STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... ·...
Transcript of STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... ·...
![Page 1: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1.jpg)
![Page 2: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/2.jpg)
STUDYGUIDEFOR
THENEW
TRADINGFORALLIVING
![Page 3: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/3.jpg)
The Wiley Trading seriesfeaturesbooksbytraderswhohave survived the market’sever-changing environmentand have prospered—someby reinventing systems,others by getting back tobasics. Whether you are anovice trader,professionalorsomeone in-between, these
![Page 4: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/4.jpg)
bookswill deliver the adviceand strategies you need toprosper today and in thefuture. For more on thisseries, visit our website atwww.WileyTrading.com.Foundedin1807,JohnWiley& Sons is the oldestindependent publishingcompanyintheUnitedStates.With offices in NorthAmerica, Europe, Australiaand Asia, Wiley is globally
![Page 5: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/5.jpg)
committed to developing andmarketingprintandelectronicproductsand services forourcustomers’ professional andpersonal knowledge andunderstanding.
![Page 6: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/6.jpg)
STUDYGUIDEFOR
THENEW
TRADINGFORALIVING
![Page 7: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/7.jpg)
Psychology•Discipline
TradingToolsandSystems
RiskControl•TradeManagement
Dr.AlexanderElder
![Page 9: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/9.jpg)
Coverdesign:PaulDiNovoCopyright©2014bybyDr.AlexanderElder.Allrightsreserved.PublishedbyJohnWiley&Sons, Inc.,Hoboken,NewJersey.PublishedsimultaneouslyinCanada.No part of this publication may bereproduced,storedinaretrievalsystem,or transmitted in any form or by anymeans, electronic, mechanical,photocopying, recording, scanning, orotherwise, except as permitted underSection107or108of the1976UnitedStatesCopyrightAct,withouteithertheprior written permission of thePublisher, or authorization throughpaymentoftheappropriateper-copyfee
![Page 10: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/10.jpg)
totheCopyrightClearanceCenter,Inc.,222 Rosewood Drive, Danvers, MA01923, (978)750-8400, fax (978)646-8600, or on the Web atwww.copyright.com. Requests to thePublisher for permission should beaddressed to the PermissionsDepartment, JohnWiley& Sons, Inc.,111 River Street, Hoboken, NJ 07030,(201)748-6011,fax(201)748-6008,oronline athttp://www.wiley.com/go/permissions.Limit of Liability/Disclaimer ofWarranty: While the publisher andauthor have used their best efforts inpreparing this book, they make norepresentations or warranties withrespecttotheaccuracyorcompleteness
![Page 11: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/11.jpg)
of the contents of this book andspecifically disclaim any impliedwarrantiesofmerchantabilityor fitnessfor a particular purpose. No warrantymay be created or extended by salesrepresentatives or written salesmaterials. The advice and strategiescontainedhereinmaynotbesuitableforyoursituation.Youshouldconsultwitha professional where appropriate.Neither the publisher nor author shallbe liable for any loss of profit or anyother commercial damages, includingbut not limited to special, incidental,consequential,orotherdamages.For general information on our otherproducts and services or for technicalsupport, please contact our Customer
![Page 12: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/12.jpg)
Care Department within the UnitedStates at (800) 762-2974, outside theUnitedStatesat (317)572-3993or fax(317)572-4002.Wileypublishesinavarietyofprintandelectronic formats and by print-on-demand. Some material included withstandardprintversionsofthisbookmaynot be included in e-books or in print-on-demand.Ifthisbookreferstomediasuch as a CD or DVD that is notincluded in the version you purchased,you may download this material athttp://booksupport.wiley.com.FormoreinformationaboutWileyproducts,visitwww.wiley.com.Library of Congress Cataloging-in-PublicationData:
![Page 13: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/13.jpg)
ISBN978-1-118-46745-9(Paperback)ISBN978-1-118-98470-3(ebk)ISBN978-1-118-98471-0(ebk)
![Page 14: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/14.jpg)
CONTENTS
1. ABOUTTHISSTUDYGUIDE
2. PARTI:QUESTIONSRATINGSCALES1. Introduction2. ONE:Individual
Psychology
![Page 15: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/15.jpg)
3. TWO:MassPsychology
4. THREE:ClassicalChartAnalysis
5. FOUR:ComputerizedTechnicalAnalysis
6. FIVE:VolumeandTime
7. SIX:GeneralMarketIndicators
8. SEVEN:Trading
![Page 16: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/16.jpg)
Systems9. EIGHT:Trading
Vehicles1. Note
10. NINE:RiskManagement
11. TEN:PracticalDetails
12. ELEVEN:GoodRecord-Keeping
3. PARTII:ANSWERSANDCOMMENTS
![Page 17: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/17.jpg)
1. Introduction1. Rating
Yourself2. ONE:Individual
Psychology1. Rating
Yourself2. Recommended
Reading3. TWO:Mass
Psychology1. Rating
![Page 18: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/18.jpg)
Yourself2. Recommended
Reading4. THREE:Classical
ChartAnalysis1. Rating
Yourself2. Recommended
Reading5. FOUR:
ComputerizedTechnicalAnalysis
![Page 19: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/19.jpg)
1. RatingYourself
2. RecommendedReading
6. FIVE:VolumeandTime1. Rating
Yourself2. Recommended
Reading7. SIX:General
MarketIndicators
![Page 20: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/20.jpg)
1. RatingYourself
2. RecommendedReading
8. SEVEN:TradingSystems1. Rating
Yourself2. Recommended
Reading9. EIGHT:Trading
Vehicles
![Page 21: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/21.jpg)
1. RatingYourself
10. NINE:RiskManagement1. Rating
Yourself2. Recommended
Reading11. TEN:Practical
Details1. Rating
Yourself
![Page 22: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/22.jpg)
12. ELEVEN:GoodRecord-Keeping1. Rating
Yourself4. Afterword5. Sources6. AbouttheAuthor7. EndUserLicense
Agreement
![Page 23: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/23.jpg)
ListofIllustrations1. THREE
1. FIGURE3.4Medtronic,Inc.(MDT)weeklychart.(ChartbyStockcharts.com).
2. FIGURE3.8WalterEnergyInc.(WLT)daily.(ChartbyStockcharts.com).
![Page 24: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/24.jpg)
3. FIGURE3.10JetBlueAirwaysCorp.(JBLU)daily.(ChartbyStockcharts.com).
4. FIGURE3.12BoeingCo.(BA)daily.(ChartbyStockcharts.com).
2. FOUR1. FIGURE4.7
Williams-SonomaInc.(WSM)daily,
![Page 25: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/25.jpg)
13-dayEMA.(ChartbyStockcharts.com).
2. FIGURE4.8BlackBerryLimited(BBRY)weekly,13-weekEMA.(ChartbyStockcharts.com).
3. FIGURE4.11DRHortonInc.(DHI)daily,26-dayEMAand12-26-9
![Page 26: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/26.jpg)
MACD.(ChartbyStockcharts.com).
4. FIGURE4.14AlexcoResourceCorporation(AXU)with22-dayEMAanda13-dayDirectionalSystem(green+DI,red–DI,blackADX).(ChartbyStockcharts.com).
5. FIGURE4.18
![Page 27: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/27.jpg)
LeapfrogEnterprisesInc.(LF)with26-dayEMAand7/3SlowStochastic.(ChartbyStockcharts.com).
6. FIGURE4.20Tiffany&Co.(TIF)with26-dayEMAand13-dayRSI.(ChartbyStockcharts.com).
![Page 28: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/28.jpg)
3. FIVE1. FIGURE5.3
CapstoneTurbineCorp.(CPST)with26-dayEMAanddailyvolume.(ChartbyStockcharts.com).
2. FIGURE5.13ScorpioTankers,Inc.(STNG)with13-dayEMAofpriceanda2-day
![Page 29: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/29.jpg)
EMAofForceIndex.(ChartbyStockcharts.com).
3. FIGURE5.15EMCCorp.(EMC)with13-dayEMAofpriceanda13-dayEMAofForceIndex.(ChartbyStockcharts.com).
4. FIGURE5.18Molycorp,Inc.(MCP)with13-day
![Page 30: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/30.jpg)
EMAofpriceanda12-26-9MACD-Histogram.(ChartbyStockcharts.com).
4. SIX1. FIGURE6.3S&P
500witha22-dayEMA,aNewHigh–NewLowIndex,withaoneyearlook-backperiod.(NH-NLdatafrom
![Page 31: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/31.jpg)
Barchart.com,chartbyTradeStation).
5. SEVEN1. FIGURE7.8Onthe
left:BBBYweeklychartwitha13-barEMAand12-26-9MACD-Histogram.Ontheright:BBBYdailychartwitha13-barEMAand2-barForceIndex.(Chartby
![Page 32: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/32.jpg)
Stockcharts.com).2. FIGURE7.12JCP
dailywitha13-barEMA,a12-26-9MACD-Histogram,andtheImpulsesystem.(ChartbyStockcharts.com).
![Page 33: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/33.jpg)
ABOUTTHISSTUDYGUIDE
Experiencedtradersseemtoglide through the markets,swinging into and out oftrades. Their trading appears
![Page 34: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/34.jpg)
effortless, like downhillskiingonTV.Theillusionofease vanishes when youclamp on a pair of skis anddiscover the bumps on theslope.Ifyouwanttoimproveyour trading skills, you haveto work, study, and do yourhomework.I created thisStudyGuide tohelpyougrowandsucceedasa trader. It is based on myyears of experience as a
![Page 35: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/35.jpg)
trader and teacher of traders.The more you study themarketsandyourreactionstothem,themorelikelyyouaretosucceed.Youneedtolearnmore about yourself as wellas themarkets—good tradersalwayslearn.EachquestioninthisGuideislinkedtoaspecificchapterinTheNewTradingforaLiving—psychology, riskmanagement, indicators, and
![Page 36: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/36.jpg)
so on. Write down youranswers and compare themwiththoseinthebook.Whenanswering chart-relatedquestions, cover each chartwith a sheet of paper andmove it slowly from left toright to imitate the unfoldingof market action. Practicedealing with the uncertaintyofthemarketswhileworkingwiththisGuide.This Guide asks questions
![Page 37: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/37.jpg)
and provides answers—butreasonable people maydisagree with some of them.Trading is partly a scienceand partly an art—partlyobjective and partlysubjective. Let this Guidechallengeyoutothinkdeeperabout the markets and yourreactionstothem.I am grateful to HenryAbelman and Jeff Parker,both repeatwinners of Spike
![Page 38: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/38.jpg)
Trade'sEagleEye award, forreviewing all questions andanswers. Carol KeeganKaynedidthefinalcheckforclarityandprecision.Thanks to my formerprofessorsandstudentsattheuniversitiesinEstoniaandtheUnited States for providingmany opportunities to teachand develop my educationalstyle.Thanks to the membersofSpikeTrade.com,whokeep
![Page 39: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/39.jpg)
sending me trading-relatedquestions.Postinganswers tothem week after week keepsmeonmytoes.IhopethisGuidehelpsyoutosharpen your skills and tobecome a better, moreconfidenttrader.
Dr.AlexanderElderNewYork—
![Page 40: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/40.jpg)
Vermont,2014
![Page 41: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/41.jpg)
PARTI
QUESTIONSAND
RATINGSCALES
![Page 42: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/42.jpg)
Introduction
Towinintrading,youmustoutperform masses of
![Page 43: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/43.jpg)
competitors. The majoritymust lose in order to paythosewhowin.Tobecomeasuccessful trader, you mustbeat the odds against you.You must learn to think andact differently from themarketcrowd.TheNewTradingforaLivingcontains several unorthodoxtradingideas.TheaimofthisIntroductionistopauseatthebeginning of the journey and
![Page 44: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/44.jpg)
toseewhetheryouareintunewith some of theunconventional thinkingabouttrading.
Questions Trial1Trial2
Trial3
1 2 3 4 5
![Page 45: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/45.jpg)
6 7 8 9
Correctanswers
Question0-1
1. Whichofthe
![Page 46: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/46.jpg)
followingmethodsofmakingtradingdecisionscanservetraderswellinthelongrun?
1. Fundamental
analysis2. Insideinformation3. Hunchesandtips4. Technicalanalysis
![Page 47: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/47.jpg)
1. IandII2. IIandIII3. IandIV4. IIIandIV
Question0-2
1. Whichofthefollowingisn'tneededfortradingsuccess?
![Page 48: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/48.jpg)
1. Tradingpsychology2. Analyticmethod3. Connectionswith
marketinsiders4. Money
managementmethod
Question0-3
1. Thebest
![Page 49: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/49.jpg)
approachtoreadingabookontradingisto
1. testalltheideas
thatinterestyouonyourownmarketdata.
2. incorporatealltheideasinyourwork.
3. nottrustwhatyouread—whywouldanyonesharegood
![Page 50: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/50.jpg)
tradingideas?4. askothertraders
whethertheideasinthebookworkedforthem.
Question0-4
1. Whichofthefollowingisnotamajorcauseoftradinglosses?
![Page 51: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/51.jpg)
1. Slippage2. Commissions3. Emotionaltrading4. Theft
Question0-5
1. TraderJimandTraderJohntaketheoppositesides
![Page 52: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/52.jpg)
ofatrade.Bothpaycommissions,andbothgethitwithslippage.TraderJim,thewinner,collects$920,whileTraderJohn,theloser,isout$1080.Theresultofthistrade
![Page 53: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/53.jpg)
illustratesthefactthattradingisa:
1. Zero-sumgame2. Positive
expectationsgame3. RandomWalk4. Minus-sumgame
Question0-6
![Page 54: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/54.jpg)
1. Youfindastocktradingat$20andplantobuy100shares.Yourbrokerwillchargeacommissionof$10.Whichofthefollowingstatementsisincorrect?
1. Whendealingwith
![Page 55: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/55.jpg)
thousandsofdollars,don'tquibbleabout$10.
2. Youneedtomake1%profittoavoidlosingmoneyonthistrade.
3. Using50%margin,youneedtomakemorethan2%profittoavoidlosingmoneyonthistrade.
![Page 56: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/56.jpg)
Question0-7
1. Youplaceamarketordertobuy100sharesofarisingstockthatcurrentlytradesat$20.Yourordergetsfilledat$20.08.Yourslippageonthe
![Page 57: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/57.jpg)
tradeis1. 80cents2. $83. $164. $80
Question0-8
1. ThestockyouboughtinQuestion7
![Page 58: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/58.jpg)
ralliedto$22.Youexpecttherallytocontinuebutraiseyourstopto$21toprotecthalfofyourpaperprofit.Thestocksinksandhitsyourstop—yougetfilledat$20.88.Your
![Page 59: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/59.jpg)
slippageonthistraderepresentswhatpercentageofyourgrossprofit?
1. 5percent2. 10percent3. 25percent4. 50percent
![Page 60: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/60.jpg)
Question0-9
1. InthetradedescribedinQuestions7and8,thetradingindustrytookwhatpercentageofyourgrossgain?
![Page 61: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/61.jpg)
1. 25percent2. 50percent3. 75percent4. 100percent
![Page 62: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/62.jpg)
ONE
IndividualPsychology
Your greatest danger in
![Page 63: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/63.jpg)
trading comes from theperson holding this book—you. Our emotions often tipthe scale between winningand losing. If you can staycool and make rationaldecisions, tradingprofitswillfollow.A professional trader is calmandcollected.Heknowswhathe'lldoifthemarketgoesup,down, or sideways. On dayswhenhe isnot sure,he stays
![Page 64: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/64.jpg)
out, patiently monitoring themarket from the sidelines. Aprofeelsincontrol.If you feel giddy with joywhen the market goes yourwaybutfreezeinfearwhenitswings against you, youractionswillbeemotionalandyour account will suffer.When the mind becomesclouded by greed or fear,eventhebest tradingsystemsfly out the window. The
![Page 65: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/65.jpg)
questions that follow aredesignedtohelpyoufocusontradingpsychology.
Questions Trial1Trial2
Trial3
1 2 3 4 5 6
![Page 66: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/66.jpg)
7 8 9 10 11 12 13 14 15 16
Correct
![Page 67: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/67.jpg)
answers
Question1-1
1. Asuccessfultrader'sattitudetowardriskisusuallyoneof
1. avoidingrisk.
![Page 68: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/68.jpg)
2. thrivingonrisk.3. enjoyingrisky
situations,eventhoughlosseshurt.
4. measuringeachrisk.
Question1-2
1. Thegoalofasuccessfultraderisto
![Page 69: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/69.jpg)
1. becomethebest
traderhecan.2. makemoremoney
thanothertraders.3. buythingsthatwill
sethimaboveothertraders.
4. winrespectoffamilyandfriends.
Question1-3
![Page 70: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/70.jpg)
1. Atraderonalosingstreakhaslost20percentofhisaccount.Hewouldbestbeadvisedto
1. subscribetoa
newsletterwithaverifiedtrackrecord.
2. purchaseatradingsystemwitha
![Page 71: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/71.jpg)
historyofprofitabilityandlowdrawdowns.
3. stoptradinguntilhehasanalyzedhislosingtradesanddeterminedtheircauses.
4. continuetotradebecausethelawsofprobabilityindicatealikelyturninhisfavor.
![Page 72: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/72.jpg)
Question1-4
1. Havingalargetradingaccountisdesirableforallofthefollowingreasonsexceptthat
1. youcanaffordto
losemore.
![Page 73: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/73.jpg)
2. youcandiversifyamongmoremarkets.
3. youcantradedifferentsystems.
4. yourexpensesrepresentasmallerpercentageofyouraccount.
Question1-5
![Page 74: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/74.jpg)
1. Whichtwoofthefollowingstatementsaboutcommerciallysoldtradingsystemsaremostaccurate?
1. Atrackrecord
providesconfidencethatasystemwillcontinuetoperformwell.
![Page 75: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/75.jpg)
2. Thefactthatasystemissoldbyaprominenttraderprovidesanextramarginofconfidence.
3. Tradingsystemsaredesignedtofitolddata,andtheyself-destructwhenmarketschange.
4. Youcanbuyasystemfromatop
![Page 76: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/76.jpg)
analystandlosemoneyusingit.1. IandII2. IandIII3. IIandIII4. IIIandIV
Question1-6
1. Whichofthefollowingisakeysignofa
![Page 77: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/77.jpg)
gamblingattitudetowardtrading?
1. Theinabilityto
resisttheurgetotrade
2. Feelingelatedwhentradesgowellandashamedafterlosing
3. Alwaysreversinglosingpositions
![Page 78: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/78.jpg)
4. Astringoftradinglosses1. Ionly2. IandII3. I,II,andIII4. I,II,III,and
IV
Question1-7
1. Withinayear,allofthe
![Page 79: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/79.jpg)
followingoccurinthelifeofatrader:hereceivesthreetraffictickets,paysapenaltyforfilinghistaxeslate,getstworeprimandsfortardinessonhisnon-tradingjob,andhistrading
![Page 80: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/80.jpg)
accountisdown35percent.Whichofthefollowingwouldbethebestadviceforthistrader?
1. It'sahardlife.Try
tomakealotofmoneytrading,quityourjob,andhiresomeonetohandle
![Page 81: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/81.jpg)
yourfinances.2. Trafficticketshave
nothingtodowithtrading—don'tworryaboutthem.
3. You'resabotagingyourselfandneedtoworkonchangingyourselfasaperson.
4. Hanginthere;itishardtokeepajobandtradeatthe
![Page 82: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/82.jpg)
sametime.
Question1-8
1. Picktwocorrectstatementsabouttradingpsychology.
1. Yourfeelings
impactyourequity.2. Towinyouhaveto
![Page 83: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/83.jpg)
bemoreintelligentthanmosttraders.
3. Feelingelatedafterprofitabletradesreinforcesgoodtradinghabits.
4. Fearandgreedhaveagreaterimpactonyourequitythanabrillianttradingsystem.1. IandII
![Page 84: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/84.jpg)
2. IIandIII3. IIIandIV4. IandIV
Question1-9
1. You'vemadeaseriesofsuccessfultradesinrecentmonths.Nowisthe
![Page 85: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/85.jpg)
timeto1. congratulate
yourselfandincreasethesizeofyourpositions.
2. usefewerstops.3. takeavacation.4. realizethatyou
havebecomeacompetenttraderandcanspendlesstimestudyingthe
![Page 86: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/86.jpg)
markets.1. IandII2. IIandIV3. IandIII4. IIIandIV
Question1-10
1. Themainsimilaritybetweenalosingtrader
![Page 87: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/87.jpg)
andanalcoholicis:
1. Losersareaddicted
totheexcitementoftradingthewayalcoholicsareaddictedtoalcohol.
2. Losershidetheextentoftheirlossesfromthemselvesandothers,justasalcoholicshidehow
![Page 88: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/88.jpg)
muchtheydrink.3. Loserstrytotrade
theirwayoutofahole,justasalcoholicstrytoswitchfromliquortowine.
4. Alloftheabove
Question1-11
1. The
![Page 89: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/89.jpg)
psychologyoflosersinvolvesallofthefollowingexceptthat
1. Losersfindtrading
veryexciting,evenwhenitleadstolosses.
2. Fewlosersrecoveraftertheydestroytheiraccounts.
![Page 90: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/90.jpg)
3. Losersknowthattheyhaveapersonalproblemwithtrading.
4. Losersusuallyshootfora“bigwin.”
Question1-12
1. Thefirststepinalosingtrader's
![Page 91: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/91.jpg)
recoveryistosay,
1. “Ineedabetter
tradingsystem.”2. “Imustfindabull
market.”3. “Ineedtolearna
newtradingmethod.”
4. “Iamaloser.”
Question1-13
![Page 92: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/92.jpg)
1. Whenatradersays,“Mynameisso-and-soandIamaloser”theresultis
1. afearfulattitude
towardtrading.2. cuttinglossesshort.3. avoidanceof
![Page 93: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/93.jpg)
overtrading.4. lowercommissions
andslippage.1. IandII2. IIandIII3. IIIandIV4. IandIV
Question1-14
1. Themost
![Page 94: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/94.jpg)
importantfactorinbecomingasuccessfultraderis
1. startingwitha
good-sizedtradingaccount.
2. beingabletolearnfromothersuccessfultraders.
3. usingwritten
![Page 95: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/95.jpg)
tradingplansandavoidingemotionaldecisions.
4. relyingonusefulskillsinyourbusinessorprofessionalbackground.
Question1-15
1. If,afterayearoftrading,the
![Page 96: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/96.jpg)
marketsseemmysterioustoyou,itisbecause
1. yourtrading
behaviorisimpulsive.
2. youlackgoodfundamentalortechnicalinformation.
3. youraccountistoo
![Page 97: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/97.jpg)
small.4. themarketsare
chaotic(RandomWalk).
Question1-16
1. Atradebeginswhen
1. themarketappears
overboughtoroversold.
![Page 98: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/98.jpg)
2. anindicatorgivesyouanentrysignal.
3. youdecidetoplaceabuyorsellorder.
4. anewslettermakesanattractiverecommendation.
![Page 99: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/99.jpg)
TWO
MassPsychology
Whenever you buy or sell,
![Page 100: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/100.jpg)
you're surrounded by a hugecrowd of other buyers andsellers, many of whom aredrivenbygreedandfear.Thesum of their orders createshugewavesofmassoptimismand pessimism. Wavesbecome tides that sweep themarkets,causingpricestoriseorfall.Crowdsareextremelypowerful—itmakes no senseto fight them. Crowds arestrong but primitive.Recognizing this will help
![Page 101: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/101.jpg)
you trade in the direction inwhich the crowd is runningbut hop off when a trend isabouttoend.It ishard to remainobjectivewhen analyzing marketsbecause crowds suck us in.Anyone who has attended apoliticalrallyorabigconcerthasfeltthepullofthecrowd.Some questions in thischapter test your knowledgeof the basic laws of crowd
![Page 102: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/102.jpg)
psychology. Others help youbecome aware of the impactof the tradingcrowdonyourown feelings and judgment.Nowisagoodtimetoreflectonyour reactions, rational orirrational, when you trade.Aimtorelateyouranswerstothe following questions toyourtradingexperiences.
Questions Trial1Trial2
Trial3
![Page 103: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/103.jpg)
1 2 3 4 5 6 7 8 9 10 11
![Page 104: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/104.jpg)
12 13
Correctanswers
Question2-1
1. Priceis1. theintersectionof
supplyanddemand
![Page 105: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/105.jpg)
curves.2. thevalueofa
tradingvehicle.3. areflectionof
companyassetsinthestockmarketorademandforacommodity.
