The Complete Trading Course E-Book

Corey Rosenbloom

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

Seitenzahl: 592

Veröffentlichungsjahr: 2010

Beschreibung

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.

Leseprobe

Contents

Cover

Half Title Page

Series

Title Page

Copyright

Dedication

Preface

HOW THE BOOK IS ORGANIZED

Acknowledgments

Half Title Page

Part I: Foundational Principles

Chapter 1: Supremacy of the Trend

METHODS FOR DEFINING TRENDS

PINPOINTING THE TREND REVERSAL IN 2009

Chapter 2: Momentum's Leading Edge

THE SCIENCE OF MOMENTUM

MOMENTUM IN THE STOCK MARKET

GAPS REVEAL MOMENTUM

THE MOMENTUM INDICATOR

THE RATE OF CHANGE INDICATOR

THE 3/10 MACD OSCILLATOR

WHERE MOMENTUM IS STRONGEST

Chapter 3: Price Alternation Principle

DEFINING THE PRINCIPLE

PRICE CONTRACTION PHASE

PRICE EXPANSION PHASE

VIEWING THE MARKET AS BUYERS AND SELLERS

FEEDBACK LOOPS

CHOOSING THE RIGHT INDICATORS

Part II: Strategies and Tools

Chapter 4: Candlestick Charting

BENEFITS OF USING CANDLESTICK CHARTS

CONSTRUCTION OF CANDLESTICK CHARTS

BASIC TERMS USED TO DESCRIBE CANDLESTICKS

COMMON SIGNALS

THREE TRADING SCENARIOS

A LITTLE KNOWLEDGE GOES A LONG WAY

Chapter 5: Examining Price Patterns

WHAT ARE PRICE PATTERNS?

INTRODUCTION TO THE MOST POPULAR PATTERNS

HEAD AND SHOULDERS

INVERSE HEAD AND SHOULDERS

BULL FLAG

TRIANGLES

USING PRICE PATTERNS IN THE REAL WORLD

Chapter 6: Fibonacci Tools

WHAT IS FIBONACCI IN TRADING?

FIBONACCI RETRACEMENTS

HOW TO IDENTIFY FIBONACCI RETRACEMENT CONFLUENCE ZONES

THE MULTIPLE USES OF FIBONACCI TOOLS

Chapter 7: Following the Life Cycle of a Price Move

THREE PHASES OF A LARGE-SCALE PRICE MOVE

VISUALIZING THE STAGES THROUGH CHARTS

RALPH ELLIOTT'S WAVE THEORY

THE THREE RULES OF ELLIOTT WAVE

ELLIOTT WAVES EXAMPLE: RESEARCH IN MOTION

FINAL TIPS FOR APPLYING THE LIFE CYCLE IN REAL TIME

Part III: Execution and Trade Setups

Chapter 8: Edge, Expectancy, and Execution

ALL ABOUT EDGE

EDGING OUT YOUR EXPECTANCY

TRADE EXECUTION TACTICS

Chapter 9: Four Basic Trade Setups

COMMON COMPONENTS OF EVERY TRADE

HOW TO CLASSIFY TRADE SETUPS

MEAN REVERSION STRATEGIES

MEAN DEPARTURE STRATEGIES

WHERE TRADES FIT IN THE LIFE CYCLE

TRADING CONFIDENTLY

Chapter 10: Specific Trade Setups for Today's Markets

THE CRADLE TRADE

THE IMPULSE BUY AND IMPULSE SELL TRADE

USING MULTIPLE TIMEFRAMES TO ENTER AN IMPULSE BUY TRADE

CONCLUDING THOUGHTS

About the Author

Bibliography

Index

The Complete Trading Course

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, please visit our Web site at www.WileyFinance.com.

Copyright © 2011 by Corey Rosenbloom. 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, [phone], 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, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

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:

Rosenbloom, Corey. The complete trading course : price patterns, strategies, set-ups, and execution / Corey Rosenbloom. p. cm. – (Wiley trading series) Includes bibliographical references and index. ISBN 978-0-470-59459-9 (cloth); ISBN 978-0-470-94729-6 (ebk); ISBN 978-0-470-94728-9 (ebk); ISBN 978-0-470-94727-2 (ebk) 1. Technical analysis (Investment analysis) 2. Investment analysis. 3. Stocks. 4. Speculation. I. Title. HG4529.R67 2011 332.63′2042–dc22 2010032311

To my parents, George and Debby, for without the life-long support, encouragement, and life-lessons you both taught me, none of this would be remotely possible.

