Trade to Win E-Book

Thomas L. Busby

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2008

Beschreibung

Divided into three comprehensive parts, Trade to Win explains the fundamental elements of author Thomas Busby's proven trading approach–which deals with the significance and use of time, key numbers, and market indicators. Along the way, you'll find strategies for trading stocks, options, futures, and other financial products, and go beyond the numbers to learn about a few of the often overlooked aspects of trading–including risk management, money management, and the impact of emotions on your trading.

Leseprobe

Table of Contents

Title Page

Dedication

Copyright Page

Foreword

Preface

Acknowledgements

PART ONE - A Foundation for Success

CHAPTER 1 - The Trader’s Edge

THE ROAD TO VEGAS

BECOMING A TRADER

THE AFTERMATH OF BLACK MONDAY

REVOLUTIONS IN TECHNOLOGY AND COMMUNICATION

THE DARK AGES: CIRCA 1986

NEW GAMES, NEW TOYS

BET ON YOURSELF

THE CHALLENGE FOR TRADERS

REVIEW

CHAPTER 2 - Time Is Money

TIME AND ITS IMPORTANCE

MAGGIE AND ME

TRADING PATTERNS ARE TIMELY

TIME TO STAY OUT

SPECIAL TIMES TO WATCH

KNOW WHEN TO CASH OUT

REVIEW

CHAPTER 3 - Opening the Vault with Key Numbers

STOCKS AND KEY NUMBERS

KEY NUMBERS IN METALS, FUELS, AND COMMODITIES

GOLD NUMBERS

KEY NUMBERS IN THE EQUITY INDEX FUTURES

CONNECTING THE DOTS

“T” SQUARE

REVIEW

CHAPTER 4 - Commonsense Market Indicators

TRACKING THE SEVEN SISTERS

THE NYSE AND NASDAQ ISSUES

THE NYSE TICK

THE TRIN

THE V-FACTOR AND THE TTICK

REVIEW

CHAPTER 5 - The Art of Trading

TIME

KEY NUMBERS

MARKET INDICATORS

THE FOURTH ELEMENT

REVIEW

PART TWO - Strategies to Win

CHAPTER 6 - The Path of Least Resistance

THE FACE PEEL

OFF TO THE RACES

THE FAST DANCE

THE SQUEAKY WHEEL

REVIEW

CHAPTER 7 - News Pays

NEVER PREDICT THE MARKET

STRATEGIES FOR EARLY NEWS

A 9:00 NEWS STRATEGY

EARNINGS SEASON AND HOW TO USE IT

CAUTION

BREAKING NEWS

REVIEW

CHAPTER 8 - Making Money with Bernanke

THE CORVETTE TRADE

THE MODEL “T”

REVIEW

CHAPTER 9 - Dancing with the Dax

THE EARLY RISER

THE BASKETBALL TRADE

REVIEW

CHAPTER 10 - Money Never Sleeps

THE FOLLOW-THROUGH

TRADING WHEN THE SUN RISES

TRADING AFTER-HOURS NEWS

HOLIDAY TRADING

AFTER HOURS—A NEW FRONTIER

CHARACTERISTICS OF NIGHT MARKETS

REVIEW

CHAPTER 11 - Cashing in on Bonds

REVIEW

CHAPTER 12 - Options Strategies to Make Money

OPTIONS LOGIC AND RISK

OPTIONS STRATEGIES

PROBING

REVIEW

CHAPTER 13 - Reaping Profits on the Farm

THE MORNING FACE PEEL

REVIEW

CHAPTER 14 - Going for the Gold

REVIEW

CHAPTER 15 - Stocks and ETFs

THE WAVE OF THE FUTURE—ETFs

REVIEW

PART THREE - The Wild Cards

CHAPTER 16 - Beyond the Numbers

WINNERS TRADE THE NUMBERS

BE DISCIPLINED

KISS YOUR EGO GOODBYE

BE PERSISTENT

PATIENCE PAYS

BELIEVE IN YOURSELF

REVIEW

CHAPTER 17 - Risk Management

THREE STRIKES AND YOU ARE OUT

LIMIT RISK

USE THE TWO-MINUTE RULE

USE STOP/LOSS ORDERS

HAVE AN EXIT STRATEGY

MANAGE EVERY TRADE

PHASING INTO AND OUT OF POSITIONS

DIVERSIFY

REVIEW

CHAPTER 18 - Psychology and Discipline: The Winner’s Edge

THE PSYCHOLOGY OF WINNING

GAINING BALANCE

REVIEW

CHAPTER 19 - The Last Word

Resources

About the Authors

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.

