Spencer Li

Fed Hikes Rates by 0.25%: What’s Next for the Markets?

Thumbnail Fed Hikes Rates by 0 25 Whats Next for the Markets

Thumbnail Fed Hikes Rates by 0 25 Whats Next for the Markets

The Federal Reserve recently raised its interest rates by a quarter point, signaling that more rate increases are on the horizon.

Despite this stance, investors are betting on only one more quarter-point increase, with some suggesting that the Fed may even cut its target range back to its current level by the end of next year.

This disconnect between the Fed’s message and what investors believe it will do poses a problem, as a drop in long-term interest rates and a stock market rally could hamper the Fed’s efforts to control inflation.

The Fed’s past behavior is partly to blame for this disconnect, as in previous cycles, it has tended to start cutting rates shortly after it finished raising them.

However, the Fed’s actions will depend on inflation and employment in the coming months.

There is a risk that investors may see the central bank’s hawkish talk as mere jawboning and that the Fed itself doesn’t believe its own message.

Despite the Fed’s recent rate hike, the S&P 500 and Nasdaq Composite closed 1.1% and 2% higher, respectively.

The stock market has been rallying since October 2022, with the S&P 500 up 17% since then and 8% since the start of the year.

There are conflicting opinions among experts on what this means for the future of the market.

Michael Burry predicts a second round of inflation spike when the Fed cuts interest rates again, while Nassim Taleb believes that the next 15 years will be harder than the previous 15 due to higher interest rates.

On the other hand, Mark Spitznagel predicts a major market crash as bad as the Great Depression.

A deeper market crash may be possible, but it is not visible at this point in time.

Historically, US midterms have resulted in positive S&P 500 performance, with a 7.3% increase after three months, a 15.1% increase after six months, and a 16.3% increase after 12 months.

Additionally, a recession is not correlated with S&P 500 performance and stock market performance after a recession is usually bullish.

The Fed has hiked rates by 450 basis points in just 10 months, far more than what was initially expected.

Ongoing rate increases will be necessary to get inflation back to the 2% target over time, with at least two more rate hikes projected in the future.

If the economy performs as expected, there will be no rate cuts this year.

The Chairman of the Fed, Powell, emphasized that there is still more work to be done with respect to inflation control and monetary policy.

The risk of doing too little is difficult to manage, while over-tightening can be addressed with available tools.

The labor market remains extremely tight, and reducing inflation is likely to require a period of below-trend growth and softening of labor market conditions.

Financial conditions have been loosening since mid-October after tightening earlier in the year, and the Fed is cautious about declaring victory in controlling inflation, viewing the job as ongoing.

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Spencer Li

What is the NFP (Non-Farm Payroll) and How to Trade it?

Thumbnail What is the NFP Non Farm Payroll and How to Trade it

What Is the Non-Farm Payroll (NFP), and How Do Traders Use It?

Last updated: 3 July 2026 · By Spencer Li, CFTe

The Non-Farm Payroll (NFP) is a monthly report from the US Bureau of Labor Statistics that measures the change in the number of US jobs, excluding farm workers, government, private household, and non-profit employees. It is released on the first Friday of each month and is one of the most closely watched economic indicators in the world, because it tells you how healthy the US labour market is. Traders watch it because a strong number (more jobs than expected) tends to support stocks and a stronger US dollar, while a weak number tends to do the opposite. The single most useful thing to understand is this: the market does not react to the raw number, it reacts to the surprise, meaning how far the actual figure lands from what economists expected.

So the headline jobs figure is only the start. The unemployment rate, average hourly earnings, participation rate, and average workweek all sit inside the same report, and on any given month one of them can matter more than the jobs number itself. Here is what the NFP is, where each number comes from, and how traders actually read it.

What is the NFP, and where did it come from?

The NFP measures the change in the number of employed people in the US during the previous month, leaving out farm workers, government employees, private household staff, and non-profit workers. It is widely treated as a key gauge of US labour-market strength, and it is published by the Bureau of Labor Statistics (BLS), a branch of the US Department of Labor.

The report has roots in the early 20th century, when the US government began collecting employment data in a structured way. It became a regular monthly release in the 1940s, and it has been a core economic indicator ever since, used by economists, investors, and policy makers to read the health of the US economy.

How is the NFP data calculated?

The BLS builds the report from two separate surveys, and it helps to know which is which.

