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From the Editor


Editorial
Publisher: Chris Myers
Transformation is the process of change, an act of the business. The trading techniques they share here
Senior Editor: John Probst
moving from one state to another of improved use- have made them some of the industry’s leaders.
Development Editor: Jody Costa fulness. It is also the theme of this electronic book.
The second industry, publishing, is also facing a
Design When we talk about transformation, it is important metamorphosis through the growing use of digital
Art Director: Larry Strauss to start with “what was” before moving on to “what content. Not only are the articles in this ebook of
Design & Production: Jennifer Marin now is.” What we had before were two things: an extreme importance, the presentation is as well. We
industry defined strictly as masculine and an indus- have gone to great lengths to ensure the best and
Business
try confined to paper. most effective online reading experience possible.
This book is meant to live and breath electronically;
VP/General Manager: John Boyer Let’s start with the first. The image of trading has providing you with more resources than any print
always been masculine. To trade, one would call a book could and giving our printers a chance to save
broker, who would place an order with a trading a tree or two.
clerk, who would send the order to the trading pit,
Published by Marketplace Books © 2007
where a floor trader would execute the order and I want to thank the contributors for taking the time
All rights reserved. make the trade with another floor trader. It was very to share their trading secrets. I hold them in the
likely, nearly guaranteed, that all involved were men. highest regard and hope that you can benefit from
Reproduction or translation of any part of this
work beyond that permitted by section 107 or 108 of their experiences. I would also like to thank our
the 1976 United States Copyright Act without the per-
Now, that is all changing. The electronic platforms graphics team for their innovative design.
mission of the copyright owner is unlawful. Requests for have leveled the playing field for retail traders and
permission or further information should be addressed to for women. Increasingly the competitor you face on And thank you for downloading. I hope you enjoy
the Permissions Department at Marketplace Books, 9002 any given trade is a woman, and an educated one this ebook and that it may transform your trading
Red Branch Road, Columbia, MD 21045, (410) 964-
at that. While successful women were the exception to one of consistent profitability.
0026, fax (410) 964-0027.
just a few years ago, the new electronic environment
ISBN: 1-59280-317-2 • ISBN 13: 978-1-59280-317-0 is providing even more opportunity for women to Enjoy and happy trading!
shine and profit. In this ebook, we have brought
you insights from some of the top female traders in
Jody Costa
Horner Turner Boroden Hansen Lien McDonald Folger Rockefeller Bios
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Raghee Horner
Importance of Chart Patterns

Chart patterns are often the very first what has been discounted into the Fast forward almost two decades,
Horner Recommends introduction traders have to charting markets can come from chart patterns and I’ve taught the same strategies
the markets. There is something in- because price analysis is an effective and market approach to thousands of
Technical Analysis herently familiar about chart patterns, way of taking fear and greed out of people around the world. I’ve noticed
and Stock Market and because of this, there is a com- your trading. It’s easier to absorb that something curious often happens
Profits fort level to trading these common news and reports when you have a after a trader discovers chart patterns.
shapes. Triangles, rectangles, wedges, measuring stick by which to gauge the They leave them behind. Most often
by Richard Schabacker
channels, and more—these are the public response. That’s the key benefit it’s in the pursuit of finding something
patterns that are often identified on a to being a chartist! more sophisticated or more advanced.
chart, and through these patterns, key
decisions can be made as to how and I started charting in high school. I Somewhere along the line we’re
when to enter a trade. In that way, I didn’t really know I was charting but brainwashed into thinking that chart
believe chart patterns are a tremen- it was the only way I could track the pattern analysis is not enough. In
dous anchor to what we know as we rise and fall of my one and only stock, some ways that is both right and
venture into the unknown waters of IBM, and my two mutual funds. As wrong. There are specific questions
trading for the first time. my interest in the market grew, so any trader can learn to ask to confirm
did my formal education into chart- that the pattern is a quality pattern.
My trust in charts begins with my ing and also technical analysis. It was Without having a checks and balances
belief that the news is built into price. through charting and chart patterns for “grading” patterns, there is a high
I’d have to say that much of my suc- that the movement of the market likelihood that a trader will enter too
cess in the trading game comes from began to take shape and make sense many sub-standard formations and
separating news from price. Knowing to me. begin to lose trust in not only their

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Figure 1

This chart clearly shows the set up and subse-


quent follow through of an asymmetrical triangle
as it breaks down through the uptrend line sup-
port. The pattern gives us the “boundaries” of
the trading range. It identifies where the buyers
support prices and where the sellers are pushing
prices lower. If one of these levels is broken, it
is believed that the traders that kept prices from
moving beyond this boundary are “defeated,” and
prices will continue through that line or level.
Again, the pattern gives us the visual cue, and the
lines and levels offer the decision levels at which
we can act.
This pattern is known as a congestion pattern
as prices are squeezed into a range as they move
sideways. The sideway movement is a market
or chart cycle known as distribution. These are
also referred to as stages. Everything has a cycle
own pattern identification, but also the confi- patterns are trendlines, support, and resistance.
or stage. Watching children grow up, we refer
dence to act on specific pattern triggers. All patterns are some sort of combinations of
to stages and these stages have specific criteria,
uptrend lines, downtrend lines, and horizontal
But, chart patterns can be traded in any market or features, which distinguishes one stage from
support and resistance levels. If you can identify
and on any time frame. For that reason alone, another. The housing market also has stages: a
the “lines and levels” on a chart, then you can
there is a lot of benefit to learning how to identi- buyer’s market, seller’s market, underdeveloped,
begin putting these patterns together because
fy them. A picture is worth a thousand words and overdeveloped. The same is true of the financial
you—most importantly—understand how to
if you ask me, a chart is worth even more. markets. These cycles or stages reflect the fear,
find the building blocks of the patterns.
greed, or uncertainty of the market.
We will examine a number of charts together Think about it this way: What is a symmetrical
and the main goal of this in-depth discussion is There are four cycles or stages: accumulation
triangle other than the intersecting of a down-
to begin training your eyes to notice the nuances (narrow sideways range), distribution, (wider,
trend line and an uptrend line? An asymmetrical
within patterns. Another key to trading chart more volatile sideways range), mark up (up-
triangle is simply the combination of one hori-
patterns is to understand the building blocks trend), and mark down (downtrend). There is
zontal level and one trend line. Take a look at
of the patterns. The building blocks of all chart no specific order in which these markets develop,
the 15-minute chart of the Dow Jones (Figure 1).

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rather that each cycle/stage has features specific to The 60-minute chart of the S&P 500 (Figure 2) Wedges are considered continuation patterns. The
it alone. Range-bound markets that develop in a is making lower highs as it bounces within the rule of thumb when analyzing or trading an estab-
narrow range moving sideways are the key to an ranges of a falling wedge. lished trend is to follow the trend until it breaks or
accumulation cycle. On the other hand, distribu- transitions to a sideways market cycle. The break
tion is also a range-bound market but the key to While the asymmetrical triangle of the 15-min- of a trend is defined by prices trading through the
distinguishing an accumulation cycles from a dis- ute Dow Jones chart occurred in a sideways resistance of a downtrend or the support of the
tribution cycle is in the price range. Distribution market, this wedge has developed in a shallow uptrend. Wedges can help a trader find an entry
cycles are wider and more volatile; the support downtrend. A downtrend is defined by the lower point within the context of a trend—which, con-
and resistance ranges will develop into triangles highs it makes. These lower highs often form a trary to belief, is a difficult thing to do correctly.
most often. Ranges can also develop in markets downtrend line, which is resistance. Downtrends Just because a market is trending doesn’t mean that
that are trending; and, when this happens, they are marked by downtrend lines (resistance) while any entry with the trend is a good one. The wedge
are referred to as ascending and descending tri- uptrend lines mean support. offers a trader a point at which to short resistance
angles and wedges. at the upper downtrend line or play the reversal
of the trend, which also is defined by the upper
Figure 2
downtrend line.
Chart patterns can develop simultaneously across
multiple time frames as well; so, they are particu-
larly well-suited to handle any trader’s demand
from the end-of-the-day trader to the most
hyperactive day trader. So far we have looked
at chart patterns as they have developed in the
indexes, however, chart patterns are especially
accurate in the forex market due to its 24 hour
trading. The U.S. Dollar/Japanese Yen 15-min-
ute chart in Figure 3 shows a symmetrical
triangle forming.
A symmetrical triangle is formed with a down-
trend line and an uptrend line. Earlier we men-
tioned that understanding a pattern’s quality is
crucial to trading patterns—that every pattern is
not a trade but a potential set up. This pattern is

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MarketplaceBooks.com Importance of Chart Patterns
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Figure 3
ties a chart pattern trader could take advantage of.
Another 15-minute rising wedge had also formed
and this wedge was a larger pattern (Figure 6).
It used many of the same touch points, but the
difference between this rising wedge and the
smaller rising wedge is that the “look back” of
this pattern was longer. Look back is the amount
of data used to form the pattern. In this case
you can see that the look back goes to the 7th
as opposed to the smaller wedge that originated
on the 8th. This may seem like a small difference
but consider that the charts are 15-minute time
frames and that each new hour presents four new
candles. The difference of even just six hours is
24 new candles from which to connect touch
points and create a pattern.
BACK

Let’s look at some more examples. Again remem-


a good quality symmetrical pattern for a num- Dollar/Japanese Yen was also shaping up. A rising ber all your studies should be geared toward
ber of reasons. The two keys to look for are the wedge was developing on the 15- and 30-minute training your eyes to notice the nuances of pat-
balance of the pattern and the balance of price. charts (Figures 4 and 5, respectively). terns because this allows you to make the distinc-
Specifically, we are looking for the two trendlines tion between good, better, and best patterns. So
to form a triangle that is squeezing price in a way As you can see, both of these patterns were using far we’ve looked at patterns that are dominated
that if we were to imagine folding the pattern some of the same touch points to create the up- by trendlines. Now let’s examine patterns formed
in half length-wise, the angles would be almost trend lines. In rising wedges there are two uptrend by more horizontal levels.
identical. In other words, the angle of the trend- lines: the lower one is support and the upper one
lines must be balanced. The other visual cue to is resistance. In rising wedges we must be especially A rectangle pattern is similar to a channel. The
be aware of is whether prices are balanced within mindful of the lower uptrend line support because difference between the two is that a channel is
the pattern. This balance can be seen if prices this is the level at which we can buy a bounce. If typically narrow and a rectangle is wider. It’s
are bouncing off both the downtrend and the this level breaks, it could signal a reversal of the much like the difference between accumulation
uptrend lines. As this symmetrical triangle pat- uptrend in which the pattern formed. and distribution. Just like triangles, rectangles
tern was developing another pattern on the U.S. (and channels) can develop simultaneously across
These two patterns were not the only opportuni- multiple time frames.

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Figure 4

those that develop on any intraday time frames.


This is mainly because daily charts are by far the
most followed by the general public.
My philosophy on time frames runs somewhat
counter to the prevailing approach. While most
traders look to longer time frames to confirm
the movement on a shorter time frame (known
as multiple time frame confirmation), I do not
subscribe to this…not at all. In fact, my belief
is that the smaller time frames are the “canary
in a coalmine” and give a trader acute and more
sensitive cues to shift in the market. Taking
this one step further, treat each time frame as a
stand alone and remember that the 15-minute
BACK

Figure 5

Let’s take a moment to discuss time frames.


Ultimately which time frame you chose to trade
should be based upon the quality of the pattern
and risk/reward ratio it presents. Other consider-
ations are more individual.
For example, if you are an intraday or full-time
trader, many shorter-term time frames will be
available to you for analysis. However, if you are a
part-time trader or someone who prefers to look
at the charts once or twice a day, then certainly
longer-term intraday charts, like the 240-minute
chart or the daily will suit your time constraints or
preference. Regardless of your preference, it must
be said that chart patterns that develop on daily
charts are more psychologically significant than

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Figure 6

chart is the building block to the 30-minute,


and the 30-minute is the building block to the
60-, to the 240-, and then to the daily. A trend
shift starts on the shorter time frame and if that
shorter time frame persists enough, it will affect
the larger time frame and so on.
One of my students told me that I described this
effect as the “stream leading to the river leading
to the ocean.” I frankly can’t remember saying it,
but it sure is accurate! So the 30- and 60-minute
charts would be the stream, the 180- and 240-
minute charts the river, and the daily the ocean.
These time frames are simply my preference when
analyzing forex. Some traders use a 15-minute
BACK
chart, which one of my students called the “creek
Figure 7
that leads to the stream.” Well said.
This rectangle appears on the 15-, 30-, and 60-
minute charts (Figures 7,8, and 9, respectively).
The horizontal support and resistance levels that
created the rectangle all use the same touch points.
The main determination of which one to trade
would be which pattern was the best example of
a rectangle; after this determination, you would
follow your preference for a specific time frame.
As you can see, chart patterns offer accuracy, flex-
ibility, and the boundaries traders need to identify
in order to locate where we choose to enter a
trade. Most of us have studied these powerful and
simple-to-understand tools. Just do not make the
error in thinking simple is ineffective.

