AVALANCHE DIRECT LIMITED Head Office: The Media Centre Northumberland Street Huddersfield, HD1 1RL England Tel: +44 (0)1484 483119 Fax: +44 (0) 1484 483120 Web: www.the-way-to-trade.com First published in Great Britain 1999 Foreword © Alexander Elder 1999 © Financial Times Professional Limited 1999 The right of John Piper to be identified as author of this Work has been asserted by him in accordance with the Copyright, Designs, and Patents Act 1988 All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without either the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1P 0LP This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers The work entitled The Way to Trade: Discover Your Successful Trading Personality, has been made available to Avalanche Direct Limited by Pearson Limited in electronic form subject to the condition that the work nor any part of the work may be copied, printed, downloaded, saved or transferred to any other computer file, or distributed on a network without Avalanche Direct Limited’s prior permission Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Please help to fight digital theft This book is a legal copy if ordered through: www.the-way-to-trade.com If you did not order it from this web-site, please send an e-mail to: illegal@the-way-to-trade.com Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ THE WAY TO TRADE Discover your successful trading personality JOHN PIPER Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ THE WAY TO TRADE Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ About the Author John Piper has been involved with markets since his early twenties In the late 1980s he started to trade markets full time and did so right through the Crash of 1987 – an experience that stands him in good stead for markets today For over a decade he has been the editor of The Technical Trader, the leading newsletter in the UK for those who trade any of the popular markets worldwide His articles bring a fine edge of analysis to markets and how they work He trades full time, making consistent profits, and now manages money for selected clients at Berkeley Futures Limited, a firm regulated by the SFA He lives in Dorking, Surrey and in Massa, Italy Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ This book is dedicated to all those who are struggling with markets, whoever and wherever they may be Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ CONTENTS Why you need this book xiii Foreword by Dr Alexander Elder xvii Introduction xix Acknowledgements xxi Section THE UNDERLYING PHILOSOPHY An introduction to the Trading Pyramid The Trading Pyramid Summary The evolution of a trader and the 55 steps 11 The three stages The 55 steps (a personal journey to success) Summary 12 15 19 The human brain 21 Structure of the brain Trading chaos Summary 22 26 26 You – the first level of the pyramid and why The trading experience Summary 29 30 33 Commitment 35 The nature of the market Market Profile Summary 35 37 39 Discipline 41 Discipline and the Trading Pyramid 42 vii Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Contents System parameters Summary 43 45 Money Management 47 Using Money Management Position size Monitoring position Summary 48 49 50 51 Risk control 53 Risk inherent in the vehicle 54 Risk inherent in the market Other forms of risk Summary 55 55 57 The three simple rules (or trading secrets) The trading secrets Following the rules Summary 59 60 61 66 10 System parameters – the thinking behind system design Buying options Writing options Futures Designing a system Summary 67 68 68 68 69 75 11 System parameters – simple trading rules and the human brain Systems The human brain Summary 77 78 79 81 12 Developing your methodology Time frame Trading type Analysis type Money Management (MM) Risk control (RC) Entry methodology (EM) 83 84 84 85 85 87 87 viii Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Contents Exit methodology (ExM) Interview with an institutional trader Summary 13 Operation 87 88 93 95 The set-up Problems with operation Summary 96 97 99 14 The whole structure = profit/loss Summary 101 103 15 Stops and acceptance 105 Are stops necessary? Stop approaches Acceptance Summary 105 106 107 110 16 A trading coach? 