4. theconsensusofvalueofallmarketparticipantsatthemomentofthetrade.
![Page 106: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/106.jpg)
Question2-2
1. Whichofthefollowingstatementsisincorrect?
1. Bullsbetthatprices
willrise;theytrytobuyaslowaspossible.
2. Uncommitted
![Page 107: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/107.jpg)
tradersputpressureonbullsandbearsbytheirpresence.
3. Thegoalofatechnicalanalystistoforecastwhetherbullsorbearswillwin.
4. Bearsbetthatpriceswillfall;theywanttosellashighaspossible.
![Page 108: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/108.jpg)
Question2-3
1. Whenyouareunsurewhethertobuyorsell,itpaysto
1. surfthenettofind
outwhatothersaredoing.
2. tradeasmallersizethanusual.
![Page 109: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/109.jpg)
3. stayoutofthemarket.
4. seekadvicefromacurrently“hot”guru.
Question2-4
1. Anyprofitsyoumakeintradingcomefrom
![Page 110: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/110.jpg)
1. thebrokers.2. thetraders.3. theeconomy.4. theexchanges.
Question2-5
1. Whenapersonjoinsacrowd,he
1. becomesmore
![Page 111: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/111.jpg)
impulsiveandemotional.
2. benefitsfromthestrengthsofothers.
3. trustscrowdleadersmorethanhimself.
4. canleavethecrowdwhenhewantsto.1. IandII2. IandIII3. IIandIII
![Page 112: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/112.jpg)
4. IIandIV
Question2-6
1. Peoplejoincrowdsoutofa
1. fearofuncertainty.2. lifelonghabit.3. desiretobeledby
strongleaders.
![Page 113: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/113.jpg)
4. searchforcomfort.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question2-7
1. Whichofthefollowingiscorrect?
![Page 114: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/114.jpg)
1. Crowdsare
primitive;itisOKtousesimpletradingstrategies.
2. Beingsmarterthanthecrowdassuresyouofwinning.
3. Agoodtraderfeelselatedwhenthemarketgoesinhisdirectionanddepressedwhenit
![Page 115: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/115.jpg)
goesagainsthim.4. Marketcrowdsare
almostalwayswrong.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question2-8
![Page 116: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/116.jpg)
1. Identifythemainleaderofmarkettrends.
1. Powerfulfinancial
interests2. Prominentgurus3. Priceitself4. Fundamental
changesintheeconomy
Question2-9
![Page 117: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/117.jpg)
1. Marketsrisewhen
1. therearemore
buyersthansellers.2. buyersaremore
aggressivethansellers.
3. sellersareafraidanddemandapremium.
![Page 118: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/118.jpg)
4. moresharesorcontractsareboughtthansold.1. IandII2. IIandIII3. IIandIV4. IIIandIV
Question2-10
1. Whenthetrendisdown,
![Page 119: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/119.jpg)
1. shortsellerstendto
increasetheirpositions.
2. longstendtoquitindisgust.
3. longsagreetobuyonlyatasteepdiscount.
4. shortsellersarewillingtosellatalowerprice.
![Page 120: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/120.jpg)
1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question2-11
1. Apriceshockduringanuptrend
![Page 121: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/121.jpg)
1. isasuddenjumpinprice.
2. isasuddendropinprice.
3. makesbullsfeelvulnerable.
4. frightensthebears.1. IandIII2. IIandIII3. IIandIV4. IandIV
![Page 122: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/122.jpg)
Question2-12
1. Apriceshockinterruptsarally,butpricesrecover.Whentheyrisetoanewpeak,severalindicatorsreachalowerpeak.Thispatternis
![Page 123: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/123.jpg)
calleda1. bullishdivergence.2. suddendropin
price.3. bearishdivergence.4. suddenriseinprice.
Question2-13
1. Themaingoalsofa
![Page 124: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/124.jpg)
traderareto1. identifythecurrent
trend.2. forecastpricesin
thenearfuture.3. forecastlong-term
prices.4. stayobjectiveand
unemotional.1. IandII2. IandIV
![Page 125: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/125.jpg)
3. IIandIII4. IIIandIV
![Page 126: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/126.jpg)
THREE
ClassicalChartAnalysis
The original chartists had a
![Page 127: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/127.jpg)
revolutionary idea—to useprice and volume data ratherthan fundamental factors fordeciding what and when tobuyandsell.Eachfundamentalanalysthasto specialize in a fairlynarrow field. Technicalanalysis, on the contrary, isuniversal. Once youunderstand the principles ofcharting,youcanapply themto stocks, bonds, currencies,
![Page 128: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/128.jpg)
futures, or any other market.As the number of tradingvehicles around the globeincreases, technical analysisisbecomingmorepopular.As longasyouhave thedataon high, low, opening, andclosingprices,alongwiththatonvolume andopen interest,you can make intelligentjudgments about the balanceof power between bulls andbears in any market. Then
![Page 129: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/129.jpg)
youcantradeinthedirectionof the dominant marketgroup.Inthischapteryou'llbeaskedto make trading decisionsusing charts. It's relativelyeasy to recognize patterns inthe middle of a chart, butgoodtradingsignalsaremuchharder to identify near theright edge. That's whereyou'll have to make yourtrading decisions—amid the
![Page 130: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/130.jpg)
uncertainty, noise, andtensionofthemarkets.
Questions Trial1Trial2
Trial3
1 2 3 4 5 6 7
![Page 131: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/131.jpg)
8 9 10 11 12 13
Correctanswers
Question3-1
![Page 132: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/132.jpg)
1. Matchthefollowingtwosetsofstatementsregardingprices.
1. Thehighoftheday2. Thelowoftheday3. Theclosingprice4. Theopeningprice
![Page 133: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/133.jpg)
1. Amateurs'opinion
2. Professionals'opinion
3. Maximumpowerofbulls
4. Maximumpowerofbears
Question3-2
1. Threeanalysts
![Page 134: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/134.jpg)
lookatthesamechart.Onearguesthatthetrendisup,theotherthatthetrendisdown,andthethirdthatthetrendissideways.Inallprobability,
1. oneortwoofthem
maybeguiltyof
![Page 135: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/135.jpg)
wishfulthinking.2. theymaynothave
agreedonthebasicdefinitionofatrend.
3. theymaybelookingatdifferenttimeframes.
4. ifeachdidabetterjob,allthreewouldagree.1. I
![Page 136: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/136.jpg)
2. IandII3. I,II,andIII4. I,II,III,and
IV
Question3-3
1. Whentryingtoenteraliquidmarketonaquietday,youarelikelyto
![Page 137: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/137.jpg)
encounter1. higherslippage.2. higher
commissions.3. lowerslippage.4. lowercommissions.
Question3-4
1. Whichlinesonthechartin
![Page 138: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/138.jpg)
Figure3.4markthelevelsofbothsupportandresistance?
1. LineA2. LinesAandB3. LinesA,B,andC4. LinesA,B,C,and
D
![Page 139: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/139.jpg)
![Page 140: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/140.jpg)
FIGURE3.4Medtronic,Inc.(MDT)weeklychart.(ChartbyStockcharts.com).
TheLinesofSupportandResistance
Question3-5
1. Supportandresistancelinesshould
1. bedrawnacrossthe
![Page 141: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/141.jpg)
edgesofcongestionareas.
2. bedrawntotouchextremehighorlowprices.
3. connecthighswithlowsandlowswithhighs.
4. connecthighswithhighsandlowswithlows.1. IandII
![Page 142: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/142.jpg)
2. IIandIII3. IIIandIV4. IandIV
Question3-6
1. Thestrengthofsupportandresistancedependson
1. thenumberoftimes
priceshitthatarea.
![Page 143: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/143.jpg)
2. thevolumeoftradinginthatarea.
3. theheightofthatarea.
4. thelengthoftimepricesspentinthatarea.1. I2. IandII3. I,II,andIII4. I,II,III,and
![Page 144: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/144.jpg)
IV
Question3-7
1. Pricesspendseveralweeksinacongestionareaandthendropbelowsupport.Whichofthefollowingtradingchoices
![Page 145: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/145.jpg)
shouldbeconsideredonthefollowingday?
1. Sellshortifprices
falltoanewlow,withastopaboveyesterday'shigh
2. Golongifpricesrallybackintothecongestionarea,withastopbelowyesterday'slow
![Page 146: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/146.jpg)
3. Sellshortattheopening
4. Golongattheopening1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question3-8
![Page 147: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/147.jpg)
1. MatchthelettersunderneaththelastfourbarsinthechartinFigure3.8tothefollowingstatements.
1. Alowerlowanda
lowerclose—monitorthedownmove.
2. Startmovingup
![Page 148: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/148.jpg)
yourstop.3. Afalsedownside
breakout—golong.4. Abreakouttoa
newlow—monitorwhetherthedownmovewillcontinue.
![Page 149: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/149.jpg)
![Page 150: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/150.jpg)
FIGURE3.8WalterEnergyInc.(WLT)daily.(ChartbyStockcharts.com).
ACongestionZone
Question3-9
1. MarkthestatementsbelowwithaTiftheyapplytotrendsandwithanRiftheyapplyto
![Page 151: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/151.jpg)
tradingranges:1. Eachrallyreachesa
higherhigh.2. Eachdeclinestops
atapproximatelythesamelevel.
3. Keepaddingtoyourpositions.
4. Runatthefirstsignofareversal.
Question3-10
![Page 152: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/152.jpg)
1. MatchtheareasmarkedbylettersinthechartinFigure3.10tothefollowingstatements.
1. Inabilitytoreach
resistanceindicatesweakness—considershorting.
![Page 153: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/153.jpg)
2. Inabilitytoreachsupportindicatesstrength—considerbuying.
3. Hittingresistance—sell.
4. Falseupsidebreakout—goshort.
![Page 154: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/154.jpg)
![Page 155: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/155.jpg)
FIGURE3.10JetBlueAirwaysCorp.(JBLU)daily.(ChartbyStockcharts.com).
DecisionsatSupportandResistance
Question3-11
1. Whichofthefollowingtacticsworkwellinuptrends?
![Page 156: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/156.jpg)
1. Buybreakoutsto
newhighs.2. Buypullbacksinto
support.3. Buywhenprofits
onyourpreviouslongpositionareprotectedbyastop.
4. Buywhenpricestakeoutthepreviouslow.
![Page 157: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/157.jpg)
1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question3-12
1. Whichofthefollowingdoesnotapplyto“kangaroo
![Page 158: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/158.jpg)
tails,”marked“T”inFigure3.12?
1. Whenatailpoints
down,goshort.2. Tailsaresinglebars
protrudingfromcompactcongestionareas.
3. Whenatailpointsup,itgivesasellsignal.
![Page 159: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/159.jpg)
4. Marketsusuallyrecoilfromtheir“tails.”
![Page 160: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/160.jpg)
![Page 161: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/161.jpg)
FIGURE3.12BoeingCo.(BA)daily.(ChartbyStockcharts.com).
KangarooTails
Question3-13
1. IfyoubuyinareaTneartherightedgeofFigure3.12,youmaydoallofthefollowing,
![Page 162: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/162.jpg)
except1. placeaprotective
ordermidwaydownthetail.
2. addtoyourlongpositiononthenextbarthattradeshigher.
3. takeprofitswhentherallystopsmakingnewhighs.
4. placeaprotective
![Page 163: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/163.jpg)
stopbelowthetipofthetail.
![Page 164: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/164.jpg)
FOUR
ComputerizedTechnicalAnalysis
![Page 165: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/165.jpg)
Today it would be unusualto see an analyst or a traderwho doesn't use a computer.The dropping cost ofequipment,software,anddatahas evened out the playingfieldbetween individualsandinstitutions.A computer can help youprocess the torrent ofmarketinformation and make youranalysismoreobjective,butit
![Page 166: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/166.jpg)
isonlyatool.Buyingthebestcar will not automaticallyturn a beginning driver intoan expert. In this section,you'lltestyourselftoseehowwell you've mastered thelessons on computerizedmarket analysis. If you owntechnical analysis software,pleasefeelfreetouseitwhileanswering questions in thischapter.
![Page 167: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/167.jpg)
Questions Trial1
Trial2
Trial3
1 2 3 4 5 6 7 8 9
![Page 168: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/168.jpg)
10 11 12 13 14 15 16 17 18 19 20
![Page 169: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/169.jpg)
21 22
Correctanswers
Question4-1
1. Computerizedtechnicalanalysis
![Page 170: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/170.jpg)
1. ismoreobjective
thanclassicalcharting.
2. allowstraderstoforecastthefuture.
3. removesemotionsfromtrading.
4. assuressuccessintrading.1. I2. IandII
![Page 171: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/171.jpg)
3. I,II,andIII4. I,II,III,and
IV
Question4-2
1. Matchthefollowingthreetypesofsoftwarewiththeirdescriptions:
![Page 172: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/172.jpg)
1. Graybox2. Toolbox3. Blackbox
1. Youfeedthisprogramcurrentmarketdataandreceivespecificbuyandsellsignals.
2. Sameas
![Page 173: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/173.jpg)
above,butyoucanchooseindicatorsettings.
3. Acollectionofchartingtoolsandindicators.
Question4-3
1. Matchthefollowingthreemain
![Page 174: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/174.jpg)
groupsoftechnicalindicatorswiththeirdescriptions:
1. Oscillators2. Trend-following
indicators3. Miscellaneous
indicators1. Provide
insightsinto
![Page 175: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/175.jpg)
masspsychologyofthemarkets.
2. Catchturningpointsinflatmarketsbutgiveprematureanddangeroussignalswhenthemarketsbegintotrend.
3. Workbestwhenmarkets
![Page 176: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/176.jpg)
aremovingbutgivebadsignalswhenthemarketsareflat.
Question4-4
1. Astockhasclosedat23,22,21,20,23,and24duringthepast6
![Page 177: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/177.jpg)
days.Whatisits5-daysimplemovingaverageonthelastday?
1. 212. 223. 234. Noneoftheabove
Question4-5
![Page 178: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/178.jpg)
1. ExponentialmovingaveragesworkbetterthansimpleMAsforallofthefollowingreasons,exceptthatEMAs
1. areeasierto
calculatebyhand.2. respondtochanges
inpricesfaster.
![Page 179: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/179.jpg)
3. donotjumpinresponsetoolddata.
4. trackthemassmoodofthecrowdmoreclosely.
Question4-6
1. Themostimportantmessageofan
![Page 180: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/180.jpg)
exponentialmovingaverageis
1. thewidthofitstime
window.2. itsabilitytoriseto
anewpeak.3. itsabilitytofalltoa
newlow.4. thedirectionofits
slope.
![Page 181: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/181.jpg)
Question4-7
1. MatchtheletteredsectionsatthebottomofFigure4.7tothefollowingEMA-basedstrategies.
1. Tradeonlyfromthe
longside.
![Page 182: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/182.jpg)
2. Tradeonlyfromtheshortside.
![Page 183: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/183.jpg)
FIGURE4.7Williams-SonomaInc.(WSM)daily,13-dayEMA.(ChartbyStockcharts.com).EMASignals—Daily
Question4-8
1. MatchtheletteredareasofFigure4.8tothefollowing
![Page 184: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/184.jpg)
EMA-basedtactics.
1. Golong,witha
protectivestopinthevicinityofthelatestlow.
2. Goshort,withaprotectivestopinthevicinityofthelatesthigh.
3. Liquidatepositionsandstandaside—
![Page 185: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/185.jpg)
themarketmaybeturning.
![Page 186: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/186.jpg)
![Page 187: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/187.jpg)
FIGURE4.8BlackBerryLimited(BBRY)weekly,13-weekEMA.(ChartbyStockcharts.com).EMASignals—Weekly
Question4-9
1. Whichofthefollowingstatementsregarding
![Page 188: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/188.jpg)
MovingAverageConvergence-Divergence(MACD)aretrue?
1. Thefastlineof
MACDreflectsshort-termbullishnessorbearishness.
2. Theslowlineof
![Page 189: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/189.jpg)
MACDreflectslong-termbullishnessorbearishness.
3. Whenthefastlineisabovetheslowline,bullsareincontrol.
4. Whenthefastlineisbelowtheslowline,bearsareincontrol.1. IandII
![Page 190: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/190.jpg)
2. IIIandIV3. Noneofthe
above4. I,II,III,and
IV
Question4-10
1. WhichstatementaboutMACD-Histogramisn't
![Page 191: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/191.jpg)
true?1. Itmeasuresthe
spreadbetweenthefastandslowMACDlines.
2. Whenitrises,itshowsthatbullsareincontrol.
3. Itforecastshigherorlowerpricesahead.
4. Itidentifiesthe
![Page 192: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/192.jpg)
dominantmarketgroup.
Question4-11
1. MatchthefollowingstatementstotheletteredareasinthechartinFigure4.11
![Page 193: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/193.jpg)
1. MACD-Histogramrisestoahigherpeak—expectpricestoretestorexceedtheirpricepeak.
2. MACD-Histogramfallstoanewlow—expectpricestoretestorexceedtheirlatestbottom.
3. Breakingthepowerofthedominant
![Page 194: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/194.jpg)
group.4. Abearish
divergenceisoccuring.
5. Abullishdivergenceisoccuring.
![Page 195: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/195.jpg)
![Page 196: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/196.jpg)
FIGURE4.11DRHortonInc.(DHI)daily,26-dayEMAand12-26-9MACD.(ChartbyStockcharts.com).MACDLinesandMACD-Histogram
Question4-12
1. AttherightedgeofFigure4.11,MACD-
![Page 197: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/197.jpg)
Histogram,EMA,andpricearetellingusthat
1. thelatestpricepeak
islikelytoberetestedorexceeded;golongimmediately.
2. bearsareincontrol;goshortimmediately.
![Page 198: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/198.jpg)
3. loweryourstopandbereadytotakeprofitsontheshortpositionfromthebearishdivergenceD-F.
Question4-13
1. Whichofthefollowingstatementsdescribes
![Page 199: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/199.jpg)
DirectionalMovement?
1. Thepartoftoday's
barthatisabovethepreviousday'sbar
2. Thepartoftoday'sbarthatisbelowthepreviousday'sbar
3. Thelargestpartoftoday'sbarthatisoutsidetheprevious
![Page 200: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/200.jpg)
day'sbar4. Noneoftheabove
Question4-14
1. MatchtheletteredareasinFigure4.14tothefollowingactions.
1. Whenthe
![Page 201: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/201.jpg)
DirectionalIndicator(ADX)turnsdownfromabovebothDirectionalLines,takeatleastpartialprofits.
2. WhentheDirectionalIndicatorpenetratesabovethelowerDirectionalLine,tradeinthe
![Page 202: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/202.jpg)
directionoftheupperDirectionalLine.
3. Donotuseatrend-followingmethodwhentheDirectionalIndicatorisbelowbothDirectionalLines.
![Page 203: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/203.jpg)
![Page 204: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/204.jpg)
FIGURE4.14AlexcoResourceCorporation(AXU)with22-dayEMAanda13-dayDirectionalSystem(green+DI,red–DI,blackADX).(ChartbyStockcharts.com).DirectionalSystem
Question4-15
1. Attheright
![Page 205: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/205.jpg)
edgeofFigure4.14,theDirectionalSystemistellingusto
1. golong.2. goshort.3. standaside.
Question4-16
1. Oscillatorscan
![Page 206: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/206.jpg)
helptradersaccomplishallofthefollowingexcept
1. identifythe
extremesofmasspessimismandoptimism.
2. catchalltopsandbottoms.
3. findwhetherbulls
![Page 207: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/207.jpg)
orbearscurrentlypredominate.
4. betagainstdeviationsandforareturntonormalcy.
Question4-17
1. Whenanoscillatorreachesitshighestpeakinseveral
![Page 208: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/208.jpg)
months,whichofthefollowingisleastlikely?
1. Therallyislikely
topause.2. Pricesarelikelyto
risetoahigherhigh.
3. Longpositionscanbeheld.
4. Pricesarelikelyto
![Page 209: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/209.jpg)
drop.
Question4-18
1. MatchthelettersinFigure4.18tothefollowingformationsofStochastic:
1. Overbought2. Oversold
![Page 210: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/210.jpg)
3. Bullishdivergence4. Bearishdivergence5. Failureswing
![Page 211: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/211.jpg)
![Page 212: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/212.jpg)
FIGURE4.18LeapfrogEnterprisesInc.(LF)with26-dayEMAand7/3SlowStochastic.(ChartbyStockcharts.com).Stochastic
Question4-19
1. AttherightedgeofFigure4.18,the
![Page 213: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/213.jpg)
tradingmessageofStochasticis:
1. Stochasticis
overbought;goshort.
2. Stochasticisrising;golong.
3. Thedowntrendisstillinforce;goshort.
4. Stochasticis
![Page 214: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/214.jpg)
neutral;standaside.
Question4-20
1. MatchletteredformationsofRSI(RelativeStrengthIndex)inFigure4.20tothepatternslistedbelow.
![Page 215: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/215.jpg)
1. Overbought2. Oversold3. Bullishdivergence4. Bearishdivergence
![Page 216: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/216.jpg)
![Page 217: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/217.jpg)
FIGURE4.20Tiffany&Co.(TIF)with26-dayEMAand13-dayRSI.(ChartbyStockcharts.com).RelativeStrengthIndex
Question4-21
1. AttherightedgeofFigure4.20,RSIistellingusthat:
![Page 218: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/218.jpg)
1. Thestockis
oversold;golong.2. Thereisabearish
divergence;goshort.
3. RSIistrendinglower;standaside.
4. Signalsaremixed;standasidefornow.
Question4-22
![Page 219: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/219.jpg)
1. Withthemarketinadowntrend,anoscillator,suchasStochasticorRSI,identifies
1. shorting
opportunities.2. sellingareas.3. buying
opportunities.
![Page 220: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/220.jpg)
4. short-coveringareas.1. IandII2. IIIandIV3. I,II,III,and
IV4. Noneofthe
above
![Page 221: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/221.jpg)
FIVE
VolumeandTime
Beginners watch only
![Page 222: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/222.jpg)
prices. It's easy to becomehypnotizedby stocksmovingupanddown.Experienced analysts gain amuch deeper understandingof the markets by includingvolume in their analysis. Inaddition, price changes needto be linked to the length oftimeittookforthemtooccur.All trading decisions have tobe made by analyzing morethanonetimeframe.
![Page 223: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/223.jpg)
This chapter also reviewsopen interest, a measurerelevant only for thederivatives markets, such asfutures or options. If youdon't trade derivatives anddon't wish to study openinterest, skip questions 5–7,5–8, and 5–9 and add threepointstoyourscore.
Questions Trial1Trial2
Trial3
![Page 224: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/224.jpg)
1 2 3 4 5 6 7 8 9 10 11
![Page 225: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/225.jpg)
12 13 14 15 16 17 18 19
Correctanswers
![Page 226: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/226.jpg)
Question5-1
1. Volumereflectsallofthefollowingexcept:
1. Howmarket
participantswillreacttofuturepricechanges
2. Howmanywinnersandlosersare
![Page 227: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/227.jpg)
activeinthemarket3. Whethermassesof
losersarestayingputorrunning
4. Thedegreeofemotionalinvolvementamongtraders
Question5-2
1. Themarket
![Page 228: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/228.jpg)
hasbeenrisingforseveralmonthsinanorderlypatternofralliesandshallowdeclines;anewrallyisinprogress.Matchthefollowingpairsofstatementsconcerningthisrally's
![Page 229: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/229.jpg)
volume:1. Volumeisslightly
higherthanduringthepreviousrally.
2. Volumeisdoublewhatitwasduringthepreviousrally.
3. Volumeishalfofwhatitwasduringthepreviousrally.
4. Volumeisapproximatelythe
![Page 230: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/230.jpg)
sameasitwasduringthepreviousrally.1. Bearsare
panicking;takeatleastpartialprofitsonlongpositions.
2. Theuptrendishealthy;holdlongsoraddtothem.
![Page 231: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/231.jpg)
3. Theuptrendisrunningoutofsteam;takeatleastpartialprofitsonlongpositions.
4. Theuptrendishealthy;holdlongs.
Question5-3
1. Identifythe
![Page 232: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/232.jpg)
followingpatternsofvolumebymatchingthemwiththeappropriatelettersinFigure5.3.
1. Volumetracesa
lowerpeakwhilepricestraceahigherone—expectadeeperreaction,
![Page 233: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/233.jpg)
takeprofitsonlongpositions.