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MarketplaceBooks.com Importance of Chart Patterns
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Figure 8

“entia non sunt multiplicanda


praeter necessitate”
(loosely translated: “All things being
equal, the simplest solution tends to
be the best one.”)
- William of Ockham

My continuing trading adventure is sprinkled


with many things I would have never thought I
would be doing: public speaking and seminars,
online classes, software development, books, and
more. In the end though, I know it’s just me
BACK
and my charts. My friends and family even joke
Figure 9 that I’m “off the chart” on weekends and vaca-
tion. When I present my trading approach at
any of the expos where everything always seems
“new and improved,” “hot,” and “advanced,” I
am proud to say that the people who taught me
were those who traded, wrote, and taught in the
early 1900’s, and that the tools to my trade are a
century old. That’s before computers, television,
and back when “Wall Street” was a street with
a tall wall built along it! Time-tested, tried and
true suits me just fine.
Special thanks to Autochartist for the pattern
alerts and charting.

Raghee Horner
BACK

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Toni Turner
Learning How to Trade:
Lessons the Market Taught Me On my Journey up the Mountain

When I reflect on my passage from in the financial markets has been the trading success. (Switchbacks are a
TURNEr Recommends novice to experienced stock market most exciting—and rewarding—jour- series of zigzag paths, or roads, used to
trader, I always picture the early part ney of my life! surmount a steep hill or mountain.)
Reminiscences of a of my journey as a multi-year climb
up a towering mountain. Now, 17 years after I first stepped These four switchbacks are:
Stock Operator foot into this challenging arena, I am
To be sure, when I began to climb the stronger, and wiser, not only in the 1. Beginner’s Luck and Unrealistic
by Edwin LeFevre.
mountain called “active trading,” I had financial arena, but in all areas of my Expectations
no idea how steep the climb was to life. I’ve learned vital skill sets and life 2. Fear-Based Trading
the summit. If I’d known about the lessons that include preparation and
precipitous switch-backs, nearly-verti- planning, focus and concentration, 3. Search for the Traders’ Holy Grail
cal trails, deep chasms, and menacing resiliency, increased inner strength,
4. Discipline, Knowledge, and Ex-
obstacles that lurked behind every tree and shouldering 110% responsibility
perience Lead to the Mountain’s
and boulder—I surely would have put for my actions.
Summit and Trading Success!
my money into CDs and opted for a
job at Macy’s selling lipstick! As you probably know, many traders
One Mountain—Four “Switch- don’t make it past the first switch-
Still, despite the steep and frightening backs” that Lead to the Summit back. They give up soon after they
terrain, despite the occasional cliff- and Trading Success start. During the second switchback
falls into the stormy, roiling seas below
During my journey as a trader and (the steepest part of the climb), many
(market downturns) where I was sure
trading educator, I’ve observed that more bemoan the hardships and
I would drown (I didn’t), I say with
traders experience four “switchbacks” soon retreat downhill to a safer and
all sincerity that learning how to trade
in their climb to the summit and more comfortable haven. Those who

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climb up the third switchback and move onto help you move forward and reach the summit of betting the ranch on a single stock. And . . . that’s
the fourth, do so with gusto. They know that the trading success! the last thing I remember for two very long years!
final switchback leads to the mountain summit,
which represents trading competence, consistent Lesson Point: If you are new to trading, or even
profits, and financial success! Switchback One—Beginner’s Luck and Unre- more experienced, know that when a stock
alistic Expectations blesses you with a multiple point profit in one
How long does this expedition take? One popular day, it’s only a stroke of good luck.
answer is: Five years if you’re smart. Ten years It was early in 1996. As a successful investor, and
if you’re really smart! (Really smart people have a very active one since 1990, I watched the finan- One of the worst things we can do is to believe
trouble accepting the market’s volatile moves and cial networks every day. I loved the excitement that a big profit is due to our own incredible
illogical moves—of which there are many!) and energy generated by the equities market and brain-power. That kind of attitude blurs our
immensely enjoyed participating in it. vision with complacency. And a complacent ap-
Here’s a more direct answer to the “how long” proach to the market almost always leads to a fall!
question: Depending on your familiarity with the Since I invested so actively, I decided it would be
financial markets when you begin, if you employ easy and profitable to buy and sell positions on When one of your holdings goes ballistic and
discipline early on to minimize your losses, then an intraday basis. Against the advice of several delivers a quick, juicy profit, grab partial or all
study hard and watch the markets intently, you stockbrokers who were my friends (what did they profits. Protect any remaining shares with a tight
should be well on your way to reasonable profits know?), I opened a trading account. protective stop.
within 18 months, to two years. It’s imperative Next, take on the appropriate mindset: Mother
I well remember the first day of my trading ca-
to observe the market in all the conditions that Market showed her generous side, and you’re
reer. I bought two stocks and quickly experienced
only time can show you. That gives you experi- grateful for the gift. Then move ahead to your
a novice trader’s worst possible fate: my first trade
ence—and experience combined with good risk next trades with your usual cautious, conscien-
ran up seven points up from my buy price. My
management is the key to success. tious approach.
second trade brought home three points.
When I started trading in the mid-nineties, I The second part of this switchback is most preva-
When the closing bell rang, I called the people
personally experienced the four switchbacks men- lent in newcomers—unrealistic expectations.
who had warned me against trading.
tioned above. I also watched my friends move
through them. Later, I observed the same pattern “What’s so hard about trading?” I gloated. “It’s a New Trader says, “Okay, I’ve got $50,000 in
of progression in my students. slam-dunk! I made a boatload of money, today! equity in my account. I should be able to make
This stuff is a walk in the park!” $1,000 per day, or $5,000 per week.” Wow!
Unless you’ve achieved super stardom in the trad- That’s $20,000 per month—a very respectable
ing world, in the discussion that follows, you may The next day, I was fat with profits. Complacent paycheck (stay-at-home mom’s paycheck, or
recognize yourself on one of these switchbacks. in the certainty that the stock market was my I-quit-my-job-to-trade paycheck, or early retire-
I trust you will also recognize concepts that will friend and trading was easy, I jumped back in, ment paycheck—you fill in the blank).

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New Trader didn’t stop to think that the $250,000 Lesson Point: Set realistic, process-oriented goals, price. (In the mid-nineties, huge, multiple-point
yearly profit target he just set comes to a 500% an- such as creating an effective plan for each trade, losses were rare.)
nual return—a highly improbable goal! or striving for 40% of your daily trades to be
profitable. You’ll achieve success easier and faster. I also remember being paralyzed with fear. I
When this reality sets in, New Trader sighs and stared at my screen, unable to grasp the mouse to
lowers his sights. Well heck. With $50,000 in sell the stock, and even more unwilling to total
equity, he should be able to make $1,000 per Switchback Two — Fear-Based Trading the losses in my head for fear of seeing my ac-
week—right? count devastation.
Traders who make it up the first switchback
That means if New Trader trades for 50 weeks per know Mother Market can always be counted Once I learned what the market can do to a
year and earns the projected $50,000 (50 weeks x on to do the unexpected. As these traders push perfectly nice person (me), without so much as
$1k per week), then he’s projecting a 100% return. forward onto the second switchback, they usually an apology, I spent the next two years doing what
arrive with a mindset laced with fear. most trading creatures do when scared: Instead
Oh. “Never mind,” New Trader says, shaking of calmly responding to market conditions, I
his head in frustration. “I know what you’re That’s not necessarily a bad thing. Like children reacted in fear.
going to say next. A 100% gain is nearly impos- who need to learn that hot stoves burn fingers,
sible.” traders need to get burned enough times to learn Knee-jerk reactions produce varied results that
discipline and the importance of strict risk-man- total on the minus side.
Yep. Sorry. It’s not to say that you can’t make
100% on your money. It’s happened . . . but agement techniques. When we respond, however, we take action that
please realize that professional traders are over- Looking back to my first “hot stove” lesson, let’s has been thought through and researched. There-
joyed if they bring home 20% to 40% per year. rewind to the first week of my trading career. fore, our results tend to produce positive results!
If you’re a novice trader and think you can earn
upwards of those percentages on a consistent A couple of days after my first glorious trading Typical Trading Fear-Based Reactions:
basis, please reconsider. day mentioned earlier, I loaded my account with • “Trading plan? What trading plan?”
shares of a tech company divined by Wall Street
As a matter of fact, new traders usually lose to be the knight in shining armor for the world’s • Ignoring broader market direction—or “fight-
money in the first year or two. We call it “tu- upcoming Y2K problems. ing the tape”
ition.” The best goals for new traders are those
I talk about in my book, A Beginner’s Guide The morning after I bought the shares, the stock • Trading on whipsaw days
to Daytrading Online. Those goals are 1) At all fell straight down—12 torturous points. I don’t
remember the reasons. I do remember watching • Overtrading to make up losses
times, protect your principal, and 2) Trade to
trade well, not to make money. (If you trade well, CNBC’s commentator Joe Kernen saying that • Comparing self-worth to net worth
you’ll automatically make lots of money!) he’d never seen such a move down in a stock

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10
MarketplaceBooks.com Learning How to Trade
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Lesson One: Trade only after you establish a Micro-caps can also move higher against bearish Another overtrading motivator: you promise
trading plan for each trade. Within that plan market action. Not listed on the major indices, yourself or someone else that you’re going to
you’ll want to establish your entry price, initial these “little guys” usually trade on their own com- make $1,000 (or you fill in the amount) today. If
protective stop price, and potential profit target. pany news. Also, on negative market days, you’ll you rack up a string of losses from forcing trades
Make sure that the amount you are risking (be- see traders who don’t want to sell short the markets to fulfill your promise, the natural reaction is to
tween entry and protective stop) is smaller than wander into small-caps and micro-caps to see if trade even more, with even larger share size. That,
your potential profit (prior price or indicator they can find some long action in these equities. of course leads to bigger losses.
resistance on a chart).
Lesson Three: Trading on choppy, trendless If you trade a lot and do make a profit, you’ll
Lesson Two: Unless you’re targeting commodi- days always ends in disaster. On days when the find that many times the commissions will eat
ties, stocks that sometimes trade independently S&P 500 and NASDAQ hop up and down like up some or all of those gains. We’re all better off
from the broader market action, trade with the a pair of kangaroos who’ve downed too many trading less, and cherry-picking only the best op-
tape. That means you trade with flow of the ma- cups of espresso, the best action is to sit on your portunities.
jor indices—the Dow Jones Industrial Average, hands. As well, if you’re a swing trader, when the
the S&P 500 Index, and the NASDAQ Com- markets move sideways for an extended period Lesson Five: Don’t equate your self-worth with
posite, or NASDAQ 100. This is particularly true of time, take profits and let the market thrash your net worth!
during bearish scenarios. around until it resumes a definite trend. Remem- If you’ve experienced a bad trading day or week,
ber, cash is a position, and sometimes the wisest don’t compare your self-worth with your losses.
You’ll find that about 40% of a stock’s price move place to be.
is related to overall market direction. Thirty-per- Berating yourself is a waste of time and leads to
cent is due to the direction of the stock’s related Lesson Four: Novice traders tend to overtrade. If more fear-based trading—and more losses!
industry group. The final 30% can be contrib- you receive your monthly trading account in the If you’ve experienced an account meltdown—and
uted to the underlying company’s fundamentals. mail and it has as many pages as the Manhattan we’ve all done it—stop trading until you can
Those approximate percentages tell you how phone book—you’ve overtraded. calmly re-evaluate your approach. Keep in mind
important it is to trade with general market flow. that your trading account balance has nothing to
Overtrading can be a symptom of several situa-
Two exceptions: The market is experiencing a tions. If you have a trading buddy, or spend every do with your personal self-worth. Whatever hap-
negative day with lots of selling pressure, but a trading day in an online trading room, you could pens, you are still a wonderful person!
high-flying stock soars higher on its own good fall victim to the “me too” syndrome. That means
news. That stock may charge higher in the morn- you take every trade that your buddy takes, or
Third Switchback—Searching for the Trad-
ing trading session; but, in the afternoon session, every trade that the trading room guru recom-
ers’ Holy Grail
it may lose steam and succumb to broader market mends, whether it fits your style or not.
selling pressure. The traders who endure the first two switchbacks

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and persevere to emerge victorious are a hardy Nope. Sorry! No indicator in the world, or If you’ve climbed to this level, you know that suc-
group. They deserve congratulations! combination of indicators, will give signals that cessful trading is a continuous learning journey,
guarantee winning trades. Chart indicators are with the destination culminating in the ability
Now, though, we start up the third switchback, valuable guidelines. to bring home profits week after week, year after
and begin our search for the one indicator, or year.
group of indicators, or pattern, or set-up, that The truth is, the longer you trade successfully, the
will point us to—and keep us immersed in—only simpler your charts will probably become. By now you know that the market cannot hurt
the most profitable of trading vehicles. you unless you allow it to. You know when you’re
I recently spoke to the president of a large Texas “in sync” with the market, and when you’re not.
“If I change Wilder’s 14-day RSI to a 9-day RSI, trading organization. He said he’s read every You know that when a trade goes against you, it’s
will it give me better signals?” trading book he could get his hands on, attended simply the market’s way of giving you feedback.
hundreds of traders’ meetings, and taken every When you’re feeling greedy or fearful, you know
“What if I overlay a 5-day RSI over a 9-day RSI?” trading course available. After evaluating dozens
how to quickly replace those feelings with calm,
“Are exponential moving averages better than of approaches to the markets, he’s decided to balance, and confidence.
simple moving averages?” take every indicator off his charts. At present, he
trades only with price and volume. You know that emotions and prices move in
“What if I combine RSI signals with Bollinger cycles: nothing goes up forever, and few things go
Bands?” While that method may not work for you, I en- down forever. You know that every trade teaches
courage you to keep your charts relatively simple you a new and precious lesson. You know that ex-
“Can I use the Parabolic Time vs. Price Indicator and clean, to lessen the chance of conflicting
perts don’t know all the answers. You know that
for buy-sell signals? signals. After all, price—and price only—has the no one knows where the market is going next.
last word.
And finally . . . “Okay. I’ve got it!! How about
Finally, you know that reaching the mountain’s
I start with a candle chart, plot five exponential
summit brings you exhilarating freedom—along
moving averages, add a scale with Stochastics Switchback Four—Discipline, Knowledge, with the satisfying certainty that the journey will
combined with the RSI, then underneath plot and Experience Lead to the Mountain’s Sum- never end!
the Commodity Channel Index, add all three of mit and Trading Success!
the Directional Indicators, throw in the MACD,
overlay On-Balance volume, plot the ROC, pop Our fourth and final switchback leads to the To your good wealth,
on Acceleration Bands, stretch Fibonacci retrace- mountain top and consistent trading profits.
ments from the highs to the lows, check out the
VWAP, and set my stops at 33% of the ATR.
Traders who reach this level of expertise have
participated in the markets long enough to
Toni Turner
ToniTurner.com
Will that guarantee me winners?” experience major highs and lows in bull and bear
market moves, as well as in their personal ap-
proaches to trading.