111 The benefits of working with a coach Adrienne Toghraie First steps Summary 111 113 114 115 Section MARKET TECHNIQUES AND METHODOLOGIES 17 Some points of principle 119 More general points Low risk trading opportunities Trading tips Summary 120 122 123 125 18 Market Profile and Minus Development 127 Market Profile Minus Development Value Other concepts TTT article Trading tips with Market Profile 127 130 130 132 132 136 Summary 137 ix Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Contents 19 Futures and options 139 Stocks Futures Options Summary 139 140 141 149 20 Spiky action 151 Trading Trend Types of spike Summary 151 152 153 21 An options strategy 155 The options strategy – principle The options strategy – operation Options – the hedging strategy Summary 22 A number of futures strategies Gas opens – code word: goose Failed breakthroughs – code word: goat Failed re-tests – code word: snake Square congestion – code word: box Key levels – code word: piano Eliott fives – code word: illusion Aborted patterns – code word: platypus Trend following – code word: horse Corrective action Other systemized approaches Summary 23 Systems 155 157 158 163 165 166 169 172 172 173 174 175 176 177 178 179 181 Stops One secret to success A few additional comments My own trading My trading rules Risk warning/disclaimer 182 183 183 183 184 185 x Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Appendix IS ELLIOTT ADDICTIVE? This is a story about my own experiences with the Elliott Wave Theory I think it illustrates a number of important points about the way in which many people (including me) use different techniques and the dangers that can befall them My story may not be typical in some ways, but in others I am sure it is I cannot recall precisely how I got hold of it, but I started to take Bob Beckman’s Investors Bulletin In 1985/86, I think, I got hold of his book Super Timing which deals with the Elliott Wave Theory Now this is a good book and the rest of this appendix is not to suggest otherwise I started to study this technique and it had immediate appeal This is probably a personal thing but the patterns seemed interesting and had the obvious attraction of apparently identifying tops and bottoms of importance Perhaps I ought to say that at this point I was very much a novice I was also reading Investor’s Bulletin and was also convinced that the market was going to fall back – I was definitely a bear at that time – and I had no idea about such things (views) being dangerous – that thought never even occurred to me So I tried to use Elliott and it worked fairly well, such that I continued to identify patterns I bought (I said I was a novice) a few puts and most expired valueless but then one did well I got out early (of course) but still covered my previous losses – Yes! I was hooked Then I had a conversation with a friend who told me how you could write options Later, whilst skiing in Avoriaz, I considered this technique and I couldn’t see how it could fail You sell some calls and if it goes up you sell some puts, if it goes down again you sell more calls The wonders of margin and the perils of doubling position size were unknown to me at that time This continued though 1986 and into 1987 I won some, I lost some My business at that time was going well and my position size kept growing – it 269 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Appendix · Is Elliott addictive? frightens me now to think back and realise the extent to which I was overtrading – but back then I was in blissful ignorance Then came the 1987 Crash Was this my undoing? Perhaps, but not in the way you might think Remember I was a bear, and I was a bear hooked on Elliott I have previously shown a chart of the 1987 Crash but it is the perfect illustration to this appendix and so Figure V.1 shows the 1987 Crash once again Look at the perfection of that Elliott pattern, the five wave decline off the August peak The obvious corrective move into the October peak and then the resolution of this pattern – perfect! Not only that, but the move was heralded by hurricanes throughout the South of England Of course my trading through this period was not perfect I had 60 long puts the week before the Crash, plus a number of short calls I managed to close 40 of the puts the week before the Crash (brilliant eh?) and the remainder on the morning of the Crash thus missing out on the best part of the move This despite that fact that I was predicting a move in excess of 300 points – following that perfect pattern But I was also using a five hour RSI and when it got oversold out I got – aren’t these indicators wonderful! Fig V.I Why Elliott is addictive 270 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Appendix · Is Elliott addictive? The week before the Crash I had a relatively long conversation with a “Gann” expert and we compared notes We were both expecting FTSE to fall back but when I mentioned 300 points, he said something like “Oh No, more like 100!” I often wonder how he felt when he got the 300 points in one day, and another 300 the day after However, consider the impact of this forecast on a novice bear – and that is what this appendix is all about The market reinforced my attraction to Elliott in the most powerful way possible and this early on in the sequence when I was the most impressionable The market showed me that it is possible to