The Compleat Day Trader II

Today's volatile markets are perfect for the new breed of day trader. Whipsaw markets can create hundreds of opportunities daily. And with the development of high-powered personal computers and sophisticated trading strategies, day trading is now open to everyone-not just floor traders.

Still, successful day traders need the skill and discipline to identify the correct target, take careful aim, and pull the trigger at just the right time. In The Compleat Day Trader II, Jake Bernstein-a 30-year veteran in the futures industry -provides strategies, psychological tips, and a host of precise methods to help you on the road to success. Not a primer-for that, day trading newcomers can turn to Bernstein's classic The Compleat Day Trader-this latest system by system text was written for traders who already have an understanding of the markets and trading basics. It shows how to go to the next level and understand the markets, and its in-depth discussion of the psychology of the day trader is enormously valuable for developing the functional psychological tools of a successful trader.

The Compleat Day Trader II introduces you to the "art" of day trading. Instead of rigorously following one system with little thought, Bernstein shows how you can fine-tune your trading system, using parts of five or six systems to assemble one that best fits your trading style. New coverage reflects the dramatic changes that have occurred in the markets since the original publication of The Compleat Day Trader:

Concise day trading methods-with a full chapter devoted to each method
Mathematical analysis and formulas to help you accurately forecast market trends
Closing and opening strategies designed to get you in and out of the market with ((surgical" timing
Rules to help you acquire discipline and persistence-the functional behavioral tools necessary for any successful day trader
The Day Trader's Rules for Success, guidelines designed to give you that winning edge
How to manage your risk of loss

Every day, wide trading ranges in S&P 500 futures, treasury bonds, currencies, and the like present substantial day trading opportunities-but only for those traders with the skills, systems, and patience to grab them! Not all day traders win at this high-risk, high stakes game; losses can mount quickly. The Compleat Day Trader II will teach both current and aspiring day traders how to cope with and, above all, how to manage these risks. It shows you how to understand the markets, develop effective tools based on those understandings, and use these tools with skill and precision.

Table of Contents

1. Perspective on Day Trading: Observations,

Claims, and Caveats

Why Day Trade? 2
Day Trading, Discipline, and Persistence 5
Day Trading: Advantage or Disadvantage? 6
As You Read This Book 7
The Importance of Self-Discipline 8
What Do I Mean by Discipline 8

2. A Review of Market Timing Indicators 13

Traditional Moving Average Indicators (MA) 14
Variations on the Theme of Moving Averages 15
Stochastics (SI) and Relative Strength
Indicator (RSI) 16
Chart Patterns and Formations 18
Parabolic 19
ADX and DMI 20
Cycles 21
Seasonals 23
Momentum/Rate of Change 26
Market Sentiment Indicators 27
Breakout Methods for Day Trading 29
Variations on the Gap Trade Theme 144
Period of Gap Comparison-Multiple-Day Gap Signals 145
Intraday Follow-Up of Gap Trades 153

13. Accumulation Distribution Oscillator Derivative 155

The Ideal Situation 156
Accumulation/Distribution Theory 158
Using the A/D Oscillator 159
The Advance/Decline Derivative (ADD) 162

14. The Importance of Orders 169

What You Should Know about Market Orders 170
Market-If-Touched (MM Orders 171
Fill-or-Kill (FOK) Orders 171
Stop Orders 172
Stop Limit Orders 172
Good-Till-Canceled Orders 172
One Cancels the Other (OCO) 173
Using Orders to Your Advantage 173

15. The Psychology of Day Trading 179

Patience, Impatience, and Temperament 180
Personality Traits of the Successful Day Trader 181
The Dangers of Being Meek 183
A Few Thoughts about Self-Control 184
Some Additional Thoughts about Day Trader Psychology 185
A Successful Day Trader Needs Discipline 186
Willingness to Accept Losses 188
The Ability to Avoid Overtrading 189
The Ability to Specialize 190
Beginning with Sufficient Capital 191
The Ability to Use News to Your Advantage 191
Taking Advantage of Brief Price Surges 192
Sticking to Your Daily Goal 193
Using Market Sentiment to Find Day-Trading Opportunities 194

16. The Day Trader's Rules for Success 197

Determine Your Orientation-Know Your Direction 198
Don't Be Surprised If You Lose Money at First- Some People May Never Succeed 199
Expect the Least, Not the Most 200
Shut Out the Input of Others-Play Your Game by Your Own Rules 201
Take Your Losses When Your Signals Dictate Don't Make Excuses! 201
Your Goals as a Day Trader 203
Don't Exit Trades Too Soon 203
Don't Hold a Profitable Day Trade Beyond Its Ideal Exit Point 204
Don't "Force" Day Trades If There Are No Signals 204
Hesitate and You Lose! 205
Keep a Record of Your Trades-the Good, the Bad, and the Ugly 205
Don't Day Trade Unless You're Properly Informed 206
When in Doubt, Stay Out 206
You Can't Succeed Unless You Do Your Homework 206
Keep Close Track of Your Results 207
More Complicated Is Not Synonymous with More Profitable 208
The Danger of Market Myths 208
The Dangers of Pyramiding 209
Avoid Inactive Markets 209
Don't Run with the Lemmings 210
Watch for Day-Trading Opportunities Following Major Events or News 2 10
The Value of Correct and Timely Price Data 211
A Few Thoughts about Commissions and Brokers 211