The Trader Trading: Principles of Successful Trading

Pattern recognition techniques, objective-trading rules, and high probability trading set-ups that will enable you to become a successful trader in today’s commodity, equity and forex markets.

Author’s Note:

The person driving with a license should in theory get behind the wheel of any car on the road and get from A to B. There will be some cars that take a bit longer to get used to, but the mechanics of every car works under the same principles. The trader trading is the exact same thing. The trader who has an understanding of the principles behind successful trading should be able to trade any market. It should be no different trading forex, futures, or equities because the mechanics behind them operate under the same principles.

The inexperienced driver behind the wheel of a high powered car driving over the speed limit will have a higher probability of crashing. The person who can only drive automatic cars will have a hard time driving a 5-speed. The same applies with trading. The trader with limited experience trying to overtrade in derivatives will probably crash. The trader who is under-capitalized won’t be able to trade enough, which limits their ability to get from A to B.

Most traders would like to believe they’ll end up being a racing driver, however most end up being lost: – they have no map, no plan and they don’t know and understand what it takes to become successful. In trading terms, they don’t understand money management and the risk behind every trade.

In my opinion the ultimate goal for the trader is to set out a plan that makes trading become the primary source of income. The plan should begin by setting rules in place that will protect their primary account, and then set in motion the principled view of events, rules and plans that will govern the protection from loss and the desired increase in profits, resulting in increased wealth over time. By understanding the principles of successful trading, the trader will have a greater chance of successfully achieving the ultimate goal of creating wealth and having an income that is purely derived from trading.

Traditional chart analysis is about identifying trends, identifying cycles, identifying support and resistance, and then applying an approach that allows you to enter and exit at a certain Price based on certain robust parameters and set-ups. With global equity and commodity markets saturated with trading systems used by large hedge funds, there is now a robust predictability and a realistic expectation that traders can identify certain patterns that will repeat over and over again.

Probability patterns are patterns that have a greater chance than 50/50 of repeating over and over again. Even though they function under ‘randomness’, it’s the Risk-Reward of the pattern that matters most. The ideal strategy then is developing trading rules based on achieving a minimum Risk-Reward factor of 2:1.

It’s the expected returns of the trade to the amount of risk undertaken that the trader focuses on, basically the trader wants to make sure that double the amount in profit is returned on any given trade compared to the Risk of being stopped out.

In ‘the trader trading’ I’ll attempt to recognize such patterns in current charts and then identify entry and exit points based on those charts. Entry and exit points are typically associated with support and resistance, the oldest and purest form of technical analysis is support and resistance. Understanding what support and resistance is provides a large portion of the technical analysis that one needs to be successful when trading.

Contents:

• The Dilernia Model
• Daily Cycles: 5-day Pattern
• Dilernia Principles
• 5-day Pattern: Standard Deviation
• The Day Trader
• Day Trading
• SPI Trading: Spiral Points
• The Trading Range: Day Trading
• Chart Reading
• Optimising Systems
• Trading Stocks
• The Passive Trader
• ‘Thrust Trading’
• Shorting Stocks
• The Weekly Close
• Compounding & Investing
• Trading Margin & Leverage
• Trading Forex

The Trader Trading: Principles of Successful Trading By Frank Dilernia pdf