Mind Over Markets: Power Trading with Market Generated Information, Updated Edition

370 Pages·2013·16.66 MB·English

by  James F. Dalton

3GFPREF 05/16/2013 12:36:28 Page16
3GFFIRS 05/14/2013 10:10:58 Page1
M
IND OVER
M
ARKETS
3GFFIRS 05/14/2013 10:10:58 Page 2
Founded in 1807, John Wiley & Sons is the oldest independent publishing
company in the United States. With offices in North America, Europe, Australia,
and Asia, Wiley is globally committed to developing and marketing print and
electronic products and services for our customers’ professional and personal
knowledge and understanding.
The Wiley Trading series features books by traders who have survived the
market’s ever changing temperament and have prospered—some by reinventing
systems, others by getting back to basics. Whether a novice trader, professional,
or somewhere in-between, these books will provide the advice and strategies
needed to prosper today and well into the future.
For a list of available titles, visit our website at www.WileyFinance.com.
3GFFIRS 05/14/2013 10:10:58 Page3
M
IND OVER
M
ARKETS
U E
PDATED DITION
Power Trading with Market
Generated Information
James F. Dalton
Eric T. Jones
Robert B. Dalton
3GFFIRS 05/14/2013 10:10:58 Page4
Cover image: # iStockphoto.com/ULTRA_GENERIC
Coverdesign:Wiley
Copyright#2013byJamesF.Dalton,EricT.Jones,andRobertB.Dalton.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
Thefirsteditionwaspublishedin1993byTradersPress,Inc.
PublishedsimultaneouslyinCanada.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinany
formorbyanymeans,electronic,mechanical,photocopying,recording,scanning,orotherwise,
exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyrightAct,without
eitherthepriorwrittenpermissionofthePublisher,orauthorizationthroughpaymentofthe
appropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222RosewoodDrive,Danvers,
MA 01923, (978) 750 –8400, fax [phone], or on the Web at www.copyright.com. Requests
tothePublisherforpermissionshouldbeaddressedtothePermissionsDepartment,JohnWiley&
Sons,Inc.,111RiverStreet,Hoboken,NJ07030,(201)748–6011,fax[phone],oronline
at www.wiley.com/go/permissions.
LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest
effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe
accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimpliedwarranties
ofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreatedorextendedby
salesrepresentativesorwrittensalesmaterials.Theadviceandstrategiescontainedhereinmaynot
besuitableforyoursituation.Youshouldconsultwithaprofessionalwhereappropriate.Neitherthe
publishernorauthorshallbeliableforanylossofprofitoranyothercommercialdamages,including
butnotlimitedtospecial,incidental,consequential,orotherdamages.
Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,pleasecontact
ourCustomerCareDepartmentwithintheUnitedStatesat(800)762–2974,outsidetheUnited
Statesat(317)572–3993,orfax(317)572–4002.
Wileypublishesinavarietyofprintandelectronicformatsandbyprint-on-demand.Somematerial
includedwithstandardprintversionsofthisbookmaynotbeincludedine-booksorinprint-on-
demand.IfthisbookreferstomediasuchasaCDorDVDthatisnotincludedintheversionyou
purchased, you may download this material at http://booksupport.wiley.com. For more
information about Wiley products, visit www.wiley.com.
LibraryofCongressCataloging-in-PublicationData
Dalton,JamesF.
Mindovermarkets:powertradingwithmarketgeneratedinformation/JamesF.Dalton,
EricT.Jones&RobertB.Dalton.–2ndEdition.
pagescm.–(Wileytradingseries)
Includesindex.
ISBN978-1-118–53173-0(cloth)–ISBN978-1-118–65978-6(ePDF)–
