Trading Without Gambling E-Book

Marcel Link

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

Seitenzahl: 511

Veröffentlichungsjahr: 2008

Beschreibung

Many people perceive trading as nothing more than a gamble. But there are still people who consistently make money trading. How do they do it? They've learned to separate gambling from trading. And the way they do this, says author Marcel Link, is by developing a proper plan. In Trading Without Gambling, Link shows how to create and use a sound game plan to improve every aspect of trading-including finding trades, timing, knowing how much to trade, where to exit, and how to adjust risk-while leaving very little to gambling.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Acknowledgements

Introduction

NO GAMBLE TRADING

WHY THIS BOOK

A LITTLE BIT ABOUT ME

A BRIEF PROFESSIONAL HISTORY

CHAPTER 1 - Everyone Needs a Plan

THE HANGING CURVEBALL

A TYPICAL BAD TRADER

A TYPICAL GOOD TRADER PREPARED WITH A PLAN

THE TRADING PLAN AND THE GAME PLAN

A DISCLOSURE OR TWO BEFORE WE CONTINUE

CHAPTER 2 - The Trading Plan

WHAT IS A TRADING PLAN?

A SIMPLE TRADING PLAN

WHY A TRADING PLAN?

A BUSINESS PLAN FOR TRADERS

MAKING A TRADING PLAN

BREAKING DOWN THE TRADING PLAN

CLOSING THOUGHTS

CHAPTER 3 - The Game Plan

ALWAYS BE PREPARED

WHY A GAME PLAN

THE BASICS OF THE GAME PLAN

KNOW YOURSELF

DRAWING UP SCENARIOS

MAKING YOUR PLAN WORK

CLOSING THOUGHTS

CHAPTER 4 - Get to Know Yourself

DIFFERENT TYPES OF TRADERS

FIGURING OUT WHO YOU ARE

THE IMPORTANCE OF KNOWING YOUR STYLE

TWO SIDES TO EVERY STORY

CLOSING THOUGHTS

CHAPTER 5 - Trading Strategies

TRADING STRATEGIES

YOUR STRATEGY NEEDS TO FIT YOUR STYLE

TECHNICAL STRATEGIES

BUILDING SYSTEMS

DON’T BE STUBBORN

WHY SHOULD YOU HAVE A STRATEGY?

WHAT GOES INTO A STRATEGY?

THE ENTRY

EXITS

TIMES FRAMES AND HOLDING TIMES

STICK TO YOUR TRADING STRATEGY

CLOSING THOUGHTS

CHAPTER 6 - Know Your Markets

MARKETS DIFFER

KNOW WHAT YOU ARE TRADING

WHAT’S THE REAL RISK?

TIME FRAMES AND CHARTING

WHO MOVES THE MARKETS?

KNOW ANY CORRELATIONS

GETTING THE BIG PICTURE

CLOSING THOUGHTS

CHAPTER 7 - After the Close

LET’S REVIEW

THE OPEN TRADES

THINKING ABOUT TOMORROW

THE CLOSED TRADES

GETTING READY FOR TOMORROW

REVIEW YOUR PLANS AND STRATEGY

CLOSING THOUGHTS

CHAPTER 8 - Before the Market Opens

TO EACH HIS OWN

GETTING THE NEWS

KNOW YOUR MARKETS

LOOK AT OVERSEAS MARKETS

HOW ARE THE MARKETS OPENING?

MAKING ADJUSTMENTS

WERE THERE ANY BIG MOVES OVERNIGHT ?