2. Volumeshrinkswhilepricesslidenearthebottomoftheirrange—lookforabuyingopportunity.
3. Volumeexpandsonarally—expecthigherpricesahead,holdthroughanycorrection.
![Page 234: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/234.jpg)
4. Volumeshrinksduringapullbacktovalue—looktogolongoraddtolongs.
![Page 235: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/235.jpg)
![Page 236: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/236.jpg)
FIGURE5.3CapstoneTurbineCorp.(CPST)with26-dayEMAanddailyvolume.(ChartbyStockcharts.com).Volume
Question5-4
1. AttherightedgeofFigure5.3,thepattern
![Page 237: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/237.jpg)
ofvolumeandpricesshowsthat
1. pricesarerisingon
heavyvolume;golongimmediately.
2. pricesarepullingbacktovalueonfallingvolume—waitforthedeclinetostopandthengolong.
![Page 238: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/238.jpg)
3. thelastrallyhadanunsustainablevolumelevel—goshort.
4. it'sbettertostandasidefornow.
Question5-5
1. Whichoneofthefollowingstatementsiscorrect?On-
![Page 239: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/239.jpg)
BalanceVolume(OBV)
1. confirmsbear
moveswhenitfallstoanewlow.
2. trackstherunningtotaloftraders'emotionalcommitments.
3. oftenreachesanewpeakbeforeanew
![Page 240: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/240.jpg)
peakinprice.4. riseswheneverthe
marketcloseslower.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question5-6
![Page 241: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/241.jpg)
1. MatchstatementsaboutAccumulation/Distributionfromthefollowingtwosets.
1. Pricesopenbelow
thepreviousday'scloseandcloselower.
2. Pricesopenabovethepreviousday's
![Page 242: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/242.jpg)
openandclosehigher.
3. Pricesopenabovethepreviousday'sclose,butcloseatthelows.
4. Pricesopenbelowthepreviousday'sclose,butcloseatthehighs.1. Amateurs
relativelybearish,
![Page 243: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/243.jpg)
professionalsrelativelybullish
2. Amateursrelativelybullish,professionalsrelativelybearish
3. Amateursandprofessionalsbullish
4. Amateursand
![Page 244: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/244.jpg)
professionalsbearish
Question5-7
1. TheChicagoBoardofTradereportsthatopeninterestinsoybeansstandsat300,000
![Page 245: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/245.jpg)
contracts.Thismeansthat
1. 150,000contracts
areheldbythelongsand150,000owedbytheshorts.
2. 300,000contractsareheldbythelongsand300,000owedbytheshorts.
3. 600,000contractsareheldbythe
![Page 246: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/246.jpg)
longsand600,000owedbytheshorts.
4. thereisn'tenoughinformationtotellwhoholdshowmanycontracts.
Question5-8
1. Matchthefollowingactionswiththeirimpacton
![Page 247: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/247.jpg)
openinterest.1. Atraderwhois
longsellstoanotherwhoisshort.
2. Anewbearentersthemarketandsellsshorttoanearlierbearwhobuystocoverhisshorts.
3. Anewbullentersthemarketandbuysfromanearlierbull
![Page 248: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/248.jpg)
whosellshisposition.
4. Anewbuyerandanewsellertradewitheachother.1. Openinterest
increases.2. Openinterest
decreases.3. Openinterest
staysunchanged.
![Page 249: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/249.jpg)
Question5-9
1. Risingopeninterestshowsthat
1. bullsareconfident
andaggressive.2. thesupplyoflosers
isgrowing.3. thetrendislikelyto
continue.
![Page 250: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/250.jpg)
4. bearsareconfidentandaggressive.1. 12. 1and23. 1,2,and34. 1,2,3,and4
Question5-10
1. Aspriceschange,whichfactorsreflect
![Page 251: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/251.jpg)
theforceoftheirmove?
1. Theamountof
pricechange2. Volumeoftrading
duringthatmove3. Directionofthe
move4. Relatedmarkets
1. 12. 1and2
![Page 252: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/252.jpg)
3. 1,2,and34. 1,2,3,and4
Question5-11
1. TheForceIndexformulais
1. Closetoday•
(Volumetoday–Volumeyesterday)
![Page 253: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/253.jpg)
2. Closetoday•(Volumetoday+Volumeyesterday)
3. Volumetoday•(Closetoday+Closeyesterday)
4. Volumetoday•(Closetoday–Closeyesterday)
Question5-12
![Page 254: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/254.jpg)
1. WhysmoothForceIndexwithamovingaverage?
1. Thehistogramof
thedailyForceIndexistoojagged.
2. A2-dayEMAofForceIndexhelpsfindentrypointsintotrades.
![Page 255: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/255.jpg)
3. A13-dayEMAofForceIndexhelpsfindmajorshiftsintheforceofbullsandbears.
4. DivergencesbetweenthesmoothedForceIndexandpriceshelptoidentifyturningpointsinthemarkets.1. I
![Page 256: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/256.jpg)
2. IandII3. I,II,andIII4. I,II,III,and
IV
Question5-13
1. Ashort-termForceIndex,smoothedwitha2-dayEMA,helpsdecide
![Page 257: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/257.jpg)
whentoputontradesinthedirectionofthecurrentpricetrend,whichwemaydefineusingtheslopeofapriceEMA.ForceIndexcanalsoshowwhentotakeshort-termprofits.Match
![Page 258: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/258.jpg)
theletteredareasinthechartinFigure5.13tothefollowingstatements.
1. Buy2. Stopshorting,look
tobuy3. Sellshort4. Covershorts
![Page 259: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/259.jpg)
![Page 260: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/260.jpg)
FIGURE5.13ScorpioTankers,Inc.(STNG)with13-dayEMAofpriceanda2-dayEMAofForceIndex.(ChartbyStockcharts.com).ForceIndex,2-dayEMA
Question5-14
1. AttherightedgeofFigure5.13,the
![Page 261: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/261.jpg)
messageofthe2-dayForceIndexis:
1. Standaside.2. Golong.3. Sellshort.
Question5-15
1. Along-termForceIndex,smoothedwith
![Page 262: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/262.jpg)
a13-dayEMA,deliversseveralstrategicmessages.PleasematchtheletteredareasinthechartinFigure5.15tothefollowingstatements.
1. Bearishcrossover
![Page 263: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/263.jpg)
—tradeshort.2. Bullishcrossover—
tradelong.3. Dominantforceis
weakening.
![Page 264: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/264.jpg)
![Page 265: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/265.jpg)
FIGURE5.15EMCCorp.(EMC)with13-dayEMAofpriceanda13-dayEMAofForceIndex.(ChartbyStockcharts.com).ForceIndex,13-dayEMA
Question5-16
1. AttherightedgeofFigure5.15,the
![Page 266: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/266.jpg)
messageofthe13-dayForceIndexis:
1. Standaside.2. Golong.3. Sellshort.
Question5-17
1. Thepresenceofcyclesinmarketdata
![Page 267: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/267.jpg)
dependson1. changesinthe
economicfundamentals.
2. greedingoodtimesandfearinbadtimesamongproducersandconsumers.
3. swingsbetweenpessimismandoptimismamong
![Page 268: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/268.jpg)
traders.4. planetary
influences.1. 12. 1and23. 1,2,and34. 1,2,3,and4
Question5-18
1. Identifythe
![Page 269: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/269.jpg)
“indicatorseasons”bymatchingthemwiththeappropriatelettersinFigure5.18.
1. Spring;golong.2. Summer;start
takingprofitsonlongs.
3. Autumn;goshort.
![Page 270: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/270.jpg)
4. Winter;starttakingprofitsonshorts.
![Page 271: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/271.jpg)
![Page 272: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/272.jpg)
FIGURE5.18Molycorp,Inc.(MCP)with13-dayEMAofpriceanda12-26-9MACD-Histogram.(ChartbyStockcharts.com).IndicatorSeasons
Question5-19
1. Traderscananalyzemarketsin
![Page 273: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/273.jpg)
greaterdepthbylookingatthemintwotimeframes.Whichofthefollowingcombinationsmakesthemostsense?
1. Weeklyanddaily2. Monthlyanddaily3. Yearlyanddaily
![Page 274: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/274.jpg)
4. Yearlyandweekly
![Page 275: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/275.jpg)
SIX
GeneralMarketIndicators
Markets consist of huge
![Page 276: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/276.jpg)
crowds of traders whosebuying and selling createwaves ofmass optimism andpessimism. The resultingprice trends lure inbystanders, and their buyingand selling reinforces thosetrends, driving them tounsustainable extremes.Fundamental economicfactors may rule the marketsin the long run, but masspsychology determinesintermediate- and short-term
![Page 277: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/277.jpg)
trends.Several indicators take thepulseof themarket crowd instocks and futures. Theindicators that analyze thestock market as a whole areespecially useful for tradingstock index futures andoptions. Since the broadmarket trends influencemoststocks,thosesignalsalsohelpstocktraders.Generalmarketindicatorsare
![Page 278: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/278.jpg)
especially important to thosewho trade in the UnitedStates, where severaladvisory services track them.Overseas traders could profitfromdevelopingsimilartoolsintheirowncountries.
Questions Trial1Trial2
Trial3
1 2 3
![Page 279: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/279.jpg)
4 5 6 7 8 9 10 11 12
Correctanswers
![Page 280: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/280.jpg)
Question6-1
1. TheNewHigh–NewLowIndex(NH-NL)
1. measuresthe
numberofnewhighsonanygivenday.
![Page 281: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/281.jpg)
2. tracksthenumberoftheweakeststocksontheexchange.
3. measuresthenumberofnewlowsonanygivenday.
4. tracksthenumberofthestrongeststocksontheexchange.1. 1and3
![Page 282: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/282.jpg)
2. 2and43. 1,2,3,and44. Noneofthe
above
Question6-2
1. MatchthefollowingNH-NLpatternswiththeirmarket
![Page 283: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/283.jpg)
messages.1. NH-NLispositive;
risestoanewhighforthemove.
2. Stockmarketfallstoanewlow;NH-NLtracesahigherbottom.
3. NH-NLisnegative;declinestoanewlowforthemove.
4. Stockmarket
![Page 284: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/284.jpg)
reachesanewpeak;NH-NLtracesalowerpeak.1. Bearish
leadershipisstrong;tradefromtheshortside.
2. Bearishdivergenceshowsthatbullsarebecoming
![Page 285: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/285.jpg)
weak;starttakingprofitsonlongpositionsandlooktogoshort.
3. Bullishdivergenceshowsthatbearsarebecomingweak;starttakingprofits
![Page 286: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/286.jpg)
onshortpositionsandlooktogolong.
4. Bullishleadershipisstrong;tradefromthelongside.
Question6-3
1. Identifythe
![Page 287: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/287.jpg)
followingpatternsbymatchingthemwiththeappropriatelettersinthechartofNH-NLinFigure6.3.
1. Bullspredominate;
tradefromthelongside.
2. Bearspredominate;
![Page 288: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/288.jpg)
tradefromtheshortside.
3. Abullishdivergence;takeprofitsonshortsandgetreadytogolong.
4. Abearishdivergence;takeprofitsonlongsandgetreadytogoshort.
![Page 289: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/289.jpg)
![Page 290: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/290.jpg)
FIGURE6.3S&P500witha22-dayEMA,aNewHigh–NewLowIndex,withaoneyearlook-backperiod.(NH-NLdatafromBarchart.com,chartbyTradeStation).TheNewHigh–NewLowIndex
Question6-4
1. Attheright
![Page 291: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/291.jpg)
edgeofFigure6.3,NH-NLtellsusthat
1. NH-NLis
overbought;sellshort.
2. NH-NLispositiveandrising;golong.
3. nobullishdivergenceispresent;standaside.
4. tradingsignalsare
![Page 292: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/292.jpg)
mixed;standaside.
Question6-5
1. WhichofthefollowingstatementsapplytotheAdvance/Declineline?
1. Ittracksthe
numbersofrising
![Page 293: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/293.jpg)
andfallingstocks.2. Itindicatesstrength
whenitrisestoanewhighandweaknesswhenitfallstoanewlow.
3. ThepatternofA/Dpeaksandvalleysismoreimportantthanitslevel.
4. Itshowswhenvolumeconfirmspricemoves.
![Page 294: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/294.jpg)
1. 12. 1and23. 1,2,and34. 1,2,3,and4
Question6-6
1. Whenbullishconsensusinthestockmarketrisestoarecordhigh,
![Page 295: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/295.jpg)
itshowsthat1. themarketisneara
top;startsellingandlookforpotentialshorts.
2. theuptrendisstrong;golong.
3. therearen'tenoughnewbuyerstosupportthemarket.
4. youshoulddoubleuponlong
![Page 296: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/296.jpg)
positions.1. 12. 1and33. 24. and4
Question6-7
1. Duringapowerfuluptrendincopperfutures,
![Page 297: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/297.jpg)
bullishconsensusrisesto75percent.Thismeansthat
1. anaveragebearhas
investedthreetimesmoremoneythananaveragebull.
2. anaveragebearhasinvestedapproximatelyasmuchmoneyasan
![Page 298: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/298.jpg)
averagebull.3. anaveragebullhas
investedthreetimesmoremoneythananaveragebear.
4. thereisnotenoughinformationtodecidewhohasinvestedmoremoney.
Question6-8
![Page 299: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/299.jpg)
1. Arichcornharvestincreasesthesupplyandsendscornfuturesintoabearmarket.Aspricesgrindtheirwaydown,bullishconsensusfallsto20percent.Thismeans
![Page 300: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/300.jpg)
that1. anaveragebullhas
investedfivetimesmoremoneythananaveragebear.
2. anaveragebullhasinvestedapproximatelyasmuchmoneyasanaveragebear.
3. anaveragebearhasinvestedfourtimes
![Page 301: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/301.jpg)
moremoneythananaveragebull.
4. anaveragebullhasinvestedfourtimesmoremoneythananaveragebear.
Question6-9
1. Yournewspaperreportsthatcoffeeprices
![Page 302: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/302.jpg)
areattheirhighestlevelinsixyears;aTVnewsshowfeaturessnowincoffee-growingBrazil;andyourmother-in-lawtellsyoushebought10lbsofinstantcoffeebefore
![Page 303: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/303.jpg)
pricesriseanyhigher.Yourresponseasatraderistoplanto
1. golongcoffee
futuresorlongcalls.
2. goshortcoffeefuturesorlongputs.
3. golongcocoafutures,asaplayon
![Page 304: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/304.jpg)
acatch-upmovewithcoffee.
4. buygoldbecausetheriseincoffeeisasignofinflation.
Question6-10
1. Matchthefollowingstatementsabouttraders'positions.
![Page 305: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/305.jpg)
1. Positionlimits2. Reporting
requirements3. Insidertrading4. Hedging
1. Thelevelatwhichyourtradegetsreportedtoagovernmentagency
![Page 306: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/306.jpg)
2. Enteringafuturestradeinordertooffsetapositioninanactualcommodity
3. Canbeexceededbycommercials
4. Legalinthefuturesmarkets
![Page 307: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/307.jpg)
Question6-11
1. Matchthefollowingstatementsaboutdifferentgroupsofmarketparticipants.
1. Smallspeculators2. Largespeculators
![Page 308: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/308.jpg)
3. Commercials4. Companyinsiders
1. Holdcontractsinexcessofreportinglevels
2. Hedgebusinessrisks
3. Officersandlargestockholders
4. Thegroup
![Page 309: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/309.jpg)
mostlikelytoloseinthemarket
Question6-12
1. Abearmarketis11monthsold;thecompanywhosestockyoufollowreportslower
![Page 310: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/310.jpg)
quarterlyearnings;itstwovicepresidentsandamajorshareholderbuyitsstock;thestockis$1aboveitslowfortheyear.Asaninvestor,you
1. goshort
![Page 311: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/311.jpg)
immediately(thebearmarketisinforce).
2. golongimmediately(insiderbuying).
3. stayawayfromthemarketuntilthenextbullmarketstarts.
4. startbuildingalongposition.
![Page 312: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/312.jpg)
SEVEN
TradingSystems
Atradingsystemprovidesa
![Page 313: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/313.jpg)
decision-making tree forsetting entries, targets, andstops.Itisausefulinstrumentbut not a magic device thatcanbefine-tunedonolddataandthenputonautomaticforeffortlesslypullingprofitsoutofthemarkets.Youdevelopatradingsystemin the quiet of your office,whenthenoiseofthemarketshasquieteddown.Acarefullycrafted system becomes your
![Page 314: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/314.jpg)
island of stability andintelligence in the stormyenvironmentofthemarket.Atrusted system will help youmaintain control at a timewhen the tide of massemotion sweeps people offtheirfeet.This chapter will test yourknowledge of several tradingsystems that have stood thetestoftime.Whileansweringquestions, consider whether
![Page 315: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/315.jpg)
to start trading with one ofthese systemsoruse themasa starting point fordevelopingyourown.
Questions Trial1Trial2
Trial3
1 2 3 4 5
![Page 316: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/316.jpg)
6 7 8 9 10 11 12 13 14 15 16
![Page 317: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/317.jpg)
Correctanswers
Question7-1
1. Whichofthefollowingstatementscanbetrueatthesametimeinanygiven
![Page 318: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/318.jpg)
market?1. Thetrendisup.2. Thetrendisdown.3. Anindicatorgivesa
buysignal.4. Anindicatorgivesa
sellsignal.1. IandIII2. IIandIV3. I,II,III,and
IV
![Page 319: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/319.jpg)
4. Noneoftheabove
Question7-2
1. Whentryingtofindatradeonadailychart,
1. focusallyour
attentiononthatchart.
2. identifythetrendof
![Page 320: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/320.jpg)
theweeklychartandusethedailycharttolookonlyfortradesinthedirectionoftheweeklytrend.
3. findatradeonthedailychartandcheckwhethertheweeklychartpointsinthesamedirection.
4. identifythetrendof
![Page 321: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/321.jpg)
themonthlychartandusethedailycharttolookonlyfortradesinthatdirection.
Question7-3
1. Whenexploringapotentialtradingsystem,allof
![Page 322: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/322.jpg)
thefollowingstepsareessential,except
1. one-bar-at-a-time
backtesting.2. forward-testing
withsmallamountsofmoney.
3. lookingforfeedbackfromothersystemusers.
![Page 323: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/323.jpg)
4. keepingrecordsofeverytrade.
Question7-4
1. Theessentialnumberstowritedownbeforeenteringanytradeincludeallofthefollowing,except
![Page 324: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/324.jpg)
1. thepriceorarange
foryourentry.2. thepotentialprofit
indollars.3. thetargetforyour
trade.4. theprotectivestop.
Question7-5
1. Ifyouusethe
![Page 325: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/325.jpg)
slopeoftheweeklyMACD-HistogramasthefirstscreenoftheTripleScreentradingsystemandthatslopeisdown,youmay
1. Golong.2. Goshort.
![Page 326: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/326.jpg)
3. Standaside.4. Alloftheabove
1. IandIII2. IIandIII3. III4. IV
Question7-6
1. Thefirstscreenofthe
![Page 327: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/327.jpg)
TripleScreentradingsystempointsup.Ifyouusea5-dayStochasticasyoursecondscreenanditrisesto85,youmay
1. golong
immediately.2. goshort
immediately.
![Page 328: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/328.jpg)
3. waitforStochastictodeclinebelow40andthengolong.
4. waitforStochastictodeclinebelow40andthengoshort.
Question7-7
1. Theweeklytrendisup,butthedeclineof
![Page 329: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/329.jpg)
thepastfewdayshaspushedthe2-dayEMAofForceIndex,whichyouuseasthesecondscreen,belowzero.Yournextstepisto
1. waituntilboth
screensgetingear.2. placeanorderto
![Page 330: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/330.jpg)
buyabovethepreviousday'shigh.
3. placeanordertosellshortbelowthepreviousday'slow.
4. closeoutanyopenpositions.
Question7-8
1. Attherightedgesofthe
![Page 331: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/331.jpg)
twochartsinFigure7.8,theTripleScreentradingsystemtellsusthat
1. theweeklytrendis
up;thedailytrendisup;golongimmediately.
2. thedailyForceIndexshowsabearishdivergence;goshort
![Page 332: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/332.jpg)
immediately.3. theweeklytrendis
upandthedailyForceIndexisoversold;placeabuyorderabovethehighofthelastdailybar.
4. theweeklyanddailytrendspointindifferentdirections;standaside.
![Page 333: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/333.jpg)
![Page 334: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/334.jpg)
FIGURE7.8Ontheleft:BBBYweeklychartwitha13-barEMAand12-26-9MACD-Histogram.Ontheright:BBBYdailychartwitha13-barEMAand2-barForceIndex.(ChartbyStockcharts.com).TripleScreenTradingSystem
Question7-9
![Page 335: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/335.jpg)
1. MatchthefollowingstatementsabouttheTripleScreentradingsystemwiththeactionsindicated.
1. Theweeklytrendis
up;thedailytrendisup.
2. Theweeklytrendis
![Page 336: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/336.jpg)
up;thedailytrendisdown.
3. Theweeklytrendisdown;thedailytrendisup.
4. Theweeklytrendisdown;thedailytrendisdown.1. Startplacing
buyorders.2. Startplacing
orderstosell
![Page 337: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/337.jpg)
short.3. Standaside.
Question7-10
1. WhichofthefollowingstatementsregardingtheImpulsesystemisincorrect?
![Page 338: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/338.jpg)
1. TheImpulsesystemtellstraderswhentobuyorsell.
2. Theslopeofafastmovingaveragereflectsthedirectionofmarketinertia.
3. TheslopeofthelasttwobarsofMACD-Histogramreflectsthedirectionofmarket
![Page 339: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/339.jpg)
power.4. TheImpulsesystem
removesaprohibitionofbuyingorshortingbychangingitscolor.
Question7-11
1. Matchthefollowingindicator
![Page 340: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/340.jpg)
readingswiththemessagesoftheImpulsesystem.
1. EMAisrising,
MACD-Histogramrising.
2. EMAisrising,MACD-Histogramfalling.
3. EMAisfalling,MACD-Histogram
![Page 341: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/341.jpg)
falling.4. EMAisfalling,
MACD-Histogramrising.1. Impulse
systemgreen(bullish)
2. Impulsesystemred(bearish)
3. Impulsesystemblue
![Page 342: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/342.jpg)
(neutral)
Question7-12
1. MatchtheletteredbarsinthechartinFigure7.12withthefollowingstatements.
1. Buyingorstanding
![Page 343: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/343.jpg)
asidepermitted;shortingforbidden.
2. Shortingorstandingasidepermitted;buyingforbidden.
3. Buying,shorting,orstandingasideispermitted.
![Page 344: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/344.jpg)
![Page 345: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/345.jpg)
FIGURE7.12JCPdailywitha13-barEMA,a12-26-9MACD-Histogram,andtheImpulsesystem.(ChartbyStockcharts.com).TheImpulseSystem
Question7-13
1. LookingattheweeklychartofBBBYin
![Page 346: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/346.jpg)
Figure7.8,whatwouldbethecolorofitsrightmostbarifweappliedtheImpulsesystem?
1. Green2. Red3. Blue4. Notenough
informationto
![Page 347: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/347.jpg)
decide
Question7-14
1. Thecorrectwidthofachannelaroundamovingaverage
1. isacloselyguarded
secretof
![Page 348: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/348.jpg)
professionaltraders.
2. containsallpricesforthepast50to100bars.
3. containsabout90percentofthepricesforthepast50to100bars.
4. containsabouthalfofthepricesforthepast50to100bars.
![Page 349: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/349.jpg)
Question7-15
1. Matchstatementsregardingmovingaveragechannelsfromthefollowingtwosets.
1. Themarketis
undervalued.
![Page 350: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/350.jpg)
2. Themarketisovervalued.
3. Dependsonvolatility.
4. Themarketisfairlyvalued.1. Theupper
channelline2. Themoving
average3. Thelower
channelline
![Page 351: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/351.jpg)
4. Channelcoefficient
Question7-16
1. Whichstatementaboutchannelsisincorrect?
1. Goinglongorshort
inthemiddleofachannelalways
![Page 352: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/352.jpg)
offersattractivetradesbecauseyoubuyorsellattheconsensusofvalue.
2. Whenachannelrisessharply,anupsidepenetrationoftheupperchannellineindicatesthatthemarketisstrongandshouldbeboughtwhenit
![Page 353: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/353.jpg)
returnstoitsmovingaverage.
