Foreword ix
Preface xiii
Acknowledgments xvii
About the Author xix
CHAPTER 1 Introduction and Getting Started 1
Introduction 2
Getting Started 10
CHAPTER 2 Trading Mechanics 21
The Basics 22
Trade Execution 27
Behind the Trade 34
Managing the Trade 42
CHAPTER 3 Price Action and Its Influences 54
Influences on Price 55
Price Movement 61
CHAPTER 4 Building the Trading Plan 79
What’s a Trading Plan? 80
Journals 81
Personal Assessment 82
The Plan 91
CHAPTER 5 Risk and Money Management 96
What Is Risk? 97
Money Management – Trade 100
Money Management – Portfolio 108
The Plan 115
CHAPTER 6 Market Analysis 119
Analyzing the Markets 120
Fundamental Analysis 121
Technical Analysis 136
Quantitative Analysis 155
Final Thoughts 160
CHAPTER 7 System Design and Testing 162
Trading Systems Defined 163
A Sample System 165
Defining the System Focus 168
Entry and Exit Rules 170
Test I—SMA Only for Buy or Sell 173
Test II—SAR Only for Buy or Sell 183
Test III—SMA Enter/SAR Exit 188
Test IV—SAR Enter/SMA Exit 194
Additional Considerations 199
CHAPTER 8 System Results and Position Size 203
Comparing Performance 204
Trade Size Determination 211
Monetary Comparison 216
Fine Tuning 223
vi CONTENTS
Risk and Position Size 226
The Final System 233
CHAPTER 9 Application 236
A Few Last Plan/System Points 237
Go Live 242
Taking It Forward 246
APPENDIX A Boxes 247
Box Trading Strategies 255
Additional Combination Strategies 262
APPENDIX B Sample System 263
A Few Advanced Words 263
Part I—Identifying the Stocks 264
Part II—Going After Big Returns 273
Index 283