This book is dedicated to Melvin T. Busby, my dad, who is a greatfather, grandfather, and uncle. His advice has propelled me to workhard and strive to improve. His smile and soft-spoken manner hasendeared him not only to his family, but many others with whomhe has come in contact throughout the 80 plus years of his life.

Copyright © 2009 by Thomas L. Busby. 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:Busby, Thomas L., 1951- Trade to win : proven strategies to make money / Thomas L. Busby with Patsy Busby Dow. p. cm.—(Wiley trading series) Includes index.

eISBN : 978-0-470-46730-5

1. Speculation. 2. Investments. 3. Risk management. 4. Investment analysis. I. Dow, Patsy Busby. II. Title. HG4521.B84 2009 332.64’5—dc22 2008023263.

Foreword

Trade to Win would seem to be the only reason to be in the markets. However, I have found from my more than 40 years of association with traders and investors, that it is not the case. In fact, I have found that traders and investors talk about winning and their individual wins, when they are, in fact, overall losers. I am reminded of a trader from the 1985 soybean market, who after making a potential huge profit gave it all back because she didn’t want to sell “her” beans.

I met Tom Busby several years ago. I was immediately impressed with his low key, down-to-earth, and confident demeanor. His approach to the markets and to trading was matter-of-fact and simple to understand. He makes a trade for only one reason—to make money. And once his objective is met, he exits. He doesn’t need to be in the markets just for the sake of being there.

Trade to Win is a roadmap to build a trader’s winning attitude. It is easy to read and easy to follow. While reading the pages, your confidence will swell as you gain insight into how you may overcome your biggest trading obstacle, yourself. Tom reassures you that it is okay to win—and to win quickly. He helps you understand the risks involved in trading while also teaching you methods to forecast and mitigate market disasters.

It is so refreshing to read about a person who admits to making mistakes and withstanding a disaster that wiped him out. Tom does just that while detailing his struggle to regain his confidence in the markets and his ability to trade again and to win. After the markets dealt him a near deadly blow, he persisted and built a successful career as both a trader and an educator. All through the text, Tom offers “pearls” of knowledge that are the foundation for understanding trading and the markets. He adds still more by showing the reader specific trade ideas and the importance of timing in achieving success.

Over the years I have worked with many trading advisors and Tom Busby is the only one who has been willing to make a live trade in front of a live audience. He puts his money where his mouth is; he is one of a kind. When he says he can show you how to make your trading day in twenty minutes, he means it, and I have seen him do it.

It is all about education. We are not born traders. Understanding the basics all the way to the psychology of trading is a learned ability. Tom is a master trainer. Trade to Win will help you build the discipline and skills that make the trading game understandable, and his strategies will prepare you to make money.

To win you need to stay in the game. Chapter 17 sets you up to stay for the long haul. Risk management is the most important lesson a trader can learn. Quickly identifying when trades are bad and cutting your losses fast, using stop/loss orders, and knowing before you place a trade the amount of money that can be lost—all of these strategies help manage risks. Not all of your trades will be winners. The key to successful risk management is knowing quickly which trades are losers and letting them go.

My favorite chapter is “Psychology and Discipline: The Winner’s Edge.” This is where the rubber meets the road. You can’t win if you won’t let yourself win. That’s right, most traders don’t believe they are good enough to win; the markets are too tough. Tom sets the tone for you to think like a winner, and be a winner from the start. The markets are here for us to make money, not just the professionals, but for us, all of us, and that means you!

Discipline is the backbone and muscle required to win. Tom Busby is the most relaxed, confident trader I have ever met. His confidence is a product of his discipline. He has developed this discipline over a lifetime of trading. Much of his discipline was gained as a by product of getting beaten up by the markets. If you read his teachings and put his lessons into practice, you may be able to avoid the hard blows that the markets can deliver. As a trader myself, I wrote my rules out and kept them next to my screen and reviewed them every day to keep me disciplined.

In a recent interview, I was asked if I would give just one piece of advice to a trader starting out. I replied, “I would tell him to read and heed Tom Busby’s Trade to Win.”

