The Compleat Day Trader

"If you seek to acquire the substantial knowledge which I have accrued during my more than 25 years as a futures and stock trader, then you've certainly come to the right place. This book will educate you, guide you, assist you, explain things to you, and illuminate the path to success for you"...

To achieve total mastery of day trading, you'd better go straight to the master. And here he is, in a book that's classic Jake Bernstein-a no-nonsense guide to the fast paced world of day trading. Whether you're a beginner or seasoned veteran, this book is for you!

The action is fast and the stakes are high and the increased volatility of the '90s has upped the ante even more. Bernstein expertly sorts through the numerous trading systems, analytical methods, and timing indicators unique to day trading-and helps you combine them expertly for minimum risk and maximum profit opportunity.

Using clear and concise language with over 100 detailed illustrations and charts designed to drive home his suggestions and insights, this distinguished trader addresses you "investor-to-investor." He reveals how to:

Get started in day trading
Analyze moving averages, stochastics, gaps, and other vital day-trading tools
Use Wilder's RSI, intra-day momentum, and other powerful indicators to your clear advantage
Use traditional chart analysis to enhance day-trading results
Apply a unique day-trading oscillator to the most active markets such as S&P, T Bonds, and currencies
Use seasonal patterns and Critical Times of Day indicators to capture big moves

You'll also discover whether you have the essential personal qualities that predispose a day trader to success-and, if not, how you can develop them.

In short, if you wish to become an accomplished day trader, and reap the accompanying profits, there is no other book that can prepare you as well.

Contents

Preface ix
Acknowledgments xi

Introduction 1

The Forces Behind Increased Volatility 1
The Computer Revolution and Trading 2
Advances in Market Quotation Systems 3
The International and Domestic Political Backdrop 3
Responsibilities and Goals of the Day Trader 3
About This Book 4
Beware of Tall Tales 5
Who Succeeds and Who Fails - Qualities for Success 5
What This Book Cannot and Will Not Do for You 9
No Exaggerated Claims 10
Historical Results 10
Do Your Own Research 10
Practice 11
Getting Started 11
Risk and Loss in Futures Trading 12

1. The Basics 13
Definition of Terms 13

2. What a Day Trader Is and What a Day Trader Does is What Does a Day Trader Trade? 19 Why Day Trade? 19

3. The Illusion of System Testing 23

System Development 23
What Is a Trading System? 24
What's Left? 25
Markets Change-Market Participants Change 26
Striving for Solutions 27
The Role of Artificial Intelligence 27
Implications for the Future 29

4. Day Trading with Moving Averages 30

Moving Average Basics 30
Traditional Moving Average Systems: Assets and Liabilities 32
Moving Average Crossovers-Price versus MA 34
Moving Averages as Support and Resistance 39

5. Intraday Application of Stochastics 43

Explaining Stochastics Quickly and Simply 43
The Basic Stochastic Indicator 44
Basic Approaches to Sl Timing 45
Intraday Stochastic POP: Definition 47
SP Parameters 48
Markets in Which SP Works Well 52
Hit and Run Trading Using the SP 52
Variation on the Theme of SP 53
What You Can Expect 54
Preferred Markets for SP Application 55

6. Gaps, Gaps, Gaps 56

Gap Trading Rules and Definitions 58
Some Observations about the Gap Technique 66
Get Some Experience 70
Gap Size and Penetration Size 71
What You Can Realistically Expect 71
A Few Last Words about Stop Orders 72

7. Support and Resistance: the "MAC" 73

The Moving Average Channel 74
How Support and Resistance Develop during the Day 76
Determining Trend, Support, and Resistance 78
Trading within an Established Trend 80
Exiting Positions-Right or Wrong 80
Sideways Trend Trading-Trading within the Channel 82
A Few Precautions and Suggestions 83
Using the Channel Technique with Other Methods 84
Evaluation of the MAC 86

8. Using Wilder's RSI for Day Trading 87

Defining the First Derivative 88
Rules for Day Trading with the RSI 89

9. Using Intraday Momentum 94

10. Rate of Change in Day Trading 100

11. Intraday Channel Breakout 106
How the Channel Breakout System Works 108

12. Traditional Methods of Technical Analysis and Day Trading 111

Trend Line Analysis 112
Trend Line Applications-Chart Formations 115

13. A Unique Oscillator for Day Trading 121

Opens versus Closes 123
Construction of the 0/C for Intraday Trading 125
Examining Some Signals 126

14. Scalping the Markets 130

What Is Scalping? 131
Rules for Scalping 132
Suggested Methods of Scalping 132
Buying into Large Declines or Selling into Large Rallies 139

15. Importance of Orders 141

What You Should Know about Market Orders 141
Market-If-Touched (MIT) Orders 142
Fill-or-Kill (FOK) Orders 143
Stop Orders 143
Stop Limit Orders 144
Good-Til-Canceled (GTC) Orders 144
One Cancels the Other (OCO) 144
Using Orders to Your Advantage 144

16. How Seasonality Affects Markets 148

Defining Key Seasonal Dates 148
How to Use the Key Seasonal Date Tendencies 149
Daily Season Tendencies 153

17. Intraday Spread Trading 163

Preselection: The Key to Profitable Spread Day Trading 163
Methods of Spread Day Trading 164
What You Can Realistically Expect 169

18. The Consecutive Closes System 170

Definitions and Signals 170
How the CC System Operates 171

19. Sentiment Reigns Supreme 175

Defining Sentiment 176
Daily Sentiment Index-Ideal for Short-Term Trading 177
Brief Historical Overview 177
DSI Day-Trading Application 178
Visualizing Market Sentiment Relationships 178
The Importance of Market Sentiment 178
DSI Historical Data 185

20. Critical Time of Day (CTOD) 186

Basic CTOD Signals and Parameters 186
Tips and Suggestions for Using CTOD 188

21. Putting it All Together 191

22. The Psychology of Day Trading 197
A Successful Day Trader Needs Discipline 198

23. The Impact of 24-Hour Trading on Day Trading 207

24. Twenty Keys to Success as a Day Trader 211

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