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Carolyn Boroden
Finding Fibonacci

My name is Carolyn Boroden, and industry magazines on the same sub- Island. Now THAT sounded good to
Boroden Recommends I am a Commodity Trading Advisor ject. I teach seminars on how to use me. She dressed me up appropriately
who specializes in trading with Fibo- this methodology on everything from for the interview at Donaldson Lufkin
Dynamic Trading nacci time and price analysis. I cur- individual stocks to the Forex markets. and Jenrette where I interviewed for a
rently run a traders chat room which For more information check out my position as a secretary/gopher to the
by Robert Miner focuses on daytrading the stock index website at www.FibonacciQueen.com. government bond department. I’ll
futures along with other financial never forget the day I walked into
futures markets. In this room I push Suprisingly, I never had any inten- this rather large office that had what
live charts and run trade setups for my tion of getting involved in the trading looked like huge TV monitors hang-
clients during the pit session hours industry. I grew up on Long Island ing down from the ceiling and tons
based on this methodology. This is just outside of New York City with a of men and a few women sitting in a
followed by a daily video update of very rebellious personality. I quit high strange looking arrangement of desks.
the markets to prepare my traders for school and left home at the ripe age of Each desk had telephones with lots
the next session. 17. As I struggled to make ends meet of buttons on them that some of the
as a speed typist, my cousin Cathy traders tended to throw the receivers
McGraw Hill will be publishing my asked me if I would like to interview at. It was awesome and frightening
first book on this subject titled Fibo- for a job on Wall Street. At that point at the same time because I was a shy,
nacci Trading. It is due on bookshelves I was working two jobs and about to albeit, tough 18 year old. William M.
in January 2008. I have presented my keel over from exhaustion. She said Kidder, who was the manager of the
methodology at many of the Traders’ that I could make as much money government bond department at that
Expos over the years and have also with the one job on Wall Street as I time, interviewed me. I didn’t think
written a number of articles for the was making between the two on Long he was going to hire me, but I told

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him I had another job that started next week with an exchange membership and where I was in Bob’s presentation and actually remember the
and needed an answer right away. I think he was paid at least $70,000 per year plus bonus. I was general area of the room where the proverbial
surprised by my aggressive statement, so he gave also made a Vice President of Bank of America “light bulb” went off. It was when Bob talked
me a shot by hiring me on the spot—and for that Futures. Not bad for a high school drop out! I about using the Fibonacci ratios on the time axis
I will forever be grateful. don’t think they knew I quit high school or I may of the market. I talked to Bob after his presenta-
not have received the promotion! tion because I was so impressed, and we started
I worked hard at keeping my government bond to develop a friendship/business relationship over
traders happy by ordering the proper lunches, Fast forward to the crash of 87. I moved on to some cocktails and pool shooting in Chicago.
getting their coffee, typing the letters and memos another company just before the crash of 1987 That was the beginning of my REAL education
they needed along with an occasional trip to the and little did I know how my life and career about the markets in this business. I feverishly
Xerox machine. That was my introduction to would change after the 1987 event. Bottom line, worked on the “Commodity Perspective” paper
the world of trading. My second position at DLJ I lost my cushy job and found it very difficult charts that were printed and sold every week at
was as a position clerk where I kept track of the to find another one. I found that even though I the exchange. I used a pencil, calculator, and
traders’ positions. In those days, this was done by was more qualified than some men to run a floor proportional divider to test what I had learned
HAND and not by computer. By the time I was operation, I was often passed up for the new job about the Fibonacci ratios in Bob’s seminar that
19, I had my third job at DLJ assisting one of the either because of my lack of formal education, or day, and his other seminars in the days to come.
commodity futures traders in the office. I used the fact that I was female. At least that is what it I continued on as his student for years. I was
to help him write up trade tickets and enter the felt like. finally introduced to an easier way to analyze the
orders on the trading floor. This led to my first markets via computer. I considered myself very
business trip where I was sent to visit the Chicago As I struggled with what to do next in my career,
the taste of success in this rather sexy business lucky as I got to be one of the first users of the
Mercantile Exchange to check out the trading Dynamic Trader software program (as created by
floor. There I was transmitting client orders via made me want to continue in the industry. I
ended up working at a few jobs that I felt were Robert Miner). This software tool made my work
phone. Now that was exciting. There was an so much easier and faster.
open position to work on the trading floor when beneath my experience, but hey, at least they paid
I visited. I asked for the job and transfer; and, the bills! As I continued to learn how to do the analysis
by the time I was 20, I moved to Chicago and One day, I believe in 1988, a friend of my broker even more proficiently by taking Bob’s home
started yet another job at DLJ as phone clerk talked me into going to a seminar on trading at study course, I started sharing the work with
on the trading floor of the Chicago Mercantile what was then the Midland hotel in downtown anyone who would listen because I was so excited
Exchange. Chicago. I was reluctant to go since I was not about it. When I finally decided to become a se-
making much money anymore, but I was assured ries 3 registered broker, I finally had an audience.
I spent many years on the trading floors in both I eventually ended up failing as a broker because
Chicago and New York, and finally worked my that I would learn something that would more
than make up for the cost of it. It was there that I did not want to solicit funds. Plus, I would talk
way up to floor manager status back in Chicago, the clients OUT of trades since I had developed
I met my friend and mentor Robert Miner. I sat

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strong opinions from my new technical analysis from these situations instead. It was “funny” To go into a little more detail of what I actually
methods. Somehow I ended up with enough of that I got fired from one company about a week do, the main ratios I use in my analysis are .382,
a reputation of accurate market calls that some or two after one of the managers showed up at .50, .618, .786, 1.0, 1.272, and 1.618. I use
traders started offering me money just for my my apartment wanting to have sex, which I had these ratios on the price axis of the market when
market advice. Eventually I decided to make it refused. First, I had no interest in this person; I run price retracements and extensions of prior
my official business. I was now self-employed and second, he was married. I don’t really wonder too swings, which are run from two price points. I
finally being paid for analysis that I LOVED to much about that coincidence in the timing of my also use them when I run price projections of
do and which still fascinates me to this day. firing. I was told it was because the desk manager prior swings, which are run from three price
was upset with me for talking to clients too much points on a chart. Running these price relation-
This eventually led to invitations to speak at trad- about Fibonacci instead of focusing on taking ships helps to point out key support and resis-
ers’ conferences. The first time I ever gave a live the trade orders, which was my official job. Oh tance zones on a chart, especially when there is a
presentation in front of an audience, the adrena- well, I chose not to fight it; and, I was referred to healthy confluence or clustering. After running
line had my knees and hands shaking during the another job that day! the price relationships, I use these same ratios to
presentation. I swore I would never do it again, project forward in time to tell me where to look
but as I grew up in the business, I finally started My specialty in technical analysis is in applying for market reversals. This is where the Dynamic
enjoying the teaching aspects of it and started the ratios derived from the Fibonacci number se- Trader program will count the number of days or
taking every opportunity to do so rather than ries (as made famous by the DaVinci code movie) bars between key highs and lows, and then proj-
shying away from it. Even though I still had fears to the key highs and lows in any market with ect the ratios forward from the last pivot. Again,
about speaking, I knew I had to push through adequate data. I apply these ratios to both the when I see a confluence of timing relationships, it
them and move forward. The speaking engage- time and price axis of the markets. When I find points out a “time window” when I should watch
ments at the Traders’ Expos eventually led to certain repeating patterns and confluences of the for a possible trend reversal.
offers of book publishing contracts! price and time relationships, I use this informa-
tion to create relatively low risk, high probability Let me walk you through a quick example of
Ok, so that was the long story of my entry into trading strategies. a trade setup that I would identify in my chat
this business. I always enjoyed the fact that I room as a possible opportunity.
was most often a successful female in a male- This trading methodology can be applied to indi-
dominated business. Of course there were those vidual stocks, stock indices, commodity futures, One of my main markets is the S&P E-mini
chauvinistic men who didn’t think I had any and the Forex markets. It can be applied to both futures contract. Some of my best setups come
talent and would try to put me down. There were higher time frames and lower time frames. I run from the 15-minute chart data. The following
also the men that tried to take advantage of me this type of analysis down to a 3-minute chart for example is an actual setup that was calculated and
being female in the business. I actually could my day traders. I also run the weekly and daily available to my subscribers that day.
have been set for life with a few sexual harass- charts that can be utilized by my swing traders
ment suits, though I opted for walking away interested in the longer-term trends. Figure 1 is a 15-minute chart of` the September
2007 E-mini S&P contract. On July 27th, the

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Figure 1

Once it was tested and price did not clear the


area, my clients were able to take their sell entry
triggers and enter the short side of the market.
The actual high in this case was made at 1488.50
into the first price cluster zone. An eventual
decline of 31.25 points was seen from this high.
I would not expect my traders to profit from this
full decline, though I would expect them to take
some profits out of the middle of that move. July
27, 2007 was not exactly a typical day in the
S&P. It ended up being a huge trend day. I gener-
ally look for a 15-minute chart to provide a setup
that may only yield 6 – 12 S&P points.
My traders also keep in mind that many of these
trade setups will either not trigger you into an
entry or position, or won’t work out after you get
triggered into one. The maximum risk on the set-
ups that don’t work out is generally 2.50 – 3.00
points in the S&P.

Carolyn Boroden
BACK

general pattern of this chart was bearish. You can One came in at the 1487.50 – 1488.50 area with
see lower lows and lower highs clearly on this a confluence of at least three Fibonacci price
chart. Since I focus on setting up my trades in relationships (I call this a price cluster). Another
the direction of the trend, on this day I looked to zone came in just above the first at the 1489.75-
set up key Fibonacci price resistance for a pos- 1492.00 area. This confluence of price relation-
sible sell entry. Late in this session I was able to ships was calculated from the prior highs and
identify two standout price resistance clusters. lows before the actual resistance zone was tested.

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Toni Hansen
Technical Analysis and Trading for
the Active Lifestyle
It’s 6:30 am ET, and my alarm clock “I did! She’s awake!” “That’s because to day and week to week. I am typi-
Hansen Recommends is going off. Unfortunately, I am not you woke her up!” cally involved in the market every day
The Master Swing a morning person by any stretch of from the open until the close, but
the imagination. One might wonder, I consider attempting to locate a household distractions, errands, travel,
Trader: Tools and snooze button but decide that chil-
Techniques to Profit given how I have three more hours etc. dictate the type of trading I am
until the market opens, why I don’t dren’s services might not look too doing from one day to the next.
from Outstanding
Short-Terms Trading reset it for a more “reasonable” time? kindly upon such an endeavor. I groan
Opportunities. Is it because I need three hours to and roll out of bed, squishing the cat The market itself is also constantly
prepare for the trading day? Nope, not next to me, who was also eyeing the evolving, favoring certain time frames
by Alan Farley intruders without much appreciation. and setups more strongly on one day
even close.
By the time I’ve finally gotten the as opposed to the next. In order to
The real reason I don’t reset the alarm kids off to school and have run all my excel under these conditions, I needed
clock is that it doesn’t appear to have morning errands, I often have only a style of trading that was not only
a snooze button, let alone a way to about 30 minutes left to prepare for flexible enough to be applied to any
reprogram it. At sunrise, every day the trading day. market vehicle and time frame, but
without exception, it goes off, al- also able to withstand the test of time.
though the message varies. Today it With two kids and an incredibly busy
went something like this: “Mommy, schedule, I simply don’t have the time As a self-taught trader, I came to real-
mommy do you want to see what I to work with a style of trading that ize that traditional market analysis
made you?” “Shhhh! You need to be would require me to learn intricate focuses on specific patterns. These
quiet! She’s trying to sleep!” “No, she’s algorithms or engage in intensive ana- include setups such as cup-with-
not! Her eyes are open.” “I told you to lytical research. The time I can devote handles, head and shoulders, etc. The
play in your room until she wakes up.” to trading varies extensively from day field of technical analysis has also

