The Complete Trading Course: Price Patterns, Strategies, Setups, and Execution Tactics: 469 (Wiley Trading) - Hardcover

Rosenbloom, Corey

Hardcover

ISBN 10: 0470594594 ISBN 13: 9780470594599

Verlag: John Wiley & Sons, 2010

Inhaltsangabe

A practical guide covering everything the serious trader needs to know

While a variety of approaches can be used to analyze financial market behavior and identify potential trading/investing opportunities, no approach is completely accurate. The challenge for traders is to find a method that they feel comfortable with and are able to implement consistently, through the normal ups and downs of trading.

The Trading Course provides you with a detailed description of the methods used to analyze markets, spot profitable trading opportunities, and properly execute trades. Page by page, this book references different trading methodologies, but focuses specifically on applying them when attempting to identify good trades.

• Discusses the principles of price behavior, trends, trade set ups, trade execution, and intermarket relationships
• Details different trading tools and techniques, including Japanese Candlesticks, Elliott Wave, Dow Theory, momentum indicators, and much more

If you want to become a successful trader, you have to be prepared. This book will show you what it takes to make it in this field and how you can excel without getting overwhelmed.

Über diesen Titel

Über die Autorin bzw. den Autor

COREY ROSENBLOOM, CMT, founded the trading education site www.afraidtotrade.com, where he offers a variety of services and market analysis. A Chartered Market Technician, he speaks regularly at industry trading conferences. Rosenbloom's work appears on a number of trading Web sites, such as greenfaucet.com, traderkingdom.com, moneyshow.com, dailymarkets.com, wallstreetcheatsheet.com, bestwaytoinvest.com, and others. His strategies have also appeared in Dr. Brett Steenbarger's book The Daily Trading Coach. Rosenbloom earned a master's degree in political science and bachelor's degree in psychology from the University of Alabama in Huntsville.

Von der hinteren Coverseite

Where do you start when you first look at a stock chart? How do you classify all the conflicting signals, cut through the noise, and get straight to the point of what matters most? With so much information for the technical analyst to discover, new traders often do not know where to start or what should guide them. And if you should decide it might be a profitable trade, how do you enter, manage, and exit the trade most efficiently?

The Complete Trading Course answers the questions of traders from all experience levels and provides you with a specific pathway for analyzing your chart to find specific trading opportunities.

Built on time-tested price principles that winning traders have used for many years but have been buried under the information overload of today's high-speed, indicator-driven markets, The Complete Trading Course cuts through the theoretical aspects and esoteric information and highlights only the most important insights from a variety of disciplines. Unlike other books, it focuses on the logic behind the pattern, how it fits into the broader context on a price chart, and how to assess the integrated whole of the chart within the context of guiding price principles that underscore all trading decisions.

Perhaps most importantly, the book reveals specifics of trade execution tactics geared to the unique experiences and personality of the trader putting on the position—the "edge" that enables you to combine objective chart information with your own understanding and experience so that you can recognize a proper opportunity, manage it in real time, and exit the position properly without emotion negatively affecting your decision.

With a firm knowledge of foundational price principles, specific trade strategies for today's markets, information on edge and execution, and a clear understanding of trade set-ups, you will be fully equipped to take your trading to the next level and formulate your own personal strategies in a trading plan that will help you continue on your lifelong journey to trading success.

The Complete Trading Course answers the questions of traders from all experience levels and provides you with a specific pathway for analyzing your chart to find specific trading opportunities.

Built on time-tested price principles that winning traders have used for many years but have been buried under the information overload of today's high-speed, indicator-driven markets, The Complete Trading Course cuts through the theoretical aspects and esoteric information and highlights only the most important insights from a variety of disciplines. Unlike other books, it focuses on the logic behind the pattern, how it fits into the broader context on a price chart, and how to assess the integrated whole of the chart within the context of guiding price principles that underscore all trading decisions.

Perhaps most importantly, the book reveals specifics of trade execution tactics geared to the unique experiences and personality of the trader putting on the position--the "edge" that enables you to combine objective chart information with your own understanding and experience so that you can recognize a proper opportunity, manage it in real time, and exit the position properly without emotion negatively affecting your decision.

With a firm knowledge of foundational price principles, specific trade strategies for today's markets, information on edge and execution, and a clear understanding of trade set-ups, you will be fully equipped to take your trading to the next level and formulate your own personal strategies in a trading plan that will help you continue on your lifelong journey to trading success.

