Way of the Trade

The Mutation 

The Phantom Menace 

Typical HFT Sheep Skinning Cycle in 2009 to 2012 

Enter the Thunder and Tumbleweeds Market Trading Landscape 

Defining Market Landscapes, Climates, and Terrains 

The Five Laws of the Marketplace 

The Profit By-Product 

The Model of Excellence: Shokunin 

The Excellent State of Excellence 

Earnings Seasons: The Super Bowl of Momentum 

Global Influences: Europe, China, and the World 

 

The Hybrid Market Predator 

The Hybrid Market Predator 43

Relevant Traits of the Three Skillsets 44

Kurt Warner: Adversity Conditioning Model 45

Pockets, Pockets, Pockets 48

Properly Aligning Your Personal Perspective 49

Manifesting By-Product into a Product 51

The Eight-Step Process to Turn Idea into Profit 55

 

The Morning Ritual 

Hunting for Prey: Headliners and Corganic 58

The Gapper/Dumper Three‐Reaction Sequence 59

Ritual Religion 61

Wasted Effort 61

The Real Work, Don’t Skimp! 61

Law of Reciprocity Revisited 62

Fast and Simply Thorough (FAST) Chart Analysis 63

Step‐by‐Step Ritual Routine by Time 65

Evaluate the Climate 73

CHAPTER 4

The UndergroundTrader Trading System: The Katana 75

Recommended Online Direct Access Broker: Cobratrading.com 76

Configuring the Rifle Charts 77

The Role of the Bumpers: Moving Average Breakouts,

Breakdowns, and Trends 79

The Four Parts of Trends:

Consolidation → Break → Peak → Exhaustion 85

The Role of the Bumpers: Bollinger Bands 87

The Slope Effect 88

The Weekly and Monthly Moving Averages and Bollinger Bands 91

The Role of the Stochastics 91

Spotting and Trading Fades 93

The Two Most Important Price Patterns: Pups and Mini Pups 96

Stinky 2.50 and Five‐Level de Facto Price Bumpers 109

The (Only) Three Candlesticks I Use 111

Massive Volume Spikes 116

Mischievous Mistick Manipulation 119

The Essence of Stops 129

Less Is More Applies More Than Ever 132

Early and Mid‐Stage Perfect Storms 142

Three Levels of Stop Mindset 144

What to Do after a Disaster 145

The Three Steps for Proper Re‐Setting 146

Purposely Add More Stocks to Watch List and Minders 149

Step‐by‐Step Healing and Recovery 150

The Unconditional Three STOP Rule 151

DSS: Defensive Sprawl Scaling 152

CHAPTER 5

The Perfect Storm Pattern Trade 157

What Is a Perfect Storm? 157

Perfect Storm Profile 161

Spotting Perfect Storm Opportunities with the Anchor Time Frame 165

How to Trade the Three Types of Perfect Storms 175

How to Play Trending Perfect Storms 177

Trading the Sympathy/Laggard Perfect Storm 180

The Tightening 181

Tightening Reversals 186

How to Play Tightening Perfect Storms 186

The Consolidation Break 189

How to Play Consolidation Break Perfect Storms 191

Repeating Nature of Perfect Storms 194

Double‐Hedged Sword Sequence Trade 197

How to Execute DHSS Trades 201

CHAPTER 6

Optimized Four-Level Research Process 205

Level 1 Research Process: Spot Technical Analysis and

Headline Search 207

Level 2 Research Process: Digging Deeper into Fundamentals 211

Level 3 Research Process: Mining Perspectives 214

Level 4 Research Process: The Juicer, Full Immersion 216

The Afterglow Effect 221

CHAPTER 7

How to Prey for Playable Stocks to Trade 223

Stocks Are Battlegrounds and Participants Prey 224

Playability: Internal and External Factors 225

The Two Types of Playable Stocks: Headliners and Corganic 229

Where to Find Playable Stocks: Sources for Ideas 236

CHAPTER 8

Stalking Prey 243

Aging: Waiting for the Pattern to Form 244

Stalking: Setting an Alerts Minder on Your Trading Platform 244

CHAPTER 9

The Encounter from Start to Finish 247

Anxiety: Bad versus Good 247

React, Don’t Panic 248

Distinguishing Trade Entry Stages: Early, Impact, Late 249

The Complete Trade Sequence 256

Pretrade Process: Information Gathering and Analysis 256

Trade Execution Process: Entering the Position 258

Trade Management Process: Monitoring and Exiting the Position 258

Identifying Maladies in Your Trading 262

Post‐Trade Sequence Analysis 273

Reconstruct the Trade and Conditions Accurately 273

Summary 274

CHAPTER 10

Portfolio Trading: The Skillset of the Evolved Hybrid

Market Predator 277

Market‐Calibrated Portfolio Creation and Management 278

General Capital Allocation 278

Activity Allocation = General Capital Allocation 280

Risk Averse Nature of Intraday Trading 280

Her Majesty, Queen Leverage 281

Application of Well‐Managed Allocation Management 282

truTV: “Not Reality. Actuality” 282

Constructing the Portfolio 282

General Macro Market Analysis and Allocation Assessment 283

Qualifying the Three Types of Trade Considerations 284

Intraday Trade Profiles 285

Position Trade Profiles 290

Active Portfolio Management 298

Options Strategies 299

Delta Neutral Hedging 300

Covered Calls: Creating Your Own Dividend 301

Bullish Call Debit Spreads 301

Bearish Call Debit Spreads 302

Portfolio Trading Schedule of Activity 302

Harnessing Your Hybrid Evolution 303

CHAPTER 11

Conclusion: Cultivating Your Personal Evolution 305

Acknowledging the Spirit 305

Elements That Affect One’s Spirit 306

Broken Spirits’ Blowout 309

Nourish Your Spirit 310

Continuing Your Progress 311

Way of the Trade covers the hands‐on tactical applications of the UndergroundTrader trading methods in the new computerized algorithm‐driven market place with an optimized market‐tested hybrid approach for intraday, swing, and portfolio traders. The book addresses market realities in all their facets, not just concepts, through a first‐hand point of view perspective complete with illustrations, analysis, lessons, case studies, insights, and stories. The delivery is multilayered and lateral to purposely challenge the conventional (shortchanged) mindset to stimulate, entertain, and ultimately enlighten the reader in the ways of the trade. The Way implies truth. Simplicity is an end goal that appeals to the masses. In the markets, the outcome of any trade will be green or red, profit or loss, simplicity in only two possible outcomes, but that’s linear hindsight mentality. Pure simplicity is a product of the relentless effort to meticulously improve efficiency while concurrently streamlining the process, often derived from a need to fill a void or fend off counterparties/competition. Technology embraces this same essence with faster, smaller, and cheaper. Moore’s Law has been consistent for over 50 years, as it observes that chips will double the number of transistors and performance every two years as size, cost, and density decrease. The nature of efficient trading seeks to capitalize on the highest quality of price movement to maximize probability and profits while minimizing risk. The markets do provide these pockets of high quality price movements shuffled between mind‐numbing headfakes, wiggles, and chop.

Since 1996, Bloomberg Press has published books for financial professionals on investing, economics, and policy affecting investors. Titles are written by leading practitioners and authorities, and have been translated into more than 20 languages. The Bloomberg Financial Series provides both core reference knowledge and actionable information for financial professionals. The books are written by experts familiar with the work flows, challenges, and demands of investment professionals who trade the markets, manage money, and analyze investments in their capacity of growing and protecting wealth, hedging risk, and generating revenue.