forecast the future (it isn’t), it showed me how accurate Elliott is (it has never given a call as good as that one since), and it has shown how good a view can be (a view is often fatal) Now let’s take a step back and consider other alternatives which can befall us as we start down the road towards trading success – not that many of us actually reach that goal – “many are called but few are chosen! “(Matthew 20:16) There are a number of possible outcomes However these can be classified into three main groupings The first grouping is where the initial analysis technique (in my case Elliott) is found to be “defective.” In this case the trader will probably switch to another technique The second grouping is what we might term as “modestly successful.” Here the trader will still lose money because of shortcomings but he may still get hooked on this technique The third grouping we might term as “very successful” and I think this is what happened to me This can be the worst of all because then the technique can become truly addictive In all cases traders need to become familiar with a large number of techniques if only so that they can dismiss them But they also need to become expert in the techniques which give them what they want What they don’t need is to become hooked on something and in this respect failure in the early stages is probably more useful than anything else Especially when you consider that early success, before an understanding of Money Management is obtained, can easily lead to trading greatly increased sums with inevitable doomsday consequences However another point in this sequence has recently been graphically illustrated to me This concerns “Market Profile.” I was introduced to “Market Profile” by a stockbroker about six 271 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Appendix · Is Elliott addictive? years or so ago At the time I read the book he recommended and it made absolutely no impact on me It seemed to me to be just a different way of displaying the same information What I completely missed was the handle on “Value” which this technique provides and how useful minus development can be Now this is a fairly important point I not consider myself much better than average in assimilating information but trading is my profession and if I read about a technique I would expect to glean at least the essential features – but in this case I did not This is a little worrying Does it mean that every book I read I approach with my subjective views firmly in place and am thus unable to see the value which might lie therein? This is clearly so, and if I this it is likely that we all the same in greater or lesser degree If this is true, and I think it is undoubtedly so, then we will only take in what we are ready for – although another way of putting this is what we want to take in This means that we are even more responsible for our actions than we might have thought because if we control our input, as we do, we also control the way we are and thus how we react to all stimuli which ultimately means our actions and what happens to us This is particularly true of trading So it might be that you have already discovered the technique which would suit you best but, for a variety of reasons, you may have dismissed it I have certainly found “Market Profile” extremely useful now that I can see it operating in real time Of course when you can watch a “master” using a technique to make money in the markets it does tend to make a lot more sense than just reading a book about the subject So the position is more complicated than merely getting to know a technique, you must also beware of failing to get to know a technique To an extent getting in tune with “your” techniques, i.e the ones which will ultimately bring you to success, is a matter of asking the right questions When we start out trading we don’t know enough to frame these questions If asked what we consider to be the most important aspects leading to trading success we might ramble on about key indicators, or following a successful trader, or some pet theory But we probably wouldn’t mention psychology, or low risk trading ideas, or even stops To a large extent the early years are spent learning the basics as happens in any apprenticeship It is purely arrogance and ignorance which leads 272 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Appendix · Is Elliott addictive? successful and intelligent people to feel that they will be able to trade markets with success right from the off – and I am not being “holier than thou” here because I was just the same But this is clearly foolish and the markets extract their pound of flesh in return So it is important to review your progress to date Review the knowledge you have acquired to ensure, as far as possible, that you have got the most out of what you know and that you have not become hooked on anything Review in particular what you want out of your techniques and whether you are getting it Review whether the trades you take are “low risk opportunities” and if not consider how to change your techniques so that they become such – because that is essential! 