3. Whenachannelisrelativelyflat,themarketisalmostalwaysagoodbuynearthebottomofitstradingchannelandagoodsellnearthetop.
4. Abreakoutbelowthelowerlineofasharplyfalling
![Page 354: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/354.jpg)
channelindicatesthatthemarketisweakandapullbacktothemovingaveragewillofferashortingopportunity.
![Page 355: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/355.jpg)
EIGHT
TradingVehicles
Some professionals say—“I
![Page 356: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/356.jpg)
don't trade stocks, futures, oroptions; I trademoney inmyaccount.” They focus onsystem design and riskmanagement,whilewhattheytrade are just vehicles inwhichtheirmoneygoesforaride, hopefully in the rightdirection.1
You have an enormouschoice of trading vehicles.Beforeyou focuson a singleclassorevenasmallergroup
![Page 357: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/357.jpg)
within that class, it pays toknowwhat other instrumentsareavailabletoyou.This chapter will test yourknowledge of several majorclasses of tradinginstruments.Whileansweringquestions, think about whatyou're currently trading.Youmay even decide to broadenyour attention and tradeanother type of instrument,andofcourse,youcanalways
![Page 358: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/358.jpg)
trademorethanonetype.
Questions Trial1Trial2
Trial3
1 2 3 4 5 6 7
![Page 359: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/359.jpg)
8 9 10 11 12
Correctanswers
Question8-1
![Page 360: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/360.jpg)
1. Inselectingatradinginstrument,whichofthefollowingisnotakeyconsideration?
1. Liquidity2. Volatility3. Popularity4. Timezones
![Page 361: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/361.jpg)
Question8-2
1. Whenbuyingastock,you
1. makealoantothe
company.2. becomeaninsider.3. willprofitifthe
companymakesmoney.
4. becomeapart
![Page 362: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/362.jpg)
ownerofthecompany.
Question8-3
1. HowdoesWarrenBuffettsuggestdealingwith“Mr.Market”?
1. BuywhenMr.
Marketishappy.
![Page 363: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/363.jpg)
2. SellwhenMr.Marketishappy.
3. SellwhenMr.Marketisdepressed.
4. BuywhenMr.Marketisdepressed.1. I2. II3. IandIII
![Page 364: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/364.jpg)
4. IIandIV
Question8-4
1. Anexchange-tradedfund(ETF)isanasset-holdingvehicle,designedtotradelikeastock.Whichoneofthe
![Page 365: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/365.jpg)
followingstatementsaboutETFsisincorrect?
1. ETFsoffera
narrowchoiceofassets.
2. ETFslooselytrackunderlyingsecurities.
3. AdministrativeexpensesofETFs
![Page 366: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/366.jpg)
take‘haircuts’fromprofits.
4. ETFsallowyoutopurchaseanassetclassorastockgroup.
Question8-5
1. Matchthefollowingsetsofstatementsregarding
![Page 367: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/367.jpg)
stockoptions.1. Abetthatastock
willdrop2. Abetthatastock
willrise3. Acallwhose
underlyingstockisbelowtheexerciseprice
4. Acallwhoseunderlyingstockisabovetheexercise
![Page 368: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/368.jpg)
price1. Out-of-the-
money2. Put3. In-the-money4. Call
Question8-6
1. Optionpricesdependonallofthe
![Page 369: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/369.jpg)
following,except
1. theclosenesstothe
optionexpirationdate.
2. theclosenesstotheoptionexerciseprice.
3. howcloselytheunderlyingstocksfollowstheirindustrygroup.
![Page 370: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/370.jpg)
4. thevolatilityoftheunderlyingstocks.
Question8-7
1. Matchthefollowingstatementsoncallsandputs.
1. Thepriceofthe
underlyingstockrises.
![Page 371: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/371.jpg)
2. Thepriceoftheunderlyingstockfalls.
3. Thepriceoftheunderlyingstockremainsflat.1. Profitablefora
callbuyer2. Profitablefora
putbuyer3. Profitablefora
callwriter
![Page 372: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/372.jpg)
4. Profitableforaputwriter
Question8-8
1. Whichofthefollowingsafety-orientedstepsisbesttoavoidwhenwritingoptions?
![Page 373: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/373.jpg)
1. Aimtowriteoptionsoutsidepricelevelsyouexpecttheunderlyingsecuritytoreach.
2. Placeastoptoexityouroptionpositionifitmovesagainstyoubyacertainamount.
3. Aimtowriteoptionswithlow
![Page 374: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/374.jpg)
Deltas.4. Openaninsurance
account.
Question8-9
1. What'sthegreatestdifferencebetweenbuyingfuturesandoptions?
![Page 375: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/375.jpg)
1. Thenumberoflongandshortpositions.
2. Futuresarelesscorrelatedwitheachotherthanstockoptions.
3. Therearethousandsofoptionablestocksbutonlydozensoffutures.
4. Themostanoptionbuyercanloseistheinitialpremium,
![Page 376: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/376.jpg)
butafuturesbuyercanlosealotmore.
Question8-10
1. Themaindangeroffuturesmarketsis
1. therelativelyshort
lifeoftheircontracts,compared
![Page 377: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/377.jpg)
tostocks.2. tradingwithsmall
margindeposits.3. theexistenceofthe
dailypricelimits.4. insidertradingby
hedgers.
Question8-11
1. Matchthefollowing
![Page 378: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/378.jpg)
statementsregardingfutures.
1. Acontractforthe
nextmonth'sdeliveryofacommodityispricedhigherthanformoredistantdeliveries.
2. Atraderopensafuturespositionoppositetohis
![Page 379: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/379.jpg)
positionintheactualcommodity.
3. Amajorweatherdisturbancethreatenscottonharvest.
4. Acoldspelldrivesupthepriceofheatingoil;atradershortsheatingoilandgoeslongcrudeoil.1. Supply-driven
![Page 380: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/380.jpg)
market2. Spreadtrading3. Inverted
market4. Hedging
Question8-12
1. Whichstatementsregardingtheforexmarket
![Page 381: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/381.jpg)
arecorrect?1. Theforexmarket
hasnocentrallocation;institutionaltradersdealdirectlywitheachother.
2. Forexhousestendtoacceptcustomerorderswithoutexecutinganytrades.
![Page 382: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/382.jpg)
3. Marginsof1:30andhigherhelptradersprofit.
4. Aretailforexbrokeragehouseearnsitsincomefromcommissions.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
![Page 383: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/383.jpg)
Note
1 Several years ago, aBedouin guide in Jordanasked me about myprofession,andItoldhimItraded on Wall Street. Hedrove by the local marketwhere his buddies tradedgoats,which,atabout$300apiece,were amajor storeof value in the desert. Heasked whether I'd like to
![Page 384: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/384.jpg)
trade, but I laughed andsaid that ifwe brought hisdesert traders to WallStreet and showed themhowtousecomputers,theywouldout-trademanylocalguys.
![Page 385: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/385.jpg)
NINE
RiskManagement
Even a brilliant systemwill
![Page 386: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/386.jpg)
not guarantee winning inevery trade. This is whyevery system must includeriskmanagementrules.Manycreators of promising tradingsystems keep losing moneybecauseofpoororabsentriskcontrol.Eachandeverysystemhasitsdrawdown periods. That'swhenriskmanagementmeansthe difference between lifeanddeath.Nosystemwilldo
![Page 387: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/387.jpg)
you any good if you don'tmanagerisk.Professionals spend much oftheir time calculating howmuch money to risk on anygiven trade and how to varytrade size, depending onmarket conditions andaccount equity. Riskmanagement is essential foryoursurvivalandsuccess.Youoweittoyourselftoearnan excellent rating in this
![Page 388: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/388.jpg)
sectionof theStudyGuide—nothing less will do! Astraders, we sail on a stormyocean. Risk managementrulesareourlifeboatsandlifepreservers. Make sure thatyour safety gear is in goodorder.
Questions Trial1Trial2
Trial3
1 2
![Page 389: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/389.jpg)
3 4 5 6 7 8 9 10 11 12 13
![Page 390: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/390.jpg)
14 15 16 17
Correctanswers
Question9-1
1. Atraderfeels
![Page 391: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/391.jpg)
overjoyedafteraprofitabletradeanddisgustedafteralosingtrade.Thismeansthat
1. heisontheright
track;itisimportanttolistentoyourfeelings.
2. hismindiscloudedbyemotionsthat
![Page 392: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/392.jpg)
interferewithmakinggoodtradingdecisions.
3. heshoulddoublethesizeofhispositionwhenhefeelshappyandgetoutwhenhefeelshurt.
4. feelingdisgustedisaproperreactiontoalosingtrade.
![Page 393: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/393.jpg)
Question9-2
1. Tradershangontolosingtradesforallofthefollowingreasons,except
1. theybecome
attachedtopositions.
2. theyhatetoadmit
![Page 394: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/394.jpg)
theyarewrong.3. theyfollowsound
tradingplans.4. takingalossmeans
givinguphope.
Question9-3
1. Youbuyafterindicatorsturnup.Twodayslaterthe
![Page 395: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/395.jpg)
marketslides,theindicatorsturndown,andyouhavea$200paperloss.Yourinitialstopwas$300belowthemarket,andthenextsupportlevelis$350belowyourentrypoint.Whatdo
![Page 396: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/396.jpg)
youdo?1. Continueinthe
trade,keepyourstop.
2. Takeyourlossandretreattothesidelines.
3. Doubleupyourpositiontoloweritsaverageprice.
4. Loweryourstoptoslightlybelowthe
![Page 397: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/397.jpg)
nextlogicalsupportlevel.
Question9-4
1. Twotradersdecidetospendtheircoffeebreakflippingacoinandbettingadollaroneachflip.TraderA
![Page 398: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/398.jpg)
brings$3tothegame,traderBbrings$10.ThechanceoftraderAbeingawinnerattheendofthatcoffeebreakis
1. near100percent.2. near50percent.3. near0percent.
![Page 399: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/399.jpg)
4. Notenoughtinformationtoanswer.
Question9-5
1. Choosetheorderofimportanceofthefollowingthreemoneymanagementgoals.
![Page 400: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/400.jpg)
1. Earnhighprofits2. Ensuresurvival3. Earnasteadyrate
ofreturn1. I,II,III2. II,III,I3. Ill,II,I
Question9-6
1. Theusefulness
![Page 401: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/401.jpg)
ofwhichofthefollowingruleshasbeenprovenbyexperience?
1. Nevermeeta
margincall.2. Neveraverage
down.3. Thefirstmistakeis
thecheapest.4. Ifyoumustlighten
![Page 402: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/402.jpg)
up,liquidateyourworstposition.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question9-7
1. Whenyoufindyourself
![Page 403: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/403.jpg)
countingmoneyinatrade,youshould
1. stop—andifyou
can't,closeoutthattrade.
2. Countmoneytocalculateyourstops.
3. Countmoneytocalculateyour
![Page 404: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/404.jpg)
profittargets.4. plotachartofyour
paperprofits.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question9-8
![Page 405: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/405.jpg)
1. Yourtradingsystemindicatesatradewithanattractiveprofitpotentialandastop$0.98persharebelowtheentryprice.Youhave$28,000inyouraccount.Accordingto
![Page 406: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/406.jpg)
the2%Rule,howmanysharesmayyoubuy?
1. 3002. 4003. 5004. 600
Question9-9
![Page 407: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/407.jpg)
1. Youbuy300sharesofarisingstock,anditrallies$3.Nowyoushouldthinkabout:
1. Wheretomove
yourstop2. Whethertomove
yourtarget3. Howmanydollars
![Page 408: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/408.jpg)
you'vemadesofar4. Howmuchyou
wouldhavemadeifyoubought600shares1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question9-10
![Page 409: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/409.jpg)
1. Whichofthefollowingstatementsaboutstopsaretrue?
1. Whenyouarelong,
donotmovedownyourstop.
2. Whenyouareshort,youmaymovedownyour
![Page 410: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/410.jpg)
stop.3. Whenyouarelong,
youmaymoveupyourstop.
4. Whenyouareshort,donotmoveupyourstop.1. IandIV2. IIandIII3. Noneofthe
above
![Page 411: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/411.jpg)
4. Alloftheabove
Question9-11
1. Astop-lossorder
1. limitsyourlosson
abadtrade.2. reducesyourstress
level.3. limitsthedamage
![Page 412: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/412.jpg)
fromabadtradingsystem.
4. guaranteesthatyourlosswillnotexceedacertainamount.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
![Page 413: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/413.jpg)
Question9-12
1. Whichofthefollowingtradersareincompliancewiththe2%Rule?
1. TraderA:$18,000
intheaccount,bought200sharesat$20,stopat$18
![Page 414: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/414.jpg)
2. TraderB:$50,000intheaccount,bought400sharesat$20,stopat$18
3. TraderC:$25,000intheaccount,bought400sharesat$20,stopat$19
4. TraderD:$60,000intheaccount,bought1,500sharesat$20,stopat$191. IandII
![Page 415: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/415.jpg)
2. IIandIII3. IllandIV4. I,II,III,and
IV
Question9-13
1. Whichtwomistakesonthislistaremostdeadlyfortraders?
![Page 416: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/416.jpg)
1. Tradingonrumors
andhearsay2. Tradingwithout
stops3. Forgettingto
monitoropentrades4. Puttingontrades
whosesizeistoolargefortheaccount1. IandII
![Page 417: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/417.jpg)
2. IIandIII3. IandIV4. IIandIV
Question9-14
1. TheIronTriangleofriskcontroltellsyouhowmanysharesyoumaybuy
![Page 418: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/418.jpg)
orsellshortbyperformingwhichcalculation?
1. Subtractyourentry
fromyourtargetprice
2. Divideyourtargetpricebyyourstop
3. Addyourstoptoyourtargetprice
4. Divideyourtotal
![Page 419: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/419.jpg)
dollarriskbytheriskpershare
Question9-15
1. Whichofthefollowingstatementsregardingthe6%Ruleiscorrect?
1. Youmaynotrisk
![Page 420: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/420.jpg)
morethan6%ofyouraccountequityonanysingletrade.
2. Ifyourisk2%pertradeandhadthreelosingtradesinamonth,youhavetoreduceyourriskonthenextthreetrades.
3. Ifyourisk2%pertradeandtakethreelossesinarow,you
![Page 421: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/421.jpg)
maynottradefortherestofthismonth.
4. Paperlossesonopentradesdon'tcountagainstthe6%Rulelimit.
Question9-16
1. Incalculatingyour“available
![Page 422: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/422.jpg)
risk,”the6%Ruletakesintoaccountallofthefollowing,except:
1. Yourpaperprofits
forthemonth2. Yourtotallosses
forthemonth3. Youramountsat
riskinopentrades4. Whatwouldhappen
![Page 423: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/423.jpg)
ifallyouropentradesturnednegative
Question9-17
1. Allofthefollowingstatementsapplytocomingbacktotradingafterasevere
![Page 424: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/424.jpg)
drawdown,except:
1. Beginbytradinga
tinysizeandincreaseitinstepsaftermeetingperformancegoals.
2. Jumpintotradingfullsize—dealwithyourfearsbyfacingthem.
3. Becomeyourown
![Page 425: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/425.jpg)
tradingmanagerbyfocusingonriskmanagement.
4. Lowerthe2%Ruletoasmallernumber.
![Page 426: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/426.jpg)
TEN
PracticalDetails
I was in a room where a
![Page 427: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/427.jpg)
world-famous technicalanalyst lectured about gold.He projected his charts on ascreenandpointedouttrendsand potential reversals. Atrader in the audience raisedhis hand: “So, at the rightedge,wouldyoubuyorsell?”Thegreatexpertponderedthescreenanduttered:“Well,I'msure that in two to threeweeks,theanswertothatwillbe very clear.” The traderstared at him
![Page 428: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/428.jpg)
incomprehensibly.Intrading,youdon'thavetheluxuryofwaitingforacoupleofweeks for an answer.Youneed to decide now, today,what you'll do at the rightedgeofthechart:buy,sell,orstand aside. Standing aside,by the way, is a legitimatechoice.Ifyoudecidetotrade,youneed to choosewhere toenter, set targets, and placestops.
![Page 429: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/429.jpg)
Tradersuseawidevarietyofmethods to accomplish thesetasks. In this chapter, we'llreview the methods that aredescribed in The NewTradingforaLiving.
Questions Trial1Trial2
Trial3
1 2 3
![Page 430: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/430.jpg)
4 5 6 7 8 9 10 11 12
Correctanswers
![Page 431: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/431.jpg)
Question10-1
1. Theleastadvisablemethodofenteringalongpositionistobuy
1. abreakoutabove
yesterday'shigh.
![Page 432: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/432.jpg)
2. abreakoutabovethechannel.
3. apullbacktothevaluezone.
4. apenetrationofthevaluezone.
Question10-2
1. Goldisinanuptrend,confirmedbya
![Page 433: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/433.jpg)
risingmovingaverage.Everyfewweeksthereisabriefpanic,aspricesstabbelowtheirmovingaveragebeforeresumingtheiruptrend.Threemonthsago,pricesstabbed$2.50below
![Page 434: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/434.jpg)
theirEMA,twomonthsago$1.50,andlastmonth$4.HowdeepbelowtheEMAwouldyouconsiderplacingabuyorder?
1. Immediatelybelow
theEMA2. $1below
![Page 435: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/435.jpg)
3. $3below4. $5below
Question10-3
1. Whenbuyinginthevicinityofarisingmovingaverage,areasonableprofittarget
![Page 436: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/436.jpg)
wouldbe1. theupperchannel
line.2. thelowerchannel
line.3. thesamedistance
abovetheEMAasthelatestpenetrationwasbelow.
4. whenthemovingaverageturnsdown.
![Page 437: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/437.jpg)
Question10-4
1. Settingprofittargetsforlong-termtradesisbestdoneonthebasisof
1. movingaverages.2. channels.3. divergences.
![Page 438: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/438.jpg)
4. supportandresistance.
Question10-5
1. Whichofthefollowingstatementsaboutstopsisincorrect?
1. Theyleadto
whipsaws.
![Page 439: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/439.jpg)
2. Theyallowyoutocalculatereward/riskratios.
3. Theylimitthemaximumamountofloss.
4. Theygiveyouanideaofamaximumlossinatrade.
Question10-6
![Page 440: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/440.jpg)
1. Whichofthefollowingmethodsofplacingstopshelpsavoidgettinghitby“marketnoise”?
1. Stopsoutsideofthe
pricechannel2. SafeZonestops3. ATRstops
![Page 441: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/441.jpg)
4. Stopsbasedonsupportorresistance1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question10-7
1. Whichofthe
![Page 442: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/442.jpg)
followingrulesapplytoplacingstops?
1. Don'tplacestopsat
obviouslevels.2. Don'tplacestopsat
roundnumbers.3. Moveyourstopsto
protectwinningtradesfromturningintolosingones.
4. Moveyourstop
![Page 443: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/443.jpg)
onlyinthedirectionofyourtrade.1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question10-8
1. Thehighofthedailybaris
![Page 444: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/444.jpg)
$23andthelow$21.Youbuyat$21.50.Whatisyourbuygrade?
1. 25%2. 50%3. 75%4. Noneoftheabove
Question10-9
![Page 445: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/445.jpg)
1. Thehighofthedailybaris$29andthelow$26.Yousellat$27.Whatisyoursellgrade?
1. 33%2. 50%3. 66%4. 75%
![Page 446: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/446.jpg)
Question10-10
1. Thetrend,definedbytheEMAslope,isrising.Onthedayyoubuy,theupperchannellineisat$32.50andthelowerchannellineisat$26.50.You
![Page 447: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/447.jpg)
golongat$29andsellseveraldayslaterat$31.Whatisyourtradegrade?
1. 25%2. 33%3. 50%4. 66%
Question10-11
![Page 448: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/448.jpg)
1. Whichofthefollowingstatementsaboutscanningisincorrect?
1. Ascanmaycovera
thousandstocks.2. Ascanfindsstocks
thatfitapatterndefinedbyyou.
![Page 449: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/449.jpg)
3. Awell-designedscanfindsprofitabletrades.
4. Onecanscanstockindustrygroupsaswellasindividualstocks.
Question10-12
1. Negativerulesforscanningmayfilterout
![Page 450: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/450.jpg)
stocksonthebasisofallofthefollowingcriteria,except:
1. Unprofitable2. Trendingdown3. Insufficientvolume
levels4. Toocheaportoo
expensive
![Page 451: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/451.jpg)
ELEVEN
GoodRecord-Keeping
Keepinggoodrecordshelps
![Page 452: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/452.jpg)
you identify past mistakesand stop repeating them.Good records make clearwhat steps brought youprofits,sothatyoucanrepeatthemgoingforward.Good record-keeping tiestogether psychology, marketanalysis, and riskmanagement. It is the besttool for developing andmaintainingdiscipline.To improve your
![Page 453: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/453.jpg)
performance, you must learnfromyourexperiences,whichis what good record-keepingallows you to do. It is themost important skill for yourgrowthasatrader.
Questions Trial1Trial2
Trial3
1 2 3
![Page 454: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/454.jpg)
4 5 6 7 8 9
Correctanswers
Question11-1
![Page 455: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/455.jpg)
1. Goodrecord-keepinghelpsaccomplishallofthefollowing,except:
1. Greaterdiscipline2. Lessimpulsive
trading3. Stopmaking
![Page 456: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/456.jpg)
mistakes4. Becomeyourown
teacher
Question11-2
1. Performingroutinemorninghomeworkisespeciallyimportantforwhatreason?
![Page 457: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/457.jpg)
1. Ithelpsyouwake
up.2. Itallowsyouto
reviewnewsandreportsrelevanttotradingduringtheday.
3. Itallowsyoutoreviewyesterday'sperformance.
4. Itallowsyoutoadjuststops.
![Page 458: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/458.jpg)
Question11-3
1. What'sthemainpurposeoftakingadailypsychologicalself-testbeforethemarketopens?
1. Toevaluateyour
mood
![Page 459: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/459.jpg)
2. Toevaluateyourreadinesstotrade
3. Toseeonwhatdaysyoushouldn'tbetrading
4. Tobereadytotradeagreatersizeonthedayswithaperfectscore1. IandII2. IIandIII3. IllandIV
![Page 460: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/460.jpg)
4. IandIV
Question11-4
1. Atradeplanmustincludeallofthefollowing,except:
1. Thestrategyyou'll
use2. Yourentry,exit,
![Page 461: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/461.jpg)
andstop3. Theamountof
moneyyou'llrisk4. Theamountof
moneyyouplantomake
Question11-5
1. Whichstatementsaboutusinga
![Page 462: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/462.jpg)
TradeApgararecorrect?
1. Themorequestions
youaskaboutyourplan,thebetteryou'llbepreparedtotrade.
2. Keepthenumberofquestionsaboutatradeplandowntofive.
3. Writedown
![Page 463: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/463.jpg)
detailedresponsestoquestionsandweighthemcarefully.
4. Useonlyoneofthreeresponses:yes,no,andin-between.1. IandIII2. IIandIV3. IandIV4. IIandIII
![Page 464: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/464.jpg)
Question11-6
1. CompletingaTradebillpriortoenteringatrademakesyoufocusonwhichofthefollowing?
1. Entry,exit,andstop2. Earningsreports
andex-dividend
![Page 465: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/465.jpg)
dates3. Thestrategyyou'll
trade4. Amountofriskand
positionsize1. I2. IandII3. I,II,andIII4. I,II,III,and
IV
Question11-7
![Page 466: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/466.jpg)
1. Afteryouenteratrade,yourTradebillshoulddocumentwhichofthefollowing?
1. Stopplacement,
bothsoftandhardifyouuseboth
2. Thelevelatwhich
![Page 467: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/467.jpg)
you'llmoveyourstoptobreakeven
3. Thefactofhavingmadeanentryinthetradediary
4. Theamountoftargetedprofit1. I2. IandII3. I,II,andIII4. I,II,III,and
![Page 468: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/468.jpg)
IV
Question11-8
1. Whichstatementaboutreviewingclosedtradesiscorrect?
1. Giveyourfull
attentiontocurrent
![Page 469: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/469.jpg)
trades,don'tdwellinthepast.
2. Losseshurttoomuchatthetimeyoutookthem,andthereisnopointrevisitingthem.
3. Spendyourtimeplanningforthefuture,notthinkingaboutthepast.
4. Learnfrompastmistakes,soyou
![Page 470: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/470.jpg)
don'trepeatthem.