Preface

When you first look at a stock chart as an opportunity to make money, where do you start? How do you classify all the conflicting signals , cut through the noise, and get straight to the point of what matters most? How do you structure your analysis? And when you find what you think could be a trading opportunity, how do you enter, manage, and exit the trade most efficiently?

The Complete Trading Course answers these common questions of traders from all experience levels and provides you a specific pathway for analyzing your chart to find specific trading opportunities. These opportunities are 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. Building from a foundation of price principles that guide your analysis, the book then overlays specific strategies onto the developing structure from insights in candlestick charts (showing not just the pattern, but how the pattern forms and its importance in assessing turns in price), price patterns, and Fibonacci retracements, all of which fit into the specific context of the life cycle of a price move on any timeframe. Knowing where the chart exists in the life cycle of a price move reveals what strategies are most effective and what indicators reveal the best setups, which guide your specific decisions on where to enter, place stops, play for a specific price target, or hold for a larger gain as you monitor open positions as new data emerges on the chart in real time.

Knowing how to identify trades based on price trend, momentum, and volatility are all foundation concepts which are covered in detail in the first part of the book. The section on edge reveals specifics of trade execution tactics geared to your unique personality, which is not covered in most trading books that reveal “buy here, sell there” strategies that do not take into account the unique experiences and personality of the trader putting on the position. If you do not understand why you are entering a trade, you will almost certainly not be successful in that trade, as you will lack the confidence and edge necessary to recognize a proper opportunity, manage it in real time, and exit the position properly without emotion negatively affecting your decision. This book specifically addresses the importance of combining objective chart information with your understanding and experience; as such, the confidence you have in your strategies and methods will combat the natural tendency to enter when you feel most confident and exit when you feel the most pain, both of which allow emotions to erode your accuracy and monetary trading edge.

I wrote this book from my combined experience and education as a Chartered Market Technician and trader of many markets and strategies; I wish this book had existed when I began my journey as a trader, as it would have saved me countless hours of wasted time and effort. What separates today's traders from those 50 years ago is the sheer amount of information, webinars, seminars, books, courses, blogs, web sites, ebooks, and so on that inundate the new trader with too much information, and too many voices saying their methods are the best. Lured by the promise of instant riches, a new trader buys a new indicator or attends a single expensive seminar, only to find the information too complicated to apply, or worse, absolutely ineffective in a real-time, fast-paced trading environment.

No one book, indicator, or seminar can teach you all you need to know to be a successful trader. Instead, your goal should be to learn foundation price principles, effective strategies, how to assess your edge, and then incorporate your unique personality, experiences, stage in life, risk-tolerance, and individual psychological make-up into a lifetime of learning, starting with the basics and building a unique creation from there as you progress month to month and then year to year as a developing trader. Trading is a performance discipline, not unlike the training and commitment required to become a professional athlete, physician, scientist, or musician. All professionals must start with the basic, time-tested principles of their respective disciplines, and then carve out their own specialty with the information they have learned and the methods that appeal to them—or “speak to them” as it has been said. Some methods will speak to you while others will not; learn more about trading methods that call to you and interest you as you develop as a trader. This book lays the basic foundation upon which to build a life-long trading career.

While each chapter could probably be a whole book in itself, and there are in fact several books written on the specific material I cover in this book, what I do for the reader in The Complete Trading Course is cut through the theoretical aspects and esoteric information, such as candle patterns not even professional technical analysts use, and combine only the most important information from a variety of disciplines such as Fibonacci retracements, Elliott wave, popular price patterns (such as the head and shoulders and bull flags), and effective candle signals. Unlike other books, I focus 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. In fact, the strategies and setups all derive from the specific principles you will learn, and in so doing, you will increase your confidence and learn how to manage open positions effectively, using the objective chart evidence rather than your emotions.