The Establishment Survey (also called the payroll survey) collects data from a sample of around 141,000 businesses and government agencies, covering roughly one-third of all non-farm employment in the US. It counts the number of people on payrolls and the hours they worked. This is the survey the headline NFP jobs number comes from.

The Household Survey collects data from a sample of around 60,000 households. It asks about the employment status of individuals, including who is unemployed and actively looking for work. This is where the unemployment rate comes from.

The headline figure is then compared month over month: this month’s employment level against last month’s. The data is also seasonally adjusted, meaning the BLS strips out predictable patterns (like extra hiring around the holidays) so you are looking at the underlying trend, not the calendar.

Do note that two surveys can disagree in any given month. When the headline payroll number looks strong but the household survey looks weak, that gap is itself a talking point, and it is one reason a single NFP release rarely settles the debate on its own.

What are the key numbers in the NFP report?

The report is more than one figure. Five numbers do most of the work, and the one that matters most shifts with the economic backdrop. Here is the full set, side by side, with what each one tells you and which way it usually pushes markets.

Data pointWhat it measuresReads as strong whenTypical market reaction to a strong/upside reading
Non-farm payroll employmentChange in non-farm jobs vs last monthThe number rises (positive)Stocks up, US dollar up (growth signal)
Unemployment rate% of the labour force jobless but seeking workThe rate fallsRate-hike expectations up, dollar up, risk assets can wobble
Average hourly earningsAverage pay per hour across non-farm workersEarnings rise faster than expectedInflation fear up, rate-hike odds up, dollar up, stocks can fall
Participation rate% of the population working or seeking workThe rate risesRead as labour-market strength
Average workweekAverage weekly hours workedHours riseRead as economic strength

A quick note on direction, because it trips people up. More jobs is “good” for the economy, but a very hot report (jobs and wages both running hot) can be read as bad for stocks, because it raises the odds the Federal Reserve hikes interest rates to cool inflation. Good news for Main Street is not always good news for the stock market on the day. That tension is exactly why the report is worth understanding rather than just reacting to.

How do traders and investors actually use the NFP?

At the simplest level, the NFP is a read on the health of the US economy, and the economy drives corporate profits, interest rates, and the dollar. A strong report (more jobs) is generally read as a growing economy, which can lift demand for stocks and strengthen the dollar. A weak report (fewer jobs) is read as a slowing economy, which can pull money out of stocks and into safer assets like bonds.

But the experienced read goes deeper than the headline. Here is how each number can shift a decision:

  • Payroll employment. Strong job growth supports a risk-on posture (more weight to stocks). Weak growth pushes some traders toward safer assets like bonds.
  • Unemployment rate. A low and falling rate can raise the odds the Federal Reserve hikes rates to keep inflation in check, which tends to strengthen the dollar and pressure riskier assets.
  • Average hourly earnings. Wages rising faster than expected is an inflation signal. That can pull rate-hike expectations forward, lift the dollar, and weigh on stocks. In some months this is the number that moves markets more than the jobs figure.
  • Participation rate. A falling rate can read as a weak labour market; a rising one as strength.
  • Average workweek. Rising hours suggest a strong economy; falling hours suggest a slowdown.

Personally, I would caution any newer trader against treating the NFP as a one-way switch. The report’s market impact depends heavily on expectations. A strong number that everyone already expected can do nothing, while a small miss against a consensus forecast can send the dollar flying. You are not trading the number. You are trading the gap between the number and the forecast.

Where the human edge comes in

An economic calendar will tell you the NFP drops on the first Friday at 8:30am ET, and a data feed will print the figure the instant it lands. That part is free, and it is the same for everyone. What the feed will not do is tell you to stand aside through the first violent minute of whipsaw, weigh the wage number against the jobs number when they disagree, or size a position for an event this volatile. The data is the easy part. Deciding whether this particular release actually offers a trade, or whether the smart move is to do nothing, is judgment. That is the first of the Five Edges a machine cannot trade for you.

Should you trade the NFP release directly?

Honestly, news trading on the NFP is one of the harder ways to make money, and I would not point a beginner at it first. The first few minutes after release are fast, the spreads widen, and price often spikes one way before reversing the other. Plenty of accounts have been stopped out on both sides of the same five-minute candle.

For most traders, the NFP is more useful as context than as a trade trigger. It tells you what regime you are in (is the economy strengthening or slowing, is the Fed likely tightening or easing) and you let that shape the swing trades you take in the days that follow, on clean setups, away from the chaos of the release minute. That is the calmer, more repeatable way to use it.

