The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management (Wiley Trading)

**The best-selling trading book of all time**—**updated for the new era** __The New Trading for a Living__ updates a modern classic, popular worldwide among both private and institutional traders. This revised and expanded edition brings time-tested concepts in gear with today's fast-moving markets, adding new studies and techniques for the modern trader. This classic guide teaches a calm and disciplined approach to the markets. It emphasizes risk management along with self-management and provides clear rules for both. __The New Trading for a Living__ incudes templates for rating stock picks, creating trade plans, and rating your own readiness to trade. It provides the knowledge, perspective, and tools for developing your own effective trading system. All charts in this book are new and in full color, with clear comments on rules and techniques. The clarity of this book's language, its practical illustrations and generous sharing of the essential skills have made it a model for the industry—often imitated but never duplicated. Both new and experienced traders will appreciate its insights and the calm, systematic approach to modern markets. __The New Trading for a Living__ will become an even more valuable resource than the author's previous books: * Overcome barriers to success and develop stronger discipline * Identify asymmetrical market zones, where rewards are higher and risks lower * Master money management as you set entries, targets and stops * Use a record-keeping system that will make you into your own teacher Successful trading is based on knowledge, focus, and discipline. __The New Trading for a Living__ will lift your trading to a higher level by sharing classic wisdom along with modern market tools. The New Trading for a Living 3 CONTENTS 9 PREFACE 13 Introduction 17 1. Trading—The Last Frontier 17 How I Began to Trade 17 Do You Really Want to Succeed? 18 2. Psychology Is the Key 19 Getting Off the Roller Coaster 19 A Man’s Game? 19 How This Book Is Organized 20 3. The Odds against You 21 A Minus-Sum Game 21 Commissions 22 Slippage 23 Bid-Ask Spreads 24 The Barriers to Success 24 PART 1 Individual Psychology 25 4. Why Trade? 25 Self-Fulfillment 25 5. Reality versus Fantasy 26 The Brain Myth 27 The Undercapitalization Myth 27 The Autopilot Myth 28 The Cult of Personality 29 Trade with Your Eyes Open 32 6. Self-Destructiveness 32 Gambling 33 Self-Sabotage 33 The Demolition Derby 34 Controlling Self-Destructiveness 35 7. Trading Psychology 35 Bending the Rules 35 The Insight That Changed My Trading 36 8. Trading Lessons from AA 37 Denial 37 Rock Bottom 38 The First Step 38 One Day at a Time 38 An AA Meeting 39 9. Losers Anonymous 39 The Urge to Trade 39 Into the Hole 40 Trader’s Rock Bottom 40 Trader’s First Step 41 A Meeting for One 42 10. Winners and Losers 43 Like an Ocean 43 Emotional Trading 44 In Charge of Your Life 45 PART 2 Mass Psychology 47 11. What Is Price? 48 A Consensus of Value 48 Behavior Patterns 48 12. What Is the Market? 49 Worldwide Crowds 50 Groups, Not Individuals 50 The Source of Money 50 Inside Information 51 13. The Trading Scene 52 Individual Traders 52 Institutional Traders 53 The Sword Makers 54 Advisors 55 14. The Market Crowd and You 55 Experts on Crowds 56 Why Join? 56 Crowd Mentality 57 Who Leads? 57 Independence 58 A Positive Group 58 15. Psychology of Trends 59 Strong Feelings 59 Rallies and Declines 60 Price Shocks 60 Social Psychology 61 16. Managing versus Forecasting 62 Poll-Taking 63 A Crystal Ball 63 Read the Market, Manage Yourself 64 PART 3 Classical Chart Analysis 65 17. Charting 66 Brief History 66 The Meaning of a Bar Chart 67 Japanese Candlesticks 69 Efficient Markets, Random Walk, Chaos Theory, and “Nature’s Law” 70 18. Support and Resistance 71 Memories, Pain, and Regret 72 Strength of Support and Resistance 74 Trading Rules 74 True and False Breakouts 75 19. Trends and Trading Ranges 76 Mass Psychology 78 The Hard Right Edge 78 Methods and Techniques 78 Trade or Wait 80 Conflicting Timeframes 80 20. Kangaroo Tails 81 PART 4 Computerized Technical Analysis 85 21. Computers in Trading 85 Toolboxes 86 Black Boxes and Gray Boxes 87 Computers 87 Market Data 88 Three Major Groups of Indicators 89 22. Moving Averages 90 Twice as Much Bark 91 Market Psychology 91 Exponential Moving Averages 92 Choosing the Length of a Moving Average 92 Trading Rules 93 More on Moving Averages 94 Dual EMAs 94 Moving Averages and Channels 95 Prices, Values, and the Value Zone 95 23. Moving Average Convergence-Divergence: MACD Lines and MACD-Histogram 96 How to Create MACD 97 Market Psychology 97 Trading Rules for MACD Lines 97 More on MACD Lines 98 MACD-Histogram 99 Market Psychology 100 Trading Rules 100 When to Expect a New Peak or Valley 101 More on MACD-Histogram 101 Divergences 102 The Hound of the Baskervilles 105 24. The Directional System 105 How to Construct the Directional System 105 Crowd Behavior 107 Trading Rules 109 Average True Range—Help from Volatility 109 25. Oscillators 111 Overbought and Oversold 111 26. Stochastic 111 Crowd Psychology 112 Trading Rules 113 More on Stochastic 