Book Review: The Art of Execution

The Art of Execution, this is the book I like for two reasons. The first reason is, it is written in a simple and clear way. This is the style I like the most. The second and the most important, it changed some preconceived convictions in my mind. I’ll explain what I’ve learned and what’s my action plan.

book-cover-the-art-of-execution

1, What I’ve learned

a, 80/20 rule holds in portfolio profits, which means 80% profits come from 20% investment ideas/stocks/trades. You need at least 1 or 2 big winners to succeed.

b, Portfolio should be relatively concentrated rather than over diversified. If you didn’t do any research, then choose the diversified way. If you’ve done in-depth research, then focus on your top ideas. Be prepared to invest big.

c, Some investor has 60% bets wrong but still make money. Because the losses are small while the wins are big.

d, Have the patience to let the big winners unfold in months and years. Avoid to take the profit too quickly.

e, When there is a losing trade, either stop the loss or invest more. The worst action is to do nothing but wait. Definitely you need to take action.

g, Size of positions matters. If you do long, lower price always matches with higer position. For example, if you do long, when price go up, you buy less; when price go down, you buy more. If you do short, when price go up, you sell more; when price go down, you sell less.

2, My action plan

e, Review the summary above to see if I will stick to those findings. Human being’s perceptions change from to time. So it is meaningful to review previous convictions periodically.

f, Adjust my trading postioning habit. For example, if I allocate 300k capital for a long trade, my first order will be 50k. If it is filled and the price go down, I will place the scecond order with 100k. If it is also filled, I will place the third order with 150k. The price gaps between two adjacent orders should be meanningflly large enough, cannot be too narrow.

P.S.: This is the first book I read on electronic devices. I purchased a Kindle Oasis and installed Kindle apps on my iMac and iPhone. It is very convient for me to use all the fragemented time to read.

 

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