FAQ

What is the Non-Farm Payroll (NFP)?
The NFP is a monthly US Bureau of Labor Statistics report that measures the change in the number of US jobs, excluding farm, government, private household, and non-profit workers. It is a key gauge of US labour-market health and is released on the first Friday of each month.

When is the NFP released?
It is released on the first Friday of each month by the Bureau of Labor Statistics, at 8:30am US Eastern Time, covering the previous month’s jobs data.

Why does the NFP move the markets?
Because it is a fast, broad read on the US economy, and the economy drives corporate profits, interest rates, and the dollar. Markets react mostly to the surprise, meaning how far the actual figure lands from what economists forecast, rather than to the raw number itself.

Is a high NFP number good or bad for stocks?
More jobs is good for the economy, but a very hot report (strong jobs plus rising wages) can be bad for stocks on the day, because it raises the odds the Federal Reserve hikes interest rates to cool inflation. Direction depends on the inflation and rate backdrop.

Which NFP number matters most?
It changes with conditions. The headline jobs figure is the default focus, but when inflation is the market’s worry, average hourly earnings can matter more, and the unemployment rate drives expectations for the next Fed move.

Now that you know what each number in the report is telling you, the question is what you do with it. Will the NFP go into your trading toolbox as a trade trigger, as context, or as something you deliberately sit out? Let me know in the comments.

And if you want to see how the macro calendar fits into a complete routine, read the pillar: The Definitive Guide to Swing Trading.

Want a routine that survives news days? Grab the free 15-Minute Swing Trading Starter Kit. It is the exact process I use to scan once a day and trade any market in 15 minutes, no staring at the screen through the NFP release required.

About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe) with 15 years of trading across stocks, forex, crypto, commodities, and bonds. His trade log is public, 404 trades, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Education, not financial advice. Synapse Trading is not licensed by MAS to advise on investment products. Trading carries risk of loss; past performance is not indicative of future results.

Related

Definitive Guide to Swing Trading (pillar) · How to trade economic news and the economic calendar · Fundamental vs technical analysis · What moves the US dollar

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Spencer Li

Book Summary: Fortune’s Formula by William Poundstone

thumbnail Book Summary Fortunes Formula The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone

Fortune’s Formula by William Poundstone: the Kelly Criterion, and How Traders Actually Use It

Last updated: 3 July 2026 · By Spencer Li, CFTe

Fortune’s Formula by William Poundstone is the story of the Kelly criterion, a formula that tells you how much of your money to bet on a single opportunity to grow your bankroll fastest over the long run without going broke. John Kelly, a physicist at Bell Labs, published it in 1956. The book traces how it travelled from information theory to blackjack tables (Edward Thorp), to Wall Street, and into the hands of gamblers, investors, and the military. The core idea is simple: bet a fraction of your capital that scales with your edge. The bigger your advantage and the better your odds, the more you commit. No edge, no bet.

The practical formula for an even-money bet is f = p − q, where f is the fraction of your bankroll to stake, p is your probability of winning, and q (which is 1 − p) is your probability of losing. For payouts that are not even money, it becomes f = (bp − q) / b, where b is the odds received (your reward-to-risk). For traders, the takeaway is not the algebra. It is this: size is a function of edge, and most people who blow up were not wrong about the trade, they were wrong about the size.

Here is what the book actually teaches, and how to use Kelly without it destroying your account.

What is the Kelly criterion?

The Kelly criterion is a position-sizing rule. It answers one question: given an edge, what fraction of my capital maximises the long-term growth rate of my bankroll?

Most people size by feel. They bet big when they feel confident and small when they are scared, which usually means biggest right before the loss that hurts most. Kelly replaces the feeling with a number. You feed in your win probability and your payout, and it returns the stake that grows your money fastest over a long series of bets.

The important word is long-term growth, not expected value. You can have a positive-expectation bet and still go broke if you size it too big, because one bad streak wipes you out before the math has time to work. Kelly is the line that separates “growing as fast as possible” from “growing, but flirting with ruin.” Bet more than full Kelly and your long-run growth actually goes down while your risk goes up. That is the part most people miss.

The story behind the book

John L. Kelly Jr. published the formula in 1956 in a Bell Labs paper on information theory. He was not trying to beat casinos. He was working on the rate at which information can be transmitted over a noisy line, and the same math turned out to describe how fast a gambler with an edge should grow a bankroll.