115 27. Relative Strength Index 115 Mass Psychology 116 Trading Rules 117 PART 5 Volume and Time 119 28. Volume 119 Crowd Psychology 121 Trading Pointers 122 29. Volume-Based Indicators 123 On-Balance Volume 123 Crowd Psychology 124 Trading Signals 124 More on OBV 124 Accumulation/Distribution 126 Crowd Behavior 126 Trading Rules 127 More on Accumulation/Distribution 128 30. Force Index 128 How to Construct Force Index 128 Trading Psychology 129 Trading Rules 129 31. Open Interest 133 Crowd Psychology 134 Trading Rules 136 More on Open Interest 137 32. Time 137 Cycles 138 Indicator Seasons 138 Market Time 140 The Factor of Five 141 33. Trading Timeframes 142 Investing 142 Swing Trading 144 Day-Trading 147 PART 6 General Market Indicators 149 34. The New High–New Low Index 149 How to Construct NH-NL 150 Crowd Psychology 150 Trading Rules for NH-NL 151 NH-NL in Multiple Timeframes and Look-Back Periods 153 35. Stocks above 50-Day MA 155 36. Other Stock Market Indicators 156 Advance/Decline 156 37. Consensus and Commitment Indicators 158 Tracking Advisory Opinion 159 Signals from the Press 160 Signals from Advertisers 160 Commitments of Futures Traders 161 Legal Insider Trading 163 Short Interest 163 PART 7 Trading Systems 165 38. System Testing, Paper Trading, and the Three Key Demands for Every Trade 167 Paper Trading 168 Three Key Demands for Every Trade 169 39. Triple Screen Trading System 170 Trend-Following Indicators and Oscillators 171 Choosing Timeframes—the Factor of Five 171 First Screen—Market Tide 172 Second Screen—Market Wave 174 Third Screen—Entry Technique 174 Triple Screen Summary 176 Triple Screen in Day-Trading 177 Stops and Profit Targets 178 40. The Impulse System 178 Entries 180 Exits 182 41. Channel Trading Systems 182 Two Ways to Construct a Channel 183 Symmetrical Channels 183 Mass Psychology 184 Trading Rules 186 Standard Deviation Channels (Bollinger Bands) 188 PART 8 Trading Vehicles 189 42. Stocks 191 43. ETFs 192 44. Options 194 Buying Options 196 Writing Options 197 Writer’s Choice 198 Limiting Risk 199 Can Option Buying Be Intelligent? 201 45. CFDs 202 46. Futures 203 Futures and Cash Trades 204 Hedging 205 Supply, Demand, and Seasonality 206 Floors and Ceilings 207 Contango, Inversion, and Spreads 207 Commitments of Traders 208 Margins and Risk Control 209 47. Forex 210 PART 9 Risk Management 213 48. Emotions and Probabilities 213 Why Johnny Can’t Sell 214 Probability and Innumeracy 216 A Positive Expectation 217 Businessman’s Risk or Loss 217 49. The Two Main Rules of Risk Control 218 The Two Worst Mistakes 218 50. The Two Percent Rule 219 The Iron Triangle of Risk Control 220 The 2% Rule in the Futures Markets 221 51. The Six Percent Rule 224 The Concept of Available Risk 224 52. A Comeback from a Drawdown 226 A Trading Manager 228 PART 10 Practical Details 231 53. How to Set Profit Targets: “Enough” Is the Power Word 231 54. How to Set Stops: Say No to Wishful Thinking 235 Place Stops outside the Zone of “Market Noise” 236 Don’t Place Your Stops at Obvious Levels 236 Don’t Let a Winning Trade Turn into a Loss 239 Move Your Stop Only in the Direction of Your Trade 240 Catastrophic Stops: A Professional’s Life Jacket 240 Stops and Overnight Gaps: Only for the Pros 241 55. Is This an A-Trade? 241 56. Scanning for Possible Trades 246 PART 11 Good Record-Keeping 249 57. Your Daily Homework 250 Are You Ready to Trade Today? 252 58. Creating and Scoring Trade Plans 254 Scoring Your Trade Plans (a Trade Apgar) 254 Using a Tradebill 256 59. Trade Journal 259 Three Benefits 261 CONCLUSION A Journey without an End: How to Continue Learning 265 Sources 269 Acknowledgments 273 About the Author 275 INDEX 277 EULA 303 The best-selling trading book of all time — updated for the new era The New Trading for a Living updates a modern classic, popular worldwide among both private and institutional traders. This revised and expanded edition brings time-tested concepts in gear with today's fast-moving markets, adding new studies and techniques for the modern trader. This classic guide teaches a calm and disciplined approach to the markets. It emphasizes risk management along with self-management and provides clear rules for both. The New Trading for a Living incudes templates for rating stock picks, creating trade plans, and rating your own readiness to trade. It provides the knowledge, perspective, and tools for developing your own effective trading system. All charts in this book are new and in full color, with clear comments on rules and techniques. The clarity of this book's language, its practical illustrations and generous sharing of the essential skills have made it a model for the industry—often imitated but never duplicated. Both new and experienced traders will appreciate its insights and the calm, systematic approach to modern markets. The New Trading for a Living will become an even more valuable resource than the author's previous books: Overcome barriers to success and develop stronger discipline Identify asymmetrical market zones, where rewards are higher and risks lower Master money management as you set entries, targets and stops Use a record-keeping system that will make you into your