Winning Edge Trading

PART I The New Trading Paradigm 1

CHAPTER 1 The Great Stock Market Meltdown 3

Primary Causes of the Current Financial Crisis 6

Dealing with the Emotional Toll 9

Rescuing Yourself from Financial Disaster 10

Transitioning from Investor to Trader 12

CHAPTER 2 Introducing the New Trading Paradigm 13

Online Trading 14

Flexible and Active Management 15

Exchange-Traded Funds 15

More Choices, Better Trading Opportunities 17

New Market Conditions 18

Intermarket Analysis Dynamics 22

Fundamental Analysis, Help Me Not! 24

CHAPTER 3 Pitfalls of the Old Investing Paradigm 27

Buy and Hold 27

Invest for the Long Term 30

Heavy Reliance on Fundamental Analysis 34

Light Portfolio Monitoring 34

Asset Selection Based Merely on Asset-Specific Risk 34

Time to Take Charge 34

PART II Trading Instruments and Markets 37

CHAPTER 4 Understanding the Financial Markets:

Common Stocks 39

What Are Financial Assets? 39

Types of Trading Markets 40

Characteristics of the Common Stocks Market 40

CHAPTER 5 The Exchange-Traded Funds Market 47

Characteristics of ETFs 47

Advantages and Disadvantages 50

Sectors and Types 51

Sponsors 55

ETFs: Attractive Trading Instruments 55

CHAPTER 6 The Futures Market: Financial and

Physical Commodities 57

Characteristics of the Futures Markets 58

Leverage Opportunities 64

PART III Trading Tools 69

CHAPTER 7 Fundamental Analysis 71

What Is Fundamental Analysis? 72

Financial Statements 72

Equity Valuation Methods 76

Fundamental Analysis Can’t Deliver Timely

Information 79

CHAPTER 8 Technical Analysis 81

Tools Used for Technical Analysis 82

Technical Indicators 85

Market Retracement Levels 100

Fibonacci Retracements 101

CHAPTER 9 The Winning Edge Trading System

Market Model 105

The Market as a System 106

Contraction/Expansion Principle 108

Fear Is Stronger Than Greed and Hope 109

Habitual Patterns 110

Market Trends 111

More Observations About Market Behavior 111

Trend-Line Orders 112

Winning Edge Market Model 113

CHAPTER 10 The Mechanics of the Winning Edge

Trading System 115

Entry Signals 115

Exit Signals 117

The System’s Protective Stops 121

CHAPTER 11 The Winning Edge System for Day

Trading 125

Day Trading E-Mini S&P Futures Contracts 125

Day Trading QQQQ 131

CHAPTER 12 The Winning Edge System for

Intermediate-Term or Swing Trading 135

Swing Trading S&P Futures 135

Long Signals for S&P Futures Contracts 136

Short Signals for S&P Futures Contracts 139

CHAPTER 13 The Winning Edge System for

Long-Term or Position Trading 143

Position-Trading Russell 1000 Index Futures 143

Long Signals for Russell 1000 Futures Contracts 144

Short Signals for NASDAQ Futures Contracts 147

Short Signals for NASDAQ Futures Contracts with No RSI

Confirmation 149

PART IV Investment Psychology 153

CHAPTER 14 Trading Psychology and Your Trading

Personality Profile 155

Two Pillars of Successful Trading 155

What Is Personality? 159

Why Is Personality Important to Trading Success? 160

Personality Theories 162

Personality Type Theory 165

Personality Traits Theory 166

Nature or Nurture? 168

Genotype and Phenotype 170

Five-Factor or Big Five Model 173

CHAPTER 15 The Trading Personality Profile

Test 177

Five-Factor Model of Personality 178

What the TPP Test Reveals About You 185

Trading Personality Profile Sample Test 188

TPP or OCEAN Score Guide 189

Reviewing Your TPP Score 190

CHAPTER 16 The Successful Trader’s Blueprint 191

Constructing Your Trading Success Blueprint 191

Set SMART Trading Goals 197

The Triple-A Formula for Success 200

See You at the Top! 201