The person who carried it into the real world was Edward Thorp, the mathematician who used it to beat blackjack (the Beat the Dealer story) and later ran a hedge fund on the same principle. Poundstone follows the formula from Bell Labs to Las Vegas to Wall Street, with a cast that includes Claude Shannon (the father of information theory), mob-connected bookmakers, and the academics who spent decades arguing about whether Kelly was genius or recklessness.

William Poundstone is a science writer and journalist, a contributing editor at Discover, New Scientist, and Scientific American, and the author of Priceless: The Myth of Fair Value. Fortune’s Formula is his best-known book and was a New York Times bestseller.

A worked example: how Kelly sizing works in practice

Say you have a setup that wins 55% of the time and pays you 1-to-1 (you risk one unit to make one unit). Plug it in:

f = (bp − q) / b = (1 × 0.55 − 0.45) / 1 = 0.10

Full Kelly says bet 10% of your bankroll on that trade. On a $10,000 account, that is $1,000 of risk. To most traders, that is a terrifyingly large number, and that reaction is correct. Full Kelly is the maximum growth size, and it comes with brutal drawdowns. A run of bad luck at 10% per trade will cut your account in half and barely register as unusual.

That is why almost nobody trades full Kelly. They trade a fraction of it.

Full Kelly vs fractional Kelly

SizingStake on the example aboveLong-run growthDrawdown / ruin riskWho uses it
Full Kelly10% of bankrollFastest, in theorySevere, swings of 50%+ are normalAlmost nobody, in practice
Half Kelly5% of bankroll~75% of full Kelly’s growthRoughly half the drawdownMany professionals
Quarter Kelly2.5% of bankrollSlower but smoothLowConservative / uncertain-edge traders

The reason half Kelly is so popular is the trade-off it offers. You give up only about a quarter of your growth rate but you cut your drawdowns roughly in half. For a real human with a real stomach and a real career, that is a far better deal than chasing the theoretical maximum.

There is a deeper reason to size down too. Full Kelly assumes you know your edge exactly. You do not. Your “55% win rate” is an estimate from a finite sample, and it is probably optimistic. When your inputs are uncertain, betting the full Kelly fraction on a wrong number can put you above full Kelly on the real number, which is the worst place to be. Sizing down is your margin of safety against your own estimation error.

Personally, I never run more than a fraction of Kelly, and I cap it well below what the formula suggests. The formula gives you the ceiling. Your job is to stay comfortably under it.

How traders actually apply Kelly

You do not need to plug numbers into the equation before every trade. The useful part of Kelly is the principle, and it shows up in a few concrete habits:

  • Size scales with edge. A high-conviction setup with a strong reward-to-risk gets more capital than a marginal one. Same trader, same account, different size, because the edge is different.
  • No edge, no bet. If you cannot state why you have an advantage, Kelly says the optimal stake is zero. That is the formula telling you to stand aside.
  • Risk a fixed small fraction, not a fixed dollar amount. Risking 1% to 2% of your account per trade is, in effect, a conservative fractional-Kelly rule. As your account grows or shrinks, your position size moves with it.
  • Better odds and bigger edge both raise the size, but the size is capped. Even a great setup gets a ceiling, because a string of “great” setups can still lose in a row.

The thing Kelly protects you from is the single most common way traders die: being right about direction and wrong about size. You can have a genuine edge and still go to zero by betting too much of it on each trade. Kelly is the math that says exactly how much is too much.

Where the human edge comes in

A spreadsheet will compute the Kelly fraction in a second. What it will not do is tell you that your 55% win rate is really 51% once you stop cherry-picking your sample, or that you are about to override your own sizing rule because the last three trades won and you feel invincible. The formula is the easy part. Sizing honestly, against an edge you have not flattered, and holding that size when your gut is screaming to do otherwise, is the discipline. That is the discipline and sizing edge, one of the Five Edges no formula trades for you.

Should you read Fortune’s Formula?

Yes, if you want the story and the intuition behind position sizing. It is a narrative book, not a textbook. You will finish it understanding why sizing matters and where the idea came from, with a cast of memorable characters along the way. What it will not give you is a step-by-step trading manual, you have to translate the principle into your own rules yourself.

I would put it on the shelf next to the practical risk-and-sizing material, not in place of it. Read it for the why, then build your own fractional-Kelly rule for the how.