own teacher Successful trading is based on knowledge, focus, and discipline. The New Trading for a Living will lift your trading to a higher level by sharing classic wisdom along with modern market tools. The best-selling trading book of all time—updated for the new era The New Trading for a Living updates a modern classic, popular worldwide among both private and institutional traders. This revised and expanded edition brings time-tested concepts in gear with today's fast-moving markets, adding new studies and techniques for the modern trader. This classic guide teaches a calm and disciplined approach to the markets. It emphasizes risk management along with self-management and provides clear rules for both. The New Trading for a Living includes templates for rating stock picks, creating trade plans, and rating your own readiness to trade. It provides the knowledge, perspective, and tools for developing your own effective trading system. All charts in this book are new and in full color, with clear comments on rules and techniques. The clarity of this book's language, its practical illustrations and generous sharing of the essential skills have made it a model for the industry—often imitated but never duplicated. Both new and experienced traders will appreciate its insights and the calm, systematic approach to modern markets. The New Trading for a Living will become an even more valuable resource than the author's previous books: Overcome barriers to success and develop stronger discipline Identify asymmetrical market zones, where rewards are higher and risks lower Master money management as you set entries, targets and stops Use a record-keeping system that will make you into your own teacher Successful trading is based on knowledge, focus, and discipline. The New Trading for a Living will lift your trading to a higher level by sharing classic wisdom along with modern market tools. The best-selling trading book of all time updated for the new era The New Trading for a Living updates a modern classic, popular worldwide among both private and institutional traders. This revised and expanded edition brings time-tested concepts in gear with today's fast-moving markets, adding new studies and techniques for the modern trader. This classic guide teaches a calm and disciplined approach to the markets. It emphasizes risk management along with self-management and provides clear rules for both. The New Trading for a Living includes templates for rating stock picks, creating trade plans, and rating your own readiness to trade. It provides the knowledge, perspective, and tools for developing your own effective trading system. All charts in this book are new and in full color, with clear comments on rules and techniques. The clarity of this book's language, its practical illustrations and generous sharing of the essential skills have made it a model for the industryoften imitated but never duplicated. Both new and experienced traders will appreciate its insights and the calm, systematic approach to modern markets. The New Trading for a Living will become an even more valuable resource than the author's previous Successful trading is based on knowledge, focus, and discipline. The New Trading for a Living will lift your trading to a higher level by sharing classic wisdom along with modern market tools. Why teach? Why not simply stay in front of the screen and quietly grind out profits? Whenever I hear this question, I say: "Preaching is good for the preacher." Showing specific chart patterns and stressing the need for discipline reinforces my own performance. To master a concept you have to be able to teach it to others. If you can't explain what you think you know, then you really don't know it. Once or twice each year I run a live trading workshop with Kerry Lovvorn, my partner in SpikeTrade.com. At the time of this writing, we had six such workshops, traded our accounts in each of them, and both of us made money in all six classes. If you were to take six random days from my trading, I wouldn't be able to deliver 100% profitability. Neither would Kerry - but we've done it in our classes because working in front of a group creates extra pressure to succeed. That's what I mean when I say that preaching is good for the preacher. Read this book carefully, take notes, test its lessons on your own data. I want this book to help you as much as writing it helped me.-Dr. Alexander Elder Based on the three M's: Mind, Method, and Money. Teaches you how to master these elements and combine personal discipline with finding the best trades and safe money management. Will put you in a better position to profit from today's markets by allowing you to master the most essential trading skills. It will help you measure your progress and improve your understanding of the concept contained in the book. Offers insights on risk management, trading systems, stock market indicators, technical analysis, trader psychology, and much more. Clarifies important trading concepts you need to understand before you enter the markets. This comprehensive study guide will put you in the best position possible to profit as you learn how to trading for a living