Introduction
The genesis of this book came from a very simple concept. We wanted to write a book that we wished was available when we started our trading careers. As hard as it may be to believe now, it wasn't too long ago that a new trader pretty much had two choices for learning the markets: (1) Find an experienced trader who would let you shadow his every move or (2) open an account and hope you had equity left over after you learned all the painful and expensive lessons. Sure, there have always been the in-depth books that cover various trading topics in excellent detail, but most never seemed to have that practical edge—the kind of edge that takes the material from the realm of the academic to the realm of being real-life applicable.
Trading by Numbers is our attempt to provide the necessary depth for understanding the markets and strategies while still maintaining a level of practicality that allows you to try these strategies on your own tomorrow. We wanted to provide you with a user's manual, rather than a reference book.
The material is presented in two main sections. The first four chapters lay out an approach to adding structure to your analysis. The two key market dimensions that every trader must understand are trend and volatility. Chapter 1 sets the stage for analyzing trend and volatility by examining the role of technical analysis. Chapter 2 discusses trends and how to quantify them for your trading decisions. We want to be clear that we're not ascribing a level ...
