An accessible, reliable course for the trader looking for profits in the competitive, dynamic world of trading.
Each section of the book offers clear examples, concise and useful definitions of important terms, over 90 charts used to illustrate the challenges and opportunities of the market; and how you can take advantage of patterns. Written in the parlance of the day trader’s world, you’ll enjoy the experience of being taught trading skills by the best of the best.
This focused and effective trading resource features seven key lessons to further a trader’s education including market basics, managing trades, psychology in trading and planning, technicals, utilizing charts, income versus wealth building producing trades, and classic patterns. It truly is as Paul Lange says, "Many of these lessons have been taught to students worldwide over a span of 4 years. These lessons contain powerful information that goes far beyond the basics you may find in many introductory trading books."
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One measure of writing for traders and investors (as perhaps with writing for all others), is the ah ha! factor—a sentence or thought that provokes a feeling of enlightenment or deep understanding with the reader. Our hope is for numerous ah ha! moments to occur in these pages.
Trading is a somewhat difficult subject to write about. As you learn and assimilate certain truths, these truths often can and should change for you later. What seemed quite profound to you at one time might seem a year later to be obvious—and no longer worthy of being mentioned. What has happened is that you have moved beyond this particular truth to a newer truth, a higher truth. In such fashion, the growing trader keeps moving beyond his own knowledge, outdating it.
At the same time, to someone new to the game of trading, these are still new truths, capable of changing one's thinking and approach, so in that sense, one is wrong not to include them. The bottom line is that a trader's approach continuously changes and evolves. Aside from the very newest beginners, and the most experienced traders, almost everyone in the market is at a different level of knowledge.
While I can't honestly say that Strategies for Profiting on Every Trade was written as a companion volume to my earlier book, Tools and Tactics of the Master Day Trader (McGraw Hill 2000), the reader of that earlier work will undoubtedly see a continuation of some of the ideas expressed in that book. Tools and Tactics dealt more with the psychology of the trader—his emotions, motivations, and frustrations—Strategies for Profiting focuses more on the game or activity itself.
This book is designed to address the needs of both income and wealth producing traders. There is a strong tendency to separate these two styles of trading into completely independent skill sets and approaches. But it is our view that not only can they not be split, but any attempt to do so would result in automatically curtailing your progress as a trader. In the same way that it is commonly understood that both your left and your right hand play equally crucial roles in everyday life, so do income trading and wealth trading play equally important roles in the daily lives of most successful traders. In other words, one should never chose whether the income producing style of trading is better than the wealth generating style, or visa-versa. Rather one should look to become adept at both styles. This book will teach you just how to accomplish that.
In chapter 1, Lessons on Getting Ready, you'll be guided in how a trader should prepare for each day and week. How you start will largely determine how you end in this business. I have witnessed far too many traders sloppily enter each week and each day without a plan and without a proper list of stocks to watch. This will not be you, after this chapter is assimilated.
In chapter 2, “Lessons on Some Basics,” you will learn some very crucial things, such as how to deal with the all-important first hour of trading. Not many traders know that the pent up demand or accumulated supply built up overnight often make the first hour of trading the most volatile. The first 30-minutes of trading in particular are very tricky. You'll learn how to deal with this all important time period and turn it into opportunity. Did you know there are nine other times during each day of which every trader should be acutely aware? These nine reversal times, as we like to refer to them, offer some unique opportunities for watchful traders. You'll also be taught how to deal with the vagaries of news and how it can affect your stocks for the positive and negative.
Chapter 3 deals with two of the most crucial aspects of proper trading, trade management and money management. The correct management of your position always hinges on several things: a favorable risk/reward ratio, a proper entry, and an intelligently selected price target. Each aspect of a properly executed trade will be reviewed in detail in this chapter.