273 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ TRADING RESOURCES Futures - http://www.the-way-to-trade.com/futures.php E-mini - http://www.the-way-to-trade.com/e-mini.php Discipline - http://www.the-way-to-trade.com/discipline.php Online - http://www.the-way-to-trade.com/online.php Stocks - http://www.the-way-to-trade.com/stocks.php Commodities - http://www.the-way-to-trade.com/commodities.php Beginners - http://www.the-way-to-trade.com/beginners.php Options - http://www.the-way-to-trade.com/options.php Swing Trading - http://www.the-way-to-trade.com/swing-trading.php Day Trading - http://www.the-way-to-trade.com/day-trading.php Lucky Dip: These are trading resources that we were unaware of at the time of publication so we are unable to name them now, but if you check out each link you'll find they are connected to something you'll find useful in your trading In fact we will frequently change their destination to the hottest new resources, so please check them regularly Lucky Dip - http://www.the-way-to-trade.com/lucky-dip1.php Lucky Dip - http://www.the-way-to-trade.com/lucky-dip2.php Lucky Dip - http://www.the-way-to-trade.com/lucky-dip3.php Lucky Dip - http://www.the-way-to-trade.com/lucky-dip4.php Lucky Dip - http://www.the-way-to-trade.com/lucky-dip5.php Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ INDEX 10-step approach expertise fear methodologies practice running profits survival theory where am I now? where I want to go? 55 steps Aborted patterns Acceptance Algorithms Analysis options type Arbitrage Asia 199–205 204 203 201–2 203 204 200–1 202 199 200 15–18 175–6, 191 107, 131, 176 35–6 8, 80 157–8 85 84 231 Bell curve Box models Plummer, Tony structure and systems and trading rules triune Williams, Bill 37, 79, 127, 128 172–3 21–2 22–4, 59, 79, 241–54 22–5 78–80 77–81 21, 22–5, 79, 242–3 21, 22–5 Chaos Character avoidance compulsion and markets nine categories structures traits vulnerable spots Chart tutorial Clinton scandal Coaches see Trading coaches Commitment Consultancy service Contact details Corrective action Crowds in financial markets 26, 59 247–9 246–52 243–7 244–7 243–7 246–7 209–18 231 4–5, 35–9 204, 240 240 177–8 252–3 275 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index Data display Derivatives Directional approach options Discipline and analysis loop and Money Management system and Risk Control Disclaimer Douglas, Mark 71–2 84 84, 119–20 155 5–6, 41–5, 184 47 21 43 43 185–6 21, 111 Economic black holes Elliott Wave Theory addiction to Elliott Fives Emotion Entry methodology strategy Exit methodology strategy 233–5 36, 85, 136, 183–4, 195, 212–3, 215–6 269–73 174–5, 190–1 3–4, 12–13, 241–2 Failed breakthroughs Failed re-tests Fear orientation Financial pressure Futures 10-step approach and FTSE strategies trading signals and value 169–71, 190 172, 190, 211 203 11–12, 13–14 68–9, 140–1, 191–3 199–205 140–1 165–79 167–8 165, 176 87 70 48 87–8 70, 131 Gann Gann Swing Charts Gap opens and Minus Development Germany Goat Goose Greed orientation Greenspan 85, 136, 195, 240 158 166–9 168 234 169–71 166–9 11, 12–13 231 Hedging moving hedges options Rule of 25 Horse 84, 185 160–1 155, 158–62, 185 159–62 176–7 Illusion 174–5, 195–6 276 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index Indicators Initial balance Initiative action IOP Iraq war Irish peace process 195–6 132 132 158 235 234 Japan 234 Key levels Kuala Lumpar 173–4 231 Long Longer time frame participants Losses cutting Low risk opportunities LTCM 119 173–4 62–4 13, 60 122–3, 131, 209–18 235–6 MACD 158 MACD 85, 195 Maclean, Paul 242 Market analysis see Analysis Market Eye 50 Market Profile 36, 37–8, 71, 78, 108, 122, 127–9, 133–5, 176 balance 127 imbalance 127 and longer time frame participants 173–4 options analysis 158 trading tips 136 value 130–1, 134–5, 165, 176 Market techniques 195–6 Markets 231–6 and character 246–52 crowds in 242–3 and motivation 3–4 effect of news 55–7 emotion in 13 essentials 29–30 human psychology 36, 241–54 nature of 35–6 observation of 69 reasons for trading 3–4 requirements for success in 88–90 reviewing 212 shocks 55–6 signals 156 Methodology 83–93 10-step approach 201–2 Minus Development 36, 37–8, 72, 79, 108, 122, 128, 130, 131, 151, 152, 168 Money Management 6–7, 47–51, 70, 85–7, 215 and analysis 47 and discipline 43 277 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index position size services Motivation Moving Averages 49–50 240 3–4, 13 158 Neuro-linguistic-programming