I show examples on multiple timeframes because the principles and strategies apply to all timeframes, from the one-minute intraday charts in a hyper-fast day-trading environment to the more deliberative, longer-term positions you can identify and manage on the weekly or even monthly charts. This is another way The Complete Trading Course appeals to all traders, as the strategies cut to the heart of what moves price—the supply and demand relationship of buyers and sellers.

Individuals who are new to trading and cannot commit full-time to a professional trading career will benefit from learning these principles and incorporating them into a swing-trading strategy that can be implemented with evening research and placing orders before going to work to manage positions that span weeks or perhaps months at a time. The tactics also apply to those who are part-time traders with part-time jobs which provide steady income as you develop your track record as a trader before making the leap to full-time trading. The book also benefits those who are currently full time and are struggling to achieve profitability, or who feel they are being blown around by different exciting strategies while being grounded in none. This book provides a foundation to make objective, clear decisions based on trend structure, momentum, and volatility as principles to guide your specific decisions, no matter what timeframe you analyze and trade.

Day traders will benefit from understanding multi-timeframe analysis and how to set trades up intraday that take advantage of the higher timeframe structure and levels to watch, particularly on the daily chart. Day traders will be able to use leverage and more aggressive strategies that swing traders cannot, though day traders tend to hold less open positions at a time than a swing trader.

Examples in the book include stocks, ETFs, futures contracts, and inter-markets, all of which highlight the application of these principles, strategies, and setups on all markets and all timeframes. All that is required is a liquid market driven by supply and demand, with the ability to plot prices on charts, and these principles will apply, though as you develop, you will begin to specialize in the specific nuances of your chosen market, vehicle, and timeframe.

HOW THE BOOK IS ORGANIZED

The Complete Trading Course progresses from a solid foundation of time-tested price principles through modern charting strategies into specific setups, and I recommend progressing through the book in the order I have arranged the material. I sought to answer the question “where do I begin in my analysis?” and have arranged the book with the answers unfolding in a journey through the material.

We begin our journey in Chapter 1 which outlines the foremost price principle on the importance of price trends, how to define these trends, what constitutes a true reversal, and how to frame the remainder of your analysis within the context of the trend structure. After learning how to recognize trends, Chapter 2 seeks to assess the health of a trend in motion by defining momentum and how it confirms a new trend and then disconfirms a mature trend. By learning how to identify momentum divergences, you can anticipate the end of a trend prior to the official reversal signal. Being a foundation principle, momentum's leading edge also explains why we take certain specific trade setups that we do, and how momentum factors into price patterns. The last of the price principles, Chapter 3 details the Price Alternation Principle, which explains why some indicators work well in certain environments and then fail in others. The principle also lays the groundwork for range-trading, mean reversion trading strategies, which give rise to breakout strategies that can lead to large profits at the exact genesis of a new move in the market.

Part 2 focuses on modern-day strategies and charting tactics to compliment your analysis from the foundational price principles. Chapter 4 explains how to identify effective candle patterns on the charts, and contains a unique step-inside perspective of each candle pattern described, cutting to the heart of why the pattern is important. You will undoubtedly be familiar with some of the popular price patterns in Chapter 5, but I explain not just how to recognize and trade the pattern, but how the pattern derives its application from one of the foundation price principles described in Part 1. I explain why it is not enough simply to recognize a pattern—particularly in today's sophisticated markets. Much has changed in the more than 70 years since early chartists quantified these patterns. In Chapter 6, I explain how to draw Fibonacci retracement grids, how to find Fibonacci price confluence, and how a Fibonacci retracement grid assists your trade identification, entry, and exit decisions, all while keeping the examples current and simple to understand; Fibonacci analysis need not be complex. I conclude the section on modern-day strategies by explaining the Life Cycle of a Stock move, from accumulation through realization, and into the final stage of distribution, explaining insights into how professionals behave against the crowd at all stages. The chapter includes a quick description on how Elliott Wave complements Charles Dow's original work on trends, and how both techniques combine in today's world of active trading.

