Table Of Content

P-00_4218 4/26/04 3:32 PM Page iii A Complete Guide to Technical Trading Tactics How to Profit Using Pivot Points,Candlesticks & Other Indicators JOHN L. PERSON John Wiley & Sons, Inc. P-00_4218 4/26/04 3:32 PM Page viii P-00_4218 4/26/04 3:32 PM Page i A Complete Guide to Technical Trading Tactics P-00_4218 4/26/04 3:32 PM Page ii Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Aus- tralia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Trading series features books by traders who have survived the market’s ever-changing temperament and have prospered—some by rein- venting systems, others by getting back to basics. Whether a novice trader, professional, or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future. For a list of available titles, visit our web site at www.WileyFinance.com. P-00_4218 4/26/04 3:32 PM Page iii A Complete Guide to Technical Trading Tactics How to Profit Using Pivot Points,Candlesticks & Other Indicators JOHN L. PERSON John Wiley & Sons, Inc. P-00_4218 4/26/04 3:32 PM Page iv Copyright © 2004 by John L. Person. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. 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Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data Person, John L. A complete guide to technical trading tactics : how to profit using pivot points, candlesticks & other indicators / John L. Person p. cm. “Published simultaneously in Canada.” Includes bibliographical references and index. ISBN 0-471-58455-X (cloth) 1. Stocks—Charts, diagrams, etc. 2. Investment analysis. 3. Futures. 4. Options (Finance) I. Title. HG4638 .P47 2004 332.63′2042—dc22 2003026687 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 P-00_4218 4/26/04 3:32 PM Page v Contents Preface ix Acknowledgments xv CHAPTER 1 Introduction to Futures and Options: Understanding the Mechanics 1 How the markets work, the elevator analogy, product for the times, important terminology such as margin, contract specifications, and leverage CHAPTER 2 Fundamentals: The Market Driver 19 Supply and demand issues, economic growth and productivity effects, major economic reports and their in role in market prices CHAPTER 3 Technical Analysis: The Art of Charts 33 Western-style bar charts and key reversals, point-and-figure charts that focus only on price, market profiling, price and time analysis CHAPTER 4 Candle Charts: Lighting the Path 43 Enlightening charting technique and its colorfully named patterns—hammers, stars, spinning tops, dojis, hanging man, and others—powerful reversal patterns, reliable continuation patterns, key examples in the dollar and bonds v P-00_4218 4/26/04 3:32 PM Page vi vi CONTENTS CHAPTER 5 Chart Analysis: Volume, Open Interest, Price Patterns 67 Volume and open interest rules for traders, M tops and W bottoms, trend lines, measuring patterns, the head-and-shoulders, triangles, pennants and flags, dia- monds, wedges, funnels, gaps, islands, rounded bottoms, oops signals, opening range breakouts CHAPTER 6 Pivot Point Analysis: A Powerful Weapon 93 The pivot point formula for target trading, calculating support and resistance lev- els, importance of multiple verification from several sources, the P3T trading technique, weekly and monthly charts and numbers, risk management techniques CHAPTER 7 Day-Trading, Swing Trading: Acting on Analysis 113 Trading to bounce off target numbers, calling tops and bottoms, weekly chart magnets, harami cross and other candle clues to market reversals, pivot points save the day, lining up the stars, the verify-verify-verify approach CHAPTER 8 Technical Indicators: Confirming Evidence 135 Moving averages and trends, simple rules with averages, tweaking and visualizing MACD, stochastics, false signals, Gann’s key numbers, Fibonacci ratios and projec- tions, time counts for cycles, Elliott wave and its clues CHAPTER 9 Market Sentiment: What Traders Are Thinking 161 Getting a market consensus from contrary opinion, Commitments of Traders reports, margin rate changes, Market Vane Bullish Consensus report, put-to-call ratios, volatility index (VIX), when the boat is tipping over, media effect CHAPTER 10 Order Placement: Executing the Plan 171 Importance of getting an order right, online platform concerns, impact of market conditions on orders, 14 top order entry selections you need to know, orders in after-hours trading, spreading concepts P-00_4218 4/26/04 3:32 PM Page vii Contents vii CHAPTER 11 The Mental Game: Inside the Trader 189 Conquering fear, learning discipline, improving confidence, suggestions for success, I’ll-think-about-it syndrome, the paper trader, fear and greed factors, becom- ing a specialist, setting up an investment diary, setting a positive mind frame, dealing with adrenaline, establishing goals, positive affirmations, stress relief techniques, rewarding success to build success CHAPTER 12 The Tactical Trader: Tips and Techniques That Work 203 Pyramiding approaches, scale trading, stop reversals, breakouts, momentum trading, the Friday 10:30 a.m. rule, stop placement near a magnet, trading multiple contracts CHAPTER 13 Options: A Primer 217 What options are and how to use them with futures, simple puts and calls, options premiums, the Greeks, comparison shopping, strangles and straddles, eight top option spreads, delta neutral techniques CHAPTER 14 Closing Bell: My Top 10 List 235 What the experts suggest, top 10 trading thoughts, measuring success Glossary 241 Bibliography 253 Index 255