Question11-9
1. ThemosteducationalpartofaTradeJournalis
1. documentingyour
strategy.2. addingentryand
exitcharts.
![Page 471: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/471.jpg)
3. postingafollow-upchartweeksormonthsafteratrade.
4. documentingentry,exit,andtradegrades.
![Page 472: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/472.jpg)
PARTII
ANSWERSAND
COMMENTS
![Page 473: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/473.jpg)
Introduction
![Page 474: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/474.jpg)
1. Answer0-1:C(IandIV)Fundamentalanalystsstudyeconomicconditions;technicalanalystsfocusonmarketbehavior.Bothcanhelpyou
![Page 475: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/475.jpg)
spotgoodtradingopportunities.Tipsaretricky—theyalmostalwayscomelate;plus,thetipperwhotellsyoutobuywillalmostnevertellyouwhentosell.Tips
![Page 476: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/476.jpg)
canbeusedonlyifyourunthemthroughyourdecision-makingsystem.Usinginsideinformationisacriminaloffenseinmostdevelopedcountries.
![Page 477: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/477.jpg)
2. Answer0-2:CThethreepillarsofsuccessfultradingaresoundpsychology,agoodanalyticmethod,andcarefulmoneymanagement.Agoodtrader
![Page 478: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/478.jpg)
withasoundanalyticmethodishisowninsider.
3. Answer0-3:ATheattitudeofbenignskepticismisthebest.Borrowtheideasthatseemtomake
![Page 479: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/479.jpg)
senseandthentesttheminthecrucibleofyourownexperience.Begintradingasmallsizeandgraduallyincreaseitasyougainconfidence.
4. Answer0-4:D
![Page 480: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/480.jpg)
Slippageandcommissionsslantthe“playingfield”againstmosttraders;emotionaltradingfinishesthemoff.Theftisonlyaminorfactorinwell-policedmarkets.
![Page 481: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/481.jpg)
5. Answer0-5:DWhenthewinnerreceiveslessthantheloserlost,thattransactioniscalleda“minus-sumgame.”Commissionsandslippage
![Page 482: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/482.jpg)
maketradingaprimeexampleofsuchagame.Manyprovidersoffinancialservicestrytohidethisfact.
6. Answer0-6:AYoupaycommissionsonstocktrades
![Page 483: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/483.jpg)
whenyoubuyandagainwhenyousell.100sharesofa$20stockwillcost$2,000.You'llpaya$10commission(0.5%)whenyoubuyandagainwhenyousell,foratotalof$20or
![Page 484: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/484.jpg)
1%.Ifyoudothistradeonmargin,payingonly$1,000foryoursharesandborrowingtherest,thatcommissionwillbe2%ofyourcapital—andthenyou'llhavetopayinterestonmargindebt.
![Page 485: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/485.jpg)
Thatseeminglysmallcommissionmultipliedbythenumberoftradesthatyoumakeinayear,cantakeaseriousbiteoutofyouraccount.Thisproblemisespecially
![Page 486: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/486.jpg)
acuteforsmallaccounts,andofcourse,usingmarginmakesitevenworse.Lesson:beveryselectiveinwhatyoutrade,weigheachtradeplancarefully.
7. Answer0-7:
![Page 487: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/487.jpg)
BYourslippageenteringthistradewas8centsforeachofthe100sharesyoubought,foratotalof$8.Itwasalmostasbigasyourcommission.Whiletrading
![Page 488: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/488.jpg)
largerpositionsreducestherelativecostofcommissionspershare,thereisnosuchbreakwithslippage—ifyoutraded1,000shares,yourslippagewouldhavebeen$80
![Page 489: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/489.jpg)
orworse.Theremedyisstraightforward:uselimitordersforenteringtrades.
8. Answer0-8:CYoubought100sharesat$20.08andsoldat$20.88
![Page 490: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/490.jpg)
foragrossprofitof80centspershareor$80for100shares.Yourslippagewas8centswhenyouboughtand12centswhenyousold,foratotalof20centspershare,$20total.The$20
![Page 491: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/491.jpg)
totalslippageis25%ofyour$80profitforthetrade.Whenitcomestostops,limitorderswon'tdo.Use“marketiftouched”orders—whenit'stimetoescape,hitthe
![Page 492: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/492.jpg)
ejectbutton.Someslippageisinevitable,butthegoalistokeepitaslowaspossible.
9. Answer0-9:BYou'veboughtyoursharesat$20.08andsoldat$20.88
![Page 493: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/493.jpg)
for80centsprofitpershareoratotalgrossprofitof$80.Yourcommissionsateup$10enteringandanother$10exiting.Therewasalsothatslippageof$8ontheentryandanother
![Page 494: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/494.jpg)
$12duringtheexit.Thetotalbitecameto$40or50%ofyourgrossprofit—andnowUncleSamislickinghislips,waitingtotaxyou.Youneedtofocuson
![Page 495: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/495.jpg)
reducingtheexpensesoftrading:askyourbrokertolowerhiscommissionrateorshopforamorecompetitivebroker,beselectiveaboutyourtrades,andwheneverpossibleuse
![Page 496: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/496.jpg)
limitratherthanmarketorders.
![Page 497: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/497.jpg)
■RatingYourself
![Page 498: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/498.jpg)
1. 0–3correct:poor.Takeheart—thequestionsthatyoufailedtoanswerareseldomasked.Manyinthefinancialservicesindustrytryto
![Page 499: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/499.jpg)
muddleupthefacts.Takeyourtime,rereadtheIntroductioninTheNewTradingforaLiving,andretakethistest.
2. 4–6correct:fairlygood.Youhavegraspedthe
![Page 500: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/500.jpg)
basicideas.Lookuptheanswerstothequestionsyou'vemissed.Thinkaboutthemandretakethistestafewdayslater.
3. 7–9correct:excellent.You
![Page 501: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/501.jpg)
understandtheseneglectedbutveryimportantconcepts.You'llenjoythechaptersonpsychologyandriskmanagement.
![Page 502: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/502.jpg)
ONE
IndividualPsychology
![Page 503: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/503.jpg)
1. Answer1-1:DTradingisinherentlyriskybecausewedealwiththeuncertaintyofthefuture.Iftherewerenoriskofloss,therecouldbe
![Page 504: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/504.jpg)
noreward.Amateurshaveemotionalreactions—fear,elation,anger.Aprofessionaltradermeasureseachriskinadvanceandtradesonlywhentheoddsareclearlyinhis
![Page 505: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/505.jpg)
favor.2. Answer1-2:
AYoumuststrivetoachieveyourpersonalbest,tobecomethebesttraderyoucan.Focusingonmoney,buyingtoys,ortryingto
![Page 506: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/506.jpg)
impressotherswillonlydivertyourattentionfromthetopgoal—reachingyourpersonalbest.Agoodsurgeondoesn'tcountmoneyattheoperatingtable—andneitherdoesan
![Page 507: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/507.jpg)
intelligenttraderwhileheisinatrade.
3. Answer1-3:CTreatyourmistakesaslearningopportunities:findthecausesofyourlosses,andcorrectthosemistakes
![Page 508: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/508.jpg)
goingforward.Thisisanemotionallyhardtask,butitneedstobedoneinordertowin.Withoutsuchanalysis,tryingtotradeyourwayoutofahole,evenwithanewguru,is
![Page 509: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/509.jpg)
doomedtofailure.Youneedtofigureoutexactlywhatgotyouintoaholeinthefirstplace.We'llreturntothistopicinthechapteronkeepingatradingdiary.
4. Answer1-4:
![Page 510: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/510.jpg)
AAlargeaccountallowsyoutodiversify,trademultiplepositions,andspendproportionatelylessonservices.Beginnersoftendiscard
![Page 511: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/511.jpg)
theseadvantagesbyblowingmoneysimplybecauseitexistsintheiraccounts.We'llreturntotherulesonmanagingtradesizeinthechapteronmoneymanagement.
![Page 512: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/512.jpg)
5. Answer1-5:D(IIIandIV)Commercialtradingsystemsarebuiltandoptimizedusingolddata;theyself-destructwhenmarketschange.Anintelligent
![Page 513: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/513.jpg)
traderwhodevelopshisownsystemcanmakeneededadjustments;atraderwhopurchasesasystemsinkswithit.Evensystemswithbuilt-inoptimizationeventually
![Page 514: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/514.jpg)
self-destructbecausewedonotknowwhatkindsofoptimizationwillworkinthefuture.Followingtradingsignalsfromanysystemrequiresdisciplineandevokes
![Page 515: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/515.jpg)
essentiallythesameemotionsasindependenttrading.Thereisnosubstituteformaturejudgment.
6. Answer1-6:C(I,II,andIII)Oneofthekeysignsofagambling
![Page 516: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/516.jpg)
attitudeistheinabilitytostoptrading,stayonthesidelines,andreflectonone'sbehavior.Traderswhogambletendtoreversetheirpositionsandfeeldepressedorelateddependingon
![Page 517: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/517.jpg)
theoutcomeoftheirlatesttrade.Alosingstreakisacommonexperience;whenyouhitone,stoptradinguntilyou'vespenttimereevaluatingyourmethod.Serioustraders
![Page 518: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/518.jpg)
learnfromtheirlosses,whilegamblerscontinuewiththeircompulsivetrading.
7. Answer1-7:CWetradethewaywelive.Personal
![Page 519: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/519.jpg)
disciplineisessentialforsuccess.Lookforcommonproblemsinyourtradingandeverydaylife.Thistraderseemstohaveseriousissueswithresponsibility.Heneedstofaceitandget
![Page 520: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/520.jpg)
himselforganizedineverydaylifeaswellasintrading.
8. Answer1-8:D(IandIV)Towin,youdon'thavetobemoreintelligentorknowledgeablethanother
![Page 521: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/521.jpg)
traders,butyoumustbebetterdisciplined.Yourfeelingsinfluenceyourtrades,includingentries,exits,andriskmanagement.Ifyourmindiscloudedbyfearorgreed,
![Page 522: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/522.jpg)
nosystemwillhelp.Gettinghighfromtradingleadstogambling,acceptingbadodds,andlosing.
9. Answer1-9:C(IandIII)Youmayincreaseyourtradingsizeas
![Page 523: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/523.jpg)
longasyoudon'triskagreaterpercentageofyourequity—we'llreturntothisinthechapteronriskmanagement.Avacationfromtradingmaynotbeabadidea—spendsomeof
![Page 524: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/524.jpg)
thetimeanalyzingwhatyoudidright.Ontheotherhand,becomingsloppywithstopsandlazyinresearcharetypicalbehaviorsofaloseronaluckystreak.
![Page 525: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/525.jpg)
10. Answer1-10:DLosersareaddictedtothethrillofthegameandhopeforabigwin.Theykeeppoorrecords,justlikealcoholicsdon'tcounttheirdrinks.
![Page 526: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/526.jpg)
Theyswitchbetweentradingsystemsandmethods,justlikealcoholicsswitchfromdrinkinginbarstodrinkingathome.
11. Answer1-11:C
![Page 527: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/527.jpg)
Losersarehookedontheexcitementoftradingandkeephopingforabigwin.Theyblameothersfortheirlossesandavoidacceptingpersonalresponsibility.
![Page 528: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/528.jpg)
12. Answer1-12:DAcceptingresponsibilityforyourlossesblowsawaythesmokeofillusionsandputsyourtradingonanew,realisticfooting.Abettertrading
![Page 529: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/529.jpg)
system,newtradingmethods,andamajorbullmarketcanhelp,butpersonalresponsibilitycomesfirst.
13. Answer1-13:B(IIandIII)Atraderwhohasthe
![Page 530: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/530.jpg)
couragetofacehisownroleinlosingcanturnaround;goingforward,heislikelytocutlossesshortandavoidovertrading.Hisdisciplinewillfreehimfromfear,butitwillnot
![Page 531: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/531.jpg)
lowerhisratesofcommissionsandslippage—forthatheneedstocarefullyshopforabrokerandavoidmarketorders.
14. Answer1-14:CBeingcalm
![Page 532: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/532.jpg)
anddisciplinedisthecornerstoneofsuccessfultrading.Writingdownyourtradeplansandimplementingthemwillputyouontheroadtosuccess—we'llreturntothistopicin
![Page 533: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/533.jpg)
thechapterontradeplans.Biggercapital,knowledgeablefriends,andahistoryofsuccessinotherendeavorsarealldesirable—butnoneequalstheimportanceofdisciplined
![Page 534: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/534.jpg)
planning.Emotionaltradingistheenemyofsuccess.Iftradingmakesyoufeelgiddyorfearful,thosefeelingswillcloudyourjudgment.Exityourtradeswhenyoufeel
![Page 535: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/535.jpg)
thegripofemotions.
15. Answer1-15:AAtrader'sownimpulsivitymakesthemarketappearconfusingandillogical.Otherproblems,suchasashortageofgood
![Page 536: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/536.jpg)
information,smallcapital,oreventhemarket'speriodsofrandomness,contributelesstoconfusionthanemotionaltrading.
16. Answer1-16:CAtradebegins
![Page 537: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/537.jpg)
whenyoudecidetoenterthemarket,anditendswhenyoudecidetoexit.Thosedecisionsarelikethebookendsofeverytrade,andtheyareyoursalone.Youmayuse
![Page 538: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/538.jpg)
technicalindicators,fundamentalanalysis,orevenpayattentiontotrustedadvisors—butonlyyoucandecidewhenatradebeginsandwhenitends.
![Page 539: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/539.jpg)
■RatingYourself
![Page 540: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/540.jpg)
1. 0–4correct:poor.Theredlightisflashing—yourlowlevelofself-awarenessputsyouindanger.Youneedtolearnmoreabouttrading
![Page 541: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/541.jpg)
psychologyinordertohaveachanceofsuccess.Manypsychologicaltricksthathelpusinourdailylivesdestroytradingaccounts.Manyeducationalsystemspromote
![Page 542: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/542.jpg)
dependenceandfollow-the-leadermentality.Successfultradersareindependent,creative,andrealistic.Pleaserereadtherelevantchapterandretakethistestbefore
![Page 543: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/543.jpg)
proceedingtotherestofthisStudyGuide.
2. 5–8correct:belowaverage.Gettinghalftheanswersrightmeansbeinginthebottomhalfandthat'snotgoodenough
![Page 544: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/544.jpg)
forwinning.Youneedtolearnmoreabouttheindividualpsychologyoftrading.Pleaserereadtherelevantmaterialsandretakethistest.
3. 9–12correct:fairlygood.
![Page 545: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/545.jpg)
Youhaveaworkinggraspoftheessentialconceptsoftradingpsychologybutneedtofillinthegaps.Studytherecommendedmaterialsandretakethistestinafewdays.Sound
![Page 546: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/546.jpg)
psychologyanddisciplineareessentialforyoursuccessinthemarkets.
4. 13–16correct:excellent.Youhavemasteredthetopicsinthischapter.Please
![Page 547: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/547.jpg)
reviewthosequestionswhereyouranswersdifferedfromthoseprovidedinthisbook.Successfultradersareveryindependent.Seewhetherthediscrepancies
![Page 548: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/548.jpg)
wereduetoerrors—ortoyourown,individualwayofthinking.
![Page 549: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/549.jpg)
■ RecommendedReading1. Douglas,Mark,TheDisciplinedTrader(NewYork:NewYorkInstituteofFinance,1990).
2. Lefevre,Edwin,ReminiscencesofaStockOperator(1923)(Greenville,SC:Traders
![Page 550: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/550.jpg)
Press,1985).
![Page 551: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/551.jpg)
TWO
MassPsychology
![Page 552: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/552.jpg)
1. Answer2-1:DPricesaresetbycrowdmemberswhoplaceorderstobuyorsell,orelsestandaside.Eachpricetickreflectsthe
![Page 553: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/553.jpg)
latestconsensusofvalue,hammeredoutbythoseordersorthewithholdingoforders.Tickscoalesceintopatterns—thefootprintsofbullsandbearsonourcharts.“Supplyand
![Page 554: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/554.jpg)
demandcurves”arefarremovedfromthissweatyrealityofthemarket.Pricesareconnectedtofundamentalvaluesinthelongrunbutaregovernedbycrowdpsychologyfromdayto
![Page 555: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/555.jpg)
day.2. Answer2-2:
CBullstrytobuyaslowaspossible,andbearstrytosellashighaspossible.Bothknowthattheyhavetohurrybeforesomeuncommitted
![Page 556: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/556.jpg)
traderstepsinandsnatchesawaytheirbargain.Professionalsaimtoidentifythedominantgroupandtradewithit.Thegoalofagoodtechnicalanalystistodiscoverthebalanceof
![Page 557: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/557.jpg)
powerbetweenbullsandbears—inordertotradeinthesamedirectionasthewinninggroup.Thedangerofforecastingisthatitlocksusintoaspecificmind-setinsteadoffocusingon
![Page 558: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/558.jpg)
thecurrentrealityofthemarket.
3. Answer2-3:CReadingnewspapers,watchingTV,andsurfingthenetoftenleadtopoorlyplannedandimpulsive
![Page 559: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/559.jpg)
trades.Whytrade,whetheralargeorasmallsize,whenyouaren'tsurewhattodoatthemoment?“Whenindoubt,stayout”isasensiblerule.
4. Answer2-4:
![Page 560: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/560.jpg)
BTheprofitsyou'retryingtomakecancomefromonlyonesource—fromothertraders'accounts.Themirrorimageofthatisthatanylossesyoutakewillgive
![Page 561: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/561.jpg)
yourmoneytoothertraders.Tradedefensivelybecauseothertraderswilltrytopickyourpocketsbeforeyoucanpicktheirs.Brokersandexchangeswillalsotaketheircut,whetheryou
![Page 562: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/562.jpg)
win,lose,ordraw.
5. Answer2-5:B(IandIII)Whenwejoincrowds,ourindependencedissolves,andthecapacityforcriticalthinkinggoesoutthewindow.
![Page 563: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/563.jpg)
Crowdsareimpulsive,addingtovolatility.Crowdmembersblindlyfollowtrends,andtheirpsychologicaldependencemakesthemunlikelytoleavethe
![Page 564: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/564.jpg)
crowd,untilshakenbyasevereloss.
6. Answer2-6:D(I,II,III,andIV)Thegreatertheuncertainty,themorelikelywearetoturntoothersforreassuranceandcomfort.
![Page 565: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/565.jpg)
Thisbehaviorisdeeplyingrainedinhumannature.Groupsareheldtogetherbytheirloyaltytotheleader.
7. Answer2-7:A(I)Crowdsarebiggerand
![Page 566: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/566.jpg)
strongerthananyofus;don'targuewiththemarket.Crowdsarestrongbutprimitive,andyoucanexploittheirrepetitivebehavior—butonlyifyoucanstandapart
![Page 567: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/567.jpg)
fromthem.Marketcrowdsarerightduringtrendsbutwrongatturningpoints.Whenyouletthemarketmakeyoufeelelatedordepressed,yougiveitpoweroveryourself;professional
![Page 568: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/568.jpg)
traderstrainthemselvesnottoreactemotionallytogainsorlosses.
8. Answer2-8:CAlleyesinthemarketaregluedtoprices.Thelongerarallylasts,themore
![Page 569: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/569.jpg)
peopleturnbullish,pushingpriceshigherandattractingevenmorebulls.Apersistentdeclinemakesmorepeoplefeelbearish,andtheirsellinghelpspushthemarkereven
![Page 570: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/570.jpg)
lower.Priceisthetrend'sleader.Fewfinancialfirmsarebigenoughtodominateamarketfordaysorevenhours.Gurusaretothemarketlikeatailistoadog,andfewdogschasetheir
![Page 571: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/571.jpg)
tailsforverylong.Fundamentalchangesintheeconomysetconditionsforbullandbearmarkets,butonlytraderscanbuyandsell,creatingself-reinforcingpricetrends.
![Page 572: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/572.jpg)
9. Answer2-9:B(IIandIII)Pricesarehammeredoutinthebattlesbetweenbullsandbears.Pricesrallywhenconfidentbullsarepayingup,whilesellersdemanda
![Page 573: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/573.jpg)
premiumforparticipatinginthegamethat'sgoingagainstthem.Thereisabuyerandasellerbehindeverytransaction.Thenumberofstocksorfuturesboughtandsoldisequalby
![Page 574: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/574.jpg)
definition.10. Answer2-10:
D(I,II,III,andIV)Inadowntrend,theshortsaremakingmoney,andmanybecomewillingtosellatalowerpriceto
![Page 575: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/575.jpg)
increasetheirpositions.Atthesametime,bullsarelosing,andmanywanttogetout.Thosethatagreetobuydoitonlyatadiscount.Theyplacetheirbidsbelowthemarket,
![Page 576: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/576.jpg)
forcingbearstosellcheaper.Thisprocessisreversedduringuptrends.
11. Answer2-11:B(IIandIII)Apriceshockisasuddenmoveagainstthetrend.Itfrightensthe
![Page 577: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/577.jpg)
dominantgroupandmakestheoppositionbolder.Asuddenpricebreakinanuptrendprovidesapriceshockthatfrightensthebulls.Eveniftheymanagetotakeprices
![Page 578: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/578.jpg)
toanewhigh,theirconfidenceisshaken,andtheuptrendmaywellbereadytoreverse.
12. Answer2-12:CAbearishdivergenceoccurswhen
![Page 579: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/579.jpg)
pricesrallytoanewhigh,whileanindicatorrisestoalowerpeak.Inabullishdivergence,pricesfalltoanewlow,whileanindicatorfallstoamoreshallowlow.
![Page 580: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/580.jpg)
Bearishdivergenceshelpidentifyuptrendtops.Bullishdivergenceshelpidentifydowntrendbottoms.Theyareamongthemostusefulpatternsintechnicalanalysis.
![Page 581: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/581.jpg)
13. Answer2-13:B(IandIV)Atradermuststaycalm,focusontherealityofthemarket,identifythecurrenttrend,andgetingearwithit.Whentraderstrytoforecast
![Page 582: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/582.jpg)
exactlywhatthemarketwilldo,theiregosbecomeweddedtotheirpredictions,anditbecomeshardforthemtochangetheirtradingstance.Whenthemarketrefusestofollow
![Page 583: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/583.jpg)
forecasts,traderswhosticktothemgetfinanciallyhurt.
![Page 584: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/584.jpg)
■RatingYourself
![Page 585: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/585.jpg)
1. 0-4correct:poor.Youhaveaverylimitedunderstandingofmasspsychologyofthemarkets.Ifyoudon'tunderstandhowmarket
![Page 586: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/586.jpg)
crowdsinfluenceyourbehavior,you'llbesweptawaybythemandlosemoney.Pleaserereadtherelevantsectionofthebook,andretakethistestinafewdays,before
![Page 587: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/587.jpg)
proceedinganyfurther.
2. 5–9correct:fairlygood.Youhaveaworkinggraspoftheessentialconceptsofmasspsychology,butneedtolearnmoreaboutthe
![Page 588: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/588.jpg)
balancebetweenbullsandbears,theimpactofthetradingcrowdsonyou,andthedifferencebetweenmanagingtradesandforecastingprices.Pleasereviewtherelevant
![Page 589: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/589.jpg)
sectionofthebookandretakethistestinafewdays.
3. 10–13correct:excellent.Youhavemasteredtheessentialconceptsofmasspsychology.
![Page 590: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/590.jpg)
Nowreviewsomeofyourrecenttradesinlightoftheseprinciples.Continuetomonitorhowthemarketimpactsyou.Asyouproceedtothechaptersonmarket
![Page 591: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/591.jpg)
analysis,keepinmindthattechnicalanalysisisappliedsocialpsychology.
![Page 592: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/592.jpg)
■ RecommendedReading1. Mackay,Charles,ExtraordinaryPopularDelusionsandtheMadnessofCrowds(1841)(NewYork:CrownPublishers,1980).
![Page 593: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/593.jpg)
THREE
ClassicalChartAnalysis
![Page 594: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/594.jpg)
1. Answer3-1:I=C;II=D;III=B;IV=AAmateurstendtogettheirinformationafterworkandtradeinthemorning.Professionals
![Page 595: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/595.jpg)
respondtochangingconditionsthroughoutthedayandtendtodominatethemarketnearclosingtime.Buyingpushespricesup,andthehighestpriceofthedaymarksthe
![Page 596: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/596.jpg)
maximumpowerofbulls.Sellingpushespricesdown,andthelowestpriceofthedaymarksthemaximumpowerofbears.Thisreasoningalsoappliestoweeklyandintra-day
![Page 597: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/597.jpg)
charts.2. Answer3-2:
C(I,II,andIII)Wishfulthinkingisrampantamonganalysts,especiallythosewhodon'ttrade.Keepingbasic
![Page 598: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/598.jpg)
definitionsfuzzycontributestotheconfusion.Itisquitecommonforthemarketstobetrendinghigherandloweratthesametimeindifferenttimeframes.Goodanalysts
![Page 599: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/599.jpg)
whofocusondifferenttimeframesmaycometodifferentconclusions,andallcanmakeprofitabletrades.
