Book Review: Flash Crash by Liam Vaughan

I preordered this book on Audible, waited impatiently for it be be released, and just finally finished listening to it. I was very excited for this book (and I still am) so I'm going to do my best not to give too much away as I share my takeaway from it.


Furthermore, I'm writing this shortly after finishing the book so I hope I'm getting all of my facts straight. This book, in short, provided some great insights into the flash crash of 2010. If you do a quick search, you'll see plenty of articles on the phenomenon that happened.


Navinder Sarao's story was definitely an interesting one. While this book was overall entertaining, there was still a bit you could take away and apply to your own trading. I certainly did.

The author, Liam Vaughan, talked about how Navinder got his start in a trading arcade. Liam briefly mentioned that Navinder was absorbed in watching the price ladder, just patiently waiting and picking his spots. Keep in mind that this was when Navinder first started out, which was before he started placing trades with contracts of huge proportions.

Sadly, Liam didn't talk too much about this process. I can understand why. There probably wasn't anything glamorous about this. Who wants to hear a story about a guy watching price fluctuate back and forth and clicking when the opportunity arose?

While that probably wouldn't make for a good story, it is a good lesson for every beginner trader. I personally believe that there are two lessons to be learned here.

Lesson #1: Learn the market structure by committing chart time

Something that bugs me about new market participants is this desire to be taught how to trade. Sure, you can have mentors to help guide you, but nothing is a substitute for hard work. I personally stray away from forums, discussion boards, chat rooms, etc. because every member seems to want to talk about brokers, posting P&Ls, and basic questions that can probably be searched with a few clicks.

I still think that chart time is a very underrated topic of discussion. I'm not saying that it's a substitute for basic knowledge, but it's something that I think every participant needs to commit to. If you just monitor how price plays out over time, you'll slowly come to the realization that price behaves in a certain way. The easiest example is identifying when price ranges and trends.

This quick tidbit in the book about how Navinder would drown out the noise around him and just watch the activity of the price ladder is a pretty good indication that he was committing the time to study the markets. At Futex, the firm where he traded at, they taught him basic techniques and strategies. That wasn't a substitute for the study he did of the markets.

Lesson #2: Timing your trades

The book also touched upon how Navinder would wait and pick his spots to enter. It was almost as if he was surgical in picking the trades to take. Admittedly, this is something that I still sometimes struggle with to this day. I'm getting better at being patient. Especially with the use of the EdgeWonk journaling software, I plan my trades more carefully and have drastically reduced my desire to take impulse entries.

My takeaway from this? You can definitely be successful without a constant need to be taking trades. By waiting for higher quality signals, you're probably lowering the volatility of your trading account as well. Granted, Navinder's tactics were definitely controversial. However, I still think that he was an overall great trader because of his ability to analyze the ladder and adapt accordingly. If you gave someone the exact tools that Navinder had, would that person be able to replicate Navinder's success? I highly doubt it. 

Without straying from too far from this lesson, my takeaway is the need for patience. Entering the trade is the easy part. The hard part is the planning and preparation process.

Is this book worth reading? 100%. Don't just take this book at face value. If you try to draw your own conclusions, I'm sure there are valuable lessons that can be applied to your own trading.

Before learning about this book, I heard an interview the author over on Chat With Traders. I'd say this podcast interview is a good preview for those that are hesitant about reading the actual book.