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been strongly influenced by the development of to begin to rely solely on these crutches. Differ- different types of patterns, I take one step further
market indicators such as Bollinger bands and ent indicators work well under different market and classify according to the different charac-
stochastics. The market itself, however, cannot be conditions; so, utilizing them exclusively has teristics of which the patterns are composed.
as easily broken apart and analyzed. The average some obvious drawbacks. For instance, using a For instance, consider a double bottom versus a
trader and investor simply cannot expect to take plethora of indicators tends to create confusion reverse head and shoulders pattern. Both are gen-
these tools and quickly become successful enough as to which is worth paying attention to at any erally classified as reversal patterns off the lows,
to consistently pull money out of the market. given moment and which should be ignored. but both patterns can also end up falling into
Instant success is often fleeting. Although I do use moving averages and Fibonacci continuation moves on the downside. So, what
levels to some extent in my trading, my attention makes them work well in one instance and fail
The market is not a series of snapshots like the is first focused on the price and volume move- miserably the next? To understand how this hap-
system of pattern identification implies. It’s a ments. These types of tools are used sparingly as pens, a trader needs to look at how the patterns
fluid, ever-evolving being. Even though recogniz- additional means for assessing the pros and cons developed in the first place.
ing patterns in the market is a highly success- on a position.
ful method used by traders and investors, those A double bottom is rather self-explanatory. It
who continue to thrive learn how each of these When I first started developing my trading system, occurs when a security has established an initial
patterns consists of a series of favorable traits a few things quickly became evident. The most low and later retests that low, creating a buying
that flow from one into the next. When one of important of these was how indispensable it was to opportunity as a result of the initial low serving
these is not quite perfect, the odds of reaping have a sound understanding of the building blocks as price support. Typically, when a security retests
the rewards on a setup begins to decline, and that make up the run-of-the-mill chart patterns. a price levels such as a new high or low, it will
something that initially looked like one pattern Like most traders, I began my career by attempt- react to that level and not break it quickly. This is
or market bias can begin very quickly to favor a ing to identify opportunities like sideways trading particularly true if there was a lot of retracement
move in the opposite direction. ranges along highs for upside breakouts. My rudi- off the initial low prior to the retest.
mentary style meant that I was often buying once
Additionally, while all the pretty colors of various the highs of the range had broken and was thereby In the ideal double bottom (Figure 1), a trader
market indicators are visually appealing, it’s akin competing with a great deal of other traders and wants to see a slower pace or slower momentum
to viewing a landscape through a stained glass missing out on the best entries. I also would con- move into the second low than when the secu-
window, whereby the underlying image itself stantly find myself in a position that often pulled rity dropped into its first low. For instance, if it
becomes distorted. Most indicators are merely back into the trading range shortly after I had took 10 days to drop $5 into the first low, then
an attempt to indicate price and volume activity, entered, leaving me nervous and prone to making a drop into the second low that takes longer
and while tools like moving averages or Fibonacci mistakes in my trade management. than 2 days for every $0.50 move means that
levels in the indices can assist in recognizing areas the momentum heading into the second low is
of support or resistance, momentum, and inter- These days, even though my trading journal is more gradual than the first. This opens the door
est levels by market participants, it is all-too-easy still broken down into segments dealing with for a stronger bounce off the support when the

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Figure 1
than 50% of the previous wave of price decline, pattern consists of an initial low (the left shoul-
then the security has a better chance of displaying der), a second slightly lower low (the head), and
a strong reaction to the support level when it hits then a higher low (the right shoulder) for a total
it the second time around. A lesser retracement of three downside moves. If the momentum is
means that even though there may be a bit of slower into the head on the second drop than in
stalling at the previous low, that first low can still the first (Figure 2), then the retracement degree
break without much hassle. Those that retraced and volume activity of a double bottom will also
less than 30% of the previous downside move are work well in this situation. This is wonderful if
particularly at risk. the second low is only slightly under the first.
The volume on these moves into support is an- An example of this type of reverse head and
other thing that should not be ignored. Ideally, the shoulders pattern took place in the NQ, which
volume will increase and even spike as a security is the Nasdaq 100 E-Mini futures contract, on
hits the support that leads to a double bottom for
the first time. When it retests that same support
Figure 2
BACK level on the second go-around, a lighter volume
low as compared to the first one indicates that the
sellers are not feeling as aggressive as before and
first low hits again on that second decline. If the that the second low will have a better chance of
momentum on the second drop to lows is faster generating a successful reversal position.
than the first, however, then the reaction to the
support will usually be more choppy, and the risk These three traits are crucial to the success or
increases that the security will just hug the zone failure of a double bottom pattern. To summa-
of the initial low before breaking lower on a third rize, they include a more gradual return to lows
test of lows without any significant upside price on lighter volume after more than a 50% retrace-
movement in between. This result means that ment off the initial low.
the double bottom would fail to hold and fail to
Many technicians consider a reverse head and
produce significant gains.
shoulders pattern to be a separate entity as com-
The price movement alone is another factor that pared to a double bottom. In reality, a successful
will indicate whether a double bottom has higher reverse head and shoulders setup has most of the
odds for success or not. Look at when a security same traits as a successful double bottom! The
bounces off the first low: if that bounce is more only difference is that the lows are in different
locales. For instance, a reverse head and shoulders

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Case Study #1

July 30th (Case Study #1). The index had sold


off sharply into the open, establishing an initial
low early in the session on higher volume. It then
pulled up into the 5-minute, 20 period simple
moving average before sliding lower again with
a choppier move and lighter volume. It made a
slightly lower low going into lunch and pulled off
that low to again test the 5-minute, 20 sma. This
time it hugged that resistance level on another
decline in volume before breaking higher into
12:30 ET. I purchased the NQ on this setup at
12:25 ET at 1969.50, right as the trend channel
from the pullback at noon broke higher.
If, on the other hand, the second drop comes
after only a mild correction following the first as
it formed the left shoulder (Figure 3), then it is
easier for those initial lows to break strongly. In
addition, the pattern has now been pushed over
in terms of the traits to look for, and it is the low
of the second move, or the head of the pattern,
that will ideally have the highest volume. The
security will then move a greater percentage off
that low as well.
Essentially, this second low on the reverse head
and shoulders pattern would be the equivalent of
what to look for on the start of a double bottom.
When the security attempts to retest this level,
instead of hitting it again, it would either slide
more gradually lower on declining volume, or
just base along resistance like a 20 period simple
moving average. In other words, this third move

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Figure 3
as a whole will give any trader a one-up over his A typical example of this form of continuation
or her colleagues who are viewing any retest and pattern can be seen on the monthly chart of
attempted move off a second low as a double bot- Key Technologies Inc. (KTEC) (Case study #2).
tom or any lower low and then higher low as a This stock caught my eye because it had pulled
reverse head and shoulders pattern. up by at least 50% off the 2004 lows into 2005,
and then hugged the upper 1/3 of that move as
These traits or building blocks of the strongest it pulled back gently into 2006. By doing so on
reversal patterns can also be applied to breakout dramatically lighter volume, it indicated that the
and continuation patterns. It often confounds bulls had a great deal of confidence in this posi-
newer traders when I tell them this. Think about tion and that the chances were high that it would
it though. Whether looking to buy off a low or break out higher; thus providing me with a really
buy a continuation pattern in an already estab- great opportunity to get into an upcoming break-
lished uptrend, the intention remains the same: out at the end of 2006 before the momentum
accumulating a long position. As such, a trader had even begun to climb.
wants to see both a drying up of short inter-
est and panic selling, and a build-up of bullish
BACK curiosity and speculation, eventually resulting in
Figure 4
a rally.

down on the reverse head and shoulders pattern Figure 4 displays one example of an ideal con-
should have similar qualities (like the slide into tinuation pattern: notice how volume and pace
the second low on the double bottom) in order to (or momentum) again interact. The larger cor-
obtain the greater gains from a long position off rection off the first low and back into the zone of
those lows and to lessen the chance of failure. the initial highs also shows us that there is confi-
dence that the first low will hold. Higher volume
I found it to be a very exciting and rewarding on a first low, followed by lighter on the second,
discovery to learn that the same traits that create indicates that market participants are more com-
the most successful and least risky double bot- fortable holding onto a position throughout the
toms are nearly identical to those that lead to a correction, even though the buyers have yet to
successful reverse cup with handle pattern, even emerge in force. The slower momentum on the
though the lows themselves differ and chartists second pullback echoes these sentiments.
have assigned them different names. Respecting
the individual traits that make up the patterns

Horner Turner Boroden Hansen Lien McDonald Folger Rockefeller Bios


21
MarketplaceBooks.com Technical Analysis and Trading
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BACK

One of my son’s favorite pastimes is to play understand why a setup works out in one in- THE HEROES OF WALL STREET
with his Legos. He loves building things such as stance and fails in another. It also makes it simple
monsters and refers to most of his creations as to take strategies from one time frame, such as Known as the most fascinat-
“transformers.” When asked why they are trans- a 5-minute chart, and apply them to a monthly ing book ever written about
formers, he will remove a few pieces from one time frame, as well as use them to trade anything Wall Street, these guys have it
spot and put them on in another location and from stocks to Forex to options! It certainly all—method, conviction and
say, “See! Now it’s different!” You can learn a lot makes trading with a hectic lifestyle very obtain- discipline. Jack Schwager’s book
from kids sometimes! A simple change in one of able! Now, if I could only figure out a reasonable gives you a glimpse into the
minds of these Market Wizards.
the building blocks of a market pattern is all it strategy to make kids sleep longer…
takes to turn it into something else. By looking at For More info - CLICK HERE
the pieces though, it becomes easier and easier to
Toni Hansen
Horner Turner Boroden Hansen Lien McDonald Folger Rockefeller Bios
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MarketplaceBooks.com i | h| 

Kathy Lien
The Five Steps to a Successful
Trading System
“Trading is a Man’s Game,” but is that same level of success as men; but, at sales). But what was most impressive
Lien Recommends really true? If you walked onto the the same time, I do not believe in the was not the success that she achieved
floor of the New York Stock Exchange glass ceiling. I have met countless suc- by that time, but the fact that she was
Millionaire Trad- or the Chicago Mercantile Pits that cessful women in finance and trading a pioneer in recognizing the potential
ers: How Everyday may seem the case. If you enter the who make me believe that if there is a of credit derivatives. She single-hand-
People are Beating electronic trading floors of big banks glass ceiling, it is only as thick as you edly convinced regulators around
Wall Street at Its like Citigroup, JPMorgan Chase, or perceive it. the world that these products were
Own Game Goldman Sachs on the other hand, sound because they moved risk off of
things are quite different. Although Strong and successful women have a bank’s balance sheet. In less than
by Kathy Lien and
Boris Schlossberg still male dominated, it is clear that always been apart of my life. At 10 years, the market ballooned from
gender has become less of an issue in JPMorgan I first did a brief stint on a tiny niche business to over $12 tril-
a world where how fast you can click the Credit Derivatives Structuring lion. Blythe has achieved the pinnacle
a button is far more important than desk as a part of my Analyst Rotation of success in finance. The last time I
how loud you can yell. Women are program, which is completely differ- heard about her, she was both a man-
sitting alongside men and not just ent from my current level of expertise aging director and Chief Financial Of-
as their trading assistants. In fact, in foreign exchange. The head of the ficer of JP Morgan’s Investment Bank.
gender only becomes a problem if group at the time was a woman by
you let it be one. Don’t be mistaken, the name of Blythe Masters. When Another woman who I worked with
as a female who has worked both as I met her, being impressed was an briefly was Angie Long, a derivatives
a market maker and prop trader at understatement. At the time, she trader who later went on to be named
JPMorgan Chase, I know that women was young, and already the head of one of the Top 100 Highest Earning
have to work harder to achieve the everything related to Credit Deriva- Traders by Trader Monthly magazine in
tives (from structuring to trading to 2005. When I met her, she was an am-

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bitious Associate on the High Yield credit deriva- Having graduated from New York University’s successful trader is not just about making one hit
tives trading desk, and in 2007, she was promoted Stern School of Business at the age of 18, I never wonders. You need to develop a trading strategy
to head of the desk at the ripe age of 29. believed that anything was impossible. As proba- that YOU understand inside and out. Warren
bly one of the youngest internationally published Buffet made his billions in equities by trading
When I moved onto the foreign exchange desk, financial authors ever, my book Day Trading the only what makes sense to him; foreign exchange
there were countless other examples of successful Currency Market published by Wiley & Sons in should be approached in the same way.
female traders. The head of USD/JPY trading 2005 has received widespread acclaim. Not be-
was a female. On the prop side, I worked as an ing afraid to take risks is a big part of being suc- Whenever I give a presentation or lecture, I am
Associate for a female Managing Director. I am cessful in life as well as being successful in trading always asked what is the best indicator or time
sure that both of these women worked hard to because trading is all about taking risk. The key is frame to trade on. My answer is that there isn’t
earn their stripes and although JPMorgan Chase to take calculated risks. When it comes to trad- one. Both short term and long term traders can
could have been exceptionally female friendly, it ing, I am very methodological because I trade on be profitable just as technical or fundamental
is probably not the only reason why they became skill and not on luck. I always develop rule-based traders. The key is to find a trading style that
so successful. There are definitely more men in strategies because that prevents me from trad- fits your personality and not to try to mold your
the trading business than women, but the great ing emotionally. When it comes to trading, you personality to fit a specific trading style. If you
thing about trading is that at the end of the day, always make the most rational decisions before a are reading this, then there is a 99 percent chance
your success and failure is measured only in num- trade is put on and the most irrational decisions that that you are an adult. As adults, we all have
bers. If you make more money than your male when the trade is live and bleeding. fully developed personalities that are difficult to
counterpart, that is all that matters. change. By now you should know whether you
When I trade, I like to follow a five step process, are someone who is impatient, needs instant
Trading is very high pressure, especially when the and I encourage all new traders to do the same: gratification, sits glued to the trading screen and
markets get active. Decisions need to be made becomes agitated by every 10 pip fluctuation,
in a split second—but if you thrive in those OR someone who wants to approach trading
environments, then the illusion of a glass ceiling Step 1: The A-B-C of Developing from a more relaxed, patient, and longer-term
should be just that, an illusion. On a day to day a Trading Plan perspective.
basis having a thick skin helps because it does
get brutal. I have seen many trading assistants or Step one is to create a trading strategy and to If you need instant gratification, trading on daily
junior traders pushed to tears. As a woman, you define a trading plan. The biggest mistake that charts may not be suitable for you. On the other
may need to work harder to prove yourself, but new traders make is to trade on gut, a feeling, hand, if you are a more relaxed and patient per-
that is just a part of the challenge; and, success- or someone else’s trading tip. Even if you make son, you may not be able to stomach the volatil-
ful women traders are the type that thrive rather money on the trade, this is a trading sin because ity of 5- or 15-minute charts. Money can and
than complain about challenges. you can’t possibly replicate the profits again un- has been made trading any time frame, just make
less your friend gives you another tip. Being a sure you find one that is right for you.

