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Manuscript on Trading INTRODUCTION: What are my thoughts concerning trading over the years? As I sit at my favorite place to think, my local Barnes & Noble Bookstore here in Greensburg, PA. I am reminded about how lucky I am to be alive and to be able to do the one thing I am most passionate about trading ... outside of God, and my family. Being an independent trader is the most enjoyable experience, I believe a person can obtain. More importantly, here is one arena where a person can start with next to nothing, and make themselves into something. You have the ability to truly reach for the stars; if you fall short you can still reach the moon. My first immediate thought on becoming a successful trader has to be the learning process is a hand’s on job. There is no experience quite like your own experience as it relates to trading. What do I believe is true is it relates to trading? The next conclusion concerning trading over a lifetime; you have to be able to survive and thrive through turmoil. The best teacher for a trader is experience. Many years ago, I use to wonder how a person gains experience, if no one is willing to take the time to train a person. In my pursuit of becoming a successful trader, my trading experience has been filled with many twists and turns throughout my career. There have been way too many books written on the subject of trading. My library is filled with many of these so called trading ‘masters’. Whether they are a true master or not, is not for me to say. What do I know about trading? To become a successful trader, think of it as a building process. Much like any profession that requires training, you have to start at the foundational level to make any progress on the journey. I believe the toughest concept concerning trading is the overwhelming desire to make money quickly, in this cut-throat environment. There has never been a week and now with the lightning speed of email, a day, where I don’t see a 'get rich quick in trading scheme' come across my trading desk. In my early trading career, I fell for the same hyped-up mumbo jumbo sales letters. The millions in a year stories. The latest greatest bread slicer trading method/system ... just send $XXXX to this address or website.

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Why am I writing a book on trading? My purpose in writing this book is to talk to the small account trader working hard to make a living trading. The grinders out here, that have the never say die attitude. The, I will survive, mentality it takes to become a success as a trader. Being a trader is not for the faint of heart, after all, you may find yourself at the mercy of the market, if you allow it to take control. Let’s talk a little bit about control … there is no such thing as a single person having control of the market. You may be able to influence the market as a big account trader for a short period of time, but the market is much bigger than any one person or company. Enjoy the Journey! I believe, the journey a person goes on, can be the greatest gift I may be able to give you. So enjoy the ride ... YOU ... the aspiring trader looking to take this journey with me.

The chart above is the eMini Dow Daily OHLC Bar Chart. My first trading course I put online was called the eMini Bull Bear Trading Method. In 2009 on YouTube, I recorded 9 videos documenting this trading strategy: eMini Bull Bear Trading Strategy. We will start our next discussion, in areas, I believe are important to understand as a trader. They are: TRENDS, WAVES, and SUPPORT and RESISTANCE.

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TRENDS: HOW TO DETERMINE OVERALL TREND OF THE MARKET The TREND (overall) as a DAY TRADER is determined from the DAILY Chart. This is the big picture of the market you are trading, as a day trader. In addition, I like to utilize the 50 Bar Simple Moving Average (SMA) relationship against the 200 Bar Simple Moving Average (SMA) to help me determine the overall trend. I believe, simply trying to trade a moving average crossover, without a momentum indicator, is my definition of insanity. I have used all kinds of momentum indicators in the past. Other traders use indicators like: CCI, MACD, RSI, Stochastic, Williams PercentR and many other numerous indicators to help them trade in the markets. What I honestly believe about trading, now after years of experience, is the most important component to consider ... What is the Mass Trader Psychology (MTP) of the Overall Market? If you can determine MTP as a trader, then you will make more money than you lose. Understanding MTP of the market you are trading determines the ultimate success or failure of an individual trader. In my opinion, the most efficient way to quickly determine MTP is to determine the overall trend of the market you are trading. The chart directly below shows the first two components of the eMini Bull Bear Trading Method. They are Price Action represented by the Open, High, Low and Close (OHLC) Bars and the 50 Bar Simple Moving Average (SMA) Line, represented by the rising black line cutting through prices. The SMA allows us to smooth out the Price Action. Additionally, it will show a snapshot picture of the market trend. The Daily Chart below is from the eMini Dow, (Dow Industrial 30 Stocks), which gives us our first glance of the overall trend, in the market we are trading. When the simple moving average (SMA) is going up then the overall trend of the market is LONG a (Buy), meaning there are more buyers than sellers; the exact opposite is true for the SHORT a (Sell) of the market.

