Trading as a Business: The Methods and Rules I've Used To Beat the Markets for 40 Years

165 Pages·2015·8.77 MB·English

by  Dick Diamond

Table of Contents
Title Page
Copyright
Foreword
Preface
Acknowledgments
Chapter 1: My Life as a Trader
Trading as a Business
Chapter 2: Emotional Discipline
Why Traders Fail
Core Position and 80/20 Trades
The Emotions of Trading
The Importance of Commitment
Chapter 3: Principles of Successful Trading
Trade within Your Capital
Quiet Confidence
Sell Too Soon, Not Too Late
Take Personal Responsibility for Your Trading
Wait for 80/20 Trades
Play Great Defense
Pull the Trigger
Opinions Are for Pundits, Not Traders
Strictly Follow Technical Data
Market Entry Tactics: Use Limit Orders, Buy/Sell Zones, and Position
Scaling
Use Defensive Stops
Track Your Results
Managing Your Trading Account
Take Advantage of Market Conditions
Review the Rules Every Week
Chapter 4: Technical Analysis and Trading Concepts
Moving Averages
Crossovers
Divergences
Williams %R
Stochastic Oscillator
Stochastic Momentum
Bressert
RMO
Moving Ribbons
Chapter 5: Trading with the Moving Average Template
Chapter 6: Trading with the Moving Ribbons Template
Chapter 7: Trading with the Bressert Template
Chapter 8: Trading with the RMO Template
Chapter 9: A Day of Trading
Appendix About MetaStock Pro Templates
Creating the Dick Diamond Templates
Template 1: Walter Bressert
Template 2: Moving Ribbons
Template 3: RMO
Template 4: Moving Averages
Applying an Existing Template
Making Changes to a Template
Saving a Template
The Default Template
Creating the Diamond Work Space
About the Author
Index
Make Market Veteran Dick Diamond Your Mentor!
End User License Agreement
List of Illustrations
Figure 4.1
Figure 4.2
Figure 4.3
Figure 4.4
Figure 4.5
Figure 4.6
Figure 4.7
Figure 4.8
Figure 4.9
Figure 4.10
Figure 4.11
Figure 5.1
Figure 5.2
Figure 5.3
Figure 5.4
Figure 5.5
Figure 5.6
Figure 5.7
Figure 5.8
Figure 5.9
Figure 5.10
Figure 5.11
Figure 5.12
Figure 5.13
Figure 6.1
Figure 6.2
Figure 6.3
Figure 6.4
Figure 6.5
Figure 6.6
Figure 6.7
Figure 6.8
Figure 6.9
Figure 6.10
Figure 6.11
Figure 7.1
Figure 7.2
Figure 7.3
Figure 7.4
Figure 7.5
Figure 7.6
Figure 7.7
Figure 7.8
Figure 7.9
Figure 7.10
Figure 7.11
Figure 7.12
Figure 7.13
Figure 7.14
Figure 8.1
Figure 8.2
Figure 8.3
Figure 8.4
Figure 8.5
Figure 8.6
Figure 8.7
Figure 8.8
Figure 8.9
Figure 8.10
Figure 8.11
Figure 8.12
Figure 8.13
Figure 9.1
Figure 9.3
Figure 9.4
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Trading As A Business
The Methods and Rules I've Used to Beat the
Markets for 40 Years
Dick Diamond
Cover image: © iStock.com/ricardoinfante Cover design: Wiley
Copyright © 2015 by Dick Diamond. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
Charts in the book were created using the MetaStock trading platform, and have been used with permission.
© MetaStock 2014.
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Library of Congress Cataloging-in-Publication Data:
Diamond, Dick (Stockbroker)
Trading as a business : the methods and rules I've used to beat the markets for 40 years / Dick Diamond.
pages cm.—(Wiley trading series) Includes index.
ISBN: 978-1-118-47298-9 (paperback) 1. Investment analysis. 2. Speculation. 3. Investments. 4. Portfolio
management. 5. Stockbrokers. I. Title.
HG4529.D497 2015
332.64--dc23
Foreword
In 1979, I was sitting between two traders at a specialty brokerage firm. The one
on my left was on the phone all day, working his contacts to get preopening
shares in initial public offerings, which he would jettison at a profit shortly after
the deals. He solicited opinions from friends to figure out hot stocks to ride. He
was always long, never short. The guy on my right was a plunger who would
identify markets that were extended and then bet huge wads on a reversal. I was
there when a reversal didn't come, and he was gone.
Sitting across the room was a loner who quietly worked his system. The friend to
my left suggested I meet him, so I did. I asked him what he was doing. He said
he traded options, and I could sit and watch if I wanted. His name was Dick
Diamond.
Most of the traders in the room were chatty, but Dick was quiet. Mostly, he just
watched the screen and updated his indicators. Then every now and then he
would sit up straight and become hyperalert. Then—bam—he would call in a
trade. (There were no electronic trading platforms back then.) He would stay on
edge for a period of time, maybe an hour, and then call to close the trade. Then
he relaxed again.
When I pressed him about what he was doing, he would talk about waiting for
the right “setups,” acting swiftly and getting out while momentum was still in his
favor, an absolute must when trading options. He seemed more disciplined than
other traders. He wasn't trying to win a war; he was in a bunker, taking the
occasional shot when his odds of a hit were 80/20. He never changed his tactics,
never asked other people their opinions, and never bet big. Incredibly, unlike
almost everyone else, he was also making a very good living, every single
month.
I liked Dick right away because he was a pure technician. He never acted on
news; he didn't care about valuation; he didn't try to solicit inside information; he
didn't factor in what the economy was doing, or the president, or the Fed. He just
waited for the market to signal the start of a volatile move; then he grabbed a
piece of it, time and again. We struck up a friendship that's still ongoing.
In the mid-1980s, Dick and I talked about teaching his method. Subscribers were
always asking me about where they could learn trading, and he was ready to