FAQ

What is the Kelly criterion in simple terms?
It is a formula that tells you what fraction of your money to bet on an opportunity to grow your bankroll fastest over the long run without risking ruin. The bigger your edge and the better your odds, the larger the fraction. With no edge, the optimal bet is zero.

What is the Kelly criterion formula?
For an even-money bet it is f = p − q, where p is your win probability and q is your loss probability. For non-even payouts it is f = (bp − q) / b, where b is the reward-to-risk odds. The result, f, is the fraction of your bankroll to stake.

Why do professionals use fractional Kelly instead of full Kelly?
Full Kelly gives the fastest theoretical growth but produces severe drawdowns and assumes you know your edge exactly. Half Kelly keeps about 75% of the growth while roughly halving the drawdown, and it leaves a safety margin for the fact that your edge is only an estimate.

Who wrote Fortune’s Formula and what is it about?
William Poundstone, a science writer and journalist. The book tells the history of the Kelly criterion, from John Kelly at Bell Labs through Edward Thorp’s use of it to beat blackjack and run a hedge fund, and how the same math applies to gambling and investing.

Can the Kelly criterion be used for stock trading?
Yes, as a position-sizing principle rather than a precise formula. Most traders apply it as a conservative fractional version, risking a small fixed percentage of the account per trade, and sizing up only when the edge and reward-to-risk genuinely justify it.

Now that you have the formula and the half-Kelly trade-off, the real question is the one most people skip: what is your honest edge, before you flatter it? Get that number right and the sizing takes care of itself. Let me know in the comments how you size your trades.

And if you want the wider reading list this book sits on, see the pillar: Best Investing and Trading Books of All Time.

Want the system the sizing plugs into? Grab the free 15-Minute Swing Trading Starter Kit. It is the exact routine I use to scan once a day and trade any market in 15 minutes, sizing included.

About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe) with 15 years of trading across stocks, forex, crypto, commodities, and bonds. His trade log is public, 404 trades, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Education, not financial advice. Synapse Trading is not licensed by MAS to advise on investment products. Trading carries risk of loss; past performance is not indicative of future results.

Related

Best Investing and Trading Books of All Time (pillar) · Position sizing and risk management · Beat the Dealer by Edward Thorp · The Five Edges

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Spencer Li

Book Summary: Forex Price Action Scalping by Bob Volman

thumbnail Book Summary Forex Price Action Scalping an in depth look into the field of professional scalping by Bob Volman

Forex Price Action Scalping by Bob Volman: Book Summary and Review

Last updated: 3 July 2026 · By Spencer Li, CFTe

“Forex Price Action Scalping” by Bob Volman is a practical, no-fluff manual for trading forex on very short timeframes using raw price action, no lagging indicators, on a tight bid-ask spread. It is best for traders who already know the basics and want a disciplined, repeatable scalping method, not for beginners or anyone uneasy with fast, high-pressure decisions. The core message is honest: scalping (taking many small, quick profits on tiny price moves) is a real skill, not a shortcut, and it asks for sharp focus, strong risk control, and emotional discipline most people underestimate. Volman teaches you to read the chart itself (support, resistance, the round number, the false break) rather than chase signals. My short verdict: a genuinely good book if scalping is the game you want to play, and a useful read even if it is not, because the price-action thinking carries over. Just go in knowing scalping is one of the harder paths in trading, not the easiest.

Here is what the book covers, what is worth keeping, and who should actually read it.

Who is Bob Volman?

Bob Volman is a professional trader with more than 20 years in the forex market, and he is widely respected for his work on price action (reading the chart’s own movement instead of relying on indicators). He trades and teaches a pure, discretionary style, and his books are treated as serious reference material by price-action traders. When someone with that long a track record sits down to write out exactly how he reads a one-minute chart, it is worth a careful read.

What is the book about?

The book is a complete walkthrough of one thing done well: scalping forex with price action.

It starts at the basics (what scalping is, how to read price action) and builds toward a full method, with specific setups, entry and exit rules, and a heavy focus on risk and mindset. Volman does not sell it as easy money. The main message is the opposite: scalping is potentially profitable but genuinely demanding, and it only works if you bring the right skills, knowledge, and discipline. That honesty is the best thing about the book.

10 key ideas from the book

These are the takeaways I would underline if I were reading it again.

