Trading for a Living Read online

  Table of Contents

  Introduction

  The Best Trading Lessons of Jesse Livermore

  Introduction

  How to Make Big Money

  Wait for a Breakout

  Breakout Trading Example

  How to Trade a Trend

  When to Exit a Trend

  The Four Foundations of Successful Trading

  Trade Probabilities

  On Charting

  Calling

  Importance of Memory

  Look for Parallel Cases

  Expect Nothing New

  Record Your Observations

  Forget the Why

  Stick to Your Plan

  Don’t Trade for Excitement

  Inner Game

  The Right Side

  Learn from Every Mistake

  Make a Strong Commitment

  Expect the Unexpected

  Watch the Slippage

  Learn What Not to Do

  If It Doesn’t Act Right, Don’t Touch It

  Have a Schedule

  Make Use of Fundamentals

  Don’t Enter on Pullbacks

  On Grades of Suckers

  Sit Tight

  The Role of Confidence

  Make a List of Don’ts

  Never Take Tips

  Pyramid Winners

  How to Pyramid

  Mind

  The Thing To Do

  Trader’s Evolution

  On Mistakes

  Do Your Own Thinking

  Buy All Time Highs

  Big Money

  The Greatest Danger

  Self-Sabotage

  Sell Down to the Sleeping Point

  The Average Speculator

  Wait for Clarity

  No Set Opinions

  Buy High, Sell Higher

  Trend Pyramiding Arithmetics

  Can’t Tell til You Bet

  Reverse Your Psychology

  Can Make Money, but Cannot Beat the Market

  The Amateur vs. The Professional

  The Pleasure of Trading

  Never Average Losers

  On Tuition Fees

  On Making the Market ‘Pay’

  Trading State of Mind

  Know Thyself

  Possibilities

  Experience Not Free

  Moneyless Periods

  Take Responsibility

  Read Yourself, Not Just the Market

  Save for a Rainy Day

  Until It’s In Your Bank Account

  Intuition

  How to Think Like a Trader

  Psychology Study Crucial

  Easy Money

  Livermore's Model Trader

  Good and Cheap

  Warning

  Speculator’s Enemies

  Conclusion - The Final Lesson

  Expert Trader: 93 Trading Lessons of Richard Wyckoff

  Introduction

  The Essence of Trading

  How to Find an Edge

  Look for Minimum Risk Points

  Is There a Trading Formula?

  Why Trading Cannot Be Reduced to Simple Rules

  How to Develop Competence

  First Requirement of Success

  Second Requirement of Success

  Questions to Ask Yourself

  Trading Method Outline

  Wyckoff’s Trade Management

  Take a Free Position

  Selective Day Trading

  Wait for Wide Swings

  Distinguishing Pullbacks from a Change in Trend

  One Man’s Meat

  Pitfalls

  The Sixth Sense in Trading

  The Power of Commitment

  The Prince of Floor Traders

  Keene

  How Success Happens

  Full Time Learning from Mistakes

  What Trading is Not

  Inertia

  Manipulation Not a Problem

  Advantage Over Big Traders

  The Trading Objective

  Before, During, and After the Trade

  The Ideal Work Environment

  How Money is Made

  Trading Driven by Psychological Needs

  Start with Minimum Size

  Start Right or Not at All

  Entering at the Right Time

  Get On!

  Specialize

  What to Trade

  Interdependence

  On Break Even Trades

  Expert

  Always Have a Stop

  Trailing Stops

  How to Manage an Open Trade

  The Importance of Immediate Trend

  Stay Out of Quiet Markets

  Strong, High Momentum Moves

  Never Move Your Stop

  Never Average a Loser

  Gun for Absolute Profits

  Four Reasons to Close a Trade

  Volume As a Crucial Indicator

  How to Evaluate Volume

  Price Factors Everything

  Strength and Volume

  Don’t Enter after Prolonged Moves

  Chances Decrease as Move Continues

  Day Trading Is Fine, But...

  The Use of Market Cycles in Wyckoff’s Day

  Getting to the Bottom of Things

  No One Knows

  How to Anticipate Big Moves

  Scalping

  Developing Subconscious Competence

  Discretionary Trading

  Charting and Hindsight Bias

  Proper Use of Charts

  Wide Vision

  Local Trends vs. General Trends

  Identifying Trend, Range, Accumulation, and Distribution

  Discard All Mechanical Helps

  Watching One Market Insufficient

  Market Absorption

  Range Does Not Mean Reversal

  Document All Trades

  Professional Losses Are Tiny

  Big Swings and Large Volumes

  What is the ‘Best’ Trading Style?