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The Trading Course

Technical Analysis, High-Probability Set Ups, and Execution TacticsBy Corey Rosenbloom

John Wiley & Sons

Copyright © 2011 John Wiley & Sons, Ltd
All right reserved.
ISBN: 978-0-470-59459-9

Chapter One

Supremacy of the Trend

Where do you start when you first look at a stock chart? Are your eyes drawn to the indicators first? Perhaps your chart has too many indicators and you don't know where to start. With so much information for the technical analyst to discover, new traders often do not know where to begin or what should guide them in structuring their price charts. Sometimes it can be helpful to remove the indicators and focus squarely on price itself—after all, you've certainly heard the axioms "Price is King" and "Only price pays."

This introductory chapter will examine why trend analysis is so important to formulating your trading plan. Using your assessment of the current trend structure as guidance for which indicators to use and which to ignore, you will then be able to envision a clearer pathway ahead for the next swing or directional move in price, and thus be better equipped to take advantage by trading the expected move.

After all, you must start your decision-making process somewhere and you must be as objective as possible, as opposed to subjective analysis which is prone to opinion, bias, and error. While technical analysis is more of an art than a science—which leaves the chart open to interpretation—you build your foundation from time-tested principles that guide your analysis each time you review a chart and seek opportunities for profit. This chapter lays the foundation for successful analysis and trading, starting with the underlying principle of technical analysis—the trend.

WHAT IS A TREND? Before making any decisions about buying or selling a particular stock or market, you must first assess the current price trend as a backdrop to further analysis. Afterward, you will be better able to assess the longevity, magnitude, and probabilities of the current trend continuing. Before applying any intermediate or advanced analysis methods, you should always start with a firm understanding of the basic concepts of supply and demand, as revealed through the price charts. The best way to begin your analysis is by simply quantifying the current trend objectively, be it up, down, or sideways. While it seems so simple, many traders skip this step and jump right to the indicator signals, not understanding that some popular indicators work well when a trend is established but then fail when a sideways trend occurs. By objectively assessing the trend in place, you will then be prepared to take the next step in your analysis. Let's start with the basic question, "What is a trend?"

Breaking it down into simplest terms, a trend is a series of price swings traveling in the same direction over time. Most traders assess the strength of up-trends in order to find buying opportunities in a prevailing trend that has been confirmed. In the context of a prevailing up-trend, traders will be looking to put on new positions on pullbacks to expected support levels.

TREND

Trend is the prevailing tendency of the price of a security or market to move in the same direction over time. In the stock market, trends are often divided into long-term or secular trends, intermediate term trends, and short-term trends.

Up-trend: A series of higher price swing highs and higher price swing lows over a given period of time. Down-trend: A series of lower price swing highs and lower price swing lows over a given period of time.

In his book Technical Analysis Explained, Martin Pring gave us the best definition of technical analysis—the method of making decisions to the likely future price movement of a stock based on the past and current chart—with the following definition, which underscores all of our efforts as traders:

The technical approach to investments is essentially a reflection of the idea that prices move in trends which are determined by the changing attitudes of investors towards a variety of economic, monetary, political, and psychological forces. The art of technical analysis is to identify trend changes at an early stage and to maintain an investment posture until the weight of the evidence indicates that the trend has reversed.

For traders, the most important parts of the definition are the "identify trend changes at the earliest stage" statement as well as the "weight of the evidence" portion. These two concepts underscore all of the decisions you make as a trader or an investor. Let's break them apart individually.

Identifying Trend Changes Early

One of the most commonly accepted principles of technical analysis states that the trend, once established, has greater odds of continuing than of reversing. If we accept this principle as true, then the most profitable, lowest risk opportunities will come by trading retracement-style set-ups in the direction of a confirmed, prevailing trend. Many new traders try to call tops and bottoms in a stock and thus fight established trends, which often results in monetary losses and psychological frustration. While all traders want to be the first to call reversals in markets, and indeed traders can make a public name for themselves by accurately calling major turns in a market, it is important to realize that for every correctly called market top or bottom, there are dozens if not hundreds of inaccurate calls of tops or bottoms that lie scattered in the graveyard of market analysis and in personal trading accounts. Some traders destroy their accounts by stubbornly fighting a trend, clinging to their opinions of what the market should be doing as opposed to what the market is actually doing. Traders lose money when they try to force their will on a market, and traders who fight prevailing trends can suffer major losses as they trade against the probabilities from the onset.

