STREET SMART

CHAPTER 1 INTRODUCTION Yes, Virginia, you CAN make a living from trading! In a day when global money managers are given increasing attention and funds seem to dominate the market arena, it might be difficult to imagine that the small speculator could have much of an edge. Has trading become a function of computer power? Have markets changed in the last decade? How relevant is the theoretical world in the heat of battle? The truth is, a few trading tricks and a little common sense will get you more mileage than all the books on technical analysis combined. Ultimately, an individual can better determine support and resistance than a computer can. And yes, the private individual has more of an edge than he knows! This book is written for the active trader. It is a compilation of strategies that the two of us have been trading with for the last 15 years in both equities and futures. The strategies are conceptually simple and have been readily adopted by our friends and colleagues. This is not a book of technical analysis. It is a manual of precise setups that have you in the market for only a limited amount of time. Consider it to be a collection of "surgical strikes" with a distinct methodology for managing each one'. Each pattern identifies a distinct market condition. After all, trading should be done on only the most recognizable and reliable patterns. Most of the setups can be traded on any market and on any time frame. This manual will teach you everything we know about swing trading. By swing trading we mean monitoring the market for support and resistance levels and actively trading around those areas. Stops are placed just beneath support or above resistance to minimize risk. You will learn to recognize the best setups at these levels and then how to lock in profits when trades are made. In order for you to get the most out of trading these setups, a few points need to be covered: • It is important to initially trade a new concept or strategy on paper. Only by seeing a pattern over and over again will you truly feel comfortable with it. You must believe in its ability to repeat itself. Don't be surprised if you find yourself actually becoming excited as you see the patterns begin to set up. • If a pattern does not make sense to you, don't trade it. If you don't have a 100 percent belief in it, you will not be able to overcome losing streaks. • All you need is one pattern to make a living! Learn first to specialize in doing one thing well. We know two traders who do nothing but trade the "anti" pattern from a five-minute S&P chart.