The ART of Trading: Combining the Science of Technical Analysis with the Art of Reality-Based Trading

324 Pages·2008·6.03 MB·English

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The ART of
Trading
Combining the Science of
Technical Analysis with the
®
Art of Reality-Based Trading
BENNETT A. McDOWELL
John Wiley & Sons, Inc.
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⃝R
The ART of
Trading
Combining the Science of
Technical Analysis with the
®
Art of Reality-Based Trading
BENNETT A. McDOWELL
John Wiley & Sons, Inc.
i
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Disclaimer: This eBook does not include ancillary media that was packaged with the
printed version of the book.
Copyright ⃝C 2008 by Bennett A. McDowell. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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or extended by sales representatives or written sales materials. The advice and strategies con-
tained herein may not be suitable for your situation. You should consult with a professional
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Library of Congress Cataloging-in-Publication Data:
McDowell, Bennett, 1957–
The art of trading: combining the science of technical analysis with the art of reality based
trading / Bennett McDowell.
p. cm. – (Wiley trading series)
Includes index.
ISBN 978-0-470-18772-2 (cloth/dvd)
1. Investment analysis. 2. Speculation. 3. Stocks.
I. Title.
HG4529.M385 2008
′
332.63 2042–dc22
2007049357
Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
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For my children, Heather Frances and Brady Bennett,
with love and affection.
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Contents
Foreword ix
Preface xi
Acknowledgments xiii
Diclaimer xv
Introduction xvii
PART I Reality 1
CHAPTER 1 It’s All About Reality 3
CHAPTER 2 The Reality of Price and Volume 7
CHAPTER 3 Managing Risk: Always Set a Stop-Loss Exit 13
CHAPTER 4 If It Sounds Too Good to Be True . . . 19
CHAPTER 5 Personal Methods to Increase Trading
Success 23
CHAPTER 6 Identify Your Personal ART Profile 27
PART II Art 39
CHAPTER 7 Design Your Business Plan 41
CHAPTER 8 Selecting a Financial Market 47
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vi CONTENTS
CHAPTER 9 Selecting a Time Frame 55
CHAPTER 10 Selecting an ART Platform, Broker, and
Data Feed 59
CHAPTER 11 Psychology and the Trader’s Mind-Set 63
CHAPTER 12 Artistic Simplicity 67
CHAPTER 13 The Art of Paper-Trading 71
PART III Science and Math 75
CHAPTER 14 Calculating Proper Trade Size 77
CHAPTER 15 Other Formulas and Recipes 83
CHAPTER 16 The Human Brain 87
PART IV ART System Basics 91
CHAPTER 17 ART Is the Total Solution 93
CHAPTER 18 Pyramid Trading Points (P and MP) 97
CHAPTER 19 Market Truths: Price Bars and Volume 115
CHAPTER 20 ART Reversal Bar Signals (1B and 2B) 121
CHAPTER 21 Trend-Trading Rules 135
CHAPTER 22 Countertrend-Trading Rules 141
CHAPTER 23 Scalping Rules 147
PART V Advanced Techniques 155
CHAPTER 24 When to Use Advanced Techniques 157
CHAPTER 25 Scaling Out and Scaling In 161
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Contents vii
CHAPTER 26 How to Trade Bracketed Markets 167
CHAPTER 27 Software Optimization and Average True
Range (ATR) 179
CHAPTER 28 Stop and Reverse (SAR) 183
CHAPTER 29 Higher-Time-Frame Filter 187
CHAPTER 30 Other Filter Techniques 205
CHAPTER 31 Elliott Wave—Ungrounded Assessment 215
CHAPTER 32 Other Ungrounded Assessments 223
Epilogue 231
About the DVD 233
APPENDIX A ART Software Quick-Start 237
APPENDIX B ART Tips 241
APPENDIX C ART Software Technical Support 243
APPENDIX D Resources 247
Glossary 263
About the Author 285
Index 287