  1. Reading market structure and price action is the foundation. Trends, support and resistance, and chart patterns come first, before anything else.
  2. Indicators are a supplement, not the engine. Tools like moving averages and stochastics can support your read on entries and exits, but the price action leads.
  3. Discipline and risk management are non-negotiable. Stop-loss orders and strict limits on capital at risk per trade are what keep you in the game.
  4. The psychology is the hard part. Controlling your emotions and holding discipline under pressure is harder than spotting the setup.
  5. Leverage cuts both ways. It can magnify profits and losses in equal measure, so use it with caution.
  6. Scalping demands total focus. You need to read charts fast and decide in real time, with no room to drift.
  7. You trade specific setups, not vibes. Success comes from identifying and trading defined chart patterns and price-action setups.
  8. A robust trading plan is built in advance. That plan must include risk rules and a clear plan for managing losses before they happen.
  9. Stick to the plan and avoid impulsive trades. Discipline means following your own rules even when the screen tempts you.
  10. Keep learning and adapting. Markets shift, and the scalper has to keep adjusting to current conditions.

How do you apply the teachings?

A book is only useful if it changes what you do at the screen. Here is how to put Volman’s ideas to work.

  • Trade defined chart patterns and price-action setups, not gut feel.
  • Build in risk management from the start: stop-loss orders and position sizing on every trade.
  • Write a trading plan, then actually follow it.
  • Practise discipline and emotional control as a skill, the same way you practise the setups.
  • Keep learning and adapt to current market conditions.
  • Use indicators alongside price action to refine entries and exits, not to replace your read.
  • Cap the capital at risk on each trade, and let the stop-loss enforce it.
  • Train yourself to spot trends, support and resistance, and patterns quickly.
  • Treat leverage with respect, and know its dangers before you size up.
  • Build the speed to analyse a chart and decide in real time.

The honest catch: scalping is capital-hungry and high-pressure

There are a few things Volman is upfront about that I want to repeat, because they are the parts people skip.

Scalping aims at very small price moves, so the math only works at size. That means it tends to need a larger amount of capital, and the same leverage that lifts the profit lifts the loss. The potential for gains is matched, bar for bar, by the potential for losses.

And it is not for everyone. If you are not comfortable with fast, high-pressure, screen-glued decision-making, scalping will grind on you. There is no shame in that. Knowing it is not your style is itself a useful conclusion to reach from reading the book.

Should you read it? A quick decision table

You are…Read it?Why
A complete beginnerLaterStrong price-action foundations help first; the scalping detail will overwhelm you
An intermediate trader wanting a defined methodYesThis is the sweet spot: a complete, rules-based scalping system to study
A swing or position traderOptional, but usefulYou will not scalp, but the price-action reading (false breaks, round numbers, support/resistance) transfers cleanly
Someone who hates fast, high-pressure tradingProbably notThe method demands real-time focus you may not want to live in daily
Looking for easy, passive returnsNoScalping is one of the more demanding paths, not a shortcut

Where the human edge comes in

Here is the part I keep coming back to. A platform can plot every level, flag every round number, and even auto-mark a clean false break for you. The reading is getting cheaper every year. What no tool hands you is the discipline to size the trade, the patience to skip the marginal setup, and the emotional control to take the stop without flinching. Volman spends as much ink on mindset as on setups for exactly this reason. The chart pattern is the easy part. Trading it like a professional is the judgment, and that is the first of the Five Edges no scanner can trade for you.

My take

Personally, I rate this book highly within its lane. It is honest, specific, and it teaches you to read the chart rather than worship an indicator, which is a habit that pays off whatever timeframe you end up trading. I do not personally scalp as my main game, I prefer low-risk swing trading where I can scan once a day and act calmly. But I still got value from how clearly Volman lays out price-action reading, and I would recommend it to any intermediate trader who is curious about short timeframes. Just keep your eyes open about the capital and the pressure it asks for.

FAQ

Is “Forex Price Action Scalping” by Bob Volman good for beginners?
Not as a first book. It is best for intermediate traders with some forex knowledge. A complete beginner should build price-action foundations first, then come back to the scalping detail.

What is forex price action scalping?
It is a style of trading forex on very short timeframes (often the one-minute chart) by reading raw price action, support, resistance, round numbers, and false breaks, to take many small, quick profits, without relying on lagging indicators.

Do you need a lot of capital to scalp?
Generally yes. Scalping targets very small price moves, so the strategy tends to need more capital to be worthwhile, and the leverage that boosts profits boosts losses just as much.

