The Art of Trend Trading: Animal Spirits and Your Path to Profits
Format: PDF / Kindle (mobi) / ePub
Look inward for the missing piece to your trading strategy "The Art of Trend Trading" bucks the trend of technicality to show readers how instinct and strategy can unite to bring about consistent investment success. Rather than diving ever-deeper into the overdone world of complicated modeling and forecasting techniques, trader, CEO, and bestselling author Michael Parness explains how making intuition a part of your investment strategy tends to result in more long-term profit. Using animal spirits as a metaphor and tool, Parness helps readers understand how their natural tendencies may run counter to their strategy, and how this dichotomy may be the shackle holding them back from true market success. Readers will learn how this perspective lifted Parness from homelessness to making millions in both Bull and Bear markets, and will start developing their own market instinct as they refine and tune into their own natural intuition.
Everyone's looking for the "ultimate" system, a way to "game the market" and uncover the "secret" to successful investing. Over the years, Parness has observed that the best traders - those who consistently make money - are the ones that use instinct and intuition, as well as strategy. This book shows you how to identify the natural trader within, and use your gut to inform an ever-evolving investment plan. Follow the author's journey from homelessness to millionaire Identify and understand your own strengths and weaknesses Develop your instinct alongside your strategy Take a lesson from traders making consistent money
There's no substitute for good strategy, but it's no secret that some strategies seem to be more profitable than others. "The Art of Trend Trading" helps you find that missing piece and turn it into more consistent investment success.
descriptions, I’ll refer to the underlying asset as stock, since stocks are the most popular form of options currently 52 The Art of Trend Trading traded. Just keep in mind that the underlying asset could be indexes or other types of securities as well. A stock option gives you the right to buy (call options) or sell (put options) 100 shares of the underlying stock at a specified price on or before a specified date. You also have the right to exercise stock options, that is, to take
complex standardized formula based on time and volatility (covered next). Extrinsic value is predominately a time-based value, or a time premium. It’s based primarily on the length of time that remains before an option expires. As the time to expiration decreases, the extrinsic value decreases. Volatility Volatility is a measure of how fast the underlying stock changes price. A stock that has wide price swings in a relatively short period of time is considered to be more volatile than one whose
a comparable option premium for both. To make money on the $40 KLAC put options, you need the stock’s price to move toward the $40 option strike price near term, or below $40 by option expiration. If the stock’s price stays substantially the same over time, or until the options expire, the time-based portion of the option premium will decline, resulting in a loss on the trade. Figure 7.2 is another December options quote screen for EXPE. The current EXPE stock price is $75.08. Looking at Figure
the gap down, which illustrates the profit potential of fading gaps. To trade a gap down, you buy the stock long once the initial selling pressure subsides. Afterward, you should place a stop-loss order slightly beneath the low of the day, or according to your own tolerance for risk, to limit losses in the event the price continues to move lower. Chapter 10 discusses additional techniques you can consider using to time the entries and exits for your gap trades based upon charts and technical
expert chartist. I don’t use them that often, and when I do I usually ask my partner, Mike Di Gioia, or someone else who is an expert what they think. If you would like to explore technical analysis and/or candlestick charting further, there are many good books devoted entirely to these topics. Doji The appearance of a doji candle (see Figure 10.1) indicates the price opened and closed within a tight range for the candle’s time period (I generally use 5 minutes when trading gaps). It means the