Far From Random is a well-written and engaging book with an oddly matched set of themes, in three parts.
In accord with the title, the first part of the book is largely a refutation of Malkiel's "random walk" theory of market movements, and a manifesto for technical analysis. At the same time, Lehman demonstrates why fundamental analysis, Wall Street's stock-in-trade, is of little use to the average investor. Although the arguments may be old, Lehman's presentation is articulate, passionate, and and thought-provoking. Old hands, as well as investors new to the market, will find it an enjoyable read.
The second section goes into behavioral finance, the psychological forces that impel investors to trade according to certain patterns. Lehman's roots in this subject are so deep that they pre-date any recognition by Wall Street of investor psychology as a factor in market movements. Lehman provides a laundry list of specific psychological behaviors that affect investor decisions irrationally, and suggests, without quite demonstrating, that certain chart indicators (such as the VIX, MACD, and TRIN) can show these factors at work. For me, this section was full of "aha!" moments, as my own past mistakes were revealed in a new light.
Thus, I was primed for a continuation of the argument that would go into specific chart patterns, with an analysis of the behavioral elements they suggest—or better yet, predict. But instead, the third section is a relatively self-contained primer on Lehman's favorite technical tool, Trend Channel Analysis. Lehman's approach to trend channels is unique in several respects, but seemingly easy to use and relatively intuitive, making this a rewarding study for anyone willing to interpret charts. But, alas, we must revert to interpreting them as mere charts, not as the hoped-for revelation of the human drama underlying them.
Despite my disappointment that the broader theme was not carried through to the end, the clarity of Lehman's presentation on each topic puts Far From Random among the most accessible, interesting, and potentially useful finance books of the year.
Far From Random is available from Bloomberg Press.