3. Answer3-3:CSlippagetends
![Page 600: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/600.jpg)
tobeloweronquiet,narrow-rangedays.That'swhenyoucangetabetterentry,butitdoesn'tchangeyourcommissions.
4. Answer3-4:4(A,B,C,andD)MDTis
![Page 601: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/601.jpg)
tracingapatternofralliesanddeclines.Assoonaspricesbegintodeclinefromthelatestpeak,drawahorizontallineacrossthatpeak,markingaresistancelevel.As
![Page 602: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/602.jpg)
pricesrallyagain,theysometimesslowdownattheresistancelevel.Aftertheypenetrateit,theyusuallypullback—whatusedtoberesistancebecomesasupportlevel.
![Page 603: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/603.jpg)
5. Answer3-5:D(IandIV)Supportlinesaredrawnacrossthelows,andresistancelinesacrossthehighs.Theycanchangeroleswiththepassageoftime,asthe
![Page 604: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/604.jpg)
marketmovesawayfromthoselevels.Theedgesofcongestionzonesshowwheremassesoftradershavetradedandreversedtheirpositions.Extremepricesshowonlythelevelsofpanic
![Page 605: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/605.jpg)
amongtheweakestmarketparticipants.
6. Answer3-6:D(I,II,III,andIV)Supportandresistanceexistbecausetradershavememories.Themoreintense
![Page 606: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/606.jpg)
theirmemories,themoreactivelytheybuyandsell,strengtheningsupportandresistance.Highvolumereflectsagreaterdegreeoffinancialandemotionalcommitment,
![Page 607: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/607.jpg)
whilethegreaterheightofthesupportandresistancezonesshowsahigherlevelofactivity,andconsequently,strongermemories.Thegreaterthedurationofacongestionareaandthe
![Page 608: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/608.jpg)
moretimesit'sbeenhit,themoretradersexpectanewreversaltooccur,reinforcingsupportandresistance.
7. Answer3-7:C(I,II,andIII)Waitingfora
![Page 609: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/609.jpg)
newlowbeforeshortinghelpsensureyou'redealingwithadownsidebreakout.Falsebreakoutsarethebaneofamateurs,butprofessionaltraderslovethem.They
![Page 610: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/610.jpg)
oftenwaituntiladownsidebreakoutstopsmakingnewlowsandthentradeagainstit:buyandplaceaprotectivestopnearthelatestlow.Sincepricesmadeanewlow
![Page 611: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/611.jpg)
yesterday,shortingattheopeningwouldmeanfollowingthetrend,butbuyingwouldbeapooroption.
8. Answer3-8:A=IV;B=I;C=III;D=IIThelower
![Page 612: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/612.jpg)
dashedline,drawnacrosstheedgeofacongestionarea,marksthelevelofsupport.WhenpricesbreakouttoanewlowduringbarA,andevenslightlylowerduringbarB,thereisa
![Page 613: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/613.jpg)
possibilitythatthedowntrendwillresume.Still,theshortnessofthosebarsindicatesthatthedownmoveisfacingastiffresistance.AsbarCmovesupintothecongestionarea,itleaves
![Page 614: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/614.jpg)
behindafalsedownsidebreakout.Youmaystartbuyingwhenitcrossesabovethepreviouslybrokensupportline,withastopneartherecentlows.Theshortnessofthelastbarindicatesthat
![Page 615: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/615.jpg)
therallyisslowingdown—tightenyourstopandconsidermovingituptothebreakevenlevel.
9. Answer3-9.Trends=AandC;Trading
![Page 616: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/616.jpg)
ranges=BandDWhenpricestrend,theykeeprisingorfallingovertime,reachinghigherhighsorlowerlows.Intradingranges,mostralliespeteroutatapproximately
![Page 617: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/617.jpg)
thesamehighs,anddeclinesstopatapproximatelythesamelows.Asatrader,whenyourecognizeatrend,followitandhangontopositions.Ifyoutradetheswingswithin
![Page 618: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/618.jpg)
atradingrange,beextracarefulnottooverstayyourpositions.
10. Answer3-10.I=G;II=A,B,andF;III=CandD;IV=ETheactionsofanytradingvehicleasit
![Page 619: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/619.jpg)
nearssupportorresistanceprovideinformationaboutitsstrengthorweakness.Whenastockcannotriseuptotouchresistance,itshowsweakness.Holdingabove
![Page 620: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/620.jpg)
supportindicatesstrength.Falsebreakoutsprovidesomeofthebestsignalsintechnicalanalysis.
11. Answer3-11:C(I,II,andIII)Thetrendis
![Page 621: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/621.jpg)
yourfriend.Aslongasyouseethepatternofhigherhighsandhigherlows,tradethatmarketfromthelongside.Makesuretoprotectyourpositionswithstopsandmovethemupasthetrend
![Page 622: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/622.jpg)
progresses.Addtoyourpositionsonlyafteryourpaperprofitshavebeenprotected.Ifthemarkettakesoutitspreviouslow,itthrowstheuptrendindoubt.
![Page 623: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/623.jpg)
12. Answer3-12:AdoesnotapplyTailsshowthateitherahighoralowpricelevelhasbeenrejectedbythemassofmarketparticipants.Sincemarketstendtomove
![Page 624: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/624.jpg)
awayfromrejectedpricelevels,itpaystotradeinthedirectionoppositeatail.Sometradingvehiclesaremorelikelytohavetailsthanothers—youseethreeofthemonthischartofBA,
![Page 625: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/625.jpg)
followedbyreversals.
13. Answer3-13:DisnotpermittedPayingcloseattentiontomarketactionafterakangarootail,youmayincreaseyourpositionsize
![Page 626: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/626.jpg)
ortakeprofitswhenthemoveappearstostall.Whatyoushouldn'tdoisplaceyourstopbelowthetipofthetailbecauseitwouldexposeatradetotoomuchrisk.
![Page 627: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/627.jpg)
■RatingYourself
![Page 628: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/628.jpg)
1. 0-4correct:poor.Chartstellanimportantstory—andifyoucan'treadit,you'llmissthemarket'smessage.You'llrunaseriousriskof
![Page 629: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/629.jpg)
buyingatthetopsandsellingatthebottoms.Pleaserereadtherelevantsectionofthebook,reviewyourmistakes,andthenretakethistest.Donotproceedtothenextchapter
![Page 630: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/630.jpg)
untilthen—thesematerialsaretooimportanttoskip.
2. 5–9correct:fairlygood.Youhaveaworkingknowledgeofthekeyconceptsofcharting.Now
![Page 631: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/631.jpg)
youhavetodecidewhether“fairlygood”isgoodenoughforyou.Itmaybeenoughifyouplantofocusoncomputerizedtechnicalanalysis,butnotenoughifyouplanto
![Page 632: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/632.jpg)
workwithcharts.Allseriousinvestorsandtradersneedtograspsuchessentialconceptsastrendsandtradingranges,supportandresistance,continuationandreversal.It
![Page 633: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/633.jpg)
wouldbeagoodideatoreturntotherelevantsection,reviewit,andthenretakethistest.
3. 10–13correct:excellent.You'vemasteredtheessential
![Page 634: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/634.jpg)
conceptsofcharting.Theycanhelpyoudiscovertheshiftsofpowerbetweenbullsandbears.Nowproceedtothechaptersoncomputerizedtechnicalanalysis.
![Page 635: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/635.jpg)
■ RecommendedReading1. Edwards,RobertD.,and
JohnMagee,TechnicalAnalysisofStockTrends(1948).(NewYork:NewYorkInstituteofFinance,1992).
2. Pring,MartinJ.,TechnicalAnalysisExplained,5thedition
![Page 636: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/636.jpg)
(NewYork:McGraw-Hill,2013).
![Page 637: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/637.jpg)
FOUR
ComputerizedTechnicalAnalysis
![Page 638: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/638.jpg)
![Page 639: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/639.jpg)
1. Answer4-1:A=(I)Computerizedtechnicalanalysisismoreobjectivethanclassicalcharting.Youmayarguewhethersupportor
![Page 640: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/640.jpg)
resistanceispresent,buttherecanbenoargumentaboutthedirectionofanindicator—it'seitherup,down,orflat.Agoodtechnicianaimstodiscoverthebalanceof
![Page 641: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/641.jpg)
powerbetweenbullsandbearsandbetonthewinninggroup—nottoforecastthefuture.Acomputerdoesn'tremoveemotionsfromtradingbecausewestillhavetoplaceour
![Page 642: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/642.jpg)
orders.Anyonewhotriestosellyou“asurething”shouldbeviewedwithuttersuspicion.
2. Answer4-2:I=B;II=C;III=AAtoolboxisacollectionof
![Page 643: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/643.jpg)
analyticandchartingtools.Blackboxesforautomatictradingcomewithexcellenthistoricalrecordsbutself-destructwhenmarketschange;grayboxesstraddletheboundarybetweenthose
![Page 644: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/644.jpg)
twogroups.3. Answer4-3:I
=B;II=C:III=AItpaystocombineindicatorsfromdifferentgroupssothattheirnegativefeaturescanceleachotheroutwhiletheir
![Page 645: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/645.jpg)
positivefeaturesremainundisturbed.We'llreturntothisthemeinthechapterontheTripleScreentradingsystem.
4. Answer4-4:BTocalculatea
![Page 646: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/646.jpg)
simplemovingaverage,addtheclosingpricesinitstimewindowanddividetheirsumbythenumberofdaysinthatwindow.Addingpricesforthepast5daysproduces110,and
![Page 647: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/647.jpg)
dividing110by5is22.
5. Answer4-5:AExponentialmovingaveragesarehardertocalculatebyhandthansimpleMAs.Ifyouuseacomputer,both
![Page 648: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/648.jpg)
areequallyeasy.
6. Answer4-6:DArisingEMAconfirmsthatbullsareincontrol—it'stimetogolong.WhenEMAdeclines,itshowsthatbearsarein
![Page 649: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/649.jpg)
control—it'stimetogoshort.TheabilityofanEMAtoreachanewhighshowsthatbullsarestrongerthanbefore,whiledecliningtoanewlowshowsthatbearsare
![Page 650: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/650.jpg)
strongerthanbefore.Theseareimportantsignals,butlessfrequentorimportantthanthedirectionoftheEMAslope.ThewidthoftheEMA'stimewindowissetbythetrader.
![Page 651: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/651.jpg)
7. Answer4-7:1=A&C;2=BWhentheEMArises,tradethestockonlyfromthelongside—placeyourbuyordersslightlybelowtheEMA.WhentheEMAturns
![Page 652: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/652.jpg)
down,tradethestockfromtheshortsidebyplacingsellordersslightlyabovethefallingEMA.You'refreetostandasidewheneveryou'dlike.
8. Answer4-8:1=D,E,F,and
![Page 653: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/653.jpg)
G;2=A,B,andI;3=C,H,andJWhentheEMApointsup,pullbacksmarkbuyingopportunities.WhentheEMApointsdown,pricesareusuallybelowit,and
![Page 654: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/654.jpg)
ralliestotheEMAmarkshortingopportunities.Thetransitionalzonesbetweenuptrendsanddowntrendsarethehardesttotrade.Whenindoubt,standasideuntilacleartrend
![Page 655: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/655.jpg)
emerges.9. Answer4-9:
D(I,II,III,andIV)Eachpriceisamomentaryconsensusofvalue,whileamovingaveragereflectstheaverageconsensusof
![Page 656: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/656.jpg)
value.Ashorter-termMAtracksshort-termconsensus,andalonger-termMAtrackslonger-termconsensus.MACDlinesconsistofmovingaverages,andwhenthefast
![Page 657: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/657.jpg)
lineofMACDisaboveorbelowtheslowline,itshowswhetherbullsorbearscurrentlydominatethemarket.
10. Answer4-10:Cisn'ttrueMACD-Histogram
![Page 658: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/658.jpg)
tracksthespreadbetweenthefastandslowMACDLines.ItsslopeisdefinedbytherelationshipbetweenthelasttwobarsofMACD-Histogram.Whenthesloperises,it
![Page 659: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/659.jpg)
showsthatbullsareincontrol,andwhenitdeclines,itshowsthatbearsareincontrol.Itpaystotradeinthedirectionofthedominantmarketgroup.Thisisnotforecasting—
![Page 660: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/660.jpg)
it'sreadingthemarketandbettingthattheinertiaofthemarketcrowdwillcontinue.
11. Answer4-11:1=D;2=A;3=BandE;4=F;5=CWhenMACD-Histogramreachesanew
![Page 661: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/661.jpg)
high,ittellsyouthatbullsarestrongandpricesarelikelytoretestorexceedtheirlatestpeak.Whenitfallstoanewlow,itshowsthatbearsarestrongandpricesarelikelytoretest
![Page 662: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/662.jpg)
orexceedthelatestlow.Afterwards,whenMACD-Histogramcrossesitszeroline,itsignalsthatthepowerofthedominantgrouphasbeenbroken.Abullish
![Page 663: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/663.jpg)
divergencegivesastrongbuysignal;itoccurswhenpricesfalltoanewlow,butMACD-Histogramtracesashallowerbottom.Abearishdivergencegivesastrong
![Page 664: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/664.jpg)
sellsignal;itoccurswhenpricesrisetoanewhigh,butMACD-Histogramtracesalowerhigh.
12. Answer4-12:CThebearishdivergencehassentprices
![Page 665: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/665.jpg)
lower,buttheyrefusedtobreakbelowtheirEMA.Atthesametime,MACD-Histogramhasdroppedbelowzero,showingthatbearsarenearingtheirmaximumeffortlevel.Withbears
![Page 666: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/666.jpg)
havingdeliveredaboutasmuchpowerastheycouldandpricesholdingup,it'sbettertotakeprofitsandmovetothesidelines.
13. Answer4-13:CThepartof
![Page 667: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/667.jpg)
today'sbarthatprotrudesaboveorbelowyesterday'sbarrepresentstoday'sdirectionalmovement.Iftoday'sbarextendsbothaboveandbelowyesterday's
![Page 668: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/668.jpg)
bar,thenonlythelongerpartrepresentsdirectionalmovement.Iftoday'sbarisinsideofyesterday'sbar,orifitextendsaboveandbelowbyequalamounts,directionalmovementis
![Page 669: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/669.jpg)
zero.14. Answer4-14:
I=B;II=A,C,E;III=DTradeinthedirectionoftheupperDirectionalLineaslongasADXrisesabovethelowerDirectional
![Page 670: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/670.jpg)
Line.ExitwhenADXrisesabovebothDirectionalLinesandthenticksdown.AnotherexitsignaloccurswhenADXsinksbelowbothDirectionalLines.Aslong
![Page 671: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/671.jpg)
asADXstaysbelowboth+DIand−DI,avoidusingatrend-followingmethod.
15. Answer4-15:CWhenADXrisesabovebothDirectional
![Page 672: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/672.jpg)
Linesandthenticksdown,itsignalstheendofastronglydirectionalmoveandsuggeststheonsetofgreatervolatility.Youcanstilltradethismarket,butonlyusingshorter-term
![Page 673: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/673.jpg)
indicatorsratherthantheDirectionalsystem.
16. Answer4-16:BOscillatorsshowwhetherbullsorbearsarecurrentlyincontrol.Theirpeaksandbottoms
![Page 674: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/674.jpg)
marktheextremesofmassoptimismandpessimism.Overboughtreadingsofoscillatorshelpidentifymarkettops,andoversoldreadingshelpcatchmarketbottoms.
![Page 675: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/675.jpg)
Thesesignalstendtoworkwellduringtradingrangesbutarelessusefulduringtrends.Noindicatorcancatchalltopsandbottoms.
17. Answer4-17:DWhenan
![Page 676: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/676.jpg)
oscillatorreachesanewrecordhigh,itreflectsstrengthandtellstradersthattherallyislikelytocontinue,evenifthereisatemporarypause.Youmayaddtolongpositions
![Page 677: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/677.jpg)
ortakepartialprofits,butit'sbettertoignoreshortingsignalsbecauseunderthoseconditions,pricesaren'tlikelytodropbyameaningfulamount.
![Page 678: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/678.jpg)
18. Answer4-18:1=A,C,I;2=B,E,F;3=E–F;4=C–DandI–J;5=D,G,H,andJStochasticbecomesoverboughtwhenitrisestooraboveitsupper
![Page 679: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/679.jpg)
referenceline.Thereitgivesasignaltoselloratleastavoidbuying.Stochasticbecomesoversoldwhenitfallstoorbelowitslowerreferenceline.Thereitgivesasignaltobuy
![Page 680: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/680.jpg)
oratleastavoidshorting.AfailureswingoccurswhenStochasticfailstoreachitsreferencelineduringamarketmove.WhenStochasticcouldnot
![Page 681: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/681.jpg)
reachitsupperreferencelineduringtherallyG,itshowedthatbullswereweakandgaveasellsignal.FailureswingsDandJbecamepartsofbearishdivergences.Inthebullish
![Page 682: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/682.jpg)
divergenceE–F,thesecondbottomwasshallowerthanthefirst,butnotafailureswingbecauseitwasbelowthelowerreferenceline.
19. Answer4-19:CStochasticis
![Page 683: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/683.jpg)
nearitsneutralmidpoint—butit'sfallingfromapowerfulbearishpattern.Ithasjusttracedafailureswingandabearishdivergence.Inaddition,youcanseeanupward-
![Page 684: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/684.jpg)
pointingkangarootailonthepricechart,reinforcingStochastic'sbearishmessage.
20. Answer4-20:1=A,B,F;2=D;3=D–E;4=B–CRSIbecomes
![Page 685: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/685.jpg)
overboughtwhenitrisesaboveitsupperreferenceline.Thereitgivessellsignals,whichhelptraderssellshortindowntrendsorinflatmarkets,butareoftenpremature
![Page 686: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/686.jpg)
duringuptrends.RSIbecomesoversoldwhenitfallsbelowitslowerreferenceline.Thereitgivesbuysignals,whichhelptradersgolonginuptrendsorflatmarketsbutareoften
![Page 687: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/687.jpg)
prematureduringdowntrends.Bullishandbearishdivergencesgivethestrongestbuyandsellsignals.Alldivergencesyouseeonthischartprecededsubstantial
![Page 688: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/688.jpg)
marketmoves.21. Answer4-21:
BRSIhasjusttracedaclearbearishdivergence,withitsfirsttopaboveandthesecondbelowtheupperreferenceline.
![Page 689: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/689.jpg)
ThisbearishmessageisreinforcedbythefactthattheslightpricedeclineofthepastfewdaystookTIFbelowthetopitreachedseveralmonthsearlier.Afalseupsidebreakoutis
![Page 690: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/690.jpg)
nowinplaceandthat,reinforcedbytheRSIdivergence,givesasignaltosellshort.
22. Answer4-22:A(IandII)Whenthemarkettrendisdownandanoscillatorrises
![Page 691: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/691.jpg)
aboveitsupperreferenceline,itidentifiesashort-termsplashofbullishness—ashortingopportunity.Afterward,youmaywanttocovershortswhenanoscillatorfalls
![Page 692: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/692.jpg)
belowitslowerreferenceline,oryoumaywanttoholdshorts.Inanycase,donotuseoscillatorstogolonginawell-establisheddowntrend.AsPeterLynch,anotedmoney
![Page 693: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/693.jpg)
manager,oncewrote:“Tryingtocatchabottomisliketryingtocatchafallingknife—youinvariablygrabitinthewrongspot.”
![Page 694: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/694.jpg)
■RatingYourself
![Page 695: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/695.jpg)
1. 0-8correct:poor.Youhaveaverylimitedunderstandingofmoderntechnicalanalysis.Youoweittoyourselftolearnthe
![Page 696: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/696.jpg)
essentialconceptsofusingindicators.Pleaserereadtherelevantchapterandretakethistestbeforeproceedingtotherestofthisbook.
2. 9–15correct:
![Page 697: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/697.jpg)
fairlygood.Itisimportanttounderstandthemessagesoftrend-followingindicatorsandoscillators.Theyofferinsightsintothebalanceofpowerbetweenbullsand
![Page 698: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/698.jpg)
bears.Youhaveadecentgraspoftheessentialconceptsofcomputerizedtechnicalanalysis.Nowreviewyouranswerstofindoutyourareasofstrengthandweakness.Are
![Page 699: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/699.jpg)
youmorecomfortablewithtrend-followingindicatorsoroscillators?Areyoubetteratfindingsignalsthatidentifytrendsorreversals?Pleasereviewtherecommended
![Page 700: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/700.jpg)
literature,andretakethistestseveraldayslater.Thinkaboutwhatthesetestsrevealaboutyourpreferences.Mostsuccessfultradersconcentrateonjustafew
![Page 701: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/701.jpg)
typesoftrades.Someprefertofollowtrends,whileothersarebetteroffatcatchingreversals.Trader,knowthyself.
3. 16–22correct:excellent.Youhavea
![Page 702: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/702.jpg)
goodcommandofcomputerizedtechnicalanalysis.Theseindicatorsarethebuildingblocksofseveralproventradingsystems(seePart7).Beforeweworkona
![Page 703: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/703.jpg)
system,let'sreviewothertypesofindicatorsavailabletomarketanalysts(Parts5and6).
![Page 704: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/704.jpg)
■ RecommendedReading1. Murphy,JohnJ.,TechnicalAnalysisoftheFinancialMarkets(NewYork:NewYorkInstituteofFinance,1999).
![Page 705: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/705.jpg)
FIVE
VolumeandTime
![Page 706: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/706.jpg)
1. Answer5-1:AEachtradereflectsafinancialandemotionalcommitmentbytwotraders:abuyerandaseller.Sinceoneofthemis
![Page 707: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/707.jpg)
boundtoberightandtheotherwrong,volumerepresentstheactivityofwinnersandlosers.Itsurgeswhenloserspanic.Itmirrorscurrentactivitybutdoesn'tforecastthe
![Page 708: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/708.jpg)
future.2. Answer5-2:1
=B;2=A;3=C;4=DTrendstendtopersistwhenthevolumeissteadyorrisesinanorderlymanner.Theyusuallyexpirewitheitherabangora
![Page 709: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/709.jpg)
whimper—aburstofvolumeoritsdrasticshrinkage.Thetrendcannotcontinueaftermassesoflosersstartleaving.
3. Answer5-3:1=D;2=AandB;3=C
![Page 710: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/710.jpg)
andF;4=EandGRisingorsteadyvolumeconfirmstrends.Whenpricesrisetoanewhighorfalltoanewlowwhilevolumeshrinks,ittellsusthatthe
![Page 711: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/711.jpg)
pricetrendislikelytoreverseoratleasttopause.
4. Answer5-4:BThereisapowerfulrallygoingon,withasteadypatternofhigherhighsandlows.
![Page 712: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/712.jpg)
CPSTisslowlydecliningfromitslatesthigh,whilevolumeisshrinking.Waitforabarorafewbarsthatfailtoreachanewlowforthisminordownmove—andthengo
![Page 713: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/713.jpg)
long.5. Answer5-5:
C(I,II,andIII)OBViscreatedbyaddingeachday'svolumetoarunningtotalwhenatradingvehiclerisesandsubtractingit
![Page 714: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/714.jpg)
onthedayswhenthatvehiclefalls.OBVconfirmsbullmoveswhenitrisestoahigherhighthanatthepreviouspeak;itconfirmsdeclineswhenitfallstoalowerlowthanattheprevious
![Page 715: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/715.jpg)
bottom.Pricesrepresenttheconsensusofvalue,whilevolume,measuredbyOBV,trackstraders'emotions.
6. Answer5-6:1=D;2=C;3=B;4=AOpeningand
![Page 716: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/716.jpg)
closingpricesareamongthemostimportantpricesoftheday.Openingstendtobedominatedbyamateurswhoseordersfloodthemarketsinthemornings.Closingstendtobe
![Page 717: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/717.jpg)
dominatedbyprofessionalswhomonitortheconditionsallday.Accumulation/Distributiontiesdailyvolumetotherelationshipbetweenopeningandclosingprices.