Is the price-action method in the book useful if I do not want to scalp?
Yes. The way Volman reads charts (false breaks, round numbers, support and resistance) carries over to swing and position trading, even if you never trade a one-minute setup.

Is scalping profitable?
It can be, but it is one of the more demanding styles. It requires sharp focus, strict risk management, and emotional discipline, and the potential for losses matches the potential for gains. It is a skill, not a shortcut.

Now that you have the summary, would you add this one to your reading list? And if you have already read it, what stuck with you most? Let me know in the comments.

If you want the wider shortlist, read the pillar: Best Investing and Trading Books of All Time.

Want a calmer way to trade than scalping? Grab the free 15-Minute Swing Trading Starter Kit, the exact routine I use to scan once a day and trade any market in 15 minutes.

About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe) with 15 years of trading across stocks, forex, crypto, commodities, and bonds. His trade log is public, 404 trades, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Education, not financial advice. Synapse Trading is not licensed by MAS to advise on investment products. Trading carries risk of loss; past performance is not indicative of future results.

Related

Best Investing and Trading Books of All Time (pillar) · Trading in the Zone by Mark Douglas (review) · Reminiscences of a Stock Operator (review) · Definitive Guide to Price Chart Patterns

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Spencer Li

Book Summary: Following the Trend by Andreas Clenow

thumbnail Book Summary Following the Trend Diversified Managed Futures Trading by Andreas Clenow

“Following the Trend” by Andreas Clenow: Book Summary, Key Ideas, and Who Should Read It

Last updated: 3 July 2026 · By Spencer Li, CFTe

“Following the Trend: Diversified Managed Futures Trading” by Andreas Clenow is a practical guide to systematic trend following, the strategy of using futures contracts across many markets to ride large price moves in either direction. Clenow, a hedge fund manager and CIO of Zephyr Asset Management with over 20 years in the industry, walks you through how managed futures actually work, why diversification across markets is the engine of the whole approach, and how to evaluate performance honestly using metrics like the Sharpe ratio and drawdown. The core thesis is simple: prices in different markets tend to trend, and a diversified, rules-based system that follows those trends can be a valuable addition to a portfolio. The catch is that it requires real understanding and the stomach for long, painful drawdowns. Personally, I rate it as one of the clearest, least hyped books on the subject. It is best for traders and portfolio managers who want the mechanics of trend following, not beginners looking for a first trading book.

Here is what the book teaches, the ideas worth keeping, and who should actually read it.

What is “Following the Trend” about?

The book explains the ins and outs of managed futures (a strategy that trades futures contracts to bet on the direction of price moves across stocks, bonds, currencies, and commodities). Clenow covers the types of contracts typically used, the benefits and risks of the approach, and how to build a diversified portfolio that incorporates trend following.

What makes it useful is that he does not stop at theory. He shows real-world examples of strategies he has used himself, walks through the mathematics behind trend following, and is honest about where it goes wrong. The main message is that managed futures can earn a real place in a diversified portfolio, but only if you understand the market and the strategies underneath it.

This is not a get-rich book. It is a how-the-machine-works book.

Who is Andreas Clenow?

Andreas Clenow is a hedge fund manager and the CIO of Zephyr Asset Management. He has over 20 years of experience in the industry, has been a frequent speaker at industry conferences, and has been interviewed and quoted across several financial publications.

That background matters for how you read the book. Clenow writes from inside a real fund, not from the sidelines, so the risk-management and portfolio-construction chapters carry weight that a purely academic treatment would not.

The 10 key ideas, in one table

I find a book like this is easier to hold in your head as a list of claims than as prose. Here are the ten ideas that do the heavy lifting, and why each one matters.

#Key ideaWhy it matters
1Managed futures uses futures contracts to bet on the direction of price moves across many marketsIt is directional and systematic, not a stock-picking exercise
2Prices in different markets tend to trend, and following those trends can be profitableThis is the entire thesis the strategy rests on
3The book covers contract types, benefits, risks, and how to build a diversified portfolioGives you the full mechanics, not just the highlights
4Clenow shows real strategies he has used successfully himselfGrounds the theory in a practitioner’s actual book
5Risk management is central, and you need a defined plan before you tradeTrend following lives or dies on how you control losses
6Diversification across markets is what mitigates riskSpreading across uncorrelated markets is the core engine
7He maps the managed futures industry and the players in itContext for where your strategy sits in the wider market
8The book examines performance over time and how to evaluate strategiesTeaches you to judge a system, not just admire its returns
9He compares fund types, including commodity trading advisers (CTAs)Helps you choose the right vehicle for your goals
10It closes on the future of managed futures, its opportunities and challengesFrames the strategy as evolving, not a finished answer

A few of these deserve a closer look.

