Ordinary People, Extraordinary Profits: How to Make a Living as an Independent Stock, Options, and Futures Trader

287 Pages·2005·4.906 MB·English

by  David S. Nassar

Ordinary People,
Extraordinary
Profits
How to Make a Living as an
Independent Stock, Options,
and Futures Trader
DAVID S. NASSAR
John Wiley & Sons, Inc.

Additional Praise for
Ordinary People, Extraordinary Profits
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Ordinary People,
Extraordinary
Profits
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Ordinary People,
Extraordinary
Profits
How to Make a Living as an
Independent Stock, Options,
and Futures Trader
DAVID S. NASSAR
John Wiley & Sons, Inc.
Copyright © 2006 by David S. Nassar. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Nassar, David S.
Ordinary people, extraordinary profits : how to make a living as an independent stock, options, and
futures trader / David Nassar.
p. cm.—(Wiley finance series)
Includes bibliographical references and index.
ISBN-13: 978-0-471-71236-7 (cloth/dvd)
ISBN-10: 0-471-71236-1 (cloth/dvd)
ISBN-13: 978-0-471-72399-8 (cloth)
ISBN-10: 0-471-72399-1 (cloth)
1. Investment analysis. 2. Portfolio management. 3. Risk management. 4. Investments. I.
Title. II. Series.
HG4529.N372 2005
332.6—dc22
2005010210
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
Contents
Preface xi
Acknowledgments xiii
INTRODUCTION 1
Trade the Professional Way 2
Ride the Statistical Edge . . . Like Betting Seven in Craps 3
Master the Inner Game 4
CHAPTER 1 Foundational Analysis 5
Charts 7
Two Types of Analysis 12
What Exactly Is Technical Analysis? 14
The Four-Stage Theory 19
Stage 1: Accumulation 22
Stage 2: Markup 25
Stage 3: Distribution 29
Stage 4: Decline 29
Support and Resistance 34
Definitions of Support and Resistance 34
Once Broken, Support Tends to Act as Resistance 36
Once Broken, Resistance Tends to Act as Support 37
The More Often Support or Resistance Is Tested, the More Likely
That Level Is to Fail to Hold Back Price Movement 38
The Longer the Trend Has Been Neutral (Consolidating), the More
Significant the Eventual Breakout Becomes 41
Trends 43
Trading Volume 51
Moving Averages 58
CHAPTER 2 Risk Management 69
Discipline—The Key to Trading Success 70
Discipline Perspectives 70
v
vi CONTENTS
Avoid Trading with Scared Money 71
Terra Nova Trade Evaluator 71
Your Goal: To Trade without Emotion 71
Plan Your Trade and Trade Your Plan with
Risk-Reward Ratios 73
Setting Stops—Overview 75
Overall Protective Stop Guidelines 75
Protective Stops and Trading Time Frames 76
Percentage of Price Stops 79
Time Stops 80
Avoid This Mistake 80
RealTick® Can Help 80
Risk Management and Trading with the News 81
Risk Management and Share Size 83
Summary 84
CHAPTER 3 Basic Chart Formations 85
Time Frames 88
Weekly Charts 89
Daily Charts 90
Intraday Charts 90
Sixty-Minute Charts 91
Ten-Minute Charts 91
Interpreting Chart Patterns 92
Reversal Patterns 92
Head and Shoulders Chart Formation 92
Long Base and Saucer Formations 94
Saucer Bottoms and Tops 96
Cup and Handle Formation 97
Bull and Bear Traps 97
Continuation Patterns 100
Rectangle (Box) 100
Flags and Pennants 102
Triangles 105
Summary 111
CHAPTER 4 Going Short 113
Finding Shorting Opportunities 115
Price/Earnings Ratio Imbalance 115
Gap Openings 116
The Loaded Spring 118
Day-Trading “Tape Resistance” 122
The Short Squeeze (Be Cautious) 123