ENTRIES & EXITSVISITS TO SIXTEEN TRADING ROOMS
DR. ALEXANDER ELDER
John Wiley & Sons, Inc.
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ENTRIES & EXITS
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Founded in 1807, John Wiley & Sons is the oldest independent publishing company in theUnited States. With offices in North America, Europe, Australia, and Asia, Wiley is globallycommitted to developing and marketing print and electronic products and services for ourcustomers professional and personal knowledge and understanding.
The Wiley Trading series features books by traders who have survived the marketsever-changing temperament and have prosperedsome by reinventing systems, others bygetting back to basics. Whether a novice trader, professional, or somewhere in-between,these books will provide the advice and strategies needed to prosper today and well intothe future.
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ENTRIES & EXITSVISITS TO SIXTEEN TRADING ROOMS
DR. ALEXANDER ELDER
John Wiley & Sons, Inc.
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Copyright 2006 by Dr. Alexander Elder. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in anyform or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, exceptas permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either theprior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923,(978) 750-8400, fax (978) 750-4470, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons,Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online athttp://www.wiley.com/go/permissions.
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Library of Congress Cataloging-in-Publication Data
Elder, Alexander, 1950Entries & exits : visits to sixteen trading rooms / Alexander Elder.
p. cm. (Wiley trading series)Includes bibliographical references.ISBN-13: 978-0-471-67805-2 (cloth)ISBN-10: 0-471-67805-8 (cloth)
1. Investment analysis. 2. Stocks. 3. Futures.I. Title: Entries and exits. II. Title. III. Series.
HG4529.E46 2006332.6420922dc22
2005029249
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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www.wiley.com
In memory of Eddie Ching,
my best friend Patricias kid brother,
who on September 11, 2001,
went to a business meeting at the World Trade Center
and vanished from our lives.
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Introduction 3
Chapter 1
Sherri Haskell A Logical Way of Looking at Things 12
Chapter 2
Fred Schutzman My Computer Can Do the Trading for Me 30
Chapter 3
Andrea Perolo Simple Charts, Clear and Uncluttered 48
Chapter 4
Sohail Rabbani The Discipline of Loss Control 66
Chapter 5
Ray Testa Jr. Developing a Consistent Approach 84
Chapter 6
James (Mike) McMahon A Successful Engineer Has a Disadvantage 100
Chapter 7
Gerald Appel Looking for Favorable Probabilities 118
Chapter 8
Michael Brenke To Keep Repeating What I Did Right 136
Chapter 9
Kerry Lovvorn A Squeeze Play 158
vii
CONTENTS
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Chapter 10
Dr. Diane Buffalin Dancing Like Fred Astaire, Only Going Backwards
and in High Heels 176
Chapter 11
David Weis Price-Volume Behavior Is Steeped in Reality 192
Chapter 12
William Doane The Bigger the Foundation, the Taller the Building 208
Chapter 13
Peter Tatarnikov We Analyze People Who Analyze Markets 224
Chapter 14
Damir Makhmudov Technical Signals in the Fundamental Context 240
Chapter 15
Pascal Willain Effective Volume 258
Chapter 16
Martin Knapp Do It Right the Next Time Around 276
Conclusion
Your Trading Room 307
Bibliography 319
Reading Lists 321
Acknowledgments 329
About the Author 331
Index 333
viii Contents
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ENTRIES & EXITS
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Last Number One Head 3
You are about to meet 16 private traders. Some trade for a living, while others are stillat a semiprofessional level, clawing their way to the upper rung. These men andwomen live in different countries, trade different markets, and use different methods, butall share several traitsmost importantly their dedication to trading. They are utterly seri-ous about their work, while most amateurs, who supply the bulk of their winnings, arechasing the excitement of an adrenaline rush.
The people you are about to meet have generously agreed to describe their methodsand show their actual trades. Why would they do that? Why would a person who knowshow to trade talk to anyone instead of keeping his or her mouth shut and grinding outprofits in silence?
The secret of trading is that there is no secret. There is no magic formula you can buyor steal and plug into your computer to automatically make money. Success is based ondiscipline, hard work, and a bit of flair. These traders know that their success will not bediminished by the success of others, which is why they are willing to show you what theydo. Also, many have traveled a hard road and feel kind toward beginners.
Trading is an immensely rich field, and no one can become an expert in all aspects ofit, just like a doctor cannot be an expert in every field of medicine. Many beginners spreadthemselves painfully thin between investing and day-trading, between stocks, futures, andoptions. Youre about to see that almost all successful people find one area that appeals tothem and specialize in it.
People become successful when they focus on what they love to do. In reading thisbook you will probably come across a trading vehicle you like or a concept that appeals toyou. Once you find it, stay with it and mine that area for its rich deposits. I wrote this bookto help you break out of isolation, learn from others, pick up ideas that suit your style, andreturn to your trading room a better, more confident trader.
HOW I MET THESE TRADERSEight years prior to writing this book, I went on a Caribbean vacation and by the end ofthe week felt thoroughly bored. The blue sky, the warm beach, and the rich food became alittle repetitive after a few days. I realized that my favorite vacation was a working trip dur-ing which I could alternate work with sightseeing. I thought there must be others with
3
INTRODUCTION
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similar tastes, and the following winter scheduled my first Traders Camp. Eighteen traderssigned on, and we went to the Dominican Republic for a week. We ran on the beach everymorning, had classes from 9 AM to 1 PM and again from 5 to 6:30 PM, spent several hoursaround the pool after lunch, and partied every night. The group loved the classes, theresort, and the company. They told their friends about our Camp, and people started call-ing and asking to join. From then on we ran Traders Camps several times a year on islandsin the Caribbean, Pacific, and Mediterranean.
After working and playing together for a week, many campers became friends andkept in touch. I started having monthly campers meetings in my apartment in New York.Many campers returned to s