On the other hand, a trend cannot persist forever; as such, downtrends evolve over time into up-trends, and then mature up-trends must devolve again into down-trends as the market cycle continues throughout history. Chapter 7 describes the typical lifecycle of a price move from bottom, to top, to bottom again. Those who do well over their trading careers are the ones who understand this principle and act accordingly when the weight of the evidence has shifted, rather than remaining committed to a losing position. The majority of this book will be dedicated to identifying trend reversals as early as possible as you assess the weight of the chart evidence, which implies never looking at one indicator or variable in isolation, but as a composite whole to the best of your ability. While your goal should always be to determine trend structure, you must simultaneously be aware of potential signals that a trend in its mature stage might be reversing. No matter what your emotions or other anecdotal evidence suggest, you must be able to change your expectations once the price chart gives a trend reversal signal, and not stubbornly assume that the current trend will continue forever. Sometimes traders learn this lesson with one painful experience, as a child learns not to touch a hot stove, though other traders may need to be reminded throughout their career that the best trades often come in the direction of the prevailing trend, rather than against it.

You must be prepared to sell your position and take profits when the trend changes from up-trend to early down-trend, just as you must also be able to act on any positive reversal in a down-trend which is showing signs of reversing into an up-trend. It takes confidence to buy after a sustained down-trend, just as it takes a strong fortitude to sell a position with profit once a market signals odds favor a turn to the downside. Those who identify confirmed reversals at the earliest reasonable stage possible will outperform those who are not as systematic in determining the health of a trend in existence and the probabilities of continuation or reversal of the prevailing trend. We will be discussing this concept in great detail.

Waiting for the Weight of the Evidence

As mentioned earlier, you cannot wager consistently on a trend reversing. Doing so will often result in numerous losses and unnecessary frustration. Most of the easiest trades come from positioning yourself in the direction of a prevailing trend, usually during pullbacks or retracements to support or resistance levels, and assuming that the trend will continue rather than reverse. In those terms, you can think of almost all the trades you take as either betting on a prevailing trend continuing or of a mature, lengthy trend reversing. Do not make this decision lightly.

Many of the most successful traders have solid rules for assessing the markets or stocks they trade, and their methods can be summarized as assessing the evidence—whether from fundamental, technical, or quantitative methods—and making a determination of the probabilities of a market continuing to rally or reversing into a down-mode. No single method is perfect, and no one method can ever call all tops and bottoms in a market.

Over the lifetime of your trading or investing career, you will do better to use noncorrelated methods to assess the probabilities from an unbiased approach to the best of your ability. In this book, I will be sharing how to combine leading methods into a unified approach for assessing the probability of the next likely swing or directional move in price. In so doing, you will be assessing the weight of the evidence using methods that you understand and that interest you. Do not feel as though you have to learn every single method of any trading system or strategy perfectly. By the same token, do not give any one method absolute dominance over others. When you observe noncorrelated methods and indicators such as moving averages, candles, divergences, and price patterns pointing in the same direction, you will increase your odds of a successful trade outcome more than if you used any one of these methods in isolation.

For example, if you see a reversal candle, it can be a bearish signal to exit a position. However, if you fail to assess the weight of the evidence, or the context in which the reversal candle occurs, you might be exiting a profitable position too early, or worse, if you chose to put on a short-sale position (attempting to profit from a market decline) based on a single candle, you might subject yourself to an unnecessary loss had you taken more time to assess the trend structure, volume signals, confirming indicators, or any number of analytical methods before making a final trading decision.

It can simplify your task immensely if you think of trading as a measurement of the probabilities of a trend continuing or of reversing, and taking specific entries and exits based on the developing structure that the price chart reveals to you. You will enter at more favorable levels, place stops at key points at the price where an idea will be proven incorrect, and play for realistic targets with exits that are generated by the weight of the evidence that solves the "exiting too early or too late" problem that most traders face.

METHODS FOR DEFINING TRENDS

"What is a trend?" seems like such an easy question to answer but, as you'll see, the answer can be as simple as "higher highs and higher lows" or as complex as a linear regression analysis or other statistical calculations. Despite the complexity (not to mention usefulness) of some mathematical models, the best way to define a trend can still often be the simple principles defined by Charles Dow in the early 1900s.

