Trade my way share trading tactics that really work for novices to experts ( PDFDrive )

prelims.indd ii 6/20/11 7:28 AM TRADE * MYWAY MY WAY prelims.indd i 6/20/11 7:28 AM prelims.indd ii 6/20/11 7:28 AM TRADE * REVISE EDITIO D N MYWAY MY WAY ALAN HULL prelims.indd iii 6/20/11 7:28 AM First published in 2011 by Wrightbooks an imprint of John Wiley & Sons Australia, Ltd 42 McDougall St, Milton Qld 4064 Office also in Melbourne Typeset in Berkeley LT 11/14 © Alan Hull 2011 The moral rights of the author have been asserted National Library of Australia Cataloguing-in-Publication data: Author: Hull, Alan, 1962- Title: Trade my way: share trading tactics that really work, for novices to experts / Alan Hull ISBN: 9780730375807 (pbk.) Notes: Includes index Subjects: Stocks Speculation Stock exchanges Investments Dewey Number: 332.63228 All rights reserved Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission All inquiries should be made to the publisher at the address above Cover design by Peter Reardon, Pipeline Design Back cover image: used courtesy of Sky News Microsoft Excel tables and screenshots used with permission from Microsoft Printed in China by Printplus Limited 10 Disclaimer The material in this publication is of the nature of general comment only, and neither purports nor intends to be advice Readers should not act on the basis of any matter in this publication without considering (and if appropriate, taking) professional advice with due regard to their own particular circumstances The author and publisher expressly disclaim all and any liability to any person, whether a purchaser of this publication or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance, whether whole or partial, upon the whole or any part of the contents of this publication prelims.indd iv 6/20/11 7:28 AM Contents Acknowledgements About the author Preface ix xi xiii Part I: A few things you should know What is share trading? What is charting? Modern technical analysis Risk management Anatomy of a trade Part II: Active trading Introduction to active trading Tools of the trade for active trading Taking active trading for a test drive (by Simon Sherwood) Part III: Breakout trading Introduction to breakout trading 10 Tools for breakout trading 11 Applying the breakout trading strategy 12 Taking breakout trading for a test drive (by Janice Korevaar) 15 29 47 65 81 83 93 107 131 133 147 163 175 v prelims.indd v 6/20/11 7:28 AM Trade My Way Part IV: In conclusion 13 The biggest problem is you 14 Keep your eye on the ball 15 Blue chip share trading 193 195 203 213 Appendix A: MetaStock indicator formulae for active trading Appendix B: MetaStock indicator formulae for breakout trading Appendix C: Trading performance and strategy review Index 221 223 225 229 vi prelims.indd vi 6/20/11 7:28 AM This book is dedicated to a good friend of mine A man who works very hard at trying to be successful A man who works hard to make his own luck A man who will get lucky and succeed This book is dedicated to Mark Successful share trading is about hard work and having the strength of character to persevere You will encounter hardship and you will suffer losses At times, you will also get lucky This book is a road map for those who are prepared to work hard and get lucky like Mark prelims.indd vii 6/20/11 7:28 AM prelims.indd viii 6/20/11 7:28 AM Appendix C Search procedure(s) Comments Changes/improvements Trade entry Comments Changes/improvements Trade exit Comments 227 Appendix C.indd 227 6/20/11 7:40 AM Trade My Way Changes/improvements Risk management Comments Changes/improvements Summary of changes 228 Appendix C.indd 228 6/20/11 7:40 AM Index active investing strategy 67–79 active trading —definition 85–86 —recognising the trend 87–88 active trading simulation 107–130 —ActTrade Newsletter data tables 115 —ActVest Trade Recorder set-up 108 —crossover charts 109, 121 —GICS industry group analysis charts 110–112, 122–124 —weekly MMA charts 113–114, 118 active trading strategy —introduction 85–86 —range indicator 102–104 —rising market indexes 88–89, 94–95 —rising sector 90, 95–97 —rising shares 90–91, 98–101 —rising week (upweek) 91–92, 101 ActVest Trade Recorder 107, 108, 130 AFM strategy 218–219 All Ordinaries index 70–71, 86–89, 94, 133, 192 Australian Securities Exchange (ASX) 17–18 