The Master Swing Trader

PART ONE

THE GATEWAY TO SHORT-TERM TRADING

Chapter 1

Trading the Pattern Cycle 3

The Path to Trading Power 3

The Hidden Market 6

Pattern Cycles 7

Trend-Range Axis 9

Swing vs. Momentum 12

Time 14

Trend Relativity 16

Volume 18

Cross-Market Analysis 20

Reward:Risk 21

Mastering the Trade 21

Chapter 2

Preparing for the Market Day 25

The Closing Bell 25

Support-Resistance 26

Types of S/R 27

Cross-Verification 35

3D Charting 35

The Charting Landscape 38

Building the Road Map 39

Moving Average Ribbons 40

Candlesticks 43

Bollinger Bands 45

Chart Polarity 50

Bull-Bear 51

Trend-Range 51

Expansion-Contraction 53

Leading-Lagging 54

Convergence-Divergence 56

Reading Market Sentiment 58

Avoiding the Momentum Trap 59

The Big Picture 60

Dow Theory Y2K 62

Finding Winners 63

Needle in the Haystack 63

Opportunity Costs 64

Building Watch Lists 66

Writing Scans 67

Chapter 3

Analyzing the Market 69

Pattern Cycles 69

Bottoms 70

Breakouts 73

Rallies 76

Highs 79

Tops 81

Reversals 84

Declines 86

Market Mechanics 90

Pattern Characteristics 91

Understanding Price Breaks 92

Recognizing Trends 95

Trend Mirrors 97

Clear Air 99

Signposts 102

Volume and the Pattern Cycle 104

Accumulation-Distribution 105

Trends and Volume 107

Congestion and Volume 109

Intraday Trading Volume 110

Silent Alarm 111

Reading The Crowd 112

Bear Markets 112

Chapter 4

Building a Swing Trading Strategy 117

Systems and Methods 117

Momentum Trading 118

Countertrend Trading 120

Trading Tactics 124

More on Cross-Verification 126

Trader vs. the Crowd 131

Short Sales 132

Time Frame 137

Loading the Gun 139

Day Trading 142

Risk Management 143

Winning and Losing 145

Stop Losses 147

Capitalization 149

Records and Results 150

Inner Trader 151

Avoiding Self-Destruction 152

Chapter 5

Mastering the Tools 155

Patterns vs. Indicators 155

Managing Technical Tools 156

Price, Time, and Volume 160

Building Custom Indicators 162

Pattern Tools 163

Trendlines 164

Psychotic Trendlines 168

Parallel Price Channels 168

Gaps 170

Triangles 180

Flags 183

Candlestick Patterns 184

Pattern Failure 189

Indicator Tools 192

Bollinger Band Tactics 193

MACD Histogram 195

RSI and Stochastics 197

Volume Tools 199

OBV 200

Farley’s ADA (Accumulation-Distribution Accelerator) 202

Special Tools 204

Fibonacci 204

Market Numbers 212

TICK 213

Chapter 6

Understanding Time 219

The Time Element 219

The Market Clock 221

Position Timing 223

First Hour 225

Opening Imbalance 225

The Gauntlet 226

Midday Markets 229

Time for the Pros 229

Finding Midday Winners 231

Last Hour 232

Change of Character 234

Quitting Time 235

Time of Week and Month 235

Seasons and Seasonality 237

PART TWO

THE 7-BELLS: TOOLS TO LOCATE OUTSTANDING OPPORTUNITIES

Chapter 7

Mastering the Setup 243

Classic vs. Original Patterns 243

Pattern Recognition 244

Managing Opportunity 246

Two Classic Applications 248

2B Top 248

Description 249

Setup Tactics 250

Execution and Position Management 251

Reward:Risk 253

Channel Break 253

Description 253

Setup Tactics 254

Execution and Position Management 255

Reward:Risk 256

Introducing the 7-Bells 257

Original Setups and Execution 257

7-Bells Characteristics 258

Dip Trip—Price That Moves Against a Strong Trend Will Rebound Sharply 258

Coiled Spring—Constricted Price Gives Way to Directional Movement 258

Finger Finder—Candles Flag Reversals in the Next-Smaller Time Frame 258

Hole-in-the-Wall—Gap Downs after Strong Rallies Signal a Trend Change 259

Power Spike—High-Volume Events Print the Future Direction of Price 259

Bear Hug—Weak Markets Drop Quickly after Rallying into Resistance 259

3rd Watch—Breakouts through Triple Tops Signal Major Uptrends 259

Trading Strategies 260

Chapter 8

Dip Trip 261

Characteristics 261

Trade Mechanics 262

Dip Strategies 265

Applications 268

The 38-62 268

Description 268

Setup Tactics 269

Execution and Position Management 269

Reward:Risk 270

Continuation Dip 271

Description 272

Setup Tactics 272

Execution and Position Management 273

Reward:Risk 275

First Pullback 275

Description 275

Setup Tactics 276

Execution and Position Management 277

Reward:Risk 278

Chapter 9

Coiled Spring 279

Characteristics 279

Trade Mechanics 279

Spring Strategies 281

More on Range Bar Analysis 283

Applications 285

Triangle Coil 285

Description 285

Setup Tactics 286

Execution and Position Management 286

Reward:Risk 287

Failure Coil I 288

Description 288

Setup Tactics 289

Execution and Position Management 289

Reward:Risk 290

Failure Coil II 291

Description 292

Setup Tactics 292

Execution and Position Management

Reward:Risk 294

Chapter 10

Finger Finder 295

Characteristics 295

Trade Mechanics 297

Finger Strategies 299

Other Considerations 300

Applications 302

Hidden 100 302

Description 302

Setup Tactics 303

Execution and Position Management 303

Reward:Risk 303

2B Finger 303

Description 304

Setup Tactics 305

Execution and Position Management 307

Reward:Risk 308

Death Star 308

Description 308

Setup Tactics 309

Execution and Position Management 311

Reward:Risk 311

Chapter 11

Hole-in-the-Wall 313

Characteristics 313

Trade Mechanics 313

Hole Strategies 316

Applications 319

1-2 Decline 319

Description 319

Setup Tactics 319

Execution and Position Management 320

Reward:Risk 322

Support Hole 322

Description 322

Setup Tactics 323

Execution and Position Management 324

Reward:Risk 324

Island Reversal 324

Description 325

Setup Tactics 326

Execution and Position Management 327

Reward:Risk 328

Chapter 12

Power Spike 329

Characteristics 329

Trade Mechanics 329

Spike Strategies 332

Applications 333

Breakdown Spike 335

Description 335