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MarketplaceBooks.com The Five Steps to a Successful Trading System
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When developing a trading strategy, the first 3 Q6: Do interest rates matter to you? Will you usually three times my amount risked. When my
questions that you need to ask yourself are the only go long currency pairs that pay you first target is hit, I will move my stop to break-
following: interest? even on the second half of my position and keep
trailing my stop with it upwards with the goal of
Q1: Is your strategy based upon fundamental never letting a winner turn into a loser.
analysis, technical analysis, or both? Step 2: Money Management Rules
Q2: Does your strategy rely on trading ranges Step two is to consider risk management because Step 3: TEST, TEST, TEST
or a trend? knowing when to enter a trade is just as impor-
Q3: What time frame does your strategy tant as knowing when to exit it. Trading is just Once you have created your trading strategy, it is
trade? Does it use 15-minute, hourly, or like surgery where you want your doctor to get time to TEST, TEST, TEST. Everything needs to
daily charts? both the first incision and final stitching right— be tested backwards and forwards. The best way
only this time, you are the doctor. One popular to backtest is to use a coding program like Easy
By answering these questions, you will have tactic is averaging up and down but the differ- Language. However not everyone, including yours
developed an initial trading style. That was the ence between those who do it well and those who truly, knows how to do that; therefore, a poor
easy part. Afterwards, it is time to get further in do it poorly is intense. If your initial strategy calls man’s way of backtesting would be to review your
touch with your trading strategy. Certain strate- for averaging in to get a better price, that’s fine; charts. Depending on your time frame, look for
gies work better on specific currency pairs. For but, if you are averaging in to bail yourself out of at least 20 to 50 samples of your strategy or setup
example, EUR/GBP is a currency pair that typi- a losing position, that’s bad. Know exactly what triggering. Then look at a more granular time
cally trades in a range; therefore, it is more suit- you plan on doing before you place the trade and frame to make sure that execution was possible.
able for a strategy that involves buying low and how many times you are willing to average in. This sounds hard but it really isn’t. For the most
selling high instead of buying high and selling On exits, think about trailing your stops. part, it takes no longer than an hour of work
higher. The goal is to raise the odds of winning depending upon how complicated your trading
by pairing the highest probability trading setup The currency market is a very trending market, strategy is. You test a car before buying or leasing
with the most appropriate currency pair. The meaning that one way directional moves can last it. There is no reason why you shouldn’t test your
next 3 questions that you need to answer then are for thousands of pips with little retracement. trading strategy before applying it. Only after you
the following: Because of the nature of the market most fund have done your visual backtest should you trade
managers choose to be trend followers. In order your strategy on a demo account because what
Q4: What currency pairs will you trade? The to capture as much of the trend as possible, may be theoretically possible may not be physically
majors or the crosses? while at the same time limiting risk, it is very feasible. You will often find this is the case if you
important to use a trailing stop. I like to trade in try to trade breakouts or news where live market
Q5: Will you hold positions after 5pm or over multiples of two lots. My first target is usually a
the weekend? activity can be so abrupt that getting a good entry
conservative, achievable level while my second is price becomes extremely difficult. If you can make

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MarketplaceBooks.com The Five Steps to a Successful Trading System
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money trading the strategy on a demo account, time to pull the plug on the strategy and go back trading session and the beginning of Asian trad-
then you can move onto a live account; but, if you to Step 1. ing, which is probably the time when breakouts
can’t make money in a demo, you probably won’t happen the least. I told him to adjust his hours to
make money trading live, meaning it’s time to go trade the European open and just by doing that,
back to the drawing board. Step 5: Improvement his profitability improved significantly. Small ad-
justments like these can be the difference between
Finally, the last step, looking for improvements, is
success and failure.
Step 4: Know your Strategy like one that you will need to do over and over again.
Your Best Friend Every week, my trading partner and I hold a self- To learn more about how everyday people such as
reflection session. We talk about each of the trades yourselves can beat Wall Street at its own game, I
On a mechanical level, there are two types of that we have taken over the past week. We go over encourage you to read my new book Millionaire
strategies. There is one that has a high number what went wrong, the mistakes that we have made, Traders (Wiley 2007). Along with my coauthor,
of profitable trades but a low level of profit per whether there is a pattern to the losing trades, and we interviewed twelve ordinary individuals who
trade. With this type of strategy, the amount of what we could have done better. have transformed themselves into extraordinary
money that you may lose or gain on any one traders. These people aren’t hedge fund managers
trade is about the same, but because you are A great example of much needed self-reflection
or employees of large money center banks with
profitable much more often than not, the overall was a conversation I had with a trader at an expo
billions at their disposal, but regular folks who
expectancy is still positive. The second type of in Malaysia. He told me that he has a trading
started with as little as $1,000 and turned those
strategy is one where you have a low number of strategy that is very profitable but he has one
modest initial investments into six- to seven-fig-
profitable trades, but a very high profit factor, problem, which is that whenever news is released,
ure fortunes. In our book, they share with you
which means that for every one trade that is prof- his strategy fails—and believe it or not, he asked
their lessons learned, trading tips, and experi-
itable, the profits far outweigh the losses, leaving me what he should do. I told him it’s simple, if
ences on how to improve performance—whether
the expectancy of the strategy still positive. This is you make money in normal trading conditions
it be through stocks, forex or futures.
characteristic of many breakout or trend follow- and lose money when news is released, then stop
ing strategies, and knowing what type of strategy
you have lets you understand when it makes
trading around new releases. I am sure it is now
obvious to him as well, but sometimes it does
take a clear head to point out the obvious.
Kathy Lien
money AND when it loses it.
That way you can gage whether your losses are Another example was a trader who told me that
within your expectations or whether your strategy he has a strategy that trades breakouts but he
has gone completely haywire. In that case, you can’t seem to get it to work. I asked him a few
don’t need a rocket scientist to tell you that it’s questions and soon we realized that he was trying
to look for a breakout between the end of the US

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Marilyn McDonald
My fabulous flirtation with the NZD

When I was contacted about contribut- New Zealand for five years. I loved move, it usually does it in the middle
MCDONALD Recommends ing to this ebook my first thought was, the country so surely the currency of my night. That suits my schedule
“Of course! That will be fun! I con- wouldn’t want to cause me any harm, very well, and no, I do not stay up
sider myself pretty sensible and logical right? (It’s ok, I snicker at my naivety all night.
Technical Analysis with my trading so documenting one now too, go ahead.)
from A to Z of my strategies will be a piece of cake.” It also likes to trend pretty nicely. I
Little did I know that this exercise generally watch a one-hour chart of
by Steve Achelis the NZD/USD, and most times I can
would cause some serious self-examina- Positives
tion. I have had nightmares about Dr. place my trades with only the help of
The NZD/USD has some traits that I a trend line or two and some support
Phil pointing out dips in my equity
consider extremely positive. The first and resistance levels… but I am get-
line and telling me to get real.
is that it tends to move a bit slower ting ahead of myself.
Like many traders I have different than other pairs. This may not suit
Technical Analysis you, but you will appreciate it the first
strategies depending on what and
of the Financial time life gets crazy, and you go into a Negatives
how I am trading. I will focus this
Markets meeting with an open trade running.
particular 3rd-degree spotlight on my
It helps to have a currency pair that The fact that the NZD/USD is slower
by John J. Murphy favorite pair, the NZD/USD. I would
isn’t running amok like my 10-year- is also a negative in some cases. I have
love to tell you some intelligent story
old after a Red Bull. entered a trade and have watched it go
about how I analyzed all the pairs
sideways for days before I either get
and developed a perfect strategy for
It also has a smaller average trading out of the trade out of frustration or it
this particular pair. The reality is that
range for each individual session than finally does what I want it to. Honest-
I chose this pair because I lived in
other pairs. If it is going to make a ly, trading the NZD/USD works the

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best for me when I am wrapped up in a dozen So, what moves the USD? GDP Annualized q/q (r)—The GDP, or Gross
other projects because patience is not something Domestic Product, is the broadest measure of
I have managed to acquire. Part of my NZD/USD trading strategy includes economic activity. This report is compiled by
identifying the news announcements that I the Bureau of Economic Analysis, U.S. Dept. of
The other negative about this particular pair is believe have the biggest influence on the USD. I Commerce and is released at 8:30 a.m. ET the
that the spread is wider than the other pairs I came up with a short list of 18. This might not third or fourth week of the month.
trade. I usually pay about a 5 pip spread, which seem like much of a short list to you, but remem-
may not seem like a lot until you have a trade ber there are hundreds of news announcements Interest Rate Statements—It is not just a country’s
riding in a slow moving market. Then it is a for a given currency pair every month. interest rates that drive action in the currency
chasm that has to be breached until you reach market, but the expectations of future interest
profitability. Existing Home Sales—This report provides a rates that influence the price pair. You should
measure of the existing home sales. It is compiled definitely keep your eye on the Central Bank
by the National Association of Realtors and is meeting dates for any currency pair you are
The Economies Involved released at 10:00 a.m. ET around the 25th of the choosing to trade. The major central banks are
month. the Federal Reserve (FED) for the USD, the
To trade the NZD/USD you really should un-
New Home Sales—This report indicates the level European Central Bank (ECB) for the Euro, the
derstand a little bit about New Zealand’s and the
of new privately owned single-family homes sold Bank of England (BOE) for the GBP, the Swiss
United States’ economies, or at least what funda-
and for sale. It is compiled by the Census Bureau National Bank (SNB) for the CHF, the Reserve
mental news announcements affect the currency’s
of the Department of Commerce and is released Bank of Australia (RBA) for the AUD, the Bank
value. The act of studying fundamental news
at 10:00 a.m. ET around the last business day of of Canada (BOC) for the CAD, the Reserve
announcements, or fundamental analysis, is the
the month. Bank of New Zealand (RBNZ) for the NZD,
examination of the core underlying elements that
and the Bank of Japan (BOJ) for the JPY.
influence the economy of a particular currency. Core Durable Goods Orders m/m—This report
There are different levels of fundamental news measures the dollar volume of orders, shipments, Core PCE Price Index m/m—Also called the PCE
announcements; those that have the ability to and unfilled orders of durable goods. Durable Deflator, the PCE Price Deflator, or Implicit
really move the market such as the USD’s Non goods are defined as goods whose intended lifes- Price Deflator for Personal Consumption Ex-
Farm Payroll, and those that barely cause a blip pan is three years or more. This report is com- penditures, this report is released by the Bureau
on the market radar. There are plenty of good, piled by the Census Bureau of the Department of Economic Analysis. Alternately, there is the
free economic calendars out there on the market of Commerce and is released at 8:30 a.m. ET chain-type price index for personal consump-
that you can use to research your news announce- around the 26th of the month. tion expenditures that is released by the Federal
ments. I like the ones at www.interbankfx.com, Open Market Committee (FOMC), which is a
www.briefing.com, and www.forexfactory.com. nation-wide indicator of the average increase in
prices for all domestic personal consumption that