LOOK FOR POSSIBLE TRADING SITUATIONS

DRAW UP SCENARIOS

ADJUSTING SIZE

MAKE YOUR DAILY GAME PLAN

CLOSING THOUGHTS

CHAPTER 9 - Drawing Up Scenarios

KNOW YOUR MARKETS—REVISITED

GETTING THE BIG PICTURE

GETTING A BETTER PICTURE

END OF THE DAY

BACK TO MONITORING OPEN POSITIONS

ONCE THE TRADE IS ON

GENERIC STUFF TO LOOK AT WITH OPEN POSITIONS

CLOSING THOUGHTS

CHAPTER 10 - Taking the Gamble Out of Trading

GOOD TRADES CAN BE LOSERS

TWO PARTS TO A TRADE

SAME MARKET, TWO VIEWS

GOING LONG

GOING SHORT

WAITING FOR THE RIGHT OPPORTUNITIES

MEASURE THE RISK-TO-REWARD RATIO

WAYS TO GET THE ODDS IN YOUR FAVOR

CLOSING THOUGHTS

CHAPTER 11 - Getting In

SPOTTING THE OPPORTUNITY

PLANNING THE TRADE

DRAWING SCENARIOS FOR GETTING INTO THE TRADE

DON’T CHASE THE MARKET

TIMING THE TRADE

LOOK FOR PATTERNS WITHIN THE LONG-TERM TRADE

KNOWING THE RISK

DECIDING HOW MUCH TO TRADE

CLOSING THOUGHTS

CHAPTER 12 - Getting Out

PREESTABLISH YOUR EXIT STRATEGIES

CUTTING LOSSES AND LETTING PROFITS RIDE

USING STOPS IN YOUR GAME PLAN

PLANNING YOUR RISK

THE SETUP

TRADING THE GAP

ANOTHER TRADE

A CRAZY DAY

PLANNING YOUR TARGET

HOW WILL YOU EXIT?

THE IN-BETWEEN AREA

CLOSING THOUGHTS

CHAPTER 13 - Reviewing and Managing

AFTER THE TRADE IS ON

LOOKING AHEAD

REVIEWING YOUR TRADING

KEEPING A JOURNAL

CLOSING THOUGHTS

CHAPTER 14 - How to Keep from Overtrading

WHY HAVE A PLAN

YOU DON’T ALWAYS NEED TO BE IN THE MARKET

STOP BEING IN TOO MANY POSITIONS

USING A GAME PLAN TO HELP IF YOU TRADE TOO MANY POSITIONS

KEEPING TO RISK MANAGEMENT LIMITS

CLOSING THOUGHTS

CHAPTER 15 - Money Management

DON’T TAKE RISK LIGHTLY

ANOTHER GAMBLING ANALOGY

THE MONEY MANAGEMENT BASICS

INCORPORATING YOUR MONEY MANAGEMENT PLAN INTO YOUR TRADING PLAN

INCORPORATING YOUR MONEY MANAGEMENT PLAN INTO YOUR GAME PLAN

ESTABLISHING MONEY MANAGEMENT PROCEDURES FOR OPEN POSITIONS

CLOSING THOUGHTS

CHAPTER 16 - Trading Rules

TRADING RULES

USING YOUR RULES TO MAKE A TRADING PLAN

MY TRADING RULES

APPLING THE MONEY MANAGEMENT RULES

APPLYING THE ENTRY RULES

APPLYING YOUR EXIT RULES

APPLYING THE DISCIPLINE RULES

THE TOP 25 RULES

CLOSING THOUGHTS

CHAPTER 17 - Focus and Discipline

STAYING FOCUSED

DISTRACTIONS

HAVE A ROUTINE TO HELP YOU WRITE A GAME PLAN

FOLLOWING YOUR PLAN

HOW TO STAY FOCUSED IF YOU HAVE TROUBLE STAYING FOCUSED

MENTAL SIDE OF DISCIPLINE

KEEPING TABS

UNWINDING AFTER THE DAY

CLOSING THOUGHTS

CHAPTER 18 - Learning How to Win

CLEAN OUT YOUR CLOSET

DON’T BLAME OTHERS FOR LOSSES

THINK OF IT AS AN EXPENSE AND NOT A LOSS

SELF-DESTRUCTIVE BEHAVIOR

LEARN FROM MISTAKES

TRADE, TRADE, TRADE

CURB YOUR EMOTIONS

LOSSES ARE IN THE PAST

MONEY MANAGEMENT IS MORE IMPORTANT THAN TRADE SELECTION

TREAT YOURSELF

PRESERVE PRECIOUS CAPITAL

HAVE A CUTOFF POINT

JUMPING IN TOO SOON OR GETTING IN TOO LATE

DO NOT LET BIG WINNERS TURN TO LOSERS

MAKE A LIST OF RULES

TRADE YOUR STYLE

USE A PROVEN STRATEGY

TIPS ARE FOR BARTENDERS

LEARN AS MUCH AS YOU CAN ABOUT WHAT YOU ARE TRADING

KEEP LEARNING

READ AND LEARN

TRADE WITH A PLAN

FILL IN YOUR OWN

FINAL THOUGHTS

About the Author

Index

Copyright © 2009 by Marcel Link. 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:

Link, Marcel. Trading without gambling : develop a game plan for ultimate trading success / Marcel Link. p. cm. - (Wiley trading series) Includes index.

eISBN : 978-0-470-46628-5

1. Speculation. 2. Futures. 3. Stocks. I. Title. HG6041.L564 2009 332.64-dc22 2008022104.

Dedicated to all the people who bought my first book,giving me the opportunity to write another, and,to all the people I ignored and didn’t have time forwhile I wrote this book.