7. Answer5-7:
![Page 718: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/718.jpg)
BThenumberoflongandshortpositionsinthederivativesmarketsisalwaysequal.Whilestocksrepresentcurrentownership,derivativesarecontractsfor
![Page 719: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/719.jpg)
futuredelivery.Eachcontracthastwosides:asellerandabuyer.Thisiswhyopeninterestreflectsthenumberofcontractsheldbylongsorowedbyshortsinanygiven
![Page 720: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/720.jpg)
marketonanygivenday.Itequalsthetotallongorthetotalshortposition.
8. Answer5-8:1=B;2=C;3=C;4=AOpeninterestrisesonlywhenanewbuyeranda
![Page 721: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/721.jpg)
newsellerenterthemarketbecausetheirtradecreatesanewcontract.Openinterestfallswhenabullwhoislongsellshiscontracttoabearwhobuysittocoverhisshorttrade,
![Page 722: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/722.jpg)
andbothcloseouttheirpositions.Ifanewbullbuysfromanoldbullwho'sgettingout,openinterestremainsunchanged.Nordoesitchangewhenanewbearsellstoanoldbear
![Page 723: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/723.jpg)
whobuystogetoutofhisshortposition.
9. Answer5-9:D(1,2,3,and4)Whenopeninterestrises,itshowsthatacrowdofconfidentbullsisfacingdownacrowdof
![Page 724: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/724.jpg)
equallyconfidentbears.Onegroupissuretolose,butaslongaspotentialloserskeeppouringin,thetrendislikelytocontinue.
10. Answer5-10:C(1,2,and3)
![Page 725: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/725.jpg)
Thedirectionofthemoveshowswhetherthedominantforcewasupordown.Thedistancebetweentoday'sandyesterday'sclosingpricesreflectsthemarginofvictoryby
![Page 726: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/726.jpg)
bullsorbears.High-volumeralliesanddeclinesaremoreforcefulandmorelikelytopersist.Whilerelatedmarketsareimportant,theydon'treflecttheforceofmoves
![Page 727: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/727.jpg)
elsewhere.11. Answer5-11:
DForceIndexlinksthreeessentialfactors:thedirectionofpricechange,itsextent,andthevolumeonwhichitoccurred.To
![Page 728: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/728.jpg)
calculatethedailyForceIndex,subtractyesterday'sclosingpricefromtoday'sandmultiplytheresult,whetherpositiveornegative,bytoday'svolume.
![Page 729: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/729.jpg)
12. Answer5-12:D(I,II,III,andIV)SmoothingtherawForceIndexwithamovingaveragehelpsrecognizeitstrend—ashort-termtrendusingashortEMAoran
![Page 730: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/730.jpg)
intermediatetrendusingalongerEMA.Whenthe2-dayEMAofForceIndexdipsbelowzeroduringmarketrallies,itidentifiesbuyingopportunities,andwhenitralliesabove
![Page 731: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/731.jpg)
zeroduringmarketdrops,itmarksshortingopportunities.The13-dayEMAofForceIndexhelpsidentifybullishandbearishzonesbyitspositionaboveorbelowitszeroline.
![Page 732: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/732.jpg)
DivergencesbetweenForceIndexandpricetendtomarkapproachingtrendreversals.
13. Answer5-13:1=GandH;2=F;3=A,B,C,andD;4=E
![Page 733: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/733.jpg)
Inthelefthalfofthechart,pricesareinadowntrend,confirmedbyafallingEMA.Wheneverthe2-dayEMAofForceIndexrisesabovezero,itshowsabriefrecoverybythebulls—a
![Page 734: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/734.jpg)
shortingopportunity.InareaE,pricesfalltoanewlowbutrecoilfromit,leavingbehindafalsedownsidebreakout,whileForceIndextracesabullishdivergence,
![Page 735: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/735.jpg)
withamuchmoreshallowlow.Thisisagoodtimetocovershorts.InareaF,theEMAofpricesturnsup—itsignalstostopshortingandlookforbuyingopportunities.Afterwards,
![Page 736: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/736.jpg)
ForceIndexdeclinesbelowzeroinareasGandH,givingbuysignals.
14. Answer5-14:BAttherightedgeofthescreen,amovingaverageofpriceis
![Page 737: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/737.jpg)
trendinghigher,indicatinganuptrend.The2-dayForceIndexhasdippedbelowzero,signalingthatthestockisshort-termoversoldandgivingabuysignal.Youhavetwomain
![Page 738: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/738.jpg)
waystoactonthissignal.Youmayplaceabuyorderatthehighofthecurrentbar,aimingtocatchanupsidebreakout.Alternatively,youmaymeasuretheextentofan
![Page 739: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/739.jpg)
averagedownsidepenetrationoftheEMAandplaceyourbuyorderatasimilardistancebelowthecurrentEMA.
15. Answer5-15:1=C;2=AandD;3=B
![Page 740: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/740.jpg)
Thelonger-termForceIndex,smoothedwitha13-barEMA,helpsidentifytrendreversals:bullishwhenitcrossesabovethezerolineandbearishwhenitcrossesbelow
![Page 741: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/741.jpg)
thatline.Itisalsopossibletodrawhorizontalbullishandbearishlinesslightlyaboveandbelowthezeroline.Waitingfortheircrossovers,ratherthanthoseofthe
![Page 742: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/742.jpg)
zeroline,willreducewhipsaws—butitwillalsoslowdownthegoodsignals.Whatyou'dgaininonetrade,you'llloseinanother.AlowerpeakofForceIndexinareaBshows
![Page 743: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/743.jpg)
thatthebullishforceisweakeningandpreparesyouforacomingtrendreversal.
16. Answer5-16:BTheForceIndexispositive—bullish,whilethetrendisup,
![Page 744: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/744.jpg)
confirmedbyarisingEMA.Thiscombinationsuggestsgoinglong,usingpullbackstotheEMAforbuying.
17. Answer5-17:C(1,2,and3)Pricecyclesowetheir
![Page 745: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/745.jpg)
existencetofundamentalproductionfactors,suchasweatherandseasonalshiftsinsupplyanddemand,aswellaswavesofgreedandfearamongtraders.
18. Answer5-18:
![Page 746: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/746.jpg)
1=D;2=AandE;3=BandF;4=CandGTheseasonofanindicatorisdefinedbyitsslopeanditspositionaboveorbelowthecenterline.Whenanindicatorturns
![Page 747: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/747.jpg)
upbutisbelowitscenterline,itisspring;whenitrisesaboveitscenterline,itissummer;whenitdeclinesbutisaboveitscenterline,itisautumn;andwhenitfallsbelowitscenterline,itis
![Page 748: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/748.jpg)
winter.Springisthebestseasonforgoinglong,andautumnisthebestseasonforsellingshort.Seasonsarenotrigid—notinnatureandnotinthemarkets.Noticeabriefwarmspellin
![Page 749: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/749.jpg)
winterintheareabetweenlettersBandC.
19. Answer5-19:AEachtimeframerelatestoitsnextgreaterandlessertimeframesbyafactorof5.
![Page 750: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/750.jpg)
Whenyouanalyzeamarketintwotimeframes,theshorterofthemhastobeaboutfivetimesshorterthanthelongerone.Ifyourfavoritetimeframeisdaily,youmustfirst
![Page 751: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/751.jpg)
examineweeklycharts.
![Page 752: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/752.jpg)
■RatingYourself
![Page 753: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/753.jpg)
1. 0-7correct:poor.Youneedtolearnmoreaboutvolumeandtime.Theseessentialaspectsofmarketanalysiswillgiveyouan
![Page 754: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/754.jpg)
edgeovermosttraders.Pleaserereadtherelevantchapterandretakethistestbeforeproceedingtotherestofthisbook.
2. 8–14correct:fairlygood.Youhavea
![Page 755: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/755.jpg)
workinggraspoftheessentialconceptsofvolumeandtime,whichmosttradersneglectattheirperil.Pleasereviewyouranswerstoseewhetheryourscorewasloweredbyaweak
![Page 756: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/756.jpg)
knowledgeofacertainarea,suchastime,volume,oropeninterest.Reviewtheappropriatechaptersandretakethistestafewdayslater.
3. 15–19correct:
![Page 757: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/757.jpg)
excellent.Youunderstandtheconceptsmosttradersmiss.Time,volume,andopeninterestprovideanextradimensionofanalysisanddeepenyour
![Page 758: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/758.jpg)
understandingofmarketdynamics.
![Page 759: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/759.jpg)
■ RecommendedReading1. Belveal,L.Dee.ChartingCommodityMarketPriceBehavior(1969)(Homewood,IL:BusinessOneIrwin,1985).
![Page 760: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/760.jpg)
SIX
GeneralMarketIndicators
![Page 761: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/761.jpg)
1. Answer6-1:C(1,2,3,and4)NewHighsarethestocksthathaverisentothehighestlevelinayear,whileNewLowsarethestocksthat
![Page 762: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/762.jpg)
havefallentothelowestlevelinayearonanygivenday.NewHighsaretheleadersinstrengthandNewLowsaretheleadersinweakness.TheNewHigh–NewLowIndex(NH-
![Page 763: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/763.jpg)
NL)worksbymeasuringthedifferencebetweenthestrongestandtheweakeststocksonanygivenday.Itisaleadingindicatorofthestockmarket.
2. Answer6-2:1
![Page 764: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/764.jpg)
=D;2=C;3=A;4=BWhenthemarketralliesandNH-NLrisestoanewhigh,itshowsagrowingbullishleadership.Itpaystofollowtheleadersandgolong.When
![Page 765: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/765.jpg)
themarketdeclinesandNH-NLdropstoanewlow,itshowsthatbearishleadershipisbecomingstronger.Thisbearishdivergenceindicatesthatitpaystogoshort.Ifthe
![Page 766: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/766.jpg)
broadmarketralliesbutNH-NLtracesalowerpeak,itshowsthattheuptrendislosingitsleadersandmaybeintrouble.IfthemarketfallstoanewlowbutNH-NLtracesahigher
![Page 767: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/767.jpg)
bottom,itshowsthatthedowntrendislosingitsleadersandnearingabottom.
3. Answer6-3:1=AandD;2=BandF;3=G–H;4=D–ENH-NLtracksthenumbersof
![Page 768: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/768.jpg)
themarketleaders,makingitaleadingindicatorofthestockmarket.Itsbullishzoneisabovethezerolineor,ifyouwanttomakeitlesspronetowhipsaws,abovetheplus
![Page 769: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/769.jpg)
100level.Itsbearishzoneisbelowthezerolineor,ifyouwanttomakeitlesspronetowhipsaws,belowtheminus100level.Divergencesshowthattheleadershipof
![Page 770: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/770.jpg)
thecurrenttrendisbecomingweaker.BoththeS&P500andtheNH-NLralliedtonewhighsinareaD,butinareaE,onlytheS&Preachedanewhigh—thisbearish
![Page 771: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/771.jpg)
divergenceofNH-NLgaveasellsignal.BoththeS&P500andtheNH-NLfelltonewlowsinareaG,butinareaH,onlytheS&Pfelltoalowerlow;NH-NLbottomedoutatahigher
![Page 772: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/772.jpg)
level,anditsbullishdivergenceflashedabuysignal.
4. Answer6-4:2TheEMAisrisingandtheNH-NLIndexispositive,showingthatthebullsareincharge.The
![Page 773: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/773.jpg)
NewHigh–NewLowIndexhasjustralliedtoanewhighforthecurrentmove,showingthatthebullishleadershipisbecomingstronger.Pricesarealreadyabove
![Page 774: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/774.jpg)
value,butstillcloseenoughtoittomakegoinglongarealisticchoice.
5. Answer6-5:C(1,2,and3)TheA/Dlinemeasuresmassparticipationinralliesanddeclines.A
![Page 775: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/775.jpg)
stockmarketrallyislikelytopersistwhentheA/Dlinerisestoanewhigh,whileadeclineislikelytocontinuewhentheA/Dlinefallstoanewlow.Tradersneedtomonitorthe
![Page 776: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/776.jpg)
patternofA/Dpeaksandvalleysbecauseitsabsoluteleveldependsmainlyonitsstartingdate.TheA/Dlinetracksonlypricechanges,notvolume.
6. Answer6-6:
![Page 777: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/777.jpg)
B(1and3)Uptrendsattracttraders,andpoorlycapitalizednewcomersenterthemarketindrovesnearmajorpeaks.Manyofthemdoubleupattheworst
![Page 778: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/778.jpg)
possibletime.AsHumphreyNeillputit,“Wheneveryonethinksalike,everyoneislikelytobewrong.”Whenbullishconsensusreachesarecordpeak,asavvytrader
![Page 779: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/779.jpg)
startstakingprofitsonlongpositionsandlookingforshortingopportunities.Heknowsthattherecordhighbullishconsensusmeansthatbullsarealreadyloadedwithstocks
![Page 780: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/780.jpg)
andcanhardlybuymoretosupporttheuptrend.
7. Answer6-7:AThestructureofthederivativesmarkets,includingfutures,ensuresthat
![Page 781: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/781.jpg)
thenumberoflongandshortcontractsisalwaysequal.If75percentofmarketparticipantsarebullish,thentherearethreetimesmorebullsthanbears.Inthatcase,anaveragebearis
![Page 782: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/782.jpg)
shortthreetimesasmanycontractsasanaveragebullislong.Itshowsthatthebigmoneyisonthebearishside.Bigmoneydidnotgrowbigbybeingstupid;itpaystobetonthewealthy
![Page 783: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/783.jpg)
minority.Whenbullishconsensusrisesto75percent,startsellingandlookforshortingopportunities.
8. Answer6-8:DThenumberofshortandlong
![Page 784: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/784.jpg)
contractsisalwaysequalinthefuturesmarkets.Ifthemajorityofparticipantsarebearish,thenthebullishminoritymustholdmorecontractspertrader.A20percentbullish
![Page 785: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/785.jpg)
consensusmeansthattherearefourbearsforeachbull—anaveragebullholdsfourtimesasmanycontractsasanaveragebearisshort.Withbigmoneyonthelongsideofthemarket,be
![Page 786: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/786.jpg)
preparedforasharprally.
9. Answer6-9:BAbullmarketthathascaughttheattentionofthegeneralpublicisprobablyveryoldandgettingreadytoreverse.
![Page 787: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/787.jpg)
Marketsareoftenveryvolatileattops;scalingintoaputpositionmaybethesafesttradingstrategy.Tryingtobuycoffeenowmeansbettingonagreaterfooltheory.
![Page 788: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/788.jpg)
Othermarketsshouldbetradedbasedontheirownmerits.
10. Answer6-10:1=C;2=A;3=D;4=BTraders'positionsgetreportedtothegovernmentaftertheir
![Page 789: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/789.jpg)
sizesreachreportinglevels.Thoselevelsdifferfrommarkettomarket.Positionlimitsindicatethemaximumnumberofcontractsthataspeculatorisallowedtoholdinany
![Page 790: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/790.jpg)
givenmarket.Hedgersareexemptfrompositionlimits.Manytradersareshockedtolearnthattradingonmanykindsofinsideinformationisperfectlylegalinthefuturesmarkets.
![Page 791: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/791.jpg)
11. Answer6-11:1=D;2=A;3=B;4=CCommercialsdealincommoditiesinthenormalcourseoftheirbusinessandusefuturestohedgeinventoryrisks.Large
![Page 792: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/792.jpg)
speculatorsarethosewhosepositionsreachorexceedreportinglevels.Ifyousubtracttheholdingsofthosetwogroupsfromopeninterest,you'llfindouthowmanycontractsare
![Page 793: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/793.jpg)
heldbysmalltraderswhooftenwinduponthewrongsideofmarkettrends.Corporateinsidersareofficersofpubliclytradedfirmsandthosewhohold5percentormoreof
![Page 794: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/794.jpg)
companyshares.
12. Answer6-12:DBuyingbycorporateinsidersisastrongbullishsign,butyouneedtoseeabullishconfirmationfromprice
![Page 795: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/795.jpg)
action.At11months,thebearmarketisold.Nobodywillringabelltoadvertisethestartofabullmarket.Asaninvestor,it'stimetostartslowlyaccumulatingthestockyou've
![Page 796: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/796.jpg)
selected.
![Page 797: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/797.jpg)
■RatingYourself
![Page 798: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/798.jpg)
1. 0-4correct:poor.Ifyoudon'ttradestocks,youmayskipNH-NL,butifyouplantotradestocksorstockindexfuturesoroptions,you
![Page 799: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/799.jpg)
oweittoyourselftolearnhowtousethebestleadingindicatorofthestockmarket.Indicatorsofmasspsychologyprovideuniqueinsightsintotheforcesthat
![Page 800: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/800.jpg)
movemarkets,andit'simportanttounderstandhowtheywork.
2. 5–8correct:fairlygood.Youhaveadecentgraspoftheindicatorsthatmeasuremass
![Page 801: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/801.jpg)
marketbehavior.Thismaybeenoughifyouonlywantageneralunderstandingoftheconcept.Ifyouplantousethemintrading,rereadtheappropriatechapter,lookuptheanswers
![Page 802: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/802.jpg)
tothequestionsyoumissed,andretakethistestseveraldayslater.
3. 9–12correct:excellent.Youunderstandtheessentialstockmarketindicators.
![Page 803: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/803.jpg)
Theyhelpyourecognizewhenthemarketisinatoporabottomarea.Armedwiththisknowledge,youcanusecomputerizedindicators(seePart4)tofine-tuneyour
![Page 804: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/804.jpg)
entriesandexits.
![Page 805: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/805.jpg)
■ RecommendedReading1. Elder,Alexander&
KerryLovvorn.TheNewHigh–NewLowIndex(Alabama:SpikeTrade,2012).
2. Neill,HumphreyB.,TheArtofContraryThinking(1954)(Caldwell,ID:CaxtonPrinters,1985).
![Page 806: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/806.jpg)
SEVEN
TradingSystems
![Page 807: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/807.jpg)
1. Answer7-1:C(I,II,III,andIV)Trendsmaypointindifferentdirectionsatthesametimeindifferenttimeframes:forexample,
![Page 808: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/808.jpg)
uponthedailychartbutdownontheweekly,orviceversa.Atrend-followingindicatormaybegivingabuysignal,whileanoscillatorisgivingasellsignal,orviceversa.The
![Page 809: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/809.jpg)
TripleScreentradingsystemisdesignedtomanagethosecontradictorysignals.
2. Answer7-2:BTheTripleScreentradingsystembeginsbyidentifyingthetrendona
![Page 810: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/810.jpg)
chartoneorderofmagnitudegreaterthantheoneyouareplanningtotrade.Findthetrendontheweeklychartandthenlookforentrypointsinthatdirectiononthedailies.Ifyoubeginby
![Page 811: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/811.jpg)
analyzingthedailychartandonlychecktheweeklychartlater,youreyeswillbeprejudicedbywhatyousawonthedailychart.Amonthlychartistoofarremovedfromthedaily—the
![Page 812: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/812.jpg)
timeframesoftwochartsshouldrelatetooneanotherbyafactoroffive.Aweeklybarcontainsthedatafrom5dailybars.
3. Answer7-3:CKeepinggoodrecordsis
![Page 813: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/813.jpg)
essentialfortestingasystem.Startatthebeginningofyourdatafileandmoveforwardonedayatatime,recordingeachsignalandplannedactions.Watching
![Page 814: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/814.jpg)
signalsemergeandgraduallydeliverpaperprofitsandlossesistheclosestyoucangettorealtradingwithoutriskingmoney.Ifyoulikewhatyouseeandstarttradingthatsysteminyour
![Page 815: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/815.jpg)
account,keepyourpositionssmall.Concentrateonlearninghowthesystemworksintherealworldbeforegraduallyincreasingpositionsize.Sinceyoucannotknow
![Page 816: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/816.jpg)
exactlyhowothersmayusethissystem,theirfeedbackisnotnearlyasmeaningfulasyourownresults.
4. Answer7-4:BTheentry,thetarget,andthestoparethe
![Page 817: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/817.jpg)
threeessentialnumbersforeverytrade—youmustwritethemdownbeforeyouenter.Theyprovidethestructureforeverytrade,allowingyoutocompareriskandrewardand
![Page 818: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/818.jpg)
decidewhatsizetotrade.Atradewithoutthesenumbersisnotatradebutagamble.Countingprofitsinanopentradewillonlydistractyoufrommanagingthattrade.
![Page 819: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/819.jpg)
5. Answer7-5:BAdirectionaltraderhasthreechoices:buy,sell,orstandaside.ThefirstscreenofTripleScreenactsasacensorthattakesaway
![Page 820: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/820.jpg)
oneofthosechoices.Youmaylookfortradesonlyinthedirectionofthelong-termtimeframeorstandaside.
6. Answer7-6:CWhenthefirstscreenofthe
![Page 821: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/821.jpg)
TripleScreentradingsystempointsup,usedeclinesofashort-termoscillatortofindbuyingopportunities.Whenthefirstscreenpointsdown,useralliesofashort-termoscillatorto
![Page 822: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/822.jpg)
identifyshortingopportunities.Thisrulehelpsavoidchasinguptrendsanddowntrends.Inthisexample,theshort-termoscillatorisalreadyoverbought;waitforittodeclinebefore
![Page 823: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/823.jpg)
goinglong.7. Answer7-7:
BWhentheweeklytrendisupbutthedailytrendisdown,TripleScreenpointstoabuyingopportunity.Oneoftheoptionsisto
![Page 824: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/824.jpg)
placeabuy-stopabovethelastday'shightocatchashort-termupsidebreakout.
8. Answer7-8:CTheuptrendofBed,Bath&BeyondInc.(BBBY)on
![Page 825: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/825.jpg)
theweeklychartisconfirmedbyitsrisingEMAaswellastheuptrendofMACD-Histogram.Theweeklyuptrendleadstoastrategicdecisiontolookonlyforbuying
![Page 826: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/826.jpg)
opportunitiesonthedailychart.ThereweseeapullbacktotheEMA,whiletheForceIndexbelowzeroindicatesanoversoldcondition.AccordingtoTripleScreen,pullbackson
![Page 827: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/827.jpg)
thedailychartsduringweeklyuptrendssignalbuyingopportunities.Placeabuyorderabovethelatestdailyhigh.Thefactthattheweeklyanddailytrendsareinconflict
![Page 828: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/828.jpg)
isanormaloccurrenceinthemarkets—itisthepurposeoftheTripleScreentoresolvesuchconflictstoyourbenefit.
9. Answer7-9:1=C;2=A;3=B;4=CWhenthe
![Page 829: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/829.jpg)
weeklytrendisupandthedailytrendisdown,usethosedeclinestocatchbuyingopportunities.Whentheweeklytrendisdownandthedailytrendisup,usethoserallies
![Page 830: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/830.jpg)
forenteringshorts.Tryingtoenteratradewhenbothweeklyanddailytrendsaremovinginthesamedirectionislikehoppingaboardamovingtrain.Itcanbedone,butit'ssaferto
![Page 831: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/831.jpg)
waitforapullback.
10. Answer7-10:ATheslopeofthefastEMAtracksthemarket'sinertia,whiletheslopeoftheMACD-Histogramreflectsthe
![Page 832: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/832.jpg)
directionofmarketpower.TheprimaryroleoftheImpulsesystemisnottotelltraderswhentobuyorsell.Rather,itshowsthemwhenthey'reprohibitedfrombuyingorshorting.Itisa
![Page 833: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/833.jpg)
censorshipsystem,andwhentheImpulsesystemisred,itprohibitsbuying.Itremovesthatprohibitionwhenitscolorchangesfromthebearishredtoaneutralblueora
![Page 834: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/834.jpg)
bullishgreen.11. Answer7-11:
1=A;2=C;3=B;4=CThecoloroftheImpulsesystemdependsonitstwocomponents—anEMAandMACD-Histogram.
![Page 835: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/835.jpg)
Whenbotharerising,theImpulseturnsgreen—bullish,prohibitingshorttrades.Whenbothdecline,theImpulseturnsred—bearish,forbiddingbuying.Whenthesetwo
![Page 836: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/836.jpg)
componentscontradictoneanother,theImpulseturnsblue—neutral.
12. Answer7-12:1=EandH;2=AandC;3=B,D,F,GandITheImpulsesystemisacensorship
![Page 837: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/837.jpg)
system.WhenboththeEMAandMACD-Histogramturndown,coloringthebarred,itprohibitsbuying.Whenbothindicatorsturnup,coloringthebargreen,shortingisnotallowed.