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MarketplaceBooks.com My fabulous flirtation with the NZD
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is made up of the largest component of the GDP foreign purchases of U.S. securities. This report interesting because it is a more detailed and com-
in the BEA’s National Income and Product Ac- is a major component of the American capital plete description of the FOMC thinking than
counts, Personal Consumption Expenditures. account and gives valuable insight into foreign you will get in the announcement that immedi-
demand for U.S. investments and dollars. ately follows the meeting, when any change in
Chicago PMI—Also referred to as The Business the target Fed funds rate is announced.
Barometer, this report is produced by The Nation- Industrial Production m/m—The index of Indus-
al Association of Purchasing Management—Chi- trial Production is a fixed weight measure of the Non Farm Employment Change—also called the
cago or NAPM—and gauges factory health in the physical output of the nation’s factories, mines Employment Report. The Employment Report is
upper Midwest. It is announced around the end and utilities. It is compiled by the Federal Re- actually two different reports but both measure
of each month in The Chicago Report that ap- serve and is released at 9:15 a.m. ET around the employment levels, just from different view-
pears on the last business day of the month. 15th of the month. points. It is compiled by the Bureau of Labor Sta-
tistics, US Department of Labor and is released at
Core Retails Sales m/m—This report measures the Consumer Sentiment (p)—Michigan Consumer 8:30 a.m. ET on the first Friday of every month.
total receipts of retail stores. It is compiled by the Sentiment Index (MCSI) is a survey of con-
Census Bureau of the Department of Commerce. sumer confidence conducted by the University ISM Manufacturing Index—Produced by the
It is released at 8:30 am ET around the 13th of of Michigan. The preliminary report is released Institute of Supply Management the ISM Manu-
the month. on the 10th of each month (except on weekends) facturing Index is considered the king of all
and a final report for the prior month is released manufacturing indices. It is based on surveys of
Treasury Currency Report—The Treasury Cur- on the first of the month. 300 purchasing managers nationwide, represent-
rency Report is issued twice annually by the U.S. ing 20 industries.
Treasury to the U.S. Congress. Trade Balance—The Trade Balance indicates the
difference between a nation’s exports and imports There are also quite a number of news announce-
PPI m/m—The Producer Price Index, or PPI, of goods. A positive Trade Balance is considered ments that I consider medium news announce-
measures the price of goods at the wholesale level. a surplus and occurs when a country’s exports ments for the USD. These include Housing
It is compiled by the Bureau of Labor Statistics, exceed imports. A negative Trade Balance is con- Starts, Building Permits, Unemployment Claims,
U.S. Department of Labor and is released at 8:30 sidered a deficit and occurs when more goods are Consumer Confidence, Durable Goods Orders
ET around the 11th of each month. imported than exported. m/m, GDP Deflator Annualized q/q (r), Personal
TIC Net Long-Term Transactions—TIC stands Spending m/m, Consumer Sentiment (r), Retail
FOMC Meeting Minutes—FOMC stands for Sales m/m, Import Price Index m/m, Beige Book,
for Treasury International Capital System. This Federal Open Market Committee and the report
report summarizes the flow of stocks, bonds, and Core PPI m/m, Current Account, Capacity
is essentially the official minutes from the previ- Utilization Rate, Factory Orders m/m, ISM Non-
money market funds into and out of the U.S. ous FOMC meeting. It summarizes the panel
The headline figure is the difference in value Manufacturing Index, Nonfarm Productivity q/q
discussions, the vote, and describes the economic (r), Unit Labor Costs q/q (r), Unemployment
between U.S. purchases of foreign securities and conditions that were present at the time. It is Rate, ISM Manufacturing Prices, and Consumer

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MarketplaceBooks.com My fabulous flirtation with the NZD
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Sentiment. I keep an eye on when these come My News Announcements to Watch on the sector, providing a leading indicator of economic
out but don’t really expect any spectacular moves NZD activity.
from them.
Balance of Payments (BoP) and International RBNZ Interest Rate Statements—I always keep
Investment Position—The BoP statements are the my eye on any central bank announcements.
What moves the NZD? records of the value of New Zealand’s transactions Remember, it is often the difference between the
in goods, services, income, and transfers with the expectation and the outcome that drive price
The New Zealand economy differs from the U.S. rest of the world. They also detail changes in New movements. An interest rate hike, if the market
economy because it has typically been formed on Zealand’s financial claims on (assets), and liabilities has already adjusted in anticipation, is not an
exports from its very efficient agricultural system. to, the rest of the world. The International Invest- automatic driver of high volatility.
Those exports include meat, dairy products, for- ment Position statement details the stock of a
est products, fruits and vegetables, fish, and wool. country’s international financial assets and interna- The New Zealand Dollar also has a couple of
Its manufacturing industries play little to no part, tional financial liabilities. news announcements that I consider medium
unlike the United States. Many of New Zealand’s news but like to keep my eye on. They are Visi-
manufacturing industries had only been estab- Current Account—Released by Statistics New tor Arrivals and Core Retail Sales.
lished in a climate of import substitution with Zealand, the Current Account report covers the
high subsidies and tariffs. Some, such as car flow of all goods and services, income, and trans-
assembly, have completely disappeared; however, fer payments to and from New Zealand’s econo- Pulling it together
some experts estimate that tourism is now New my. The flow of goods and services to and from a
One of my favorite things about the NZD/USD
Zealand’s biggest “export,” surpassing the dairy country, also known as the trade balance, makes
pair is that it tends to trend very nicely. So while
industry in earnings. And if you have ever vis- up the largest portion of the Current Account.
I use a combination of indicators as confirma-
ited New Zealand, it is not hard to imagine why. GDP—GDP stands for Gross Domestic Product. tions, the bulk of my entry and exit signals are
Roughly about the land mass of Colorado, New This report, compiled by Statistics New Zea- taken straight from a candlestick chart. I draw
Zealand boasts both pristine white sand beaches land National Accounts unit, is a three-month on my trend lines and my support and resistance
on the east coast, and rocky, wild black sand snapshot of the performance of the economy. It levels, and then make a careful note of historical
beaches on the west coast. It is also host is published as chain-volume measures that are support and resistance levels. From there, it is
to spectacular rain forests, deserts, steaming vol- expressed in 1995/1996 prices for production pretty easy for me to pick out my trades. Bear in
canoes, glaciers, fjords, and sky scraping moun- and expenditure-based GDP and also in current mind, I have my calendar of events sitting next to
tain ranges. prices for expenditure-based GDP. my screen, so while I am essentially a chartist at
heart I always keep one eye on the fundamentals.
Retail Trade Survey—Published monthly by the Nothing worse that riding a bad trade for a week
Retail Trade Survey, this report compiles infor- or two simply because I forgot to check what was
mation on the state of the New Zealand retail coming around the bend.

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MarketplaceBooks.com My fabulous flirtation with the NZD
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I would encourage you to develop a deeper


understanding of your chosen currency pair(s).
Think of it as a way to broaden your horizons. In
your quest to dig a little deeper perhaps you can
even go have a little holiday, purely for research
If you had access to picks BEFORE
reasons, right? they made huge moves of +197%,
Happy Trading! +219% & +324% — how much
Marilyn McDonald money could you make?
Don’t miss out on HUGE gains
and WINNING picks!

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Horner Turner Boroden Hansen Lien McDonald Folger Rockefeller Bios
31
MarketplaceBooks.com i | h| 

Jean Folger
System Trading

When I began trading, I was intrigued trading day with a delicate balance of Advances in technology have made
FOLGER Recommends with the idea of expanding my knowl- adventure and professionalism. the former mystical black box trading
edge of investing. Up to that point, a viable and lucid option for today’s
Trading Systems I was a buy and hold investor, and I Like many traders, I started out by individual traders. System trading
that Work was interested in taking a more active reading as much as I could about trad- has many advantages, perhaps the
role in the markets. My goals were ing and the markets and by absorbing most enticing of which being that it
by Thomas Stridsman
not exclusively financial: in addition information from other traders, chat removes much of the emotion from
to making a decent living, I wanted a rooms, and seminars. I began my trading. I found that system trading
challenging career that allowed cre- trading career as a discretionary trader, forced me to stick with my plan, and
ativity and flexibility, both in terms relying on some degree of intuition on also that I trusted my plan more since
of how I approached the business and which to base my trading decisions. I was able to perform historical testing
how I was able to schedule my time. When I became frustrated at the to determine the mathematical expec-
lack of consistency in my trading, I tancy of a system.
Having spent earlier years in my life investigated system trading. System
as a whitewater kayak and snowboard trading is automated by a computer I will provide an example detail-
instructor, the ability to get closer to and executed with an exact set of ing how you can develop your own
these passions was an appealing bene- rules. The signals for trade entries and trading system which can then be
fit of trading. I approached each sport exits are purely objective, with no automatically traded. Please note the
with adventure and with professional- room for discretion. system I will discuss is for illustrative
ism, wanting to be a positive ambas- purposes only, and I do not intend
sador in sports that, at the time, were Once reserved for large institutional for you to program this system and
considered to be radical. And trading trading firms, system trading has start trading.
is no different: I try to approach each entered the private trader arena.

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Figure 1
Step 1 – Develop a unique indicator or con-
cept on which to base the strategy

For our example, I will use a strategy based on


the Commodity Channel Index (CCI), an indica-
tor first developed by Donald Lambert. The CCI
quantifies the relationship between price, a mov-
ing average (MA) of price, and normal deviations
from that average. The CCI indicator provides a
good basis for a strategy since it is a derivative of
price action. I like to find unique rules or settings
for an indicator, so I tightened the threshold of
the CCI to 8 periods (rather than the popular 14-
period setting). This allows me a distinct thresh-
old on which to base trading decisions.
I noticed as a discretionary trader that when the
CCI reached +/- 100, it often reversed. Figure 1
shows an 8-period CCI applied to a daily chart of
the E-mini Russell 2000 futures contract. As you
can see, when the CCI crosses above 100 or be-
low -100, subsequent price reversals are common.
This observation is the basis for the formation of
our trading system.

The CCI applied to a daily chart of the E-mini Russell 2000 futures contract.
Step 2 – Establish objective trade entry and
exit rules and program the strategy into a CCI thresholds. Using an 8-period CCI with example, we will start with an $800 stop loss and
trading platform thresholds of + /- 100, we will enter a long posi- a $2,400 profit target per contract. Once a trade
tion when the CCI value crosses below the -100 is initiated, our strategy will place a bracket order
Once we know the indicator that we would like threshold, and we will go short when it crosses for both the stop loss level and profit target level.
to use, we must decide how we want to apply it above the +100 threshold. To maintain a positive Once either the stop loss or profit target level
to our trading system. For this example, we will risk to reward ratio, we will set our profit target is reached, the position will be closed and the
create a countertrend strategy based on the above to be three times the size of our stop loss. In this remaining order canceled.

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Figure 2
Now that we know the logic that we would like
to employ in our system, we must program it
into a trading platform using its proprietary lan-
guage. This requires that you learn the
proprietary language (the platform’s specific
language used for programming), or that you
work with a developer who can do the coding
for you. The strategy code in Figure 2 is written
in EasyLanguage for the TradeStation platform.
For system traders, this code will act as an initial
trading plan.

Step 3 – Backtest and optimize the strategy


on historical in sample testing data

Once we have our idea programmed into a trad-


ing platform, we can test the data to find out how
the system would have performed in the past.
This is known as backtesting, and can add to
the validity of a trading system if done correctly.
Naturally, past results cannot always predict fu-
ture performance, but we are trying to get an idea
whether or not the system could be profitable.
As we backtest, we can view performance reports
generated by the platform that tell us how the
system performed during the testing period. Each The TradeStation EasyLanguage code that forms our trading system.
performance report is filled with information in
I believe the system has any merit. The Profit than one in order to have a profitable system. I
the form of performance metrics; these are the
Factor, calculated by dividing the gross profit by look for values in the 1.5 - 5 range; any lower
different ways in which we can evaluate a system.
the gross loss, is an important metric because it and the system may struggle to be profitable, any
I look at several different performance met- allows us to verify if a system has the potential higher and it is probably not realistic. Another
rics during this testing period to determine if to be profitable. This number must be higher important performance metric is Average Trade

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Figure 3
Net Profit, which is calculated by dividing data. The out of sample period includes
the net profit by the number of trades that the data reserved to test the system once
were taken. This metric shows the dollar the optimization has been completed.
amount that the average trade made during For example, if I have five years of data
the testing period. This number will vary on which to test a system, I will include
greatly with the type of system, whether it is the first four years as part of my in
for a day trading system (where the number sample testing. All of my system tweak-
could be quite small and still keep a trader ing will be on this data. The remaining
happy because he or she will make a lot of one year of data will be used for out of
trades) or for a swing trading system (where sample testing. The out of sample test-
the number should be larger since fewer ing provides a fresh set of data on which
trades will be made). to test the system. Figure 3 shows the
performance report for our initial sys-
Another key metric is Percent Profitable, tem. This is based on the results of the
calculated by dividing the number of win- historical in sample testing period.
ning trades by the number of total number
of trades. Again, the ideal number here will For our CCI system, I optimized the
differ with the type of system. Day trading initial system based on Profit Factor.
systems must depend on a high Percent Prof- This means that I looked for the best
itable number since each trade only takes a combination of variables to produce the
small chunk out of the market. Swing and greatest possible Profit Factor. I con-
longer-term trading systems, on the other ducted a multi-variable optimization,
hand, can survive with a much lower where I looked for the best threshold
Percent Profitable because the winners are levels on the CCI and the best stop loss
much larger. level. For the threshold, I optimized
values from 50-200 in increments of
When evaluating a system, one way to help two; for the stop loss level, I optimized
ensure that the test results are significant is between $800 and $2,000 in incre-
to segregate two periods for testing: the in ments of $10. Figure 4 shows a portion
sample testing period includes the data used of the resulting optimization report.
during any system optimizations. Optimiz-
ing a system involves changing the system The optimization report indicates that
A performance report for the initial CCI system.
parameters to find the best outcome for the a threshold of +/- 118 and a stop loss of

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Figure 4

The optimization report generated during a multi-variable optimization.

