A Complete Guide to Technical Trading Tactics E-Book

John L. Person

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Trading Series
• Sprache: Englisch

Seitenzahl: 436

Veröffentlichungsjahr: 2012

Beschreibung

A thorough trading guide from a professional trader The Complete Guide to Technical Trading Tactics can help the new individual investor understand the mechanics of the markets. Filled with in-depth insights and practical advice, this book details what it takes to trade and shows readers how they can broaden their horizons by investing in the futures and options markets. The Complete Guide to Technical Trading Tactics outlines a variety of proven methodologies-pivot points, candlesticks, and other top indicators-so readers may use those that work best for them as well as make their own trading decisions without a second thought. Author John Person also shares his insights on a variety of trading technologies that will allow readers to gain a competitive edge in the market. John L. Person (Palm Beach, FL) publishes The Bottom-Line Financial and Futures Newsletter, a weekly commodity publication that incorporates fundamental new developments as well as technical analysis using his trading system.

Leseprobe

Contents

Title

Copyright

Preface

Acknowledgments

Chapter 1: Introduction to Futures and Options

Trading Mentality

Holding Penalty

Getting Technical

Getting into Futures

The Futures Instrument

Exchange Function

Digging into Futures

Contract Specifications

Electronic Era

Investment Revolution?

Bull Market for Futures

Chapter 2: Fundamentals

The Fed Factor

Reports, Reports

What to Watch, What it Means

Staying with the Information Flow

Chapter 3: Technical Analysis

Bar Charts

Point-and-Figure Charts

Market Profiling

Chapter 4: Candle Charts

Any Market, Any Time Frame

Candle Patterns

Reading Candle Charts

Candles Plus

Chapter 5: Chart Analysis

Volume

Open Interest

Putting the Data Together

Chart Patterns

Chapter 6: Pivot Point Analysis

My Start with Pivot Points

Pivot Point Formula

Behind the Analysis

Verify, Verify, Verify

Finding Equilibrium

Pivot Points in Action

P3T Signals

Chapter 7: Day-Trading, Swing Trading

Multiple Time Frames

Supporting a Target

Picking the Market

Summing Up Trading Tips

Chapter 8: Technical Indicators

Moving Averages

Moving Average Convergence/Divergence

Stochastics

Gann Theory

Fibonacci Numbers

Elliott Wave Theory

Summary

Chapter 9: Market Sentiment

Market Consensus and Contrary Opinion

Market Vane

Commitments of Traders

Media Attention

Margin Rate Changes

Put-to-Call Ratio

VIX

Summary

Chapter 10: Order Placement

Order Entry Selections

Market Conditions

Fourteen Order Choices

Summary

Chapter 11: The Mental Game

Who Are You?

Getting in Touch With Reality

Getting Down to Business

A Dose of Reality

Understand Your Emotions

Take a Break

Your Trading To-Do List

Chapter 12: The Tactical Trader

Pyramiding

Scale Trading

Other Tactics and Techniques

Chapter 13: Options

Options 101

Options Trading Steps

Options Strategies

Chapter 14: Closing Bell

Thoughts from Other Experts

My Favorite Top 10 Trading Thoughts

Glossary

Bibliography

Index

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding.

The Wiley Trading series features books by traders who have survived the market’s ever-changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional, or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.

For a list of available titles, visit our web site at www.WileyFinance.com.

Copyright © 2004 by John L. Person. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax [phone].

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data

Person, John L.

A complete guide to technical trading tactics : how to profit using pivot points, candlesticks & other indicators / John L. Person

p. cm.

“Published simultaneously in Canada.”

Includes bibliographical references and index.

ISBN 0-471-58455-X (cloth)

1. Stocks—Charts, diagrams, etc. 2. Investment analysis. 3. Futures. 4. Options (Finance) I. Title.

HG4638 .P47 2004

332.63’2042—dc22

2003026687

Preface

The purpose of this book is to share some of the tips, techniques, and observations that have worked for me and other highly successful traders. After nearly 23 years as a registered broker in the futures and options field, I have come to know quite a few successful traders and have personally made many successful trades. I have also experienced my share of disasters and have known traders and investors who were doomed for permanent failure. Therefore, I am writing this book to help the new individual investor understand the mechanics of the markets and to serve as a refresher for the seasoned veteran trader.

Most of the trade examples demonstrated in this book were direct trade recommendations from either The Bottom Line Financial and Futures Weekly Newsletter or those that appeared in the daily Dow report provided through the Chicago Board of Trade web site and at www.nationalfutures.com. Rather than demonstrating just one methodology of trading tactics using pivot point analysis, I wanted to show through various techniques how you can implement these calculations with other methods and indicators. Much of what I have learned over the course of 23 years in the industry did come from hard work and, I must admit, being around the right people at the right time. I do not want you to abandon your knowledge of traditional technical analysis techniques. I would just like you to be open to integrating the numbers to help you confirm, validate, and identify entry and exit points when trading.