Acknowledgments

I’d like to thank the following people:

Stephen Isaacs of then McGraw-Hill for giving me a shot with my first book;

Dr. Alexander Elder, for assisting me in getting an agent for this book; Ted Bonanno, that agent who helped me land a deal for this book with John Wiley & Sons;

Kevin Commins, Laura Walsh, and Emilie Herman of John Wiley & Sons for working with me on this book, for giving me free rein, and for putting up with my requests for extensions;

Those unfortunate copyeditors at Wiley who had to fix my grammar; And last, my family for letting me ignore them while I finished up the book.

Introduction

So here I am again, writing another book. After the incredible runaway success of my debut smash book High Probability Trading, there was interest in another, so here I am. If you haven’t read my first book you should instantly go out and buy a few copies of it now.

Anyway, High Probability Trading realistically took a trader through the steps of becoming a better trader showing him how to succeed and how to avoid pitfalls. It covered many aspects of trading including entering and exiting trades, money management, making and back testing systems and fighting many of the personal demons traders have.

NO GAMBLE TRADING

If you took everything from the first book, put it into a funnel and strained out the fluff, the key things would all boil down to one basic concept and that is the importance of making a trading and game plan to trade with, and following it, of course. This new book will take that concept and expand on it as I believe it to be the key to successful trading.

Many people look at trading as a gamble, and yes there is risk involved, but a well-prepared trader, with a solid game plan and discipline can learn to trade without gambling, the same way the professional gamblers do.

Though I’ll show examples of my trading and talk about technical analysis, this book is not about how to pick market bottoms or giving you great trading systems, instead it will focus on how you can become a better trader. They key to winning in the markets is planning for it and knowing in advance how to react to certain situations, and this is what a game plan will do for you. Trading is not simply about buying and selling, but about the knowing when, and why to do so.

WHY THIS BOOK

I have found over the years that there are many ways to make and lose money in the market. For those who read my first book you’ll know I have a very down to earth way of looking at the markets and my writing style is how I talk. I never say I’m trading the Standard and Poor’s 500 futures, I say the S&Ps and that’s how you will see it in this book. I try to write as if I’m talking to you as a friendly mentor, not some arrogant know-it-all lecturer. I’m not trying to make you believe I have the holy grail of trading or that I’m the best trader out there. I’ve been trading 20 years now and I’ve had my share of mistakes, but I learned from my mistakes, and believe me there were many. It is this learning process that I’ll try to pass on to you. I got a call today from a trader in Hawaii, saying that he learned more from reading my first book than from his two years in grad school. I actually have gotten many e-mails and calls over the last few years thanking me for helping people become better traders. It’s little things like that that make writing a book worthwhile, because as my first editor said to me, most people do not write books for the money.

Throughout the book I’ll give examples of trades and positions I put on the day I’m writing. Lately, I’ve been mostly trading the Dow Jones electronic futures and the S&P E-mini, which I just refer to as the S&Ps most of the time, some crude and a few select stocks. So I’ll probably be giving examples using those. You won’t find charts from five years ago that show the perfect textbook head-and-shoulders pattern that an author researched for weeks trying to find to make a point. Instead, I’ll give you patterns from the day I was writing. I tend to talk about my many mistakes over the years, and you’ll gain a lot of knowledge if you learn from them like I have. Making mistakes and learning from them is the most powerful tool you could have. You learn a lot more from mistakes than from good trades, as you likely take good trades for granted and never realized why they are good. Many of the positive reviews I got about High Probability Trading said something like, “I wish I had read this book when I first starting trading, I would have saved a lot of money.” “Mr. Link seems to have been looking over my shoulder as he wrote this book. I can clearly see so many things I have done wrong.”

In setting out to write this book I realized I do not need to write a 700-page tome on trading. There really is not that much to say about creating a trading and game plan. What I will give you though is a concise, straight to the point idea on how to trade better by having these plans. I will do my best to not throw in a useless overflow of information. Though I do add a bit of humor and some interesting facts here and there that hopefully doesn’t offend anyone. The goal of the book is to apply every subject to just one thing and that’s how it relates to your trading plans. Whether I’m talking about stops, discipline, risk, entering a trade or anything else, it will relate to the trading and game plan.

Though I do talk about both trading and game plans, this book will be more about using a game plan than about making a basic trading plan. You’ll understand what I’m talking about after the first few chapters.

I could detail what a game plan is here but my first couple of chapters won’t be nearly as riveting if I do. What I can tell you are the basic benefits of a game plan:

• It will force you to select a trading style.

• It will encourage you to study the markets.

• It will help you pick the best trades.

• It will prepare you for what the market has to offer.

• It will help you monitor and exit trades.

• It will keep you from overtrading.

• It will keep you financially in line.

• It will keep you focused.

• It will take the gamble out of your trading.