News effect on markets Normal distribution see Bell curve 98, 253 122, 196 55–7 Operation problems with set-up Options 10-step approach analysis buying FTSE hedging in-the-money out-of-the-money pricing by market strategies trading campaign writing Overnighter 95–9 97–9 96–7 67 199–205 157–8 68, 143–8 146 155, 158–62, 185 142 142 141–3, 157 145–8, 155–63 221–9 68, 121, 122, 143–8, 155, 157–8 181, 191 Paper trading Patterns aborting PDS Piano Platypus Plummer, Tony model of brain structure Troubled Trader Position balanced monitoring size Preconceived ideas Pressure Profits letting run or losses Pruden, Henry O Psychologists Psychology and markets psychological areas psychological pressure psychological restructuring questionnaire and trading coaches 49–50 122 181, 191 173–4 175–6 21, 59, 79 22–4 241–54 121 50–1 49–50, 70, 120 183 14, 64–5, 204 9, 101–3 253 97, 98 36, 241–54 36 243–51 253 257–67 113–14 278 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index Questionnaire 257–67 Ranges range extension trading Real time price services Rejection Responsive action Risk and option buying orientation warning Risk Control and discipline risks inherent in the market risks inherent in the vehicle unexpected forms of risk Robbins, Anthony Ross, Joe RSI divergence Rule of Russia 143, 146 12, 14–15, 55 185–6 6–7, 53–7, 87 43 55 54–5 55–7 192 8, 183 195 25 159–62 231, 234, 235 Schwager, Jack Serbia Set-up Short Signal Snake Spikes and acceptance chart tutorial and stops type Spread trading Square congestion Steidlmayer, Peter Stochastics Stocks Stops and acceptance approaches avoiding hedging and Minus Development mental necessity of policies and random-entry systems and rejection and spikes and trend following types 241 235 96–7 119 50 172 72, 151–3 107, 131 209–12 151 152–3 84 172–3 37, 71, 78, 79, 127 195 139–40 13, 70, 131, 182, 185 107, 131 106–7 105–6 185 79 106 105–6 70 79 107–10 151 176 106 132 69 50 107–10 132 279 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index using Straddles Strategies and character and discipline entry exit futures options Sub-conscious Systems Aborted patterns and character design Elliott Five essential elements failed break failed re-test and human brain long-term Overnighter Parameters PDS random-entry requirements 70–1 short-term Trend-Hunter TTT weekly system V when to use XXX 61–2 84, 120, 155–6 120-2 247–52 120 70, 87 70, 87 165–79 145–8, 155–63 242 13, 181–7, 197, 240 191 253 69–74 190–1 189–90 169–71, 190 172, 190, 211 78 72–3 181, 191 6, 8, 43–4, 67–75, 77–81 181, 191 78–9 72–3 181, 191 74 190 189–93 190 Technical analysis software Tenfore Tharp, Van home study course Three simple rules see Trading secrets Three stages fear orientated greed orientated risk orientated Time frames and trends Time Price Opportunities Toghraie, Adrienne Trade selectivity Trader evolution of fear orientated greed orientated interview with institutional problems with operation risk orientated 240 50 111, 253 114–15 11–12, 13–14 11, 12–13 12, 14–15, 55 84 69–70 71–2, 128–9, 130, 131, 134–5 111, 113–4 14–15, 60–1, 65 11–19 11–12, 13–14 11, 12–13 88–93, 133–5 97–9 12, 14–15, 55 280 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index Trading chaos Trading coaches benefits Douglas, Mark home study courses Tharp, Van 111, Toghraie, Adrienne Trading Pyramid commitment discipline introduction methodology Money Management operation overview of levels personalizing profits or losses Risk Control System Parameters three simple rules you Trading secrets cutting your losses and human brain letting profits run trade selectivity trading with the trend using Trading and psychology questionnaire blocks essentials experience low risk options campaign paper personality ranges reasons for rules signals tips trends types Trend–Hunter Trends following indicators and spikes time frames trading trending signals Triune brain 26, 59 97, 111–15 111–13 111 114–15 253 111 101–3 4–5, 35–9 5–6, 41–5, 184 3–9 83–93 6–7, 47–51 95–9 4–9 213–14 6–7, 53–7 6, 8, 43–4, 67–75, 77–81 59–66 4, 29–32 7, 31, 69–66 13, 60, 62–4 77–81 14, 60, 64–5, 204 14–15, 60–1, 65 61, 65 61–5 257–67 29–30 30–2 122–3, 131, 209–18 221–9 49–50 69 3–4 184–5 167–8 123–5 69 84 181, 191 61, 65, 120, 121 176–7 167 151 69–70 69–70, 151–2 70 21, 22–5, 79, 242–3 281 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index TT1 TT2 TTT article consultancy contact details hotline Money Management services seminars systems technical analysis software TTT weekly system 240 240 47, 181, 239 132–5 240 240 239–40 240 240 240 240 74 Useful lies 31 V Value van Goetzen, Richard 190 130–1, 134–5, 165, 176 135 Williams, Bill brain model chaos theory 21, 22 22–5 22 XXX You 190 4, 29-32 Zero sum 196–7 282 Trắc nghiệm kiến thức Forex : 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