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A Beginner's Guide to Short-Term Trading - Toni Turner PDF

301 Pages·2007·19.09 MB·English
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~ inner's guide to • TONI TURNER IJ Adams Media Corporation Avon, Massachusetts Copyright ©2002, Toni Turner. All rights reserved. This book, or parts thereof, may not be reproduced in any form without permission from the publisher; exceptions are made for brief excerpts used in published reviews. Published by Adams Media Corporation 57 Littlefield Street, Avon, MA 02322. U.S.A. www.adamsmedia.com ISBN: 1-58062-570-3 Printed in Canada. JIHGFEDCBA Library of Congress Cataloging-in-Publication Data Turner, Toni. A beginner's guide to short-term trading I by Toni Turner. p. cm. Includes index. ISBN 1-58062-570-3 1. Speculation. 2. Stocks--Charts, diagrams, etc. 3. Stock price forecasting. 4. Investment analysis. I. Title. HG6041 .T87 2001 332.63'228--dc21 2001046345 This publication is designed to provide accurate and authoritative information with regard to the sub- ject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. -From a Declaration ofPrinciples jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations RealTick® is a registered trademark of Townsend Analytics, Ltd. © 1986-2002. All rights reserved. Any unauthorized reproduction, alteration, or use of RealTick is strictly prohibited. Authorized use of ,RealTick does not constitute an endorsement by Townsend Analytics of this book. Townsend Analytics does not guarantee the accuracy of or warrant any representations made in this book. Many of the designations used by manufacturers and sellers to distinguish their products are claimed as trademarks. Where those designations appear in this book and Adams Media was aware of a trade- mark claim, the designations have been printed in initial capital letters. This book is available at quantity d!scounts for bulk purchases. For information, call 1-800-872-5627. Visit our exciting small business Web site at businesstown.com I dedicate this book to my students, worldwide. You have become my teachers and my friends. Thank you for your unending gifts ofsupport and encouragement, laughter, and inspiration! Contents ACKNOWLEDGMENTS • • • • • • • • • • . • • • • • • • • • • • • • • . . • • . • • • • • • xi FOREWORD BY STEVE NISON ••••.•••••••••••••••••••••••• xiii INTRODUCTION ••••••••.••••••••••••••••••.•••••••••••• xv America's Love Affair; How the Romance Began; The Internet Played Cupid; Enter the Day Traders; My Relationship with the Stock Market; Why I Wrote This Book; Strategy Overview; What You'll Need to Succeed; Short-Term Trading: The Good News; The Flip Side; The Journey . .. ; It's Showtime! CHAPTER1-WALLSTREEn THE GREATEST GAME ON EARTH. • • • . • • • • • . • • • • • • • • • • • • • 1 Where It All ~tarted; Out of Chaos Comes O~der: The 'Crash of 1929; The Crash of 1987: More Chaos and the Resulting Order; The New York Stock ~xchange: How It Works; The Nasdaq Stock Market: How It" Works; The American Stock Exchange LLC: How It Works; Let's Dissect the Indexes; Wall Street as "The Animal House": The Bulls and the Bears, the Sheep and the Hogs; Two Emotions That Rule the Markets (and Most ofthe Rest ofthe World); Supply and Demand; Check Your Understanding; What Is "Center Point"?; Center Point: You . .. A Golden Buddha CHAPTER 2-0FF TO A RUNNING START: SETTING UP YOUR BUSINESS•••••••••••••••••••••.•••• 17 Map Your Business Plan; What's Your Time Commitment? Your Most Important Commitment: Money; Quick Asset Allocation Plan; Selecting/Updating Your Office Equipment; Choosing a Broker; The Commission Maze; Slippage: What It Means; Margin Accounts: How They Work; You Gotta Have Goals; Check Your Understanding; Center Point: Commit: Transform Your Dreams into Goals vii viii A BEGINNER'S GUIDE TO SHORT-TERM TRADING CHAPTER 3-MASTER A MONEY-MAKING MINDSET••••••.•••.•• 33 The Market as an Unstructured Entity; The Stock Market Is Always Right; Meet Your Emotions-Up Close and Personal; The Winning Mindset-Train Your Brain; The End Result: What It Looks Like; R & R: Don't Go Shopping Without It; Self-Respect and Deservability; Check Your Understanding; Center Point: Make Your Circle Bigger CHAPTER 4-MARKET MACHINATIONS 101: THE FUEL THAT SPARKS THE ENERGY••••••••••••••••••• 45 The Buck Stops Here; Fundamental Analysis vs. Technical Analysis: The Tug o'War; Fundamental Analysis, Quick Yet Thorough Sources; IBD Proprietary Corporate Ratings; More Instant Info, CNBC, CNN, and Bloomberg; Wonderful Web Sites to Wander Through; Magazines; Check Your Understanding; Center Point: Invite Spontaneity into Your Life CHAPTER 5-MARKET MACHINATIONS 102: BASIC CHARTING TECHNIQUES THAT MAKE YOU MONEY•.•• 55 Cycles: The World's Operating System; Let's Draw the Curtain on Stage Analysis; Different Stages Call for Different Reactions; Additional Cycle . Components; Support and Resistance, or Action and Reaction; Quiz; Center Point: Develop a Prosperity Mindset CHAPTER &-JUMP-START ON CHARTING BASICS ••••••••••••• 73 Charting Essentials: Line Charts and Bar Charts; Candlestick Charting Basics; Quiz; Center Point: Reach for Your Highest Potential CHAPTER 7-eHARTING CLOSE-UPS: THE PIECES OF THE PUZZLE ••••.