  Trading As a Profession

  Day Trading vs. Swing Trading

  Can’t Tell How Far

  Wait for a Breakout

  Re-enter On a Pullback

  Use Volume on Breakout

  How to Move Your Stop

  Playing Dominoes

  No Trend, No Trade

  Impaired Trading

  Tired, Hungry, Horny, or Upset

  The Foundation of Strong Trading Psychology

  One Idea into a Method

  On Trading “Teachers”

  Forming a Trading Character

  Conclusion - The Final Lesson

  Trading Essentials: 20 Lessons to Cut Your Learning Curve

  Introduction

  What Are the ‘Secrets’?

  #1 - From Denial to Commitment

  #2 - The Truth about Market Edges

  #3 - Stop the Self-Sabotage

  #4 - Before You Look for an Edge...

  #5 - The Cart AFTER the Horse

  #6 - Prove Yourself First

  #7 - The Holy Grail of Trading (If There Was One)

  #8 - System or Discretion, That is the Question

  #9 - What to Focus On

  #10 - How to Tap into Synergy

  #11 - Monitoring Your Progress

  #12 - What to Trade

  #13 - The Hallmark of Good Strategies

  #14 - The Most Important Rule

  #15 - The Law of the Jungle

  #16 - One Thing at a Time

  #17 - How to Be Active

  #18 - Be Committed, but Not Over-committed

  #19 - Congruency

  #20 - What to Do When You Don’t Know What to Do

  Summary - What Is Required

  Conclusion - The Final Thought About Trading
Success

  Recommended Reading

  SECRETS OF TRADING PERFORMANCE

  Introduction

  Question #1 - Conditions

  Question #2 - Traps

  Question #3 - Above and Below

  Question #4 - Changing Cycles

  Question #5 - Obviousness

  Question #6 - Edge

  Question #7 - Selectivity

  Question #8 - ‘I Don’t Care’ Mode

  Question #9 - The Wisdom of the Body

  Question #10 - Well-Being

  Conclusion

  Trading for a Living (4 Books in 1)

  Frank Marshall

  Copyright © 2015 by Frank Marshall

  All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, without written permission from the author, except for the use of brief quotations in a review.

  Publisher: Marshall Press

  First edition: 2015

  By reading this book, you acknowledge that trading is risky and you could have substantial losses that exceed your capital investment. Trading financial instruments profitably is very difficult and is not for everyone.

  This is an informational book and nothing associated with it should be construed as specific advice to buy or sell (or not buy or sell) any financial instruments, or be implied as a way to guarantee profitable trading. No one associated with it accepts any liability for any losses or damages relating to any content in here. Any mention of trades in financial instruments should be assumed to be hypothetical.

  We recommend that you consult with a licensed, qualified professional, before making any investment decisions. It is the individual’s responsibility to perform due diligence in regards to all trades and entities with which you choose to do business.

  Introduction

  This book is a collection of 4 trading books:

  The Best Trading Lessons of Jesse Livermore

  The Expert Trader: 93 Trading Lessons of Richard Wyckoff

  Trading Essentials: How to Cut Your Learning Curve

  Secrets of Trading Performace: 10 Questions that Immediately Improve Your Trading Results

  The aim of Trading for a Living is to give you a comprehensive picture about the methods, the techniques, and the foundations of professional trading. The first two books are studies of the trading methods of Jesse Livermore and Richard Wyckoff, two immensely successful traders whose wisdom still enlightens and informs. The last two books are focused on enhancing one’s trading performance through rapid development of psychological and technical skills. The materials put you well on your way to trading for a living, stirring you in the right directions.

  Though you could acquire these books one by one, this volume makes it easier (and less expensive) for interested traders to get the entire collection in one go and have it in one place for a handy reference and convenient reading.

  Enjoy!

  Frank Marshall

  West Palm Beach, February 2015

  The Best Trading Lessons of Jesse Livermore

  Frank Marshall

  Copyright © 2014 by Frank Marshall

  All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, without written permission from the author, except for the use of brief quotations in a review.

  Publisher: Marshall Press

  First edition: 2014

  By reading this book, you acknowledge that trading is risky and you could have substantial losses that exceed your capital investment. Trading financial instruments profitably is very difficult and is not for everyone.

  This is an informational book and nothing associated with it should be construed as specific advice to buy or sell (or not buy or sell) any financial instruments, or be implied as a way to guarantee profitable trading. No one associated with it accepts any liability for any losses or damages relating to any content in here. Any mention of trades in financial instruments should be assumed to be hypothetical.

