Trade Like a Casino

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

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