I also want to relay the message that mathematically calculated support and resistance numbers, or pivot points, work on different markets and should be derived from different time frames—not only from a daily basis, but also from a weekly and monthly time frame.

In addition, as most of the readers either know or will find out, trading is also a combination of strong emotional and personal characteristics. Through my experience and observations, I want to share and explain what works and what does not but, more important, to disclose why things go wrong when they do for those who failed. I believe it is important to take an inventory, so to speak, when things go right to capitalize on that experience by examining what you did so the results can be repeated. It is just as important to examine what went wrong so you can learn from the experience. By sharing with you the experiences and techniques that I and other professional traders have learned, the hope is that you will benefit and become a more profitable trader.

I firmly believe that traders from all different levels of experience will benefit from the information contained in this book, whether it is actually gaining a new understanding or a new technique or refreshing, reviewing, or reviving your memory about tactics, strategies, or trading techniques that an advanced trader may have forgotten.

My professional history may explain my qualifications for writing this book. I started in this business as a runner on the floor of the Chicago Mercantile Exchange in 1979. To illustrate a reference point in time, the Dow Jones Industrial Average was near the 900 level. The S&P 500 Index futures contract did not even exist back then. I became a registered commodity broker in 1982 and worked up through the ranks in the industry as I was studying economics at Loyola University. The head of the research department at the firm where I worked was George C. Lane. He, of course, is credited with developing the oscillator system known as stochastics. He was the first boss who tutored me in the art of technical analysis. Little did I know at that time that a true master of technical analysis was going to be responsible for helping to create the intrigue, financial rewards, and passion for the futures industry that I have had throughout all these years.

Granted, there were other individuals who had an influence on my career. Jack F., an old member of the Chicago Board of Trade, helped me understand the importance of moving averages and the aspect of long-term charts. Back in 1985 and 1986 in what I call the great bond market boom, he was instrumental in helping me understand how to ride a strong trending market. In 1986, I captured what I call a winning tidal wave bull market run that remains legendary to this day for those who were on board with me, as well as friends who invested and knew me well.

Another broker at a firm where I worked taught me this strange and unique method of plotting unconventional trend lines to predict price and time coordination. Harry A. was his name and this guy would tell you on a Monday that at 11:40 a.m. Wednesday the high in bonds would be 7812/32. Come Wednesday at 11:45 a.m. or so, the high was 7811/32, and I would watch the price take a disastrous plummet. His method, as I later found out, was based on Drummond geometry.

I had the privilege to work with a former chairman of the Chicago Board of Trade, Bill Mallers Sr., who was always looking for a new system. His thirst for achievement and passion for the markets amazed me. Another man in the office who worked for Bill Sr. was a fairly quiet, yet confident, guy. He always had a cigar stub in his mouth—never did smoke but just chewed on them. He sat near me and time after time would overhear my recommendations to clients, in particular my points of support and resistance. Almost on a daily basis he had the same target numbers, usually within a point or tick of mine. That is when we discovered we were doing the same thing. The amazing thing was he claimed to be a direct student of Charles Drummond.

I was also fortunate to have been introduced to another fascinating man, Dan Gramza, an instructor for several futures exchanges and firms worldwide. His understanding of the market and the relationship between time, price, and volume is incredible. His teaching also included a wonderful tutoring in candle charting. When I discovered that, he humbly mentioned that he knew Steve Nison and “helped” write some of Steve’s first book. When I got home, I immediately searched for the book in the storage box and, sure enough, there it was in the acknowledgment section on page IV. Not only was Dan mentioned in one of the best books on the basics of candle charting, in my opinion, he helped write chapter 8 in Steve’s book.

My experience has ranged from learning stochastics from the creator of the indicator, moving averages from a famous floor trader and options from my own experience, Drummond geometry from two different fascinating people at two different times in my career, pivot point analysis, and then candle charting techniques from what I would call a master.

In March 2003 I started hosting a radio program titled, The Personal Investment Hour. The format was to invite expert traders and analysts to share with listeners who they were and what they do to trade successfully. My guests have included John Murphy, Martin Pring, John Bollinger, Victor Niederhoffer, Gerald Appel, Linda Bradford Raschke, Larry Williams, and a fabulous roll call of other top experts. Most guests were thrilled to come on and share their story and methods. Some of the contents of those interviews are mentioned in this book as well. In fact, the interviews were recorded and archived on my web site, www.nationalfutures.com, where anyone can go to listen to them.

By writing this book, I can share with you how and what I do to produce the analysis that goes out every week in The Bottom Line Financial and Futures Newsletter. I believe my experience in the industry and the techniques that I have developed can be instrumental in helping you to become a better trader. I believe that you can successfully learn to better integrate the two elements of market analysis: time and price. The elements that I have focused on from the technical side are:

Pivot points, a leading price predictor that is based on price points using different time frames.