The psychological aspect of trading represents 85 percent of the game, in my opinion. As market participants, we don't really trade stocks, options, bonds, futures, currencies or any other financial instrument, for that matter. In reality, we trade people, the people who own those things I just listed. For any of the above items to move, people have to make buy and sell decisions, and the peoples' buy and sell decisions are incited by emotions, namely greed and fear. In chapter 4, we talk about how a trader is to cope with these two dominant emotions and how he can use them for profitability. We also delve into the challenge of always needing to be right and explain how the loss of trades can be turned to your best advantage.
Chapters 5, 6 and 7, get to the meat and potatoes of our trading method. We'll delve deeply into the many chart patterns that we rely on every single day in the market. You'll learn about several highly reliable trading events that happen over and over again, the same way each time. We'll show you how you can turn these events into consistent profits. In these sections, we'll equip you with many of the same trading techniques that we've taught to major Wall Street firms and some of the country's top traders.
Lao-tzu said, “a journey of a thousand miles must begin with a single step.” It is our belief that the book you now hold in your hands can be the single step that launches your journey to profitability. So read each lesson carefully, take notes, and be sure to keep a journal of the ah-ha! moments that strike you. I have always taught that it takes only the mastery of two or three reliable strategies to do extraordinarily well in the market. In these pages, you will find far, far more than that. Use them well!
It was quite a privilege when Oliver Velez approached me to help write Strategies for Profiting on Every Trade for his worldwide following. You see, Oliver Velez has been my mentor since I began trading. But as much as it was a privilege, I knew it would also be a challenge because I was about to undertake a monumental task.
Many of these lessons have been taught to students worldwide over a span of 4 years. These lessons contain powerful information that goes far beyond the basics you may find in many introductory trading books. Looking back, though it was an incredible amount of work putting this vast amount of information together, I am very proud of the task that we completed.
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Table of Contents:
11 A Beginner's Handbook
Lessons on Getting Ready
21 Developing a Watch List
25 The Watch List Concept
26 Time Frames
28 Your Progress as a Trader
Lessons on Some Basics
33 What Market Is That Again?
37 Looking at the Big Picture
41 A Guide to Protective Stop Losses
44 Trading the First Half Hour
46 Fundamental vs. Technical
49 News You Can Use
53 News and Your Trading
56 Are You Still Investing?
58 Reversal Times
60 The All Important 200 Period Moving Average
67 Moving Averages, the Power of the 20 MA
71 A Return to Some Basics
Lessons on Managing
73 Managing a Trade
75 Dealing with Disaster
77 Alternate Swing Entries
81 The Reward to Risk Ratio
87 Do You Find Yourself Target Challenged?
89 The Anatomy of an Entry
Lessons on Psychology in
Trading and Planning
94 The Psychology of Fear
96 The Trading Plan - The Key to Your Success
100 Some of Your Best Qualities
102 The Need to Be Right
104 The Ways Traders Learn
106 Using Public Fear as a Trading Tool
110 Analysis of a Losing Trade
115 Some Common Mistakes
118 Was That a Double Top?
123 Support and Resistance
127 That First Pullback
129 Recognizing a Trend Day
133 The Perspective of Multiple Time Frames
137 Zoom, Zoom, Zoom
141 Daily Pivot Points
144 Fighting the Trend
147 How a Trend Ends
150 The Intraday Trend
152 Finding an Intraday Reversal
155 A Change in Trend, Part 1
157 A Change in Trend, Part 2
159 Trading Gaps, Part I
162 Trading Gaps, Part II
Chart Lessons on the Market
165 The NASDAQ in Review
170 A Look at the Market
172 The NASDAQ Update, Part 1
175 The NASDAQ Update, Part 2
178 The Volatility Index as a Guide
181 Caution in the Market
Lessons on Classic Patterns
184 Using Relative Strength as One of Your Tools
187 Relative Strength at Reversal Time
190 Failed Breakdown at Reversal Time
193 A Strategy against the Trend
196 Playing a Climactic Reversal
198 The Lunch Time Fade
201 The Power of a Mortgage Play
204 Finding Unique Plays
207 Quality Breeds Nicknames
210 When It All Comes Together
219 A: Analyzing Pristine Buy Set-ups
225 B: Glossary
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