  We recommend that you consult with a licensed, qualified professional, before making any investment decisions. It is the individual’s responsibility to perform due diligence in regards to all trades and entities with which you choose to do business.

  Dedication

  For Panita,

  I am so happy I met you.

  Introduction

  My old copy of the Reminiscences of a Stock Operator is all worn out. This ‘bible’ of trading, originally published in 1923, has stood the test of time.

  I only wished I had its lessons in one place. The Best Trading Lessons of Jesse Livermore does just that. It gathers the best trading lessons of the Reminiscences in one place, extracted and labelled for convenience, with a brief discussion following each lesson.

  Whenever you are looking for some trading inspiration or a bit of wisdom, Livermore’s nuggets will gratify you. There is an embarrassing mine of riches waiting to be discovered.

  The lessons need not be read in the order they appear. I used descriptive lesson titles, so that you can jump to subjects that are most relevant to you, through the Table of Contents. Though all the lessons are important, I have put the most crucial ones at the beginning.

  A good alternate title for this work might be The Mind of Jesse Livermore. It is a pleasure to have access to the thinking processes of one of the greatest traders of all time.

  Frank Marshall

  West Palm Beach, May 2014

  How to Make Big Money

  “I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend.”

  Discussion: Making big money is not about grabbing tiny profits over and over. Livermore scalped when he was younger, but eventually realized that was not the way.

  Big money is about entering strong trends, and then holding for the big move.

  Wait for a Breakout

  “This experience has been the experience of so many traders so many times that I can give this rule: In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be up or down. The thing to do is to watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction. A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for reasons or explanations. Stock-market postmortems don't pay dividends.”

  Discussion: Livermore was a breakout trader. In a range market, he stood aside. Once he saw the price break outside the range limits, he put on his position.

  Breakout Trading Example

  “Let us say, for example, that the market, as it usually does in those between-swings times, fluctuates within a range of ten points; up to 130 and down to 120. It may look very weak at the bottom; or, on the way up, after a rise of eight or ten points, it may look as strong as anything. A man ought not to be led into trading by tokens. He should wait until the tape tells him that the time is ripe. As a matter of fact, millions upon millions of dollars have been lost by men who bought stocks because they looked cheap or sold them because they looked dear. The speculator is not an investor. His object is not to secure a steady return on his money at a good rate of interest, but to profit by either a rise or a fall in the price of whatever he may be speculating in. Therefore the thing to determine is the speculative line of least resistance at the moment of trading; and what he should wait for is the moment when that line defines itself, because that is his signal to get busy.

  Reading the tape merely
enables him to see that at 130 the selling had been stronger than the buying and a reaction in the price logically followed. Up to the point where the selling prevailed over the buying, superficial students of the tape may conclude that the price is not going to stop short of 150, and they buy. But after the reaction begins they hold on, or sell out at a small loss, or they go short and talk bearish. But at 120 there is stronger resistance to the decline. The buying prevails over the selling, there is a rally and the shorts cover. The public is so often whipsawed that one marvels at their persistence in not learning their lesson.

  Eventually something happens that increases the power of either the upward or the downward force and the point of greatest resistance moves up or down that is, the buying at 130 will for the first time be stronger than the selling, or the selling at 120 be stronger than the buying. The price will break through the old barrier or movement-limit and go on. As a rule, there is always a crowd of traders who are short at 120 because it looked so weak, or long at 130 because it looked so strong, and, when the market goes against them they are forced, after a while, either to change their minds and turn or to close out. In either event they help to define even more clearly the price line of least resistance. Thus the intelligent trader who has patiently waited to determine this line will enlist the aid of fundamental trade conditions and also of the force of the trading of that part of the community that happened to guess wrong and must now rectify mistakes. Such corrections tend to push prices along the line of least resistance.”

  Discussion: Don’t trade when the price is moving within a range. Wait for a breakout, and then jump in.

  What makes this type of trading difficult is the need for patience. The markets can stay in ranges for long periods of time.

  How to Trade a Trend

  “Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this you must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps! Wait until you see or if you prefer, until you think you see the turn of the market; the beginning of a reversal of general conditions. You have to use your brains and your vision to do this; otherwise my advice would be as idiotic as to tell you to buy cheap and sell dear. One of the most helpful things that anybody can learn is to give up trying to catch the last eighth or the first. These two are the most expensive eighths in the world. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.”