And it will make you a better trader.

A LITTLE BIT ABOUT ME

When I started out I always thought trading was easy and fun. I was a little lackadaisical in preparing for the markets and was undisciplined. Yes, trading was easy, making money, however, wasn’t as easy. I did so many things a trader should not do, that not surprisingly I lost a good amount of money trading. Even when I started I was really good at technical analyses and picking markets levels, however, I suffered in areas like discipline, overtrading, and not being prepared. What would happen is I’d do great for a while and then blow out. Granted, I was definitely undercapitalized at the beginning, but I still could have done okay if I had been disciplined. Having had the luxury of being in constant contact for 15 years with both successful, professional traders and those who didn’t have a prayer, I’ve been able to see one key difference they possess. Winning traders worked hard at being knowledgeable and had a definite plan and trading strategy they consistently followed, and most of all they were disciplined about adhering to their plans. Once I was able to adopt those things, I was able to turn it around and become successful.

To side track for a second, I went to a seminar recently and the speaker was talking about what success means to different people. To some it means having the most dollars, houses, and toys. To me it means being able to do what I want. I can take six months off and do nothing and not worry. Three years ago I bought an upscale bar/lounge in Manhattan that did quite well and I was offered three times my investment after six months.Then I rented a ski house in Park City, Utah, and skied for 78 consecutive days. I traded in the morning until about noon (2 P.M. New York time), then walked the 30 seconds to catch the shuttle for the one-minute ride to the base of the mountain and skied for the next five hours. Two years ago I spent quite a bit of the fall in Provence and Tuscany doing absolutely nothing. And the last two years I have stayed home raising my kids. Now I’m about to opening up a new bar/restaurant. I may not make as much money as some big-time traders, but I believe I am more successful than most as I get to do a lot of things people envy.

A BRIEF PROFESSIONAL HISTORY

After a short stint as a stockbroker in 1987, I worked as a crude oil options clerk on the floor of the New York Mercantile Exchange. A few years later, I scraped together and borrowed $30,000 and began trading NYFE and U.S. Dollar Index futures on the floor of the New York Financial Exchange and Cotton Exchange. With the popularization of the E-minis in the late nineties, the NYFE has become practically obsolete. When I started, it was the poor man’s version of the S&P futures, moving about half as fast and with smaller margin requirements. Being undercapitalized, I only lasted about three months before I lost half my capital on one mistake. Not having enough money to trade from the pit anymore, I joined forces with another trader and formed a trading partnership. We began to trade a few more markets, as well. While he stayed in the ring, I had a booth where I could look through charts, managing our positions and worked on system writing. Eventually we went our separate ways. I left the floor to trade out of a brokerage office, with several other experienced ex-floor traders.

Between 1995 and 1997, I took a break from trading full-time to go to graduate school. When I finished, I decided to start a discount brokerage firm called Link Futures. Online trading had just started creeping into the futures industry at that time, with relatively few firms having an Internet presence. We offered deep discount brokerage and had a trading room where traders could trade from. Unfortunately, as the Internet caught on, larger firms and clearinghouses started undercutting each other in price and once again I was undercapitalized to compete and make it thrive. The bright side of this was that my trading started to get consistently better as I watched what my clients did wrong.

In March 2000, when I was offered a position to trade equities, it didn’t take much thought to decide to go for it. My potential as a trader was much greater than with the brokerage firm, so I made the move to concentrate on being a proprietary equity trader.

In 2002, I set out to write High Probability Trading and got fired because it was against the company’s policy for employees to write anything or talk to the media. So I decided to just trade futures from home. The book ended up doing fairly well and I was amazed at its success and the reviews from people who read it and said they wished they had read it years ago. And though I recall how time-consuming and tedious it was writing that book, here I am again.

Good luck. Enjoy the book and feel free to e-mail me at [email protected], or visit my web site MarcelLink.com.

CHAPTER 1

Everyone Needs a Plan

A new wide-eyed, aspiring trader asks a learned, wealthy, successful trader, “How can I end up with a million dollars in the stock market?” The old trader scratches his head and after some thought says, “Start with $2 million.”

I was having trouble figuring out how to start this chapter and therefore this book, until I was listening to a New York Mets game in my car last week. During a rain delay the announcer, Steve Somers, was talking about Pedro Martinez, a three time Cy Young award winner, and for those non-baseball people, that means he was the best pitcher in baseball for the year. Somers was talking about how good a pitcher Pedro is and how he has been able to adjust due to injuries and age, as well as how he can adjust to batters in a game. He was saying Pedro has many different game plans, and he can easily switch them once he is in a game. This ability to know what is and isn’t working is what makes him one of the most dominant pitchers in baseball.