Beau, Chuck Le 40 Black Scholes options pricing formula 211 blue chip companies 16 blue chip shares 61–62, 67–68, 71–73, 86 —2 per cent risk rule 105, 159–169, 198, 218–219 —active fund management 214–215 —capital allocation 213–214 —drawdown stop loss 217–218 —historical results 218–219 —optimisation 215–217 —trading 213–219 breakout candle 143–144 —characteristics of 153–156 breakout trading —breakout candle 143–144, 153–156 —breakout pattern 135–136, 141–143 —breakout trade 138–140 —definition 134 —in trending market 141 —introduction 133–134 —moving average convergence divergence (MACD) indicator 139–140 —period of consolidation 135 229 Index.indd 229 6/20/11 7:28 AM Trade My Way breakout trading (cont’d) —point of agreement (POA) 136–138 —short selling 144–145 Breakout trading newsletter 192 breakout trading simulation 175–192 breakout trading strategy 163–173 —entry into breakouts 169–171 —evaluating breakouts 168–169 —exit criteria 171–172 —mechanical search 166 breakout trading tools 147–148 —breakout candles 143–144,153–156 —entry limit 160–161 —initial stop loss 158 —pivot points 151–152 —points of agreement (POA) 148–150 —price-related stop loss 157–158 —trailing stop loss 159 Buffett, Warren 7–8 buy/hold zone 102 candlestick charts 19–20, 84–85, 100 —rising share week/upweek 91–92, 101 —types of 20–21 capital growth charting —candlestick charts 19–20 —OHLC bar charts 19 —price versus time 17–18 —rely on price 15–17 —time frame 23–25 —trading volume 22–23 —trend lines 25–26 Charting in a Nutshell 15, 45, 83 computer-generated indicators 28 derivative trading 201 Doji candle 21 expectancy —positive 50–51 exponential moving average (EMA) 32–33 falling wedge 150 GICS industry group sectors 90, 113, 122–125 Guppy, Daryl 42 HIH Insurance Ltd 16 historical price activity 15–16 HMA see Hull moving average Hull moving average (HMA) 33, 97 MACD indicator 35–37, 139, 176–177 —‘crossover’ signals 36 MACD momentum 140 media 203–207 MMA chart 41–44, 99, 110–112, 115, 124, 128, 130 moving average convergence divergence indicator see MACD indicator multiple moving averages (MMAs) 41–44 230 Index.indd 230 6/20/11 7:28 AM Index NASDAQ index 59 OHLC bar charts 19 price —charts, access to 44–45 —information —momentum 34–36 —movement 15 —patterns see triangles —volatility 37–38 psychology of trading 195 —greed 196, 200 —networking 200–201 range indicator 74–76, 102–104 rate of annual return (ROAR) 72, 75–78 rate of return indicator (RoR) 97, 112 — values 97, 112, 124 rising index 94–95 rising market indexes 88–89 rising sector 90, 95–97 rising share 90, 98–101 risk management 47–48 —2 per cent risk rule 53–56, 59–61 —capital allocation 61–62 —catastrophic risk 58 —coin toss 48–50 —expectancy 48 —maximum position size 60–61 —money management 51–53 —portfolio risk 58–59 —position sizing 55–56 —positive expectancy 50–51 —risk rule 53 —sector risk 59 —stop losses 54–55 —trailing stop losses 56–58 ROAR see rate of annual return Roth, Martin 71 S&P-500 index 70–71 sell zone 102 share charts 99, 102 share investing 6–7 share price share trading 3, 6–9, 197 —as business 10–12 —explanation —idea of 195–196 —key for trading 12 —networking 200-201 short-term trading 38 simple moving average (SMA) 30 SMA see simple moving average stockbrokers 207–208 stock market —origins 3–4 technical analysis, modern —access to price charts 44–45 —average true range 38–39 —moving averages 29–30 —multiple moving averages 41–43 —price momentum 34 —simple moving average 30–31 —weighted moving averages 32–34 trading —anatomy of 65 —getting started 12 231 Index.indd 231 6/20/11 7:28 AM Trade My Way trading (cont’d) —premise 66–69 —volume 22–23 trading programs 209 —transparency 209–210 trade recorder 119, 180, 192 trading system —entry trigger 74–76 —exit criteria 76–78 —key components 66–67 —search procedures 70–73 —trading premise 67–69 trend lines 27, 30 —downward 83, 85 —upward 83–84 triangles 27–28 Top Stocks 71 Wilder, Welles J 38 232 Index.indd 232 6/20/11 7:28 AM ActTrade newsletter subscription form The ActTrade newsletter is updated every week and is available to download over the weekend The ActTrade newsletter includes: • the All Ordinaries and Small Ordinaries crossover charts • sector MMA charts and rate of return values • weekly rate of return search results of the entire ASX • all