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The Next Perfect Trade: A Magic Sword of Necessity
Win a free kindle copy of this book!
8 days and 17:31:41
100 copies available
U.S. only
'The Next Perfect Trade' articulates a set of principles that can be applied in discovering superior trades; those that will be profitable in the broadest range of economic scenarios. The book shifts focus from forces that drive markets to forces that drive successful trades. The robust performance of this approach has inspired the subtitle 'A Magic Sword of Necessity'.If you think of investing as a rigorous intellectual battle, you need to prepare for it thoroughly. Get in proper shape. Learn your moves, acquire your armor, your shield, your helmet and your battle horse. A magic weapon will be wasted if you get killed by the market's first arrow. Every chapter in this book represents a step towards mastering the sword of necessity. Taking each of those steps has its own merit. Both aspiring and experienced investors can find value in this book long before the advanced concepts, such as "necessity" and "dominance," are fully introduced. And with complete training and equipment, this weapon may give you a devastating advantage.
176 pages, Kindle Edition
First published September 7, 2015
59 people are currently reading
573 people want to read
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Displaying 1 - 8 of 8 reviews
January 30, 2017
A very unique trading book that I would recommend to anyone in the business. The author is definitely very qualified and effectively shares his framework of macro trading to the reader. There aren't very many books out there that do this. You don't necessarily have to agree with everything in his framework, but can take pieces here and there for your own improvement which is what the author intends. His trading style is definitely geared towards the longer term (a few years).
The book is split into three parts. In the first part, he discusses the qualities that he thinks makes an individual trade a good one. Among the qualities that he places emphasis are going with the trend and positive carry. He really points out that fighting against carry in most situations is a lost cause. It's clear that the author doesn't prefer the "fading" type of trades.
The second part discusses execution of the idea. It gets a little interesting here. The author doesn't seem to believe in the traditional notion of placing stops. His main argument is that too often, traders will get whipped around even their idea is correct. I can't say I agree with him, but given his trading horizon, it does make sense. His alternative is to simply cut down the position size. In this section of the book, he also goes into his sizing of his positions and how he trades specific markets (ex. adds to FX positions as they go in his favor vs. adds to interest rate positions as they go against him).
Finally, the third part of the book is probably the most unique and insightful. The author discusses what makes a trade dominant. He introduces us to "concurrent necessity". Macro trades are often linked and there is always a dominant trade (necessary).
He uses basic mathematical logic to argue his case. If A implies B, but B doesn't imply A, then B is the necessary. If being a salmon implies being a fish, but being a fish doesn't imply being a salmon, then being a fish is necessary. With regards to a trade, he uses the case shorting US front end rates vs. shorting EURUSD in 2014. He argues that shorting US front end rates is A, while shorting EURUSD is B. If the Fed tightens at a faster pace, then the dollar will rally (A implies B). However, if the dollar rallies, it does not necessarily mean higher US front end rates (B doesn't imply). Thus, shorting EURUSD (B) is the dominant trade. As a trader, you should always be seeking dominant trades.
To conclude, he calls the perfect a trade, a combination of two trades that share the qualities he has discussed in the book, but which neither may fail with the other succeeding.
It's a pretty quick read and definitely worthwhile for anyone in trading.
The book is split into three parts. In the first part, he discusses the qualities that he thinks makes an individual trade a good one. Among the qualities that he places emphasis are going with the trend and positive carry. He really points out that fighting against carry in most situations is a lost cause. It's clear that the author doesn't prefer the "fading" type of trades.
The second part discusses execution of the idea. It gets a little interesting here. The author doesn't seem to believe in the traditional notion of placing stops. His main argument is that too often, traders will get whipped around even their idea is correct. I can't say I agree with him, but given his trading horizon, it does make sense. His alternative is to simply cut down the position size. In this section of the book, he also goes into his sizing of his positions and how he trades specific markets (ex. adds to FX positions as they go in his favor vs. adds to interest rate positions as they go against him).
Finally, the third part of the book is probably the most unique and insightful. The author discusses what makes a trade dominant. He introduces us to "concurrent necessity". Macro trades are often linked and there is always a dominant trade (necessary).
He uses basic mathematical logic to argue his case. If A implies B, but B doesn't imply A, then B is the necessary. If being a salmon implies being a fish, but being a fish doesn't imply being a salmon, then being a fish is necessary. With regards to a trade, he uses the case shorting US front end rates vs. shorting EURUSD in 2014. He argues that shorting US front end rates is A, while shorting EURUSD is B. If the Fed tightens at a faster pace, then the dollar will rally (A implies B). However, if the dollar rallies, it does not necessarily mean higher US front end rates (B doesn't imply). Thus, shorting EURUSD (B) is the dominant trade. As a trader, you should always be seeking dominant trades.
To conclude, he calls the perfect a trade, a combination of two trades that share the qualities he has discussed in the book, but which neither may fail with the other succeeding.
