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Trend Trading For Dummies

Book Description

Trend trading lets the market do the work for you

Is your portfolio doing all it should? Are you looking for a market-focused way to increase returns? Try your hand at trend trading. Instead of analyzing the performance of a company, analyze the performance of the market as a whole. When you spot a trend, jump on it and let it ride until it's time to move. Whether your strategy is short-term, intermediate-term, or long-term, trend trading can help you capitalize on the action of market and get the most out of every move you make.

Trend Trading For Dummies will get you up to speed on the ins and outs of this unique technique. You'll learn how to spot the trends and just how heavily market analysis figures into your success. You can get as complex as you like with the data for long-term predictions or just go for quick rides that pump up your gains. Before you jump in, you need to know the basics that can help ensure your success.

  • Learn the rules of trend trading and why you need a solid system

  • Understand technical analysis to make accurate predictions

  • Analyze the market and learn what to look for before you trade

  • Use leverage to your advantage to make better moves

  • Trend Trading For Dummies includes trading strategies that you can use as-is, or customize to suit your needs. Thorough preparation is the key to any good trading plan, and it's no different with trend trading. Trend Trading For Dummies allows you to trade using every angle, and will get you out of or into the market in a flash.

    Table of Contents

      1. Introduction
        1. About This Book
        2. Foolish Assumptions
        3. Icons Used in This Book
        4. Beyond the Book
        5. Where to Go from Here
      2. Part I: Getting Started with Trend Trading
        1. Chapter 1: What Is Trend Trading?
          1. Figuring Out What the Trend Is in the First Place
          2. Knowing Why the Trend Works
            1. Being a follower by nature
            2. Following the leader
          3. Understanding Why You Should Trade with the Trend
            1. Trends make your life easier
            2. Trends can make you more money
          4. Trend Trading as Part of a Complete System: The Five-Energy Methodology
        2. Chapter 2: Gathering What You Need to Get Started
          1. Creating Your Trend Trading Toolbox
            1. Choosing the right broker
            2. Picking the right trading hardware
            3. Exploring trading software options
            4. Deciding on your Internet access
            5. Getting the best connection to the exchange
          2. Always Preparing for an Emergency
            1. Using a battery backup
            2. Keeping that cellphone handy
            3. Having a non-AC-powered landline
        3. Chapter 3: Considering the Risks of Trading
          1. Acknowledging the Ugly Truth about Trading
          2. Being Aware of Leverage and Margin
            1. Leverage: A double-edged sword in the battle for wealth
            2. Margin: The requirements for the privilege of using leverage
          3. Going Broke While You Sleep: Overnight Gaps
          4. Dealing with Technology Errors
          5. Trading Halts, Suspensions, and Curbs
          6. Knowing What to Do When (Not If) a Crisis Occurs
            1. Economic disasters
            2. Broker problems
            3. Fat-finger trades
            4. Chaos unleashing on the markets
        4. Chapter 4: Understanding the Advantages and Disadvantages of Trend Trading
          1. Discovering the Advantages of Trading with the Trend
            1. Getting big, winning trades
            2. Avoiding choppy, chaotic market movement
            3. Having confirmation before entering
          2. Realizing the Disadvantages of Trend Trading
            1. Having more losers than winners
            2. Getting bored
            3. Not getting the earliest entry
      3. Part II: Essential Trend Trading Strategies
        1. Chapter 5: Price Waves You Can Surf to Profits
          1. Grasping the Basics of Wave Theory
            1. Elliott waves for fun and profit
            2. Fibonacci levels – trading the golden mean
          2. Looking at the Limitations of Subjective Wave Counting
          3. Objectifying Waves for Trading Clarity and Confidence
            1. Measuring cycles
            2. Measuring waves
        2. Chapter 6: Looking at Chart Indicator Tools
          1. ADX Indicator: Finding Strong Trends
            1. Staying on the right side of the market with the ADX
            2. Trading the ADX indicator
          2. Bollinger Bands: Seeing Both Trend and Volatility in One Tool
            1. Getting a clear signal
            2. Trading Bollinger Bands the right way
          3. Moving Averages: Charting the Markets
            1. Following the closing price
            2. Trading moving averages
        3. Chapter 7: Understanding Broad-Based Market Indicators
          1. Seeing What Others Can’t: Volume Patterns
            1. Going up with the buying volume index
            2. Coming down with the selling volume index
            3. Focusing on the difference between the up/down volume indexes
          2. Looking Behind the Scenes: The Advance/Decline Line
            1. Advancing issues versus declining issues
            2. The difference between the advancing and declining signals
          3. TRIN: Combining Price Action and Volume
