So Tim Sykes sent me a pre-lim copy of his new book, An American Hedge Fund. It was released October 1st, I received it in September, but since everyone was posting their review on the 1st of October, I thought I’d help him out and give a little hype once the big boom of press releases and blog reviews fizzled off a little bit.

You may have caught Tim Sykes on CNBC in random interview spots midday or his appearances during CNBC’s 1 million dollar stock picking contest. He was a guest contributor a few times. Maybe it was the obscure internet show Wall Street Warriors where he was one of the stars? I saw him on CNBC.

The story goes like this, the dude turned $12,000 of his bar mitzvah cash into more than 2 million bucks (give or take a few hundred thou – my memory is squishy). Without commissions thats a 16566% return.

Tim took monster risks and really put his money to work everyday. Buying big lots of penny stocks during the 1999-2000 runup.

Tim, like many stock bloggers and other people out there, developed his own “systems” and found patterns that worked for him.

The book then chronicles Tim’s move into starting his own hedge fund. Now, anyone who is obsessed with the market and achieves dramatic returns such as what Tim experienced is naturally going to feel some invincibility. I have to say I would probably want to do the exact same thing. I actually want to do the same thing now and I’ve never turned 12k into 2 million. However, the “don’t talk about your hedge fund” rules have me wanting to stick to my desk for awhile longer.

He danced around explaining a successful pattern/trading strategy (however crazy it may be to me) that worked amazingly well. Then he has to adapt to realizations that his current strategy needs to change as the market topped and turned down. His shorting only strategy probably accounts for his poor performance in 2003; One of the best uptrends in market history.

Why I related to this book and why you might too

For the last 7 years I’ve been building systems and creating lists of workable/successful patterns and I continue to do that everyday. Like Tim I’ve had to adapt over the years when some crazy system I trusted blows up. In 2002 I had a system that produced 100% gains inside of 5 months trading index funds. By the time the year was over I gave back 90% of those profits, however, I was hooked. I knew inside those 5 months that making incredible gains was possible. You really felt Tim’s excitement as he talks about the different trades and how the gains were piling up fast. This struck a chord with me.

Simplicity. Tim made these mega gains utilizing simple methods. For the last 2 years I’ve thrown complexity out the window and have focused on simple trading methods and I’ve never had more steady success.

Hope. If you’re like me, you need hope to continue the search and to continue building systems that can beat the market. Without hope that it can be done, you might as well pack it in and invest in a mutual fund. For many people this will be a much more profitable strategy.

Once you find a successful trading system like Tim did you also need to act on your signals that your system gives you everytime. Tim did that at almost every juncture. If he didn’t act when he did, he probably wouldn’t have published a book on how he turned 12k into 2 million, and I wouldn’t be reviewing it. Huge lesson for anyone – if your system is good, follow it.

While most wannabes twiddle away backtesting strategies and utilizing paper trading accounts, frozen with fear of ever trading with real money, Sykes shows how executing a game plan is extremely profitable. Every stock blogger should read this book.

Other items I found interesting

The hedge fund industry. I don’t know much about it other than they make big bucks. I didn’t realize all the rules and red tape.

How supportive or not supportive his family was. My mom still says to me every once in awhile, “Why don’t you stop that trading stuff.” She only remembers the year I gave back 90% of my profits.

What the book lacked

Specifics on the trading strategies. The strategies were cloudy at best, however, that really may have been the way Tim traded, or he just didn’t translate that part of his memory onto the pages. Moreover, he may have been saving the specifics for his new DVD where he lays out the patterns. Doh.

Order your own copy of, Timothy Sykes, An American Hedge Fund

Thanks for reading

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