It's a pretty quick read and definitely worthwhile for anyone in trading.
October 1, 2019
Amazing concepts
So well though out and mind blowing in it’s clean logic this book is worth not just the reading time but the additional hours you spend making sure you understand Alex’s key points
So well though out and mind blowing in it’s clean logic this book is worth not just the reading time but the additional hours you spend making sure you understand Alex’s key points
May 7, 2020
Excellent
I think this book does an excellent job of laying out trade structuring and the logic required to make dominant trades.
I think this book does an excellent job of laying out trade structuring and the logic required to make dominant trades.
March 20, 2023
The Next Perfect Trade is a valuable book about the philosophy of trading. It has a similar flavour to Soros on Soros, interspersing somewhat abstract philosophical arguments with real market wisdom and examples of trades.
Gurevich discusses his framework for identifying macro trades. In brief, they should align with the long-term expected value (i.e. taking into account trends and carry), involve simple instruments, and be logically dominant.
The idea of dominant trades is something new to me (the other points, while excellently explained, have been discussed in various other texts). Literally starting from first principles (modus ponens), Gurevich identifies several logical truths:
- We should trade on necessary conditions rather than sufficient conditions, for they are correct in a broader range of scenarios
- More specifically, we want concurrent necessity: if by the time A happens, B must have already happened, then it does not make sense to bet on A.
Even if this was my only takeaway from the book, it will have been worth it: a simple razor (that is common sense once you’ve chewed through the logic) that can help choose between trade expressions.
Gurevich’s trading style is unlikely to be completely applicable to many finance professionals: few have a mandate as flexible as his, both in terms of the breadth of asset classes, and the tolerance for drawdowns. But many of his ideas are still widely applicable, and it matches advice I have heard first-hand from several traders and PMs, for example: “don’t get cute” with trade implementation, don’t fight the Fed, trade with the trend, etc.
I want to find more examples of this type of book: new theoretical frameworks, applied to practical examples and distilled into key takeaways (Geopolitical Alpha is another example).
My highlights here.
Gurevich discusses his framework for identifying macro trades. In brief, they should align with the long-term expected value (i.e. taking into account trends and carry), involve simple instruments, and be logically dominant.
The idea of dominant trades is something new to me (the other points, while excellently explained, have been discussed in various other texts). Literally starting from first principles (modus ponens), Gurevich identifies several logical truths:
- We should trade on necessary conditions rather than sufficient conditions, for they are correct in a broader range of scenarios
- More specifically, we want concurrent necessity: if by the time A happens, B must have already happened, then it does not make sense to bet on A.
Even if this was my only takeaway from the book, it will have been worth it: a simple razor (that is common sense once you’ve chewed through the logic) that can help choose between trade expressions.
Gurevich’s trading style is unlikely to be completely applicable to many finance professionals: few have a mandate as flexible as his, both in terms of the breadth of asset classes, and the tolerance for drawdowns. But many of his ideas are still widely applicable, and it matches advice I have heard first-hand from several traders and PMs, for example: “don’t get cute” with trade implementation, don’t fight the Fed, trade with the trend, etc.
I want to find more examples of this type of book: new theoretical frameworks, applied to practical examples and distilled into key takeaways (Geopolitical Alpha is another example).
My highlights here.
February 3, 2016
Investing as a general theme is one of the reading topics I've selected for 2016. After reading several classics that I hadn't yet read, I thought I would move on, since those classics didn't offer anything I wasn't already using in my financial life or had learned in business school or otherwise. After reading this, I realize there is more I can read and learn from. This book is more specific, advanced, and current than what I've been reading. Specifically, it covers how the author structures his own trades. So in that sense, it is not a book of general principles, but rather "what works and what has worked" for one experienced trader. He is gifted at understanding macro movements in the market and how you can construct superior and dominant trades based on these movements.
March 1, 2020
I have very mixed feelings about this book. The author is a very intelligent person, and clearly knows his stuff. However his trading record is pretty mixed, among other things running a hedge fund that immediately went bust. After hitting it big with a long bonds trade recently, he's reached a Eureka state where apparently he seems to think he's conquered the markets.
There's some very interesting ideas here and I've noted a few things to consider when planning big macro trades myself. However the author is not particularly likable and the book serves little function for the majority of investors. Only for global macro specialists who don't mind a rather clunky presentation.
There's some very interesting ideas here and I've noted a few things to consider when planning big macro trades myself. However the author is not particularly likable and the book serves little function for the majority of investors. Only for global macro specialists who don't mind a rather clunky presentation.
February 10, 2016
"Chickens are concurrently sufficient for eggs, but eggs are not concurrently sufficient for chickens"
September 10, 2022
Alex Gurevich's writing never fails to disappoint. This book is essential for all who trade and his years of experience culminate to this one book that is akin to a trading bible.
Displaying 1 - 8 of 8 reviews