ISBN978-1-118–65972-4(Mobi)–ISBN978-1-118–65976-2(ePub)
1. Futures. I. Jones,EricT.(EricThomas) II. Dalton,RobertB. III. Title.
HG6024.A3D352013
332.6405–dc22
2013004403
PrintedintheUnitedStatesofAmerica.
10 9 8 7 6 5 4 3 2 1
3GFTOC 05/16/2013 13:39:52 Page5
CONTENTS
Preface xiii
Acknowledgments xvii
CHAPTER1 Introduction 1
v
CHAPTER2 Novice 7
LayingtheFoundation 9
TheAuction 9
Organizing theDay 10
ChallengingtheRules 15
TheRoleoftheMarketplace 16
GoingwiththeCrowd 17
IntroductiontoDayTimeframeStructure 19
NormalDay 19
Dynamics 19
StructuralCharacteristics 21
NormalVariationofaNormalDay 21
Dynamics 21
StructuralCharacteristics 23
TrendDay 23
Dynamics 23
StructuralCharacteristics 23
Double-DistributionTrendDay 25
Dynamics 25
StructuralCharacteristics 25
3GFTOC 05/16/2013 13:39:52 Page6
NontrendDay 27
Dynamics 27
StructuralCharacteristics 27
NeutralDay 27
Dynamics 27
StructuralCharacteristics 28
DayTypeSummary 31
CHAPTER3 AdvancedBeginner 33
BuildingtheFramework 34
TheBigPicture:MarketStructure,TradingLogic,
andTime 34
ASynthesis:Structure,Time,andLogic 35
EaseofLearning 36
AmountofInformation 36
Recognition Speed 37
TradeLocation 37
fi
Con denceLevel 37
Summary 38
Evaluating OtherTimeframeControl 38
vi
OtherTimeframeControlontheExtremes 40
S Tails(orExtremes) 40
T
N
E RangeExtension 40
T
N OtherTimeframeControlintheBody
O
C fi
ofthePro le 40
TPO 41
InitiativeversusResponsiveActivity 45
TrendingversusBracketedMarkets 49
—
KeyElements ABriefDiscussion 51
TrendingMarkets 54
BracketedMarkets 54
TheTwoBigQuestions 56
CHAPTER4 Competent 59
DoingtheTrade 59
SectionI 60
DayTimeframeTrading 60
DayTimeframeDirectionalConviction 61
OpeningCall 61
TheOpen 62
3GFTOC 05/16/2013 13:39:52 Page7
TheOpenasaGaugeofMarketConviction 63
Open-Drive 63
Open-Test-Drive 65
Open-Rejection-Reverse 68
Open-Auction 69
Open-AuctioninRange 70
Open-AuctionoutofRange 71
Summary 73
’
Opening sRelationshiptoPrevious
—
Day EstimatingDailyRangePotential 74
—
OpenwithinValue Acceptance 75
Rejection(Breakout) 79
OpenoutsideofValuebutwithin
—
Range Acceptance 80
Rejection(Breakout) 83
—
OpenoutsideofRange Acceptance 84
Rejection 85
Summary 85
April13,1989 86
CrudeOil 87
vii
S&P500 87
Gold 90 C
O
JapaneseYen 92 N
T
Soybeans 92 EN
T
TreasuryBonds 92 S
Summary 95
DayTimeframeAuctionRotations 96
Two-TimeframeMarkets 97
One-Timeframe Markets 97
UsingAuctionRotations toEvaluateOther
TimeframeControl 97
Structure 99
Half-HourAuctions 100
Extremes 100
RangeExtension 101
Time 101
IdentifyingTimeframeTransition 102
DecemberSwissFranc,October12,1987 103
YtoE:One-TimeframeBuying 104
E:Time 104
3GFTOC 05/16/2013 13:39:52 Page8
YtoF:AuctionTest 104
fi
G:TransitionCon rmation 104
EtoH:One-TimeframeSelling 105
H:AuctionTest 105
fi
I:TransitionCon rmation 105
H-J:One-TimeframeBuying 105
Summary 105
AuctionFailures 105
Excess 110
SignsofExcess 111
TheRotationFactor 112
MonitoringthePOCorFairestPrice 115
9:30a.m.Figure4.30 116
10:00a.m.Figure4.31 118
10:30a.m.Figure4.32 119
NoonFigure4.33 119
2:00p.m.Figure4.34 119
TheClose 120
DayTimeframeVisualizationandPattern
Recognition 122
viii
Short-CoveringRallies 123
S Long-LiquidationBreaks 127
T
N SummaryofShortCovering andLong
E
T
N Liquidation 128
O
C Ledges 129
Summary 130
High-andLow-VolumeAreas 131
High-VolumeAreas 131
IdentifyingHigh-VolumeLevels 132
High-VolumeExamples 134
Low-Volume Areas 138
Low-Volume Examples 140
Summary 144
—
Summary DayTimeframeTrading 145
SectionII 145
Long-TermTrading 145
Long-Term Directional Conviction 146
AttemptedDirection:WhichWayIstheMarket
TryingtoGo? 146
AuctionRotations 147