No book on trading strategies would be complete without a discussion on edge, execution tactics, trade setups, and how to put the information into practice in real-time under conditions of uncertainty and heightened emotion. Part 3 begins in Chapter 8 with a detailed discussion on risk management, edge optimization, trade execution tactics, and expectancy. Unlike other books on trading tactics, I explain the importance of combining these factors into a strategy that fits your unique personality, making a careful distinction between conservative and aggressive tactics in all the trades you take. Chapter 9 combines all that we have learned in The Complete Trading Course into the four components of every trade, as well as the two broad categories of trade setups and the four specific types of trade setups, all of which reduces the uncertainty of a trading decision into four categories of breakouts, retracements, reversals, or fades. The final chapter encourages you to use what you have learned and create your own specific trade setups with a discussion on how to do so, and a detailed explanation of the Impulse Buy trade, Impulse Sell, Cradle Buy trade, and Cradle Sell.

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

Acknowledgments

Writing a book is far more difficult than writing a blog post! While one person can create and maintain a blog, it is absolutely impossible for one person to do all the work necessary for a book to come to life. I especially want to thank Kevin Commins, Meg Freeborn, and Claire Wesley along with the whole staff at John Wiley and Sons for their encouragement, feedback, and time they put in assisting me with the manuscript.

In the trading community, I want to express my thanks to Tim Bourquin of Trader Interviews.com and the hard-working staff members at the MoneyShow.com who host the popular Traders Expo conferences. It was through these Expos, both as an attendee and a speaker, that I was introduced to the professional world of trading which allowed me to make many contacts and enabled me to connect with the market professionals who molded me into the trader and market analyst I am today. Specifically, thank you to Linda Raschke who first alerted me to the early founders of technical analysis and key price principles, and whom I continue to be inspired by to this day. I also owe a lot of my professional success to Andrew Horowitz of the Disciplined Investor web site and podcast series—I cannot express how thankful I am for all your support, encouragement, and all the hours we have spent talking markets, both from a fundamental analysis and technical analysis standpoint. A special thanks also to Dr. Brett Steenbarger who taught me the importance of developing as a trader, and for the selfless insights he provided each day through his TraderFeed blog and books—thank you also for the initial push to write the book. Mike Bellafiore of SMB Capital was instrumental in sharing his insights with me about writing a book, and for his continued support and encouragement as the manuscript took shape. Thank you also to Toni Hansen and again to Linda Raschke for helpful tips on public speaking.

In the financial blogging community, thank you to everyone who has linked, commented, and visited the Afraid to Trade blog. Thank you to TraderMike for the very first link that started traffic coming to the blog early in 2007. Much appreciation to John Forman for his patience with me, along with Rob Hanna, Scott Andrews, Hale Stewart, Jeffrey Lin, Charles Kirk, Phil Pearlman, Brad Stafford, and so many others who had to endure my delayed emails as this manuscript came to completion. Thank you to the many blog readers for your encouragement and supportive emails and Tweets. I would not have kept up the early blogging activities were it not for you all. Thank you as well to the many members of the StockTwits community and your daily enthusiasm and passion for trading. Thank you to Jim Slagle and the whole crew at GreenFaucet.com for the Technician's Edge column, and to Karen, Josh, Paul, and everyone at TraderKingdom.com/ Mirus Futures for the webinar opportunities.

I wanted to share a special appreciation for all the staff and members of the Market Technician Association, and for their hard work at developing and educating professional technical analysts. All that I had learned previously through so many sources finally fell into place as I progressed through the formal CMT program and coursework, and I am thankful for your support and networking as well. Many thanks to Rick, my local CMT study-partner and all the many late hours for more than two years we spent studying the material, then continuing the study sessions once the CMT coursework was complete. You got me addicted to coffee, but without our study sessions and research meetings, I would not have been able to obtain the professional insights you provided, and had so much fun in the process.

Finally, thank you to my parents, George and Debby. Words cannot express my gratitude for your continued support and love. Without Dad and his initial encouragement early in my life that I should “learn business and investing,” when I told him I wanted to be a psychologist then later work in politics, and our many debates about stocks and the market, none of this would have been possible at all. It's hard to be a full-time trader, but having your full support made me feel that anything was possible—and many years later, I still believe it is.

The Complete Trading Course

PART I

Foundational Principles

CHAPTER 1

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?”