Diversification is the strategy, not a garnish

The single most important idea in the book is that diversification across many markets is not a nice-to-have. It is the engine. A trend follower wins because, across dozens of uncorrelated markets, a few large trends pay for the many small losses. Run the same system on one or two markets and you have removed the thing that makes it work.

Risk management before returns

Clenow spends real time on setting up a risk-management plan, because trend following produces long stretches of small losses while you wait for the big trends. Without a plan that sizes positions sensibly and caps your exposure, the drawdowns will shake you out before the payoff arrives.

Judge a system by more than its returns

The book teaches you to evaluate performance with metrics like the Sharpe ratio (return per unit of volatility), drawdown (the peak-to-trough fall in your account), and the information ratio. The point is that a headline return tells you almost nothing on its own. How much pain you took to earn it is the real story.

How to actually apply it

The book gives you a clear set of moves to put the ideas to work. Distilled, they come down to this:

  • Research different trend-following strategies and funds, and pick one that fits your goals and risk tolerance.
  • Build a diversified portfolio that pairs managed futures with other types of investments.
  • Learn the contracts and markets used, and the specific risks and benefits of each.
  • Write a risk-management plan before you put money on, then size positions to it.
  • Combine technical and fundamental analysis when you evaluate a strategy.
  • Monitor the portfolio regularly and adjust as market conditions change.

Do note that, Clenow is blunt on one point worth repeating: past performance is not a guarantee of future results, and managed futures can be volatile. The drawdowns are real, and they are long.

Where the human edge comes in

A modern platform can backtest a trend-following system in seconds and show you a gorgeous equity curve. That part is close to free now. What it will not do is sit you in the chair through an 18-month drawdown without flinching, or stop you from abandoning the system at the exact moment it is about to work. The rules are the easy part. The discipline to hold position sizing steady and follow the system through the ugly stretches is the hard part, and that is the human edge a backtest can never trade for you.

Should you read it? My honest take

Personally, I would put this on the shelf for anyone serious about systematic trading, but I would not hand it to a complete beginner. It assumes you are comfortable with the idea of futures, position sizing, and reading a performance table. If you have that footing, it is one of the clearest, least hyped books on trend following you can buy, precisely because Clenow writes from inside a real fund and does not dress up the drawdowns.

If you are still picking your first trading book, start elsewhere and come back to this one once the basics are second nature.

For more book picks in the same vein, see our roundup of the best investing and trading books of all time, and if you want the structured reading path, the Synapse book and reading list maps them by level.

FAQ

What is “Following the Trend” by Andreas Clenow about?
It is a practical guide to systematic trend following and managed futures, the strategy of trading futures contracts across many markets to ride large price moves. It covers contracts, diversification, risk management, and how to evaluate performance.

Is “Following the Trend” good for beginners?
Not really. It assumes you are already comfortable with futures, position sizing, and reading performance metrics. Beginners should start with a foundational trading book and come back to this one later.

Who is Andreas Clenow?
A hedge fund manager and the CIO of Zephyr Asset Management, with over 20 years in the industry. He is a frequent conference speaker and has been quoted across several financial publications.

What is the main lesson of the book?
That diversified, rules-based trend following can earn a place in a portfolio, but only with disciplined risk management and the patience to sit through long drawdowns. Diversification across many markets is the core engine.

What metrics does the book use to judge a strategy?
It uses the Sharpe ratio, drawdown, and the information ratio, to make the point that a headline return means little without knowing how much volatility and pain it took to earn.

Now that you have the key ideas, would you add “Following the Trend” to your reading list? And if you have already read it, what stuck with you most? Let me know in the comments.

Want a system you can actually run? Grab the free 15-Minute Swing Trading Starter Kit. It is the exact routine I use to scan once a day and trade any market in 15 minutes.

About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe) with 15 years of trading across stocks, forex, crypto, commodities, and bonds. His trade log is public, 404 trades, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Education, not financial advice. Synapse Trading is not licensed by MAS to advise on investment products. Trading carries risk of loss; past performance is not indicative of future results.

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