BACK

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Figure 5
$1,540 produced the highest Profit Fac- the results look too good to be true, they
tor when applied to our in sample data. probably are.
Figure 5 shows the resulting performance
report. Assuming I have good correlation between
the in sample and out of sample data, I
In comparing the two performance will then put the system in the market, on
reports, we can see an improvement in paper. This is known as paper trading or
the optimized system. Key metrics, such forward market testing, which is a method
as Profit Factor and Percent Profitable, for testing out the system without risking
are now in respectable areas. We are now any money. Basically, we allow the system
ready to confirm the strategy on our to generate the trades without sending
reserved out of sample data. any real orders to the market. I like to
watch the system in this manner for at least
four weeks before putting any money on
Step 4 – Confirm the strategy using the line.
historical out of sample data and/or
forward market data Figure 6 shows the strategy applied to the
daily E-mini Russell 2000 futures contract.
Once I am happy with the results of the The strategy generated the buy and sell
in sample testing, I apply the optimized signals that are shown on the chart. Dur-
system to the out of sample data to see ing forward market testing, I watch the
if the results correlate to the in sample strategy closely for a couple of reasons: 1) I
results. If so, it shows promise. If not, the want to make sure that my code is sound;
system has probably been over-optimized, that is, that the trades are being generated
meaning I tweaked the system so much according to the system’s logic, and 2) I
that it will most likely perform poorly need to see if the system responds well to
on any data besides that which I used the market, as opposed to only historical
during the testing period. Remember, I data. Again, I want to see close correlation
could optimize any system to make me a between the results of historical testing and
millionaire—in the past. We have to be this forward market testing.
careful not to optimize a system so much
that it becomes useless in the future; typi- If I do not see good correlation between
cally, the less optimization, the better. If The performance report following system optimization. the historical testing results and the for-
ward market testing, I will not put the

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system in a live market. I will need to adjust the


strategy and try again. If I see positive correla-
Figure 6 tion between the historical testing results and the
forward market testing period, I am ready for the
next step.

Step 5 – Confirm the strategy with live auto


trading using small position sizes

If the forward market testing results are solid, the


next step is to run the strategy in a live market
so that it generates and places the orders. This is
actual trading (risking real money), so I typically
use the least number of contracts that a strategy
allows. This strategy only requires one contract
since we have no split profit targets or any com-
plicated money management; we are either all in
or all out.
During this stage, it is important to watch the sys-
tem closely to confirm that technically it is work-
ing. As with forward market testing, you will need
to make sure that the trades taken by the auto
strategy are in line with the system’s logic.
This stage also brings a bit of a reality check to
BACK traders. System development is time-consum-
ing and challenging. As a result, most of us are
The CCI strategy applied to a daily chart of the E-mini Russell 2000 futures contract, anxious to see a system perform well as soon as
showing where entries and exits have occurred. it goes into a live market. The reality is, however,
that even a perfectly sound system can have a
less-than-spectacular introduction into a live
market: that maximum drawdown calculated in

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Figure 7
firming that the live trading results have good
correlation to the testing phases. At this point, I
am content with the progress of the system and
will move onto the final step.

Step 6 – Consistently trade the strategy

Now it is time to let the computer do its job and


run the auto strategy. Even though it is possible
to break the system (for example, by closing out a
trade early or turning off the strategy altogether)
it is best to let the system run. It has been devel-
oped, tested on two sets of historical data, paper
traded, and traded in a live market. You will give
the system the best odds of success by allowing it
to run with no discretionary input.
Figure 8 shows the order entry screen and trade
manager log that I use to monitor my systems.
Even after I am completely satisfied with a
system’s performance, I will continue to monitor
the trading activity. It is wise to remember that
we are dealing with multiple levels of technology
when we run an auto strategy—from our own
An equity curve of the CCI strategy from historical testing through live market trading.
computers, to the trading platform, all the way
to the exchanges. This much technology makes
the system’s performance report could very well failure. You must give the system time to recover trading easier for us—most of the time. We have
happen as soon as you go live. It is important to from that drawdown, assuming it does not fall to be ready for the inevitable system failures by
remember that the maximum drawdown metric outside the expected drawdown amount. recognizing and responding to problems. One
is based on the probability that the system will at way to do this is to monitor the system.
some point experience several losing trades in a Figure 7 shows an equity curve that includes
row. Therefore, even if it happens immediately, it trades from the development phase and into live
does not necessarily indicate that the system is a trading. The curve shows a steady incline, con-

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Figure 8
Conclusion

System development can be


a protracted and demanding
project, but it can also be fun and
quite rewarding. System trading
has many benefits, one being that
it removes emotion from trading.
Whether you are averse to pulling
the trigger, or you have a ten-
dency to trade too much, system
trading can help you develop
consistency in your trading.
Consistency in my trading has
allowed me to reach my goals.
Trading has proven to be a chal-
lenging career with room for
creativity. My schedule is flexible
enough to allow time to enjoy my
other passion: being outdoors,
whether hiking, kayaking or sim-
ply gardening.

JeanFolger

BACK

The CCI strategy goes live. Here we see the first few trades that the strategy takes during live trading.

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Barbara Rockefeller
Time Frame is Everything

How I trade for my own account is any single trade while still offering a I concede nothing to hard-core tech-
Rockefeller Recommends different from how I advise others to decent return for the time and emo- nical analysts. I have paid my dues
trade. That may sound callous and tional investment in the trade. with many a midnight hour backtest-
Encyclopedia of Chart hypocritical; but, the institutional ing trading rules. But no technical
Patterns, 2nd Edition clients of my advisory service can Maybe it would be nice to see the Big rule works much more than 50% of
afford to take a long view (weeks and Picture and to take long-term posi- the time in any time frame, if that.
by Thomas N. Bulkowski tions that end up vindicating a world-
months), while my capital stake is For a short time frame, technical indi-
very, very small and dictates a short view (like Warren Buffett and George cators are a weak tool. In fact, they get
time frame (hours, not days). Soros). Probably none of us really progressively weaker, the shorter the
escapes the inner crackpot that says time frame.
I believe that time frame is everything the price “should” go here—but it’s
in trading, and what time frame you the successful trader who says “never A moving average of one-minute bars
use is a direct function of how much mind where it should go, let’s observe is just plain dumb, and so is pretty
capital you have, and almost nothing where it really is going right now and much everything else when you are
else. It’s tempting to look at Big-Pic- get on board for the ride.” using tiny time frames. At that level,
ture analysis and try to cram it into a the noise is simply too great. Even
short trading time frame, but it’s not I didn’t become consistently suc- the finest technical filter fails at the
practical. It’s better to concentrate cessful in my own trading until I small time frames, with the notable
on news events and technical indica- shortened my time frame to match exception of the MACD indicator.
tors that work the best in a specific my capital stake. It had an interesting Check it out yourself—look at (say)
time frame, meaning the inputs that consequence too—I gave up all the the stochastic oscillator in 5-minute,
are likely to lose the least money in Big Picture analysis and many of my 10-minute, 15-minute, 30-minute,
technicals and embraced market lore.

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and one-hour intervals. If you think the stochas- actually do are usually two different things. By This is a deduction that neither fundamentals
tic oscillator has predictive value, even for its own the time a big player in your market has given a nor standard multi-period technical analysis will
time frame, that multi-time frame comparison comment to the financial press or wire service, arrive at. In fact, a technical system has to be
will disabuse you of the notion. he has already closed the position he is talking used at every opportunity—no cherry-picking
about. trades—if you want a reasonable hope of dupli-
My breakthrough came when I wrote Technical cating the system’s back-tested track record. But
Analysis for Dummies and had to write a whole But the bar lies only a little. When the open is my purpose in trading is not to prove that my
chapter on the price bar. I made more money near the low and the close is near the high, trad- back-testing is valid and that my system works.
trading for my own account while writing that ers are feeling bullish. We use longer time frame My purpose is to make $5,000 to pay for new
chapter than in any month before or since, and technicals to measure that bullish sentiment and upstairs windows. Risk management becomes
even more when writing the chapter on candle- track how it changes, but what is the point of wonderfully simpler when a specific dollar
sticks, which is essentially the same thing—read- that when the trade will not last out the day? amount for a specific expenditure is at stake.
ing the bar. Nice to know, maybe, but not more than two or
three days back. Every day is a new beginning in This is one of the messages of psychologist and
Why would this be so? I have two explanations. bar-reading. author Ari Kiev, who tells professional traders to
The first is that the rule “Simplify!” is a good one stop whining when the market is not delivering
if you are prone to analysis paralysis. So what if I say that bars lie only a little because in foreign big trading opportunities. The market is always
the price move is running contrary to what we exchange, the only market I trade, we often see a delivering opportunities; they just shift shape. It’s
think we know about the fundamentals and the closing price that is the same as the open or the the trader’s job description to find the new shape
primary trend? We are not trading economic data same as yesterday’s close, or off by one or two and exploit it, not just use the old techniques
and we are not trading the primary trend. We points in either direction. Given the thousands of over and over again. Every day should entail a
are not rich enough to trade the primary trend. market participants in every time zone in FX, this new trading plan and a new trading technique
When we see an upmove reverse into a down- can’t be a coincidence. Traders are playing games that’s in synch with evolving market conditions.
move by observing a series of lower lows, progres- with the weaker players, and that includes me. Something will work if you look hard enough
sively less high or lower closes, a bearish harami, They are deliberately concealing their bullishness and are determined to make a little money. Never
and other signs along those lines, we don’t care if or bearishness. When a price seems to stall at a has it been stated more clearly that trading is an
it’s a correction of an upmove. We won’t be in the critical level, like yesterday’s close, and especially opportunistic enterprise.
trade long enough for the true trend to matter. if yesterday’s close is near a historic high or low,
uncertainty is high. The big players can jump The bar, as it develops, defines the short-term
The second reason bar-reading works is that either way. Since it rains upon the just and the trading opportunity. The majority of professional
it’s the raw material of technical indicators. We unjust equally but the unjust have an umbrella, traders in the FX market trade on a 6-8 hour
use technicals in the first place because traders the solution is simply to stay out of the market workday time frame, and so their goal is to make
lie—what they say they are doing and what they until it is willing to give more information. a profit and not lose too much money in that sin-

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gle workday. Logically, then, a 360-minute bar is should take a short position at the next open. If traders have strong feelings; you can put more
a good starting point to evaluate how sentiment the close is over the previous close and the close is confidence in bar interpretation. If you have a
is changing. Luckily, this lines up pretty well with at or near the high, buy. Since you are determin- period of big bars that gives way to a period of
the different geographic markets in FX—Asia ing where the open and close is, although they small bars, get out of Dodge! A drop in volatil-
hands off the baton to Europe from roughly 2 am should bear some relation to market reality (like ity precedes a breakout. Note that this is exactly
Eastern Time (8 am Greenwich Mean Time) to 8 the 360-minute bar in FX), you can have more the same interpretation as when using Bollinger
am Eastern time in the US, when the New York than one trading window per 24-hour bands in a bigger timeframe.
market gets going, and so on. time period.
Candlesticks are wonderfully descriptive. In
If the European market, which is the biggest of When you have a breakout over a critical level, many instances they lack much predictive
the FX markets, puts in a rally ahead of the US like the highest high in many days or weeks, power—less in practice than their cheerleaders
open, you will want to get on the bandwagon if and the bar closes at the high, you can use the claim—but sometimes they deliver the goods in
and only if the US traders deliver a higher high rule “Buy high and sell higher.” A breakout may spades. In FX, “three white candles” and “three
very early in the US day. Then you have until 11 eventually succumb to profit-taking, but break- black candles” are notoriously unreliable, but
am (= 5-6 pm in London) to make a few bucks. outs should always be respected. Of course there bearish and bullish harami tend to work, and so
You want to exit by the time the big liquidity will be profit-taking at some point, but that is do patterns like “hanging man” and “gravestone
providers are walking out the door. The afternoon then and this is now. A confirming factor that is doji.” An old reliable is the engulfing candle,
FX session in the US is usually much slower after nice to have (but not essential) is when traders either bullish or bearish, and this one has the
they have gone. are “buying on the rumor” but then refusing to added benefit of telling you pretty much where to
“sell on the news.” It means pent-up demand was place your stop, too. A bullish engulfing buy sig-
Let’s say European traders deliver a rally (higher there all along and as other traders perceive it, nal will be invalidated if bears get a price below
high) but US traders decline to join in and they will follow. If there is no trace of “sell on the the midpoint of the candle.
instead give you lower lows and no higher highs. news,” you can safely buy at the next open (plus a
This is a selling opportunity on a mini-correc- few minutes) in expectation of a yet higher high, As with all technical indicators, even at the level
tion. Because it’s a correction, you have to set a even if the close in the current period may not be of the bar, confirmation from some other indi-
close profit target—you don’t make as much as so hot. cator is useful. In fact, the more confirmation,
when the US market is mimicking the European the better; it means other traders are going to
market, but it’s not zero. It may seem too obvious to mention, but tiny see it too. Again, simple is good enough (and
bars (smaller than the usual average high-low faster)—think hand-drawn diagonal support and
Old-fashioned market lore is surprisingly useful range) mean traders are unsure. Their emo- resistance, horizontal hand-drawn support and
in bar-reading. At the most basic, market lore tional level is low. You should have confidence resistance channels connecting clusters of highs
says that if you have an open at the high and the in bar-reading and stay away. Very long bars and lows, and standard moving averages like the
close at the low, sentiment is bearish and you (bigger than the usual average H-L range) mean 10- and 20-period.