![Page 838: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/838.jpg)
TheImpulsesystemshouldn'tbeusedasanautomatictradingmethod:whileitcatcheseverytrend,itwouldsubjectanautomatictradertomultiplewhipsaws,for
![Page 839: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/839.jpg)
example,intheareabetweenthelettersCandG.Itsbestsignalsemergewhenredorgreencolorsdisappear.Forexample,thedisappearanceofredatthebarGshowedthatthedouble
![Page 840: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/840.jpg)
bottomwasbeingcompletedandsuggestedbuying.ThedisappearanceofgreenatthebarIsignaledtheapproachingendofapowerfulupswingandsuggested
![Page 841: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/841.jpg)
takingprofits.13. Answer7-13:
AAttherightedgeofthechart,boththeEMAandMACD-Histogramarerising—theImpulsesystemwouldcolorthatbar
![Page 842: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/842.jpg)
green.Hadbothindicatorsbeendeclining,thebarwouldbered;hadtheypointedinoppositedirections,thebarwouldbeblue.Thisisimportanttokeepinmindifyouwantto
![Page 843: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/843.jpg)
findtheImpulsecolorattherightedgeofachartusingsoftwarethatdoesn'tletyouactuallycolorthebars.
14. Answer7-14:CThereisnomysteryinconstructinga
![Page 844: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/844.jpg)
channel.Keepadjustingitswidthuntilitcontainsthebulkofprices,leavingoutonlythemostextremehighsandlowsforthepast50to100bars.Pricesmovingoutsideofawell-drawn
![Page 845: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/845.jpg)
channelidentifyzonesofunsustainableoptimismorpessimism,wherethemarketislikelytoreverse.Keepinmindthatonrareoccasionsthemarketmaystay
![Page 846: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/846.jpg)
outsideofitschannelforalongertime—butthat'sanexceptionthatconfirmstherule.
15. Answer7-15:1=C;2=A;3=D;4=BAmovingaveragereflectsthe
![Page 847: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/847.jpg)
averageconsensusofvalue.Achanneltrackstheboundariesbetweennormalandabnormalpriceaction.Themarketisundervaluedwhenitfallsbelowitslowerchannel
![Page 848: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/848.jpg)
lineandovervaluedwhenitrisesaboveitsupperchannelline.Thechannelcoefficientneedstobeadjusteduntilachannelcontains90percentto95percentofthe
![Page 849: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/849.jpg)
priceactionforthepast50to100bars.
16. Answer7-16:ATheslopeofachannelprovidesimportantinformation.Whenitrises,itshowsthatthemarketis
![Page 850: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/850.jpg)
bullish.Whenitfalls,themarketisbearish.Whenitisflat,themarketisneutral.Abreakoutinthedirectionofthechannelslopeindicatesapowerfultrend;areturntothemoving
![Page 851: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/851.jpg)
averagealmostalwaysoffersagoodopportunitytotradeinthedirectionofthetrend.Swingsbetweenthewallsofaflatchannelalsoprovidegoodtradingopportunities.
![Page 852: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/852.jpg)
Buyingandsellingatthemovingaverageisn'talwaysagoodidea.Ittendstoworkwhenachannelisslantedbutnotwhenitisflat.
![Page 853: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/853.jpg)
■RatingYourself
![Page 854: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/854.jpg)
1. 0-6correct:poor.Notunderstandingtradingsystemsisdangerous—tradingwithoutasystemislikesailingwithout
![Page 855: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/855.jpg)
arudder.Pleasetakethenextfewdaystorereadtherelevantsectionofthebook,andretakethistestbeforeproceedinganyfurther.
2. 7–11correct:fairlygood.
![Page 856: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/856.jpg)
Youhaveaworkinggraspoftheessentialconceptsoftradingsystems.Thislevelofknowledgemaysufficeelsewherebutnotindealingwithtradingsystems.Youmustknow
![Page 857: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/857.jpg)
theminsideout—theyhelpyousurviveandprosperinthemarkets.Pleasereviewyouranswersandlookforyourweakspots.Thenrereadtherelevantsectionandretakethistest.
![Page 858: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/858.jpg)
3. 12–16correct:excellent.Youhavemasteredtheessentialsoftradingsystems.Pleasereviewthosequestionsforwhichyouranswers
![Page 859: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/859.jpg)
differedfromthosegiveninthisbook.Seewhetherthediscrepancieswereduetoerrorsortoyourowntradingstyle.Successfultradersarecreativeandcanhavedifferencesof
![Page 860: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/860.jpg)
opinion.Thenproceedtothenexthighlyimportanttopic—selectingthemarketsyou'lltrade.
![Page 861: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/861.jpg)
■ RecommendedReading1. Kaufman,Perry,TradingSystemsandMethods(Hoboken,NJ:JohnWiley&Sons,2013).
![Page 862: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/862.jpg)
EIGHT
TradingVehicles
![Page 863: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/863.jpg)
1. Answer8-1:CTradingliquidhigh-volumevehicleshelpsreduceslippage.Volatilefast-movinginstrumentsoffermore
![Page 864: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/864.jpg)
opportunities.Itpaystofocusonthemarketswhosemaintradinghoursareclosetoyourowntimezone,sothatyou'reawakewhiletheactionistakingplace.Popularityisn'takeyfactor:
![Page 865: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/865.jpg)
someofthebestopportunitiesoccurinthemarketsthataren'tpopularbutarefinetotrade,aslongastheyhavegoodliquidityandvolatility.
2. Answer8-2:D
![Page 866: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/866.jpg)
Bondsrepresentloans,whilesharesrepresentcompanyownership.You'dhavetobuyagreatnumberofthemtobecomeaninsider.IntheUnitedStates,
![Page 867: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/867.jpg)
formandatoryreportingpurposes,corporateinsidersaredefinedasacompany'sofficersanddirectorsandtheownersofmorethan10%ofitsequitysecurities.It's
![Page 868: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/868.jpg)
adangerousmisconceptiontoexpectthepriceofastocktoriseifthecompanymakesmoney.Ifacompanywasexpectedtoreporta$100millionprofitinaquarterbutannounceda
![Page 869: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/869.jpg)
$70millionprofit,itssharesarelikelytotakeahitfromdisappointedholderswhenearningsarereported.
3. Answer8-3:DWarrenBuffettsaysthatwhen
![Page 870: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/870.jpg)
youbuyastockyoubecomeapartnerofamanic-depressivefellowhecallsMr.Market.Eachdayhewantstobuyyoursharesorsellhissharestoyou.Occasionally,
![Page 871: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/871.jpg)
Mr.Marketbecomessodepressedthatheoffersyouhissharesonthecheap—andthat'swhenyoushouldbuy.Atothertimeshebecomessomanicthatheoffersacrazypriceforyour
![Page 872: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/872.jpg)
shares—andthat'swhenyoushouldsell.Thisis,inanutshell,aremindertobuylowandsellhigh.
4. Answer8-4:AEachETFholdsaselectionof
![Page 873: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/873.jpg)
variousassets,suchasstocksfromspecificindustrygroupsorcountries,commodities,orbonds.WithahugenumberofETFsavailabletotraders,thechoicesarevast,butETF
![Page 874: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/874.jpg)
performancelagsduetoadministrativeexpenses,alwaysoneofthekeyfactorsforlong-termresults.PricesofmanyETFsgrosslydivergefrompricesofassetgroupstheyaresupposed
![Page 875: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/875.jpg)
totrack.5. Answer8-5:I
=B;II=D;III=A;IV=CAcallisabetthatastockwillrise,whileaputisabetthatit'lldecline.Buyinga$40callwhenthe
![Page 876: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/876.jpg)
underlyingstockistradingat$38makesthatcallout-of-the-money:itsentirepricerepresentshopethatthestockwillriseabove$40.Ifandwhenitdoes,thatcallwillbein-the-
![Page 877: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/877.jpg)
money.6. Answer8-6:
COptionslosevalueastheyneartheirexpirationdate;theygainvalueasthestockapproachestheoptionexerciseprice.Options
![Page 878: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/878.jpg)
forvolatilestockstendtobemoreexpensivebecausetheirpricescanswingmorethanthoseoflessvolatilestocks.Howcloselyastocktracksitsindustrygroupisnotafactor
![Page 879: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/879.jpg)
initsoptionpricing.
7. Answer8-7:I=AandD;II=BandC;III=CandDThepersonwhobuysacallcanprofitonlyiftheunderlyingstockrises;ifitfallsoreven
![Page 880: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/880.jpg)
staysflat,thewinnerwillbethetraderwhowrotethatcall.Aputbuyerwillprofitonlyiftheunderlyingstockfalls;ifitrisesorevenstaysflat,theoptionwriterwillprofit.Therearethree
![Page 881: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/881.jpg)
possiblescenariosforanystock:up,down,orsideways.Onlyoneoutofthreeworksfortheoptionbuyer,buttwoworkfortheoptionwriter.
8. Answer8-8:B
![Page 882: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/882.jpg)
Beginbyanalyzingtheunderlyingsecurity,decidewhatlevelit'sunlikelytoreach,andthensellanoptionbeyondthatlevel.Goingonlinetolookupastock'sDeltawillhelp
![Page 883: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/883.jpg)
youidentifythatlevel.Youalsoneedtodecideatwhatleveltheunderlyingsecuritywouldproveyouwrongandpromptyoutoexit.Placinganactualstopforanoptionwouldexpose
![Page 884: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/884.jpg)
youtotherunningofopenorders,whichisacommonprobleminoptions.Betterwritedownyourstopandplaceanordertoexitaftertheunderlyingsecuritygetsthere.
![Page 885: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/885.jpg)
Considerbankingasmallpercentageofyourprofitsinaninsuranceaccountforthedaywhenanoptionyouwrotejumpssharplyagainstyou.
9. Answer8-9:
![Page 886: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/886.jpg)
DThenumberoflongandshortcontractsforeveryoptionandfutureisalwaysequalbydefinition.Ahugedifferencebetweenoptionsandfuturesisthat
![Page 887: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/887.jpg)
ifyoubuyanoptionanditspricemovesagainstyou,youcanabandonitandwalkaway,losingonlywhatyoupaidforit.Thereisnowalkingawayfromfutures—youmusteither
![Page 888: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/888.jpg)
takealossorsendinadditionalmargintosupportadeepeningloss.Allotherdifferencesareminorincomparisonwiththisone.
10. Answer8-10:B
![Page 889: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/889.jpg)
Dailypricelimits,contractexpirations,andlegalinsidertradingarechallengingenough,buttheriskiestfactorinfuturesisthatpeoplecantradethemonverysmall
![Page 890: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/890.jpg)
margins,aslowas5%ofcontractvalue.Whenyour$5,000depositcontrols$100,000worthofacommoditythatmoves5%inyourfavor,you'lldoubleyourmoney.Troubleisthat
![Page 891: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/891.jpg)
ifitmovesagainstyoubyafewpercentagepoints,it'llwipeoutyourmargin.Youmustbeabsolutelydisciplinedandhaveexcellentmoneymanagementskillstoprofit
![Page 892: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/892.jpg)
fromfutures.11. Answer8-11:
I=C;II=D;III=A;IV=BDemandforanycommoditychangesslowly,butthemarketcanreactviolentlywhensupply
![Page 893: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/893.jpg)
becomesthreatened.Spreadtradersbetonaresumptionofnormalmarketrelationships;whentworelatedmarketsgooutofsync,theybuytheunderpricedoneandshort
![Page 894: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/894.jpg)
theoverpricedone,waitingfortheirrelationshiptoreturntonormal.Remotedeliverymonthsarenormallymoreexpensiveduetothe“costofcarry,”suchasstorageand
![Page 895: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/895.jpg)
insurance,butinbullmarkets,whendemandisred-hot,futurescanbecomeinverted,withapremiumforearlydelivery.Hedgingistheeconomicfoundationofthefuturesmarkets:a
![Page 896: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/896.jpg)
farmercansellwheatfutureslongbeforeharvestinghisgrainwhileanairlinecanbuygasolinecontractsmonthsorevenyearsbeforeitneedsairplanefuel.
12. Question8-
![Page 897: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/897.jpg)
12:B(IandII)Theforexmarketiscompletelydecentralized;institutionaltradersdealdirectlywitheachother,usingonlineplatforms.Retail
![Page 898: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/898.jpg)
customerscometogriefwhenforexhousestaketheoppositesidesoftheirordersinsteadoftransmittingthemtothemarket—foryoutowin,theforexhousemustlose.Wildmargins
![Page 899: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/899.jpg)
inthehandsofunsophisticatedtradersturnintoa“get-poor-quick”tool.Forexhousesseldomchargecommissions,butmanyprofitfrompositioningthemselvesagainsttheir
![Page 900: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/900.jpg)
customers.
![Page 901: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/901.jpg)
■RatingYourself
![Page 902: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/902.jpg)
1. 0-4correct:poor.Whateveryoutrade,youneedtounderstandthekeyfactorsaboutthatmarket.Lackingthatknowledge,
![Page 903: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/903.jpg)
you'llbecomeaneasymarkforsharpoperatorsandenduplosing.Pleasetakethenextfewdaystorereadtherelevantsectionofthemainbook,andretakethistestbeforeproceeding
![Page 904: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/904.jpg)
anyfurther.2. 5–8correct:
fairlygood.Youhaveaworkinggraspofatleastsomeclassesoftradingvehicles.Ifallyouranswersaboutstocksoroptionswerecorrectand
![Page 905: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/905.jpg)
thosearetheonlymarketsyouevertrade,thatmightbesufficient.Toobtainadeeperknowledgeofallclassesoftradingvehiclesavailabletoyou,pleaserereadthe
![Page 906: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/906.jpg)
relevantsection,andretakethistest.
3. 9–12correct:excellent.Yourknowledgeoftradingvehiclesisverygood.Pleasereviewthequestionswhoseanswers
![Page 907: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/907.jpg)
youmissedandlookuptherelevantpagesinthebook.Thenproceedtothenexthighlyimportanttopic—riskmanagement.
![Page 908: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/908.jpg)
NINE
RiskManagement
![Page 909: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/909.jpg)
1. Answer9-1:BEmotionaltradingistheenemyofsuccess.Nobodycangethighandconsistentlymakemoney.Atradercan
![Page 910: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/910.jpg)
getawaywithemotionaltradingforashortwhile,butuncheckedgreedandfearwilldestroyanyaccount.Yourgoalmustbetomakethemostintelligenttrades,calmlyweighing
![Page 911: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/911.jpg)
potentialgainsandlimitingrisks.
2. Answer9-2:CWeallliketothinkwe'resmart—takinglosseshurtsouregos.Takingalossmeansgivinguphopethata
![Page 912: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/912.jpg)
tradewillworkout—andnobodylikestolivewithouthope.Goodtradersarerealists;hangingontoalosingtradeisnotasoundtactic.
3. Answer9-3:B
![Page 913: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/913.jpg)
Areluctancetotakealossisasignofemotionaltrading.Addingtoalosingtradeshowsthatthetraderishangingontoafantasyofwinningratherthanfacingtherealityofa
![Page 914: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/914.jpg)
loss.Foraloser,adreamisaliveaslongasheholdshisposition.Infact,ifyouenteredatradeonasetofindicatorsignalsandthoseindicatorsreversed,what'sthe
![Page 915: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/915.jpg)
rationaleforstayinginthattrade?Itisnotworkingout—getouttopreserveyourcapitalandlookforabettertrade.
4. Answer9-4:CAseriesofthreelosses
![Page 916: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/916.jpg)
canwipeouttraderA,buttraderBcansurviveastreakof9losses.TraderAisonlythreethrowsawayfromgoingbust,whiletraderBhasenoughcapitaltosustainhimthrough9
![Page 917: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/917.jpg)
unluckythrows.Allotherfactorsbeingequal,thepoorerofthetwotraderswillgobrokefirst.
5. Answer9-5:B(II,III,I)Thefirstgoalofmoneymanagementis
![Page 918: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/918.jpg)
toensuresurvival.Thesecondistoearnasteadyrateofreturn,andthethirdistoearnhighreturns—butsurvivalcomesfirst.That'showprofessionalstrade;manybeginnershave
![Page 919: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/919.jpg)
theirprioritiesbackwards.
6. Answer9-6:D(I,II,III,andIV)Allofthesemoneymanagementruleshavestoodthetestoftime.Followthem—letyour
![Page 920: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/920.jpg)
competitorsviolatethem.
7. Answer9-7:A(I)Countingmoneyinanopentradeflashesaredlight—awarningthatyouremotionsarekickinginandyou're
![Page 921: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/921.jpg)
abouttolosebecausetheywilloverrideyourintellect.Ifyoucannotgetmoneyoffyourmind,getoutofatrade.Thetimetosetprofittargetsandstoplevelsisbeforethetrade.Thetimetotrackyour
![Page 922: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/922.jpg)
equityisafterthetradehasbeenclosed.
8. Answer9-8:CThe2%Ruledictatesyourmaximumdollarriskpertrade.Twopercentofa$28,000accountis
![Page 923: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/923.jpg)
$560,whichmustcovernotonlyyourriskbutalsoslippageandcommissions.Withastop98centsaway,ifyoubuy500shares,youwillhaveenoughlefttopaycommissions
![Page 924: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/924.jpg)
andcoveranypossibleslippage.Tradingabiggersizewouldbereckless.
9. Answer9-9:B(IandII)It'sdangeroustocountmoneyinopentradesbecause
![Page 925: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/925.jpg)
itleadstothinkingaboutwhatyourpaperprofitswillbuy.That'showpeoplestartdreaming,insteadofmanagingtrades,andlosemoney.Movingatargetor
![Page 926: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/926.jpg)
raisingastopispermitted.
10. Answer9-10:D(I,II,III,andIV)Serioustradersplaceastopthemomenttheyenteratradeandadjustitonlyoneway—inthedirection
![Page 927: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/927.jpg)
ofthattrade.Whenyougolong,youmaykeepyourstopinplaceorraiseitbutneverlowerit.Whenyougoshort,youmaykeepyourstopinplaceorloweritbutneverraiseit.
![Page 928: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/928.jpg)
11. Answer9-11:C(I,II,andIII)Astop-lossorderlimitsyourrisk,butitdoesn'talwaysworkasexpected.Pricesmaygapacrossastop.Astopisn'taperfect
![Page 929: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/929.jpg)
tool,butit'sthebestdefensivetoolthatwehave.
12. Answer9-12:B(IIandIII)TraderAisrisking$400,whilethe2%Ruleallowshimtorisknomorethan$360.TraderB
![Page 930: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/930.jpg)
isrisking$800,whilethe2%Rulepermitshimtoriskupto$1,000.TraderCisrisking$400,whilethe2%Rulepermitshimtoriskupto$800.TraderDisrisking$1,500,while
![Page 931: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/931.jpg)
the2%Ruleallowshimtoriskupto$1,200.TradersBandCacceptbusinessman'srisks,whiletradersAandDareriskingreallosses.The2%Rulesetsaclearlimitonyour
![Page 932: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/932.jpg)
riskpertrade—it'saneasyruletofollow,unlessgreedraisesitsuglyhead.
13. Answer9-13:D(IIandIV)Thetwodeadlyerrorsintradingarenotusingstopsandputtingon
![Page 933: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/933.jpg)
tradesthatriskmorethanyouraccountcanafford.Othermistakesarebadenough,butifyouusestopsandtradeareasonablesize,atleasttheywon'tkillyouraccount.
![Page 934: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/934.jpg)
14. Answer9-14:DTheIronTriangleasksthreesimplequestions:whatisyourmaximumacceptabledollarriskforthistrade?Wherewillyouenterthis
![Page 935: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/935.jpg)
trade?Wherewillyouplaceyourstop?Thedistancefromyourentrytoyourstopisyourriskpershare.Dividingyourtotalacceptableriskbyyourriskpersharewillgiveyouthe
![Page 936: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/936.jpg)
maximumnumberofsharesyoumaybuyorsellshortinthistrade.
15. Answer9-15:CAseriesofevenrelativelysmalllossescanadduptoaserious
![Page 937: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/937.jpg)
drawdown.The6%Ruleprotectsyoubymakingyoustoptradingearlyinadrawdown.Itcreatesacoolingoffperiod:reviewyoursystem,studythemarkets,andreturntothem
![Page 938: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/938.jpg)
thefollowingmonth.
16. Answer9-16:AThe6%Ruledoesn'tconcernitselfwithprofits.Itsjobistomanageriskandlimitdrawdowns.Youwillcount
![Page 939: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/939.jpg)
profitsattheendofthemonth.Ifyourequityhasincreased,boththe2%andthe6%Ruleswillgiveyoumoreavailableriskthefollowingmonth.
17. Answer9-17:B
![Page 940: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/940.jpg)
Lossestraumatizetraders.Returningtothemarketafterabreakyouneedtobegentletoyourself.Reducetheamountofriskyouacceptoneachtrade.Setrealistic
![Page 941: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/941.jpg)
performancetargets,andgraduallyincreaseyourtradingsize.
![Page 942: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/942.jpg)
■RatingYourself
![Page 943: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/943.jpg)
1. 0-6correct:poor.Theredlightison—youdonotunderstandmoneymanagement.Beforeyoumakeanothertradewithrealmoney,study
![Page 944: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/944.jpg)
therelevantchaptersandretakethistest.
2. 7–12correct:so-so.Therearegapsinyourunderstandingofriskmanagement.Thistopicistooimportanttosettlefor
![Page 945: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/945.jpg)
anythingbutthetopscoreonthistest.Pleasereviewyouranswerstothequestionsthatyoumissed,reviewtherelevantchapters,andretakethistestafewdayslater.
![Page 946: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/946.jpg)
3. 13–17correct:excellent.Youhaveaworkingcommandoftheessentialmoneymanagementrules.Reviewthequestionswhereyouranswers
![Page 947: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/947.jpg)
differedfromthoseinthisbook.Moneymanagementsetsaprotectivewallaroundyouraccount.Lookforeverygapinthatwallandplugitup.
![Page 948: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/948.jpg)
■ RecommendedReading1. Vince,Ralph.PortfolioManagementFormulas(Hoboken,NJ:JohnWiley&Sons,1990).
![Page 949: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/949.jpg)
TEN
PracticalDetails
![Page 950: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/950.jpg)
1. Answer10-1:BDependingonhowbullishyoufeel,youmaybuyabreakoutaboveyesterday'shigh,apullbackto
![Page 951: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/951.jpg)
value,orapenetrationofthevaluezonetothedepthatwhichpreviouspullbacksbottomedout.Itisgenerallynotagoodideatogolongabovethechannel.Theupperchannel
![Page 952: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/952.jpg)
linemarksthezonewherebullishnessbecomesmanic,andeventhoughitmaycontinue,itismorelikelytoreverse.
2. Answer10-2:BWhenthe
![Page 953: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/953.jpg)
trendisup,itmakessensetobuypullbacksbelowvalue.Theaverageofthepreviousthreemonths'penetrationswaslessthan$3.Thereisnopointinbeinggreedyandtryingtonailthevery
![Page 954: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/954.jpg)
bottomofapullback—catchinga$1penetrationwouldbemorereliablethana$3one.
3. Answer10-3:AAwell-designedchannelcontainsthe
![Page 955: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/955.jpg)
majorityofmarketswings,makingitsupperboundaryagoodtargetforrallies.Atradethatcaptures30%ofthechannelheightearnsanA.Inanuptrend,weshouldexpectpricestorise
![Page 956: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/956.jpg)
byagreateramountabovetheEMAthantheydippedbelowitonapullback.Bythetimethemovingaverageturnsdown,apaperprofitmayturnintoaloss.
4. Answer10-4:
![Page 957: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/957.jpg)
DWithlong-termpositiontrades,onehastobeleeryofusingsuchprofit-takingtoolsasmovingaverages,envelopes,andindicatordivergences.If
![Page 958: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/958.jpg)
youplantoholdforseveralmonths,thosesensitivetoolswouldgetyououtofthetradetoosoon.It'sbettertosetprofittargetsusingsupportandresistancezones.
![Page 959: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/959.jpg)
5. Answer10-5:CSettingstopsandprofittargetsallowsustocalculatereward/riskratios.Totheannoyanceofmosttraders,whipsawshappen,asmarkets
![Page 960: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/960.jpg)
reverseintheirfavorrightaftertheygotstoppedout.Stopsprