Not many may have heard about him,but during his trading career he has achieved a feat very few fund managers can boast about; his name is Monroe Trout. He is one of the very few traders who have been able to make consistent profits using minimal risk. According to the book, “The New Market Wizards”, after a survey carried out over a period of five years, Monroe Trout was found to have an average return of 67%. He was also profitable in 87% of all the months in consideration. This article is aimed at giving an insight into the mind of the great man called Monroe Trout.
Monroe Trout’s trading tactics involved pattern recognition backed by statistical data; essentially he studied price data and identified patterns that could be traded profitably. Some of the very well known candle stick patterns can be seen below.
Monroe did not blindly trade these price patterns, he selected patterns he felt were profitable after extensively testing them on past price behavior. Even after the systems gave indications of whether to buy or sell, all the trades were taken at his discretion; this is because he had to consider other factors such as fundamental announcements and data.…