NED W. BENNETT CEO, optionsXpress, Inc. Executive Vice Chairman, optionsXpress Holdings, Inc. September 2008

Preface

I have waged a lifelong battle with Wall Street. I placed my first trade almost three decades ago. Since that time I have made literally thousands of trades in a variety of markets. I have traded stocks, bonds, options, futures, commodities, and U.S. and foreign products. In my youth I never imagined that I would become a professional trader. However, once I began trading, I was hooked. In years past I was employed by some of the major brokerage houses. However, today I trade for myself and I teach trading to others. My school, DTI, is more than 10 years old. Students come to DTI from around the United States and some even come from foreign countries to learn the art of trading.

Over the years the DTI staff and I have taught hundreds of students. One of them, Charlie Prince, stands out in my mind because Charlie wanted to learn all that he could. It seems that it was not Charlie who initially had such a keen interest in his studies, but his wife. She was the driving force behind him and his trading education. His wife brought Charlie into my office and explained that it was important for him to understand how to invest and manage their money so that they would be able to enjoy their retirement. She planned to spend her days walking down some sandy beach and relaxing. Money was needed to achieve that goal and she made that crystal clear to both Charlie and me. Luckily, Charlie was willing and able to take on the task. He said that he would work as hard as necessary and take as many courses as needed to learn the information that would give him personal control over his financial destiny. Charlie enrolled in a class and has been returning to DTI and learning ever since. Charlie understood both then and now that empowerment comes through education.

Trading is not easy, and I have suffered my fair share of setbacks and losses. But, I have learned from my experiences and I am a survivor. I enjoy trading. Every morning when I slip out of bed, I know that new challenges will face me. I do not fear those challenges—I look forward to them. I do not make a fortune every day, but all of my trading days combined generate a good living for my family and me. Trading allows me to live my life on my terms.

This book is divided into three parts. Part One explains the fundamental elements of my trading approach. It deals with the significance and use of time, key numbers, and market indicators. It also explains how these elements of trading work together to properly read the tape and understand the language of the markets. Part Two details specific trading strategies. You will find strategies for trading stocks, options, futures, and other financial products. If you have ever traded, you know the importance of risk management, money management, and emotions in successful trading. Without them, the best strategy will fail. Furthermore, Part Three offers guidance and strategies for putting all of the elements of trading together to enable you to approach the financial markets with more wisdom and more strength. It is my hope that Chapter 18 will be especially helpful to you. It deals with real-world psychology to assist you in having the discipline to succeed.

Trading to win is a mind-set. Those who succeed in the financial marketplace are the ones that expect to do so. They do not win by accident. They learn about the markets. They work at their craft. As markets and technologies change, they change with them. There are two ways to gain lessons from Wall Street: let the market beat you up and teach you, or learn from someone who has taken the licks and teaches from experience. Through these pages readers have the opportunity to learn vicariously from a person who made his first losing trade in the late 1970s but was not turned off by Wall Street—a person who is a professional trader, daily doing battle with the bulls and the bears of the financial markets.

Throughout the text are 31 Pearls of Wisdom. They are numbered and scattered in text boxes as applicable throughout the book. Take note of these as they will aid you in your quest for success. I hope you find the information in these pages helpful and that it will assist you in improving your consistency and your profits.

THOMAS L. BUSBY

Acknowledgments

The students and staff of DTI are major contributors to this book. When I work with students, they have much knowledge and insight to share. As we strive together to understand the markets and trade effectively, we learn from each other and that knowledge is shared in these pages. In addition to my many students who challenge me and show me new approaches to old problems, the staff at DTI is also responsible for many of the ideas in these pages. Chuck Crow assisted with graphics. Geof Smith contributed ideas and assisted with edits. Jeanette Sims keeps the company going on a day-to-day basis and works hard to keep us all on track. Patsy penned the book and worked hard to explain my strategies and ideas. Petra Gross, a student and friend, assisted with editing and I thank her for her excellent editing. To all of them, I say “Thank you.” I appreciate each of you.

I would also like to thank Paula, my wife of 25 years, my sons, Winston and his wife Casey, and Morgan and his wife Melanie. They are the ones who have always believed in me and have given me the fortitude to keep learning and trading. And, of course, there is Maggie, my bulldog and friend who is my trusted early-morning and late-night trading companion.

T. L. B.