range indicator values and portfolio weightings for the two per cent risk rule of shares that have passed the weekly rate of return search • MMA charts of shares that have passed the weekly rate of return search Please print all details clearly, tick where appropriate, sign, date and fax or post to: ActVest P/L 53 Grange Drive Lysterfield Victoria, 3156 or fax 03 9778 7062 Please forward your enquiries to enquiries@alanhull.com YES I wish to subscribe to the ActTrade newsletter at $33.00 per month plus an initial joining fee of $49.50 AND receive, as a bonus, the ActVest Trade Recorder for FREE (valued at $49.50) Please charge to my credit card: VISA MasterCard Card no Expiry: / Full name Email address _ Daytime phone Please sign here Date: / / I understand that signing this form indicates my acceptance of the terms and conditions contained overleaf 233 ActTrade form.indd 233 6/20/11 7:28 AM DISCLAIMER • Alan Hull is an authorised representative of Gryphon Learning, holder of Australian Financial Services Licence No 246606 None of Gryphon Learning Pty Ltd, its Authorised Representatives, the ‘Gryphon System’, ‘Gryphon MultiMedia’, and ‘Gryphon Scanner’ take into account the investment objectives, financial situation and particular needs of any particular person and before making an investment decision on the basis of the ‘Gryphon System’, ‘Gryphon MultiMedia’ and ‘Gryphon Scanner’ or any of its authorised representatives, a prospective investor needs to consider with or without the assistance of a securities adviser, whether the advice is appropriate in the light of the particular investment needs, objectives and financial circumstances of the prospective investor • Although every care is taken the nature and content of the education and/or training prevents the giving or making of any representations or guarantees as to the commercial or financial suitability of any of the material, information and opinions given • Alan Hull and his servants and/or agents accept no liability for any reliance upon the material, information and opinion given in any course or written materials and no responsibility is accepted for any losses, charges, damages or expenses which may be sustained or incurred by any participant or otherwise by reason of any reliance upon the materials, information or opinion given • Individuals are responsible for making their own assessment of all materials provided and are hereby expressly advised to verify and to obtain independent advice before acting on any representations, statements, information or opinions given • This disclaimer is a continuing disclaimer and applies to the primary course or written materials provided and any future support given (whether on-going or otherwise) Acknowledgement • I, the abovesigned, acknowledge that I have read and understand the above advice and disclaimer 234 ActTrade form.indd 234 6/20/11 7:28 AM • I acknowledge that ActVest P/L ABN 44 101 040 939 must retain my credit card details for the purpose of charging me $33.00 including GST on the 1st day of each month for my ActTrade newsletter subscription and that, should I elect to discontinue my subscription, I must notify ActVest P/L in writing • I acknowledge that I will at all times in the future indemnify Alan Hull and his servants and/or agents against all actions, liabilities, proceedings, claims, costs and expenses which I may suffer, incur, or sustain in connection with, or arising in any way whatsoever in reliance upon any material, information or opinions provided by Alan Hull and his servants and/or agents • I acknowledge that any future dealings I may undertake in any securities will be entered into freely and voluntarily and without inducement or encouragement from Alan Hull and his servants and/or agents 235 ActTrade form.indd 235 6/20/11 7:28 AM ActTrade form.indd 236 6/20/11 7:28 AM Breakout trading newsletter subscription form The Breakout trading newsletter is updated every week and is available to download over the weekend The Breakout trading newsletter will provide you with: • • • charts of all new and existing long and short trades entry and exit data including specific buy, hold and sell signals all risk management calculations so you can implement the strategy in less than an hour a week! Please print all details clearly, tick