Cycle analysis, which deals with predicting market turning points based on time.

Candle chart patterns, which are based on price relationships between the open, high, low, and close and past chart points such as old highs or lows.

Fibonacci ratio corrections and extension studies, which are based on past price points.

Other studies such as volume are used to gauge the level of participation and to help uncover the strength or weakness of a market trend.

The last—and maybe the most—important aspect of trading that this book covers is evaluating the psychological makeup of traders and providing exercises that can help those who are having a rough period overcome their problems. Learning who you are and how you react to market conditions is a vital aspect of trading.

I hope that reading this book will help you have a better understanding of what it takes to trade and to broaden your horizons in investing in the futures and options market. More important, I want you to know how to learn to do it on your own. Industry experts agree that about 80 percent of the people who trade lose. With those odds against you, you need all the help you can get! Individual speculators need to know that it is a rewarding adventure as long as they can make it against the markets and their biggest competitor, every other trader. As a zero-sum game, for every loser there is a winner in futures trading. Or another way to think about it, perhaps, is that 20 traders are taking the money of 80 other traders.

If you are going to trade successfully, you need to understand that it requires hard work and, above all, to think of trading as a business. As you read this book, I hope you learn that you do not need to have an IQ of 160 or be a mathematician or possess superhuman skills to be successful. What you do need to have is a fascination for this business, patience, discipline, a trading plan, identification of what type of trader you are, risk capital, and the desire to improve your financial life.

Through the development of technology and the Internet, more information is accessible today for the individual speculator than ever before. I sincerely believe a knowledgeable and educated investor is a better trader.

So if you are trading or are getting ready to trade, try to work at continually learning what is available to you. Cutting-edge technology will continue to offer more powerful and helpful trading tools to individual traders. It is up to you to learn how to use them to your advantage. I hope that you will benefit from the tips and techniques that are mentioned in these pages and certainly hope that you can apply them successfully in your trading.

John L. Person

Palm Beach, Florida

March 2004

Acknowledgments

Writing requires intense devotion and discipline; I now have a new sense of respect for anyone who has ever written any books or published material, especially on the subject of technical analysis. I have many people to thank—those who were indirectly responsible and influential in my education throughout the years and, of course, my family, especially my wife, Mary, who also tolerated my perseverance for finishing this book at the expense of ignoring her and asking too many questions when I had computer problems.

Mom, I know you wanted a lawyer in the family; instead you got a futures trader. My son, John Paul, who decided not to get in the investment business; instead, he followed the entrepreneurial spirit and opened his own chain of cell phone stores. There is still a chance to convert him back to the investment world: He likes my stock picks!

Special thanks to the Friday night “wanders” group, the best support group of friends one could ever have. Those I wish to mention directly: Lan Turner from Gecko Software, Stuart Unger, Barry Isaacson, Cheryl Fitzpatrick, Rory Obractin, and Jonathan W. Dean from FutureSource; Dan Gramza for inviting me to his class and taking my calls; Barbara Schmidt Bailey and Ted Doukas from the Chicago Board of Trade; and James Mooney, president of Infinity Brokerage Services.

The more analysts and authors I met, the more I found how truly fortunate I was in having Pamela van Giessen of John Wiley & Sons as my editorial director. Thank you, Pam! My special thanks go to Darrell Jobman, who was directly responsible for orchestrating and directing me through the whole process of this project and directly responsible for helping to get this material organized and published.

J. L. P.

CHAPTER 1

Introduction to Futures and Options

Understanding the Mechanics

Success is turning knowledge into positive action.

Thinking is easy, acting is difficult, and to put one’s thoughts into action is the most difficult thing in the world.

—Johann Wolfgang von Goethe

Goethe could have been referring to paper trading versus the act of actually trading when he wrote the phrase above. Trading is exactly that: putting your thoughts or convictions about a price move into action by entering an order and placing money at risk.

Investing is a totally different ball game. This book is about trading. The purpose of trading is to turn over or buy and sell (sell and buy) to build cash in an account by capitalizing on changes in price. It is not about acquiring and holding assets or property.

Futures trading is becoming more attractive than ever before as investors transfer their knowledge and trading skills from the stock market boom of the late 1990s to more active markets where the idea of creating wealth is still alive. As the equity markets became consumed by the bear market mentality liquidation phase, investors with knowledge of technical analysis and computer skills flocked to open futures accounts to trade e-mini S&P 500 and e-mini Nasdaq 100 index futures.

Stock market firms and brokers have developed futures divisions, and day-trading education experts have crawled out of the woodwork to teach investors the art of day trading those products. Some of the numerous quality instructors come with a very high tuition cost; others are not so expensive.