Trade Like a Casino

A detailed look at the common characteristics found in most successful traders While there are a variety of approaches to trading in the financial markets, profitable traders tend to share similar underlying characteristics. Most have a methodology that they believe will prove profitable over the long run and are willing to endure short-term setbacks. If you're looking to make the most of your time in today's markets, you need to understand what separates the best from the rest. And with Trade Like a Casino, you'll gain the knowledge needed to excel at this challenging endeavor. Engaging and informative, this reliable guide identifies and explains the key techniques and mental processes characteristic of successful traders. It reveals that successful traders operate very much like a casino in that they develop a method that gives them "positive expectancy" and they unflappably implement the method in the face of changing, and oftentimes volatile, market conditions. Page by page, the book explores the intricacies of methodology, mental control, and flexibility that allow traders to develop and maintain the casino-like edge. Reveals how many successful traders tend to follow the same general principles, even if their approach to trading may differ Explores how to account for the risk of being wrong and the market moving against you Discusses how to develop an approach that combines trade selection with sound risk management, avoids emotional attachment to positions, exploits volatility cycles, and focuses on market action Regardless of how you approach markets, the insights found here will help improve the way you trade by putting you in a better position to distinguish the differences between successful and unsuccessful traders.

Preface xi  Acknowledgments xvii Part I The Casino Paradigm 1  Chapter 1 Developing Positive Expectancy Models 3  Why Technical Analysis Helps 3  The Inefficient Market 6 If It Feels Good, Don't Do It 10 “Just Make the Money” 15 Final Thoughts 21 Chapter 2 Price Risk Management Methodologies 23 One Sure Thing 23 Base of Pyramid 26 Middle of Pyramid 37 Apex of Pyramid 47 Pros and Cons of the Risk Management Pyramid 49 Putting It All Together: A Case Study 49 Final Thoughts 51 Chapter 3 Maintaining Unwavering Discipline 53 Defining Discipline 53 Discipline and the Positive Expectancy Model 55 Types of Traders 61 Discipline and Price Risk Management 64 Patience and Discipline 67 Final Thoughts 70 Part II Trading Tools and Techniques 71  Chapter 4 Capitalizing on the Cyclical Nature of Volatility 73  The Only Constant 73 Defining Volatility with Technical Indicators 76 Building Positive Expectancy Models with Volatility Indicators 89 Final Thoughts 94 Chapter 5 Trading the Markets and Not the Money 95  Ten Thousand Dollars is a Lot of Money! 95 “Baby Needs a New Pair of Shoes” 99 Trading with “Scared Money” 100 Time is Money 101 Final Thoughts 104 Chapter 6 Minimizing Trader Regret 105 The Softer Side of Discipline 105 Issues for Trend-Followers 106 Issues for Mean Reversion Traders 113 Final Thoughts 123 Chapter 7 Timeframe Analysis 125 Traditional Timeframe Analysis 125 Timeframe Confirmation Trading 131 Timeframe Divergence Trading 131 Final Thoughts 142 Chapter 8 How to Use Trading Models 143 Mechanical Trading Systems 143 Nonmechanical Models 162 Equity Trading Models 170 Final Thoughts 175 Chapter 9 Anticipating the Signal 177 Always Trade Value, Never Trade Price 177 Support (and Resistance) Were Made to be Broken 179 Don’t Anticipate, Just Participate 181 Final Thoughts 187 Part III Trader Psychology 189 Chapter 10 Transcending Common Trading Pitfalls 191 Characteristics of Market Behavior 191 Obstacle Makers to Growth as a Trader. 195 Final Thoughts 202  Chapter 11 Analyzing Performance 205  A Due Diligence Questionnaire 205  Trading Journal 225 Final Thoughts 236 Chapter 12 Becoming an Even-Tempered Trader 241  The “I Don’t Care Guy” 241  The Master Trader 244  Reprogramming the Trader 247  Flexibility and Creativity 248  Meditation 250  Visualization 251  Somatic Exercises 253  Final Thoughts 254  Notes 257  Bibliography 263  About the Author 265  Index 266