where appropriate, sign, date and fax or post to: ActVest P/L 53 Grange Drive Lysterfield Victoria, 3156 or fax 03 9778 7062 Please forward your enquiries to enquiries@alanhull.com YES I wish to subscribe to the Breakout trading newsletter at $49.50 per month plus an initial joining fee of $49.50 AND receive, as a bonus, the ActVest Trade Recorder FREE (valued at $49.50) Please charge to my credit card: Visa Card no Mastercard Expiry date: / Full name _ Email address _ Daytime phone Please sign here Date: / / I understand that signing this form indicates my acceptance of the terms and conditions contained overleaf 237 Breakout form.indd 237 6/20/11 7:28 AM DISCLAIMER • Alan Hull is an authorised representative of Gryphon Learning, holder of Australian Financial Services Licence No 246606 None of Gryphon Learning Pty Ltd, its Authorised Representatives, the ‘Gryphon System‘, ‘Gryphon MultiMedia’, and ‘Gryphon Scanner’ take into account the investment objectives, financial situation and particular needs of any particular person and before making an investment decision on the basis of the ‘Gryphon System’, ‘Gryphon MultiMedia’ and ‘Gryphon Scanner’ or any of its authorised representatives, a prospective investor needs to consider with or without the assistance of a securities adviser, whether the advice is appropriate in the light of the particular investment needs, objectives and financial circumstances of the prospective investor • Although every care is taken the nature and content of the education and/or training prevents the giving or making of any representations or guarantees as to the commercial or financial suitability of any of the material, information and opinions given • Alan Hull and his servants and/or agents accept no liability for any reliance upon the material, information and opinion given in any course or written materials and no responsibility is accepted for any losses, charges, damages or expenses which may be sustained or incurred by any participant or otherwise by reason of any reliance upon the materials, information or opinion given • Individuals are responsible for making their own assessment of all materials provided and are hereby expressly advised to verify and to obtain independent advice before acting on any representations, statements, information or opinions given • This disclaimer is a continuing disclaimer and applies to the primary course or written materials provided and any future support given (whether on-going or otherwise) Acknowledgement • I, the abovesigned, acknowledge that I have read and understand the above advice and disclaimer 238 Breakout form.indd 238 6/20/11 7:28 AM • I acknowledge that ActVest P/L ABN 44 101 040 939 must retain my credit card details for the purpose of charging me $49.50 including GST on the 1st day of each month for my Breakout trading newsletter subscription and that, should I elect to discontinue my subscription, I must notify ActVest P/L in writing • I acknowledge that I will at all times in the future indemnify Alan Hull and his servants and/or agents against all actions, liabilities, proceedings, claims, costs and expenses which I may suffer, incur, or sustain in connection with, or arising in any way whatsoever in reliance upon any material, information or opinions provided by Alan Hull and his servants and/or agents • I acknowledge that any future dealings I may undertake in any securities will be entered into freely and voluntarily and without inducement or encouragement from Alan Hull and his servants and/or agents 239 Breakout form.indd 239 6/20/11 7:28 AM Breakout form.indd 240 6/20/11 7:28 AM Also in this trading series Available from all good bookstores Advert.indd 241 6/20/11 7:28 AM ... 1962- Title: Trade my way: share trading tactics that really work, for novices to experts / Alan Hull ISBN: 9780730375807 (pbk .) Notes: Includes index Subjects: Stocks Speculation Stock exchanges... Blue chip share trading 193 195 203 213 Appendix A: MetaStock indicator formulae for active trading Appendix B: MetaStock indicator formulae for breakout trading Appendix C: Trading performance... running a share trading business So now I’m going to switch from share trader to business consultant to help you get ready to start trading shares Get ready to trade I know this is going to sound