knowledge as the keys to finding profits in stocks. Can’t wait to employ these techniques.

Finally, a strategy that fits perfectly with my personality type and investment mindset! Contrarian Ripple trading is sure to become a household name (at least in the households of wise traders). Aidan McNamara and Martha Brozyna bare all, from their detailed index of each trade over a twenty six month period (not one for a loss!) to their thoughts on which stocks can be successfully ‘ripple’ traded. They’ve even included a brief history of how the modern market has evolved from it’s simple days of traders meeting under a buttonwood tree in Manhattan.

In my short history of investing and trading (and this book definitely helps define these two terms), I’ve come to grips with what my two fatal blunders are: holding losers until I just can’t take it anymore and settle for a loss, and cutting my profits short. Contrarian ripple trading actually encourages me to exercise both of these so-called blunders by changing the dynamics of my thought process before I even enter a trade. Knowing the right stocks to pick, when to buy, and exactly when to sell has completely transformed my trading style, not to mention my bottom line. The only problem I have with this book is that it wasn’t written ten years ago when I began my little dance with Wall Street.

Please keep in mind, this is by no means a ‘get rich quick’ plan meant to replace your day job. Both the authors and myself have benefited from this alternate stream of income that flows with the market, and as such is prone to vary in regard to its consistency. That being said, it should be noted that each year’s net income from the trades indexed at the end of the book has continued to increase. This may be due to the authors using the previous year’s profits to ripple trade a larger number of stocks, or it may be the case simply because they’ve grown more comfortable with the strategy’s validity and proven track record.

3/4 of the book consists of common theories and knowledge about stock markets / a summary of other books.
The “own analysis” part of the book is weak. Essentially it is the simple rule of buying good stocks (P/E, dividend yield etc.) around the low of the 52 week trading range and sell them as soon as the position reaches a predetermined profit target (e.g. invest $3000 and sell when you earned a profit of $40). The strategy has been tested only in a period of very positive general stock market performance and therefore doesn’t tell you anything about whether it works or not outside of the testing period. There are many other books written by real investment professionals that can teach any reader more about investing.

The short-term trading system described in this book is so simple, so intuitively obvious, that I could not believe that someone had not written a book outlining it before. I don’t watch hours and hours of financial TV, read the WSJ religiously or scrutinize the financial statements of every company in which we own stock, and therefore have for years been content to leave investing and trading to my husband. I have simply never had the time or inclination to immerse myself in the world of finance to the degree I thought would be necessary to become a good investor or stock trader. This book outlines a strategy that I can follow with an amount of market research that I am capable of fitting into my already demanding schedule. McNamara and Brozyna’s system is one that any reasonably intelligent person can master, but it requires self-discipline (i.e., keeping in check the fear and greed that can so easily undermine a trading strategy). It is not a get rich quick scheme, but a good, solid and fairly conservative short-term trading plan. If this sounds like a contradiction in terms, it isn’t. The authors provide their complete trading record in the book, and the numbers speak for themselves. They are not hucksters offering “think and grow rich” pep talks and stories about parlaying a $5,000 investment into a million dollar portfolio. Their profits from each trade are modest, but taken as a whole, the results are most impressive. For those who want to jump right into the trading system, chapters 4 and 5 explain the details. The first three chapters provide more general background on stock trading, and in addition to shedding more light on the Contrarian Ripple Trading system, they make for highly readable, entertaining history.