Charles Dow was one of the earliest researchers of technical analysis, and modern traders study his principles of what developed later into the Dow Theory of technical analysis. Dow noted that an uptrend required a higher high and a higher low to be valid, just as a downtrend required a lower low and lower high to be valid. Dow noted that volume confirmed the trend, such that in the context of an uptrend, volume rose during the upward swings in price and declined during the downward corrections or retracements, just as volume rose during the downward swings in a downtrend and declined during the corrections or upward retracements in the context of a trend. Modern day traders have layered complex methods over these simple, basic principles.

Recall that early technical analysts did not have the benefit of computer charts as we have today. Instead, they calculated charts each day by hand and placed a high emphasis on trend structure as defined by price itself. This is called the Pure Price Method and it is still used today as one of the most accurate and objective methods of defining a trend. In addition to the Pure Price Method, contemporary traders use the Moving Average Method to assess the structure of a short-term, intermediate term, and long-term moving average, paying specific attention both to the orientation of the averages themselves, and the relation of price to these averages.

The preferred method combines both the Pure Price and Moving Average methods, as each give similar signals and exact prices where a trend officially reverses. It will be these official classifications that remove the subjectivity or confusion most traders experience when attempting to label trends on price charts.

The Pure Price Method

Let's start with the simplest concept and move to more detailed definitions. As its name implies, the Pure Price Method removes all indicators from the charts and builds the foundation for trend analysis on the price itself. The method is only concerned with locating swing highs and swing lows while comparing prior highs to recent highs and prior lows to recent lows. You can use a candle chart, standard bar chart, or even a line chart to define trends using this method; sometimes a line chart can be the best place to begin when objectively analyzing trend structure. The goal is to remove bias and get a clear picture of the steady rising or falling rhythm of the price of the stock or market you are analyzing and thinking of trading.

As most traders can recite without thinking, an uptrend is defined as a series of higher price highs and higher price lows while a downtrend is defined as a series of lower price highs and lower price lows. Using this phrasing as our departure point, let's see this definition in action.

Figure 1.1 shows a snapshot of the Dow Jones Industrial Average rising through 2006 to the October 2007 peak. According to the Pure Price method, we are only concerned with key swing highs and swing lows to develop our definition of the trend. Any change in the series of higher highs and higher lows will be a warning sign of a potential reversal ahead, but until we see price either form a lower swing low or a lower swing high, we must assume that the uptrend in place will continue and trade accordingly in the direction of the prevailing trend. We will learn trading tactics in later chapters, but this principle lays the foundation for all other analysis we layer onto the price trend structure.

What Constitutes a Swing? On the surface, the Pure Price method is deceptively simple, but the challenge comes from your definition of what constitutes a price swing. Can one bar (day or week) be a swing? Does price have to move a certain percentage to classify as a swing? Does a swing have to last a certain number of bars? These are just some of the questions a trader must define in advance when labeling price highs and lows.

Like most things you will discover as a trader, there is a balance you must achieve when defining what constitutes a price swing. If your definition is too narrow, you will label too many swings and arrive at false conclusions, calling a potential trend reversal far too early. If your definition is too broad, you will not label enough swings and likewise arrive at false conclusions and call changes in trend far too late. This is where eyes can be deceiving and simple mathematical models can provide clarity.

Let's first start with time or duration. What you label as a swing depends on the timeframe you are analyzing. On a five-minute intraday chart, a single price swing may last 30 minutes to two hours or more. On a daily chart, a single swing might last weeks to months. On a weekly chart, a single swing might last months to one year. Your chosen timeframe provides guidance for you in assessing the time component in classifying what a swing actually is. Let's focus mainly on daily and weekly charts.

(Continues...)

Excerpted from The Trading Courseby Corey Rosenbloom Copyright © 2011 by John Wiley & Sons, Ltd. Excerpted by permission of John Wiley & Sons. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Details zur Ausgabe

• Verlag: John Wiley & Sons
• Erscheinungsdatum: 2010
• ISBN 10: 0470594594
• ISBN 13: 9780470594599
• Einband: Tapa dura
• Sprache: Englisch
• Anzahl der Seiten: 312
• Kontakt zum Hersteller: Nicht verfügbar