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Channels are useful, and that means all chan- Traders joke that “risk preference” is how bad
nels. I like the Bollinger band, average true range you feel over a minor loss compared to how good
band, and standard error channel. When they all you feel over a big gain. Professionals know that
line up on the same chart with the top and bot- they will take losses, and it’s only a question of
tom of each channel not too far away from one controlling them in order to have some capital to Are Great Traders Born or Made?
another, you are being given the gift of a natural trade with the next time out. Bar-reading has the
“cycle” top and bottom. It would be greedy to set virtue of keeping you sane because you really are Discover how a simple
your profit target at or above the top and foolish reading the mind of the market. Using bars with bet between fellow traders
transformed into Wall Street’s
to set your stop below the bottom. A reasonable channels helps to make your expectations of both
most legendary experiment. In
trader picks targets and stops somewhere within gain and loss reasonable. You wouldn’t expect
this fascinating true story, 23
the channel. A divergence of two channels, as to make a seven-course meal with two eggs and ordinary people are trained to
when the Bollinger band is pointing downward thyme leaf, the culinary equivalent of “get rich be extraordinary traders in just
but the standard error channel is pointing up- quick” by trading, but you can make a splendid two weeks.
ward, is abnormal. Either you drew it wrong or omelet every day if you don’t break the eggs.
For More info - CLICK HERE
the move is unstable.
The average true range band is logically the most Barbara Rockefeller
sensible range to use in setting stops and targets.
Let’s say the daily range is 120 points and your RULES TO LIVE BY
per-trade profit goal is 40 points, or one-third.
Draw the 360-minute ATR band and see where In simple, no-nonsense style,
the current price lies on it. If it’s near the bottom William Eng pulls from his own
of an upsloping band, you have room to trade on experience to offer 50 hard-
earned rules that lay the foun-
the long side. A drop under the band (where you
dation for lasting success in the
locate the stop) may occur, but it would have to
markets. Eng’s book isn’t about
be because of an extraordinary event that changes surviving the fluctuations of the
sentiment suddenly. This is why you do need to Market, it’s about mastering the
know the fundamentals and the upcoming news moves and making money. Every
releases—to avoid being blindsided. Bar-reading intelligent trader should study
will only protect you sometimes from the unex- and apply these critical insights For More info
pected news release. of a gifted expert. CLICK HERE

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Raghee Horner Raghee Horner is an experienced


trader with over 15 years in the mar-
kets. She is the co-founder of EZ2Trade
Software and has taught her brand of
technical analysis and charting strategies
She has been interviewed by radio com-
mentators as well as offered education
and analysis on her own radio program.
Raghee is a sought-after speaker who has
conducted seminars throughout the US,
to students all over the world. Canada, Caribbean, and Asia. She is also
is frequently invited to teach and offer
As an international author, Raghee has analysis about the forex, futures, and
taught currencies, futures and equities stock market.
trading for over a decade. Her bestsell-
ing Forex Trading for Maximum Profit is Raghee has written more than 100 articles
gaining critical acclaim as it introduces on investing, active trading, and market
readers to the forex market and her Three psychology. She has also advised money
Classic Tools to a Three Step Analysis. managers and hedge funds. Her chart
analysis and commentary have appeared
With an emphasis on charting and price on TradingMarkets, JAGNotes, Stock-
action, Raghee continues to teach the Charts.com, TheMoneyBlogs.com, and
tools and strategies that encourage self- FXStreet. She has also been a regular on
directed traders to pursue the study of the MoneyWatch Radio Network and at
technical analysis and market psychology. the Forex Trading Expos and International
Allowing experience of actual trades to Traders Expos.
inspire her strategies, Raghee has maxi-
mized the tools of eSignal to develop au-
tomated charting tools for active traders
and investors.

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Toni Turner Toni Turner is a trader/investor


with 16 years of experience in the finan-
cial markets. She is the best-selling author
of A Beginner’s Guide to Day Trading
Online, A Beginner’s Guide to Short Term
Trading and Short-Term Trading in the
complicated material in a simplified
manner that makes it interesting and
enjoyable to learn. She presents both
online and live seminars that focus on
helping traders and investors reach their
financial goals.
New Stock Market.
Toni has appeared on NBC, MSNBC,
With an international following, Toni’s CNN, and CNBC. She has been inter-
books are translated into Vietnamese, viewed on dozens of radio programs and
Japanese, and Chinese. featured in periodicals such as Fortune
magazine, Stocks and Commodities,
Toni is a popular educator and sought- SFO, MarketWatch.com, Fidelity Active
after speaker in the financial arena. She Trader, and Bloomberg Personal Finance.
speaks regularly at trading forums and
conferences across the United States, in- Toni is the President of TrendStar
cluding college campuses, Traders’ Expos, Group, Inc. For more information, go to
and Money Shows. www.ToniTurner.com

An accomplished technical analyst, Toni


is well-known for her ability to present

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46
MarketplaceBooks.com Author Bios
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Carolyn Boroden Carolyn Boroden is a Com-


modity Trading Advisor and Technical
Analyst that has been involved in the
trading industry for over 25 years. Her
background includes working on the ma-
Technicians Association, Tradingmar-
kets.com, and the International Traders
Expo on technique. She currently runs
an INTRADAY trading advisory service
(www.fibonacciqueen.com), based on her
jor trading floors including the Chicago unique Fibonacci time and price analysis.
Mercantile Exchange, the CBOT, NYFE Her live charts are broadcast live through
and COMEX. She taught a segment of hotcomm webconferencing software. She
the Chicago Commodity Boot Camp also runs a Paltalk voice/text room which
seminars for 4 years on advanced trading focuses on discussing the Fibonacci trade
techniques using Fibonacci ratios on both setups exclusively during the session.
the time and price axis of the market.
She has also lectured for the Market

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MarketplaceBooks.com Author Bios
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Toni Hansen Toni Hansen is a full time trader


who has spent the past decade emerged
in the market. A popular speaker and
columnist, Toni spends much of her free
time sharing her knowledge with others.
ken on behalf of Townsend Analytics, as
well as the Chicago Board of Trade as an
active trader of their Mini-Dow futures
contract. Toni is popular columnist on
The Hard Right Edge and is a repeat con-
tributor to Stocks, Futures, and Options
Now one of the most respected technical Magazine, known most widely as SFO,
analysts and traders in the industry with a and has recently co-authored their newest
high reputation for accuracy in both bull book Online Trading.
and bear markets, she began her trading
career as an equity swing trader and has Throughout the boom and bust of the
since expanded into many other sectors last decade, Toni has been consistently
of the market. Her style of trading and trading and educating new traders. Her
market analysis transcends both time as students include a diverse spectrum of
well as market vehicles, making it at- market participants, from professional
tractive to investors and trader of stocks, money managers, market analysts, broker
futures, options, ETFs, and even the and traders to retirees and stay at home
Forex market. parents, as well as those simply wishing to
hone their market skills. Over the years
This adaptable nature allows her to be she has spent most of her trading days
active even in the slowest periods in the online sharing her skills and insights
overall market and successful during both with others.
bull and bearish market moves.
For more information go to
Toni is a frequent speaker at the trade www.tonihansen.com
shows and trading expos and has spo-

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48
MarketplaceBooks.com Author Bios
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Kathy Lien Kathy Lien is the Chief Currency


Strategist at DailyFX.com, one of the
leading resources for online FX news and
research. Kathy is responsible for provid-
ing research and analysis for DailyFX,
including technical and fundamental re-
Kathy has a Bachelors degree in Finance
from New York University. She is an inter-
nationally published author of Day Trad-
ing the Currency Market (2005, Wiley)
and Millionaire Traders: How Everyday
People Beat Wall Street at its Own Game
search reports, market commentaries and (2007, Wiley). She has also written for
trading strategies. A seasoned FX analyst Stocks and Commodities, CBS Market
and trader, prior to DailyFX, Kathy was Watch, ActiveTrader, Futures, and SFO
an Associate at JPMorgan Chase where Magazine and has taught seminars across
she worked in Cross Markets and Foreign the country. Kathy has hosted trader chats
Exchange Trading. She has vast experi- on EliteTrader, eSignal, and FXStreet,
ence within the interbank market using sharing her expertise in both technical and
both technical and fundamental analysis fundamental analysis. She frequently ap-
to trade FX spot and options. She also pears on Bloomberg and CNBC. Follow
has experience trading a number of prod- her blog at kathylien.com.
ucts outside of FX, including interest rate
derivatives, bonds, equities, and futures.

Horner Turner Boroden Hansen Lien McDonald Folger Rockefeller Bios


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MarketplaceBooks.com Author Bios
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Marilyn McDonald Marilyn McDonald, Director


of Marketing for Interbank FX, considers
herself first and foremost a Forex trader.
She is also a series 3 licensed Futures
FX, a forex brokerage. Having been ex-
posed to the theories and the sales pitch-
es, she started writing in 2006 with the
intent of passing along what she knows.
Brokers and has just finished writing a
Please visit her sites:
book that is due to be on the market in
www.marilynmcdonald.com
September of 2007 called Forex Simpli-
www.interbankfx.com
fied (Marketplace Books). She has been
working in the trading industry for many
years, with several years spent working for
a company that made technical analy-
sis software for stocks, options, mutual
funds, etc. A few years ago, she moved
over to her current position at Interbank

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MarketplaceBooks.com Author Bios
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Jean Folger Jean Folger is an experienced


stock and futures trader who began her
trading business while searching for
dynamic portfolio diversification. She dis-
tion and trade analysis to develop unique
indicators and strategies for the intraday
markets.
Jean is author (with Lee Leibfarth) of
covered day trading and since has focused
Make Money Trading – How to Build a
on analyzing and trading the intraday
Winning Trading Business (2007, Mar-
markets. Her articles on short-term
ketplace Books). This book presents an
trading have been featured online and in
organized, top to bottom look at what it
Futures magazine.
means to start, run, and ultimately suc-
Jean is the co-founder of PowerZone ceed at the business of trading.
Trading, a company that offers custom
When she is not trading or writing,
programming and innovative indicators
Jean can be found outside, enjoying the
for active traders. Primarily a system trad-
mountains and beaches of the Carolinas.
er, Jean relies on careful market observa-

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MarketplaceBooks.com Author Bios
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Barbara Rockefeller Barbara Rockefeller is


an international economist and trader
specializing in foreign exchange. She is
the publisher of two daily newsletters and
in spot foreign exchange, published for
central banks, fund managers and multi-
national corporations. The “Daily Futures
Report” is a technical-analysis-based
author of four books, including Technical report on currency futures. Samples are
Analysis for Dummies. available for review at www.rts-forex.com.
Miss Rockefeller also writes for finance-
Prior to starting the newsletter business oriented magazines like Active Trader,
in 1990, she was the senior risk manager Currency Trader, and Stocks, Futures
in the international division at Citibank. and Options.
Before then, Ms. Rockefeller was in the
treasury division with a specialization in Barbara Rockefeller is the author of:
foreign exchange. At the beginning of her
Technical Analysis for Dummies
career in banking, she completed credit
Wiley, 2004
training and was a loan officer in the
multinational division at Manufacturers The Global Trader (Wiley, 2001)
Hanover Trust.
CNBC 24/7--Trading Around the Clock,
Education: BA, Reed College (Econom- Around the World (Wiley, 2000)
ics) and M.A., Columbia University
(International Affairs). How to Invest Internationally (Japanese,
Franklin-Covey, 1999)
Newsletters are “Daily Currency Brief-
ing,” a synopsis of events and forecasts

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MarketplaceBooks.com i | h| 

MarketPlace Books
Started in 1993, Marketplace Books grew out of the realization that Contact Information
mainstream publishers were not meeting the demand of the trad-
ing and investment community. Capitalizing on the access we had Please let us know your thoughts about this ebook.
through our distribution partner Traders’ Library, Marketplace Books Contact Jody Costa at jcosta@marketplacebooks.com
began publishing some of the most well-known books in that market.

One of the best examples of our early success was Reminiscences of a Join our e-mail list
Stock Operator by Edwin LeFevre. Written in the 1920s, the thinly Get huge discounts, free offers and make sure you find every
fictionalized story of legendary trader Jesse Livermore contains insight trading resource you need. Sign up for our Rewards Weekly pro-
and wisdom that still rings true today. gram now and make sure you don’t miss your chance to save big
Following the success of this title, Marketplace Books launched a on trading related products.
co-publishing relationship with John Wiley and Sons to create trading
classics like Larry McMillan’s McMillan on Options , Bernie Schaef- Email this eBook
fer’s Option Advisor, Tom Dorsey’s Point and Figure Charting, and
Ted Tesser’s The New Trader’s Tax Solution, among others. We took Like what you read? These amazing traders have shared their
that success and stretched into our own program. insights. Be sure to share this book with a trader you know. Click
here to send this book to a friend.
Today, Marketplace Books publishes top authors in the industry,
where household names like Oliver Velez, Larry McMillan, Sheldon Marketplace Books Catalog
Natenberg, Mark Larson, Martin Pring, David Vomund, George Fon-
Check out our catalog at www.MarketPlaceBooks.com
tanills, Louis B. Mendelsohn, Jay Kaeppel are just the beginning. We
are actively acquiring some of the brightest new minds in the industry
including technician Jeff Greenblatt and programmers Jean Folger and
Lee Leibfarth.

With Traders’ Library and our extensive affiliate channels, Marketplace


Books is providing traders and investors with the material they need
to keep their profits increasing. We are excited about our publishing
program and look forward to continued growth for our company and
our authors.

Horner Turner Boroden Hansen Lien McDonald Folger Rockefeller Bios


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