••••••••••••••••••.•• "93 Anatomy ofYour Friend: The Uptrend; Buy Signals: What to Look For; How to Draw an Uptrend Line; Trading in a Range, Congestion, and Consolidation; Anatomy ofa Downtrend; Overview ofSell Signals: What to Look For; How to Draw a Downtrend Line; Quiz; Center Point: The Power ofSynchronicity CHAPTER 8-PUTTING THE PUZZLE TOGETHER • • • • • • • • . . • . . • 119 Volume: A Mega-Important Indicator; Moving Averages: What They Are, How to Use Them; Quiz; Center Point: Thoughts Are "Things" ix CHAPTER 9-THE BELLS AND WHISTLES: HOW THEY CHIME AND TWEET. • • • • • • • • • • • . • • • • • • • • • • • 135 Oscillators: What They Are; The RSI, What It Is, How to Use It; Stochastic Oscillator: What It Is, How to Use It; The MACD: What It Is, How It Works; On-Balance Volume: What It Is, How to Read It; Bollinger Bands: What They Are, How to Read Them; Fibonacci Retracements: What They Are, How You Read Them; Gaps: A Trader's Black Hole; Quiz; Center Point: You Are Perfect Right Now! CHAPTER 1O-IT'S SHOWTIME! ••••••••••••••••••••••••••• 157 Continuation and Reversal Patterns: What They Are; Reversal Patterns: What They Look Like; Let's Take Itfrom the Top!; Big Picture Dynamics; Choose a Leading Stock in a Leading Industry, Check Out the Fundamentals; The Industry Group or Sector Shows Immediate Strength; Indicators." All Systems Are Go!; The Urge to Fudge; Get Ready to Pull the Trigger: The Buy Setup; Buy Trigger List; Quiz; Center Point: Awaken to Forgiveness CHAPTER ii-WHERE THE RUBBER MEETS THE ROAD: MONEY-MANAGEMENT TECHNIQUES •.•••• •' • • • • • • • • • • • • 183 Plan Your Trade and Trade Your Plan; Piece of the Pie; RiskIReward Ratio: What It Means, How to Calculate It; Where to Place Your Stop-Loss Orders; Now That You've Got It, What Do You Do with It?; Intra-day Reversal Periods: What They Are, What They Mean to You; Market Orders, Limit Orders, and More; Quiz; Center Point: The Circle ofGiving CHAPTER 12-WINNING STRATEGIES FOR SELLING SHORT ••••• 199 Overcoming Mental and Emotional Roadblocks to Selling Short; Selling Short: The Rules; Here's the Process; What Makes Your Shorts Fall Down; Fundamentals: What to Look For; Chart Patterns and Setups: What to Look For; Shorting Indicators: Ugly Is Good!; How to Place Your Order; Shorting Strategy: The Overextended Stock; Shorting Strategy: The Overextended Double Top; Sell Short Trigger List; Shorting Tips: FAQs (Frequently Asked Questions); Quiz; Center Point: Banish Fear and Let Your Light Shine x A BEGINNER'S GUIDE TO SHORT-TERM TRADING CHAPTER 13-ANATOMY OF A TRADE •.••••••••••••••.••••• 219 Find an Industry Group or Sector to Target; The Preparation; The Journey; The Rest of the Story . ..; A Quick Look at Intra-day Charts; Center Point: Detachment Brings New Possibilities CHAPTER 14-YOU, THE WIZARD OF ODDS •••••••••••••••••• 237 Back up and Look at the Big Picture; The "If, Then" Mindset; Analyze the Broader Markets; Learn to Assess the Trading Environment; The AdvancelDecline Line: Market Narrator in a Capsule; A "Heads Up" on Economic and Earnings Reports; Options Expiration Day-You're Outta' Here!; FOMC Reports; Mother Market's Contrarian Indicators; Stay Tuned to Changing Conditions; A Word about Losses; The Best Gift to Give YourseIf..' A Trading Journal; Level-II Trading: Is It for You?; Quiz; Center Point: Come Back to Center GLOSSARY OF TRADING AND FINANCIAL TERMS ••••••••••••• 253 RECOMMENDEI) READING ••••••.••••••••••••••••••.••••• 273 INDEX••••••••••••••••••••••••••.••••••••••••••.••••• 275 Acknowledgments If ever a book was created out of patience and love, this is the one! I consider myself blessed to have been surrounded by so many people who gave of their encouragement and support while I wrote this manuscript. My thanks and gratitude to ... First and always, my daughter Adrienne, who is the light of my life and my best friend. My agent, Deidre Knight, the best ally an author could have, along with being a business partner, friend, and mother of another beautiful soul, Tyler. My editor, Gary Krebs, who helped shape and mold this book into final form, editorial assistant Elizabeth Gilbert, whose patience shall endear her to me forever, business. editor Jill Alexander, and another patient soul, Copy Chief Laura MacLaughlin. Harold Komhaus, who offered constant support and lots of hugs. Best friends Dan Gibby, David Kohn, and Vince Shorb, who gave wise advice, along with gentle, much-needed prods when I slowed down. Mark Frauman, mentor and friend, as well as Mike McMahon, Cathy Vlad, Jennifer Perrier, Claud "OEX" Staples, and Chris Dover. Dr. Dale Townsend of Tesserack, along with my wonderful friends, the "Hot Dogs," who motivated me and pushed me to the outside of my personal envelope. My Internet group, who gather each day for "Toni on Trading." They have become like family. Again, thank you all, and God bless! xi 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 -'I 1 1 1 1 1 1 1 1 1 1 j , 1 1 1 'I 1 - 1 1 1 1 -- I

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