          4. Trading with Market Consensus
            1. Sector consensus
            2. Industry consensus
            3. Creating and analyzing your own list of sectors and industries
          5. Getting a “Feel” for the Market: Market Sentiment Indicators
            1. Mood swings don’t always result in market swings
            2. Sentiment indicators as contrarian indicators
          6. VIX: Watching for the Volatility Outliers
        4. Chapter 8: Knowing What Time You Want to Trade
          1. Trading Is All Relative to Time
            1. Understanding time intervals
            2. Discovering the importance of time when trading
          2. Day Trading: Taking It One Day at a Time
            1. Advantages of day trading
            2. Disadvantages of day trading
          3. Swing Trading: Holding On a Little Longer
            1. Advantages of swing trading
            2. Disadvantages of swing trading
          4. Investing: Staying in for the Long Term
            1. Advantages of investing
            2. Disadvantages of investing
        5. Chapter 9: How to Make Money When the Market Goes Up or Down
          1. Trend Trading to the Short Side
            1. Discovering what makes short trading so exciting
            2. Understanding the challenges of shorting the market
          2. Trend Trading to the Long Side
            1. Exploring the advantages of going long
            2. Being aware of the disadvantages of trading to the long side
      4. Part III: Becoming a Top Trader with the Five-Energy Method
        1. Chapter 10: Cycle Timing Tools: Finding the Best Time to Enter a Trend
          1. Trading the “Wiggle” of the Trend
          2. Exploring the Stochastic Indicator as Your Cycle Timing Tool
            1. Realizing the best timing tool isn’t a timing tool
            2. Optimizing the timing tool for optimal entries
          3. Finding the Final Low or the Final High for the Best Entry
        2. Chapter 11: Support and Resistance: Figuring Out the Best Price to Enter a Trend
          1. Grasping the Importance of Support and Resistance Levels in Trading
          2. Closely Watching Previous Major Highs and Lows
          3. Mastering Mathematical Wizardry: Fibonacci Levels
            1. Defining Fibonacci levels
            2. Discovering how Fibonacci levels work
          4. Using Floor Trader Pivots Like the Pros
            1. Calculating floor trader pivots
            2. Understanding how and why floor trader pivots work
          5. Riding Wave and Cycle Highs and Lows
          6. Remembering that People Like Big, Round Numbers (And Why You Should, Too)
          7. Knowing That 52-Week Highs Are On Everyone’s Radar
        3. Chapter 12: Using Momentum Indicators to Test the Strength of a Trend
          1. The Traditional Momentum Indicator
          2. The Relative Strength Index (RSI)
          3. The Moving Average Convergence-Divergence (MACD) Indicator
        4. Chapter 13: Scale: Confirming the Trade on a Longer Time Interval
          1. Understanding How to Use Multiple Scales in Trading
          2. Trading with the Bigger Scale Trend: The Common Approach
          3. Using the Superior Approach and Trading with the Bigger Scale Momentum
            1. Understanding why the bigger scale momentum is superior to the bigger scale trend
            2. Trading the bigger scale momentum
        5. Chapter 14: Putting It All Together: The Five-Energy Trading Methodology
          1. Combining Forces with the Five-Energy Trading Method
            1. Putting the odds on your side
            2. Looking for the preponderance of the evidence
          2. Discovering How to Trade the Five-Energy Methodology
            1. Identifying the trend
            2. Determining whether the trend is strong or weak
            3. Figuring out when to enter
            4. Bouncing off support/resistance
            5. Filtering your trades with the energy of scale
        6. Chapter 15: Seeing the Five Energies in Action
          1. What Real World Examples Can Teach You About Trend Trading
          2. Scoping Out Stocks
            1. Day trading stocks
            2. Swing trading stocks
            3. Investing with stocks
            4. Analyzing a sample chart
          3. Finding Out About Forex
            1. Day trading with forex
            2. Swing trading with forex
            3. Investing with forex
            4. Analyzing a sample chart
          4. Fiddling with Futures
            1. Day trading with futures
            2. Swing trading with futures
            3. Analyzing a sample chart
          5. Getting Curious About Commodities
            1. Day trading with commodities
            2. Swing trading with commodities
            3. Investing with commodities
            4. Analyzing a sample chart
          6. Ogling the Options
            1. Buying calls or puts in the direction of the trend
            2. Putting in spread strategies in the direction of the trend
            3. Selling options against the trend
      5. Part IV: Determining Where, When, Why, What, and How to Trade
        1. Chapter 16: Understanding Leverage
          1. Using Leverage for Financial Gain
            1. Controlling a lot of money with a little money
            2. Making a money-management plan
          2. Trading with a Smaller Account
            1. Opting for options
            2. Building a fortune with futures
            3. Making money by trading money (forex)
        2. Chapter 17: Choosing a Trading Time That Works for You
          1. Day Trading During Open Outcry Hours
            1. Trading stocks and futures when you can
            2. Trading during the most active and exciting times of day
          2. Swing Trading for Those Who Have to Work for a Living
            1. Trading stocks after work
            2. Taking your own sweet time
          3. Forex Trading Around the Clock
            1. Trading the sun around the clock
            2. Knowing which currencies to trade and when
        3. Chapter 18: Creating Watch Lists to Find the Best Opportunities
          1. Finding the Raging Bull and Bear Markets
            1. Figuring out where to look
            2. Creating a watch list
          2. Using Watch Lists for Day Trading
            1. Watching uncorrelated markets
            2. Sampling some sample lists
          3. Analyzing Opportunities for Swing Trading and Investing
            1. Diving into a plethora of opportunities
            2. Sampling a sample list
        4. Chapter 19: Using Relative Strength to Make More Money
          1. Finding What’s Hot Now
            1. Measuring relative strength
            2. Reading relative strength
          2. Getting in Early While the Iron’s Hot
            1. Knowing when to enter on relative strength signals
            2. Protecting yourself against false relative strength signals
          3. Buying What No One Else Wants — Yet
            1. Jumping in early on a trend
            2. Risking being first to jump
        5. Chapter 20: Scanning Markets with Technology
          1. Getting Chummy with Your Computer
            1. Reviewing the software you need
            2. Understanding how software can help
          2. Scanning for Day Trading
            1. Acquiring fast technology
            2. Being quick with your reflexes
          3. Scanning for Swing Trading
            1. Navigating 10,000 opportunities
            2. Taking stock of the tools of the trade
          4. Scanning for Investing
            1. Approaching investment opportunities
            2. Going back to the fundamentals
      6. Part V: Managing Risk and Following the Keys to Success
        1. Chapter 21: Practicing Diversification
          1. Trading Various Markets
            1. Uncorrelated markets
            2. Value stocks and growth stocks
          2. Using Different Trading Methods
          3. Employing Trading Strategies Other Than Trend Trading
            1. Momentum trading
            2. Contraction/expansion trading
        2. Chapter 22: Hedging Your Position to Protect You from Losing All Your Money
          1. Protecting Your Hard-Earned Money with Options
            1. Getting to know your options
            2. Buying insurance against losing money: Buying a put
            3. Getting paid to protect your position: Selling covered calls
            4. Taming your trades: Put a collar on their necks
          2. Diversifying to Protect Yourself
        3. Chapter 23: Using Stop Signs to Keep You Safe
          1. Placing Protective Stops to Minimize Losses When Trades Go South
            1. Determining your initial stop price
            2. Opting for hard stops versus mental stops
            3. Opting for limit orders or market orders
          2. Protecting Your Profits with Trailing Stops
            1. Understanding how and when to use trailing stops
            2. Managing a trailing stop
          3. Utilizing Stops Each Day/Week/Month/Year
        4. Chapter 24: Documenting Your Trades and Printing Your Charts
          1. Documenting Your Entries, Exits, and Reasons for Taking a Trade
          2. Being Aware of What You Think and Feel As You Trade
          3. Recording Your Mistakes
          4. Going Old School: Printing Your Trading Charts
            1. Discovering how to print your charts
            2. Analyzing your printed charts
        5. Chapter 25: Reviewing Your Trades — Always!
          1. Looking for Your Mistake Patterns
            1. Taking a look in the mirror
            2. Knowing that you’re a uniquely flawed trader
          2. Comparing Your Actual Profits to Your “Perfect” Profits
          3. Reviewing the Documents for Your Documentation
      7. Part VI: The Part of Tens
        1. Chapter 26: Ten Habits of Highly Effective Trend Traders
          1. Being a Perpetual Student
          2. Being Flexible
          3. Being Part of a Trading Community
          4. Having Realistic Expectations
          5. Being Disciplined
          6. Working on Your Mindset
          7. Going to Work as a Professional
          8. Reviewing Your Performance and Applying What You Learn
          9. Focusing on Trading Mastery
          10. Leading a Balanced Life
        2. Chapter 27: Ten Common Misconceptions about Trend Trading
          1. If I Back Test Successfully, It Will Work in the Future
          2. The Market Is Out to Get Me
          3. Trading Is Easy — Just Follow the Trend
          4. The Professionals Know a Secret That I Don’t Have Access To
          5. I’d Be Successful if I Just Had That One Special Indicator
          6. Commission Prices Aren’t Important
          7. It’s Best to Follow the Advice of the Professionals
          8. I Have a Gut Feeling for Where the Market Is Headed
          9. I’ll Be Successful if I Trade Exactly Like My Mentor
          10. I’d Be Profitable if I Could Find a Trading Method That Worked
      8. About the Author
      9. Cheat Sheet