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Now, the 50 BAR SMA by itself, can be a little deceiving. This is why I like to use another simple moving average, the 200 BAR SMA, in addition, to the 50 BAR SMA. The combination of these two simple moving averages (SMA), really helps paint a picture, of the overall trend on the daily price action chart (OHLC). For instance, if the 50 BAR SMA is above the 200 Bar SMA, then you would say the market is in an uptrend, and the reverse is true for a downtrend of the market. So, if we correctly determine the TREND of the overall market utilizing the 50/200 BAR SMA relationship, then you will have a accurate picture of the market. In the picture below, we would say the eMini Dow is in an UPTREND, because the 50 Bar SMA (black line) is above the 200 Bar SMA (purple line) on the Daily Chart.

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Wasn't that easy peasy lemon squeezy?

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WAVES: WAVES IN THE MARKET One of my core beliefs concerning trading is this; a market trades in wave like patterns.

It will move up in a progression of waves, very much like when you watch a gentle tide roll in, at the beach. At times the ocean and waves are rough, and at other times the ocean and waves are very smooth; like glass. I would also agree, easier trading is completed when the waves are in a smoother; more predictable environment. Another core belief concerning trading; how volatile and aggressive is a market. This can best be demonstrated in wave patterns; like a normal storm, a tropical storm or even a hurricane. There is a time to trade and not to trade. Perhaps, the smooth, predictable environment is like the consolidating trading ranges, when a market hasn’t shown anything tradable. I find the easiness of the market in calmer waves is a more enjoyable trading experience than extreme volatility. Yes, it is a true statement, you need volatility in a market to trade it but ... The market can become too VOLATILE to trade. The waves can become very violent and the up and down extreme swings of a market will leave many traders terrified and decimated, if they trade it. Extremely volatile markets should be a time when the small account trader must stand aside, or you will risk too much of your trading account per trade you take on. So understanding the type of wave patterns, the ocean, will assist you as a trader.

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How is the water (WAVES) today? Is it the cold, January, water of winter, the hot, July, water of summer or somewhere in between? Waves can be counted. This is the KEY to a trend with wave patterns. Waves can be seen in Price Action, and in Moving Averages plotted on the chart. Price Action by itself can only tell you so much. I know of traders who have the ability to simply trade on the Price Action of the charts and nothing else. These traders are the true surfers and artists of trading. They find it completely natural to be in a market and understand Mass Trader Psychology (MTP) of a market. For most of us; we need an indicator to help us in trading, but if you place too much information on a chart, then you will not be able to place a trade at the appropriate time. It is a fine line, between not having enough information to make a trading decision and having too much information on the chart. When you have too much information on your trading chart, then you will find yourself paralyzed in your decision making process. If this happens to you in your trading, then you need to reconsider the indicators you are using. Determine which indicators are beneficial in your trading decisions or not.

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SUPPORT AND RESISTANCE: S & R in the Market

When you start talking about Support and Resistance, then you need to begin with the highest time frame you are looking at to make decisions from that chart on correct trading levels.

On the chart above, this is the Daily Crude Oil Candlestick Chart with all of the data that is important as a trader.

Points of Interest on the Daily Chart:

• 50 Bar SMA • 200 Bar SMA • Pivot Points: PP, R1, R2, S1 and S2 • Major Support and Resistance Levels • Minor Support and Resistance Levels

All of this information is extremely helpful to traders, but what exactly should you be looking at on a daily basis.

We can determine the daily trend of the Crude Oil Market ... Down ... because the 50 Bar SMA (Gold line) is below the 200 Bar SMA (Purple line). Therefore; until proven otherwise, the crude oil market will make a better short (sell) opportunity than a long (buy) opportunity.

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It is important to note, we are in a Price Action Pattern of what is commonly referred to as a Trading Range or a Congestion on the Daily Crude Oil Chart. We are able to subdivide the Support and Resistance areas into our daily target trading levels.

The most significant point on any Daily Trading Chart will be the Pivot Point. Notice, on the Crude Oil Trading Chart above, this is located at 4558. This number will normally change on a day by day basis. This is the most significant point of value where traders are more apt to be short below the Pivot Point line, and long above the Pivot Point line.

Also looking at the Daily Crude Oil Chart, we are much closer to the Major Support level, than to the Major Resistance level. To get these Price levels you look for the Highest Point for Resistance on your chart data, normally going back a couple of months worth of data from the charts. Likewise; we are looking for the Lowest Point for Support.

On the Daily Crude Oil Chart Shown Above These Levels are Currently:

• Major Support: 3850 • Major Resistance: 6400 • Minor Support: S1 Line 4407 and S2 Line 4311 • Minor Resistance: R1 Line 4654 and R2 Line 4805

Additionally, what is seen on the Daily Crude Oil Candlestick Chart is our 50 Bar SMA and our 200 Bar SMA levels are above Price Action. Once again, this confirms that traders would much rather be a seller, than a buyer given the current Price Action of the Crude Oil Market.

In summary, the best chart to start formulating Support and Resistance Levels is the Daily Crude Oil Price Action Chart, then working your way on down to the chart that is utilized for your trading decisions. By accomplishing this task, you will have a top-down approach to your trading decisions and you will take advantage of the best possible trading opportunities as they develop.

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VOLUME VS RISK: Volume versus Risk In Trading

In my humble opinion, I have struggled as a trader in placing the 'R' (RISK) over the years working on the CL Power Trading Method. In other words, should I be at 1/2R, 2/3R or at 1R on my stop loss after I enter the trade.

Most of the time, 1/2R is enough to make the trading decision on the CLPORT Method, but at select times it is not the optimum level for the stop loss.

Trading days like today happen where I take on more trades than what I would like trying to position myself on the trade. Before I can get positioned for the profitable trading day, I run into my Max Daily Loss inside the trading day.

Looking at the chart below, and the video I placed up on YouTube: Volume Versus Risk, I hope this helps you in your trading as it will help in my trading decisions going forward.

By implementing the R-Risk versus the V-Volume in Trading ... I will be in effect allowing the market volume spike bar to determine how many ticks I should be risking given the trade.

In a nutshell, I have determined a level of ticks for a stop loss from 400 in Volume to above and beyond 2,500 in Volume on one Volume Bar.

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In today's trading example, we had a Volume Spike Bar of 1725 at 7:39AM CST. This means it is above 1000 in Volume ... so this should tell me for my CLPORT Method trade I should use 1R in RISK for the trade.

Today, this would have meant a 23 tick stop loss on the trade entry of 4425. This would have placed the Stop Loss on the Long Signal at 4402 in the Crude Oil Market.

Bottom line, you need to determine how far and how much you should be willing to RISK on any given trading opportunity.

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(information below this line is still a work in process)

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MOVING AVERAGE CROSSOVER INFORMATION:

As I look at the chart above what I can see is the market has went up and also has went down. The 14 Bar Weighted Moving Average represented by the green line is a little smoother, and the smoothest line is the 50 Bar Simple Moving Average. You can see the green line crossing over the black line, and this is what traders call a moving average crossover. It is a very basic trading concept. Moving Average Crossovers work great in a trending market, but they will kill you in a grinding non trending market. The market is said to only trend 20 to 25 percent of the time at most. What this means to some degree, if the trend is your friend, then you should be very selective of your trends, and friends for that matter. Price Action automatically over time will show support and resistance levels, because trading is about mass psychology. The PRICE ACTION does not lie. In fact, it is just about the only thing you can trust as a trader. The price action will always be right, and you will find yourself not right on many occasions. The true market is shown by the price action at any given point in time. The market will stop and reverse and go up, and it will stop and reverse and go down. You can bet on this and win. But the trick is when … when is a good time to place the money on the table and take a shot? You will see and hear people talk about trends, and trend lines, and tops and bottoms of the market. You will hear them talk about double tops and bottoms, and occasionally even triple and quadruple tops and bottoms. What we know about trading is at any given point in time, the market will have a low on the chart, and it will have a high on the chart. Our job is to trade to make money, by going long into an uptrend, and to go short into a downtrend.

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Sounds easy? So why is it then so very hard to do! Why do most traders fail in the pursuit of trading? One of those facts you hear about over and over again, approximately 90% of traders fail and lose all their money in trading. And others will say it is as high as 95% of people. So if your odds of success are between 5 to 10 percent … why bother? I have asked myself this very question, and my conclusion more than any other is most trading losses come from a lack of discipline and self-control in a losing streak. The comparison most traders find themselves in is much like the table limit at a casino. What we know about the casino is they always win more than they lose because of their edge. There is no 50/50 proposition in the casino. You will not find a coin flip game in a casino, and they are not in the business of being fare on the odds. They will exploit their edge each time you place a bet, and you can count they will make their edge. Our job as traders is to find an edge and more importantly, exploit it. This leads me to my 3 Principle Trading Rules of Trading. They are as follows:

1. Cut Losses Short 2. Let Profits Run 3. Take Profits on the Ride!

This is the key to being successful as a trader. I have no doubt in this fact, if you can win more money than you lose after commission costs, you will be a winner as a trader. If you do the other, then you will lose your money and be out of business. You can take this to the bank. You as a trader must have an edge and exploit it for all it is worth. Here is the key to making money in the markets: The masses make money in the middle of a trend, but they lose all the money they made during the beginning and end of trends. The next thing I want to work on is to further my eMini Bull Bear Foundational Trading Strategy and demonstrate it in a live trading environment when I figure out how to put it together. I need to know the minimum I should have on the charts and what exact setups I am looking to do. I know it will be a TAKE THE TREND AND COUNTER TREND trading strategy. This fact is true. I have moving averages, and Bollinger bands and that are like a highway. What is the best way to put it together? How can I use the information that is in my head and from others to put together a valid trading strategy that people will pay money for to obtain, and I would build my trading room in the process by demonstrating it. The overall key is multiple contracts and my ADR concept … ??? How much do I give for a little amount of money to build confidence and trust? My concept of red/green lines could be very helpful in determining the overall trend of the trade to help the individual trader understand exactly what I am trying to show them. The disadvantage will be they will want to know the formula for setting it up … this shouldn’t be a problem if I show a set up video and record it. I am giving some of my trading information away as value to allow them to profit and hopefully buy more from me.

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The GREEN line shows a possible up trend and the RED line shows a possible down trend. How many charts should this trading strategy utilize and what time frames? What should be the shortest time frame, do I need 2 or 3 charts on the page to help them determine the trend of the trade and waves. What chart shows the wave count? I am going with the middle one in three … this would be a tick chart. Three charts will show a 5 Minute, and 2 tick charts. Two charts will show 2 tick charts and more for a scalper in the markets. Do I introduce the HIGHWAY in this strategy? My thought is to hold that back to the next course. What charts and how should I introduce them to traders? The next video needs to be a wave count video, the next one after that should be to color the bar charts. Back to waves, waves can be counted on your charts, and this trading strategy takes advantage of the ‘sweet-spot’ of the 2nd and 4th wave retracements. (See the 3rd video for a further explanation graphically … show some charts here …)

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MONEY MANAGEMENT AND POSITION SIZING Here is where the concept of ADR will come into play and profit targets. My belief about trading is the tortoise and the hare concept. This trading strategy will employ a minimum of 2 contracts, and then multiples of 2 for each increment. Find out the day trading margin for the eMini YM is $500 at Infinity Futures. 5 times this … would be $2500 … so you need a minimum of $5,000 to trade 2 contracts for this trading strategy. If I may for a moment digress for a bit, and talk about one of my hot buttons as a trader. Many trader’s and trading books talk about 2% account risk per trade which equals say $400 on a $20,000 trading account. What many of these so called educators don’t really realize, this is not possible for the “average” trader entering in the market. I believe this is a way for them to shelter themselves from having to talk to the small account trader. Now, don’t get me wrong, I am in firm belief that as a trader, you should only risk the 2% per trade, when you have a large account, but to get that LARGE account you WILL have to take on more RISK! There is no way around this KEY concept. You either accept the INCREASED RISK per trade, or you have the money to allow you to trade the 2% to 5% per trade most of the educators and trading books will preach to you about. The reason this is such a hot button for me is because I have placed myself into the shoes of the small account trader trying to get a nut from the market. To paraphrase Donkey from Shrek, YOU GOT-TA, GOT-TA, GOT-TA, allow yourself to accept more RISK or FIND something else to do with your life than trading as a small account trader. You either accept this as a FACT or you don’t take on TRADING … it’s that simple! I can’t stress this point enough to you. If you can accept this point, then we can talk more about trading. The Second Key Trading Principle is to “Let Your Profits Run,” but the other and more important component to this is the Third Trading Principle to “Take Profits on the RIDE!” What does it mean to take profits on the ride? This can be summed up in two different ways of thinking. When you are trading multiple contracts, in this case you are trading 2 contracts minimum of the YM eMini Dow, you will have a set profit target on one of these contracts, and you will allow the other to RUN! In addition, the other component is to take profits out of your trading account. Jesse Livermore, a very famous trader in the early 1900s talked about taking ½ of your trading gains off the table at certain increments. I would ARGUE this more than any other concept I can teach you is the overall key to money management. (talk more on this and show examples even a spreadsheet)

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It is OK, and you have to ALLOW yourself, to be OK, with taking TRADING PROFITS from your trading account. Go to the bank, and make them count out $100 dollar bills to you on a consistent basis! Make ‘them’ think you are doing something ‘illegal’. This is where the FUN of trading comes into play.

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GOALS – VISION BOARDS You need to have set goals, and a clear vision to reach these goals. I utilize a vision board myself, and I highly recommend it to you. I have placed this video as required watching for those that really want to grow their trading accounts the right way! MANY MANY MORE CHARTS !!! The trading strategy is taking shape I have to figure out waves and the CCI with Price Action … do not introduce volume on the foundational trading strategy. PROFIT TAKING SECTION My take on Jesse Livermore goes here … another spreadsheet showing how to do this … become a LLC and a trading entity as a business.

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