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Summary A Beginner's Guide to Short-Term Trading - Toni Turner.pdf
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~ inner'sguide to•TONI TURNERIJAdams Media CorporationAvon, Massachusetts
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Copyright ©2002, Toni Turner. All rights reserved.This book, or parts thereof, may not be reproduced in any formwithout permission from the publisher; exceptions are made for briefexcerpts used in published reviews.Published byAdams Media Corporation57 Littlefield Street, Avon, MA 02322. U.S.A.www.adamsmedia.comISBN: 1-58062-570-3Printed in Canada.JIHGFEDCBALibrary of Congress Cataloging-in-Publication DataTurner, Toni.A beginner's guide to short-term trading I by Toni Turner.p. cm.Includes index.ISBN 1-58062-570-31. Speculation. 2. Stocks--Charts, diagrams, etc.3. Stock price forecasting. 4. Investment analysis. I. Title.HG6041 .T87 2001332.63'228--dc21 2001046345This publication is designed to provide accurate and authoritative information with regard to the sub-ject matter covered. It is sold with the understanding that the publisher is not engaged in renderinglegal, accounting, or other professional advice. If legal advice or other expert assistance is required,the services of a competent professional person should be sought.-From a Declaration ofPrinciples jointly adopted by a Committee of the American BarAssociation and a Committee of Publishers and AssociationsRealTick® is a registered trademark of Townsend Analytics, Ltd. © 1986-2002. All rights reserved.Any unauthorized reproduction, alteration, or use of RealTick is strictly prohibited. Authorized useof ,RealTick does not constitute an endorsem*nt by Townsend Analytics of this book. TownsendAnalytics does not guarantee the accuracy of or warrant any representations made in this book.Many of the designations used by manufacturers and sellers to distinguish their products are claimedas trademarks. Where those designations appear in this book and Adams Media was aware of a trade-mark claim, the designations have been printed in initial capital letters.This book is available at quantity d!scounts for bulk purchases.For information, call 1-800-872-5627.Visit our exciting small business Web site at businesstown.com
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I dedicate this book to my students, worldwide. You have becomemy teachers and my friends. Thank you for your unending giftsofsupport and encouragement, laughter, and inspiration!
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ContentsACKNOWLEDGMENTS • • • • • • • • • • . • • • • • • • • • • • • • • . . • • . • • • • • • xiFOREWORD BY STEVE NISON ••••.•••••••••••••••••••••••• xiiiINTRODUCTION ••••••••.••••••••••••••••••.•••••••••••• xvAmerica's Love Affair; How the Romance Began; The Internet Played Cupid;Enter the Day Traders; My Relationship with the Stock Market; Why I WroteThis Book; Strategy Overview; What You'll Need to Succeed; Short-TermTrading: The Good News; The Flip Side; The Journey . .. ; It's Showtime!CHAPTER1-WALLSTREEnTHE GREATEST GAME ON EARTH. • • • . • • • • • . • • • • • • • • • • • • • 1Where It All ~tarted; Out of Chaos Comes O~der: The 'Crash of 1929; TheCrash of 1987: More Chaos and the Resulting Order; The New York Stock~xchange: How It Works; The Nasdaq Stock Market: How It" Works; TheAmerican Stock Exchange LLC: How It Works; Let's Dissect the Indexes;Wall Street as "The Animal House": The Bulls and the Bears, the Sheep andthe Hogs; Two Emotions That Rule the Markets (and Most ofthe Rest oftheWorld); Supply and Demand; Check Your Understanding; What Is "CenterPoint"?; Center Point: You . .. A Golden BuddhaCHAPTER 2-0FF TO A RUNNING START:SETTING UP YOUR BUSINESS•••••••••••••••••••••.•••• 17Map Your Business Plan; What's Your Time Commitment? Your MostImportant Commitment: Money; Quick Asset Allocation Plan;Selecting/Updating Your Office Equipment; Choosing a Broker; TheCommission Maze; Slippage: What It Means; Margin Accounts: How TheyWork; You Gotta Have Goals; Check Your Understanding; Center Point:Commit: Transform Your Dreams into Goalsvii
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viii A BEGINNER'S GUIDE TO SHORT-TERM TRADINGCHAPTER 3-MASTER A MONEY-MAKING MINDSET••••••.•••.•• 33The Market as an Unstructured Entity; The Stock Market Is Always Right;Meet Your Emotions-Up Close and Personal; The Winning Mindset-TrainYour Brain; The End Result: What It Looks Like; R & R: Don't Go ShoppingWithout It; Self-Respect and Deservability; Check Your Understanding;Center Point: Make Your Circle BiggerCHAPTER 4-MARKET MACHINATIONS 101:THE FUEL THAT SPARKS THE ENERGY••••••••••••••••••• 45The Buck Stops Here; Fundamental Analysis vs. Technical Analysis: The Tugo'War; Fundamental Analysis, Quick Yet Thorough Sources; IBDProprietary Corporate Ratings; More Instant Info, CNBC, CNN, andBloomberg; Wonderful Web Sites to Wander Through; Magazines; CheckYour Understanding; Center Point: Invite Spontaneity into Your LifeCHAPTER 5-MARKET MACHINATIONS 102:BASIC CHARTING TECHNIQUES THAT MAKE YOU MONEY•.•• 55Cycles: The World's Operating System; Let's Draw the Curtain on StageAnalysis; Different Stages Call for Different Reactions; Additional Cycle .Components; Support and Resistance, or Action and Reaction; Quiz; CenterPoint: Develop a Prosperity MindsetCHAPTER &-JUMP-START ON CHARTING BASICS ••••••••••••• 73Charting Essentials: Line Charts and Bar Charts; Candlestick ChartingBasics; Quiz; Center Point: Reach for Your Highest PotentialCHAPTER 7-eHARTING CLOSE-UPS:THE PIECES OF THE PUZZLE ••••.••••••••••••••••••.•• "93Anatomy ofYour Friend: The Uptrend; Buy Signals: What to Look For; Howto Draw an Uptrend Line; Trading in a Range, Congestion, andConsolidation; Anatomy ofa Downtrend; Overview ofSell Signals: What toLook For; How to Draw a Downtrend Line; Quiz; Center Point: The PowerofSynchronicityCHAPTER 8-PUTTING THE PUZZLE TOGETHER • • • • • • • • . . • . . • 119Volume: A Mega-Important Indicator; Moving Averages: What They Are,How to Use Them; Quiz; Center Point: Thoughts Are "Things"
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ixCHAPTER 9-THE BELLS AND WHISTLES:HOW THEY CHIME AND TWEET. • • • • • • • • • • • . • • • • • • • • • • • 135Oscillators: What They Are; The RSI, What It Is, How to Use It; StochasticOscillator: What It Is, How to Use It; The MACD: What It Is, How It Works;On-Balance Volume: What It Is, How to Read It; Bollinger Bands: What TheyAre, How to Read Them; Fibonacci Retracements: What They Are, How YouRead Them; Gaps: A Trader's Black Hole; Quiz; Center Point: You ArePerfect Right Now!CHAPTER 1O-IT'S SHOWTIME! ••••••••••••••••••••••••••• 157Continuation and Reversal Patterns: What They Are; Reversal Patterns: WhatThey Look Like; Let's Take Itfrom the Top!; Big Picture Dynamics; Choose aLeading Stock in a Leading Industry, Check Out the Fundamentals; TheIndustry Group or Sector Shows Immediate Strength; Indicators." All SystemsAre Go!; The Urge to Fudge; Get Ready to Pull the Trigger: The Buy Setup;Buy Trigger List; Quiz; Center Point: Awaken to ForgivenessCHAPTER ii-WHERE THE RUBBER MEETS THE ROAD:MONEY-MANAGEMENT TECHNIQUES •.•••• •' • • • • • • • • • • • • 183Plan Your Trade and Trade Your Plan; Piece of the Pie; RiskIReward Ratio:What It Means, How to Calculate It; Where to Place Your Stop-Loss Orders;Now That You've Got It, What Do You Do with It?; Intra-day ReversalPeriods: What They Are, What They Mean to You; Market Orders, LimitOrders, and More; Quiz; Center Point: The Circle ofGivingCHAPTER 12-WINNING STRATEGIES FOR SELLING SHORT ••••• 199Overcoming Mental and Emotional Roadblocks to Selling Short; SellingShort: The Rules; Here's the Process; What Makes Your Shorts Fall Down;Fundamentals: What to Look For; Chart Patterns and Setups: What to LookFor; Shorting Indicators: Ugly Is Good!; How to Place Your Order; ShortingStrategy: The Overextended Stock; Shorting Strategy: The OverextendedDouble Top; Sell Short Trigger List; Shorting Tips: FAQs (Frequently AskedQuestions); Quiz; Center Point: Banish Fear and Let Your Light Shine
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x A BEGINNER'S GUIDE TO SHORT-TERM TRADINGCHAPTER 13-ANATOMY OF A TRADE •.••••••••••••••.••••• 219Find an Industry Group or Sector to Target; The Preparation; The Journey;The Rest of the Story . ..; A Quick Look at Intra-day Charts; Center Point:Detachment Brings New PossibilitiesCHAPTER 14-YOU, THE WIZARD OF ODDS •••••••••••••••••• 237Back up and Look at the Big Picture; The "If, Then" Mindset; Analyze theBroader Markets; Learn to Assess the Trading Environment; TheAdvancelDecline Line: Market Narrator in a Capsule; A "Heads Up" onEconomic and Earnings Reports; Options Expiration Day-You're Outta'Here!; FOMC Reports; Mother Market's Contrarian Indicators; Stay Tunedto Changing Conditions; A Word about Losses; The Best Gift to GiveYourseIf..' A Trading Journal; Level-II Trading: Is It for You?; Quiz; CenterPoint: Come Back to CenterGLOSSARY OF TRADING AND FINANCIAL TERMS ••••••••••••• 253RECOMMENDEI) READING ••••••.••••••••••••••••••.••••• 273INDEX••••••••••••••••••••••••••.••••••••••••••.••••• 275
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AcknowledgmentsIf ever a book was created out of patience and love, this is the one!I consider myself blessed to have been surrounded by so many people whogave of their encouragement and support while I wrote this manuscript. My thanksand gratitude to ...First and always, my daughter Adrienne, who is the light of my life and mybest friend.My agent, Deidre Knight, the best ally an author could have, along withbeing a business partner, friend, and mother of another beautiful soul, Tyler.My editor, Gary Krebs, who helped shape and mold this book into finalform, editorial assistant Elizabeth Gilbert, whose patience shall endear her to meforever, business. editor Jill Alexander, and another patient soul, Copy ChiefLaura MacLaughlin.Harold Komhaus, who offered constant support and lots of hugs.Best friends Dan Gibby, David Kohn, and Vince Shorb, who gave wiseadvice, along with gentle, much-needed prods when I slowed down.Mark Frauman, mentor and friend, as well as Mike McMahon, Cathy Vlad,Jennifer Perrier, Claud "OEX" Staples, and Chris Dover.Dr. Dale Townsend of Tesserack, along with my wonderful friends, the "HotDogs," who motivated me and pushed me to the outside of my personal envelope.My Internet group, who gather each day for "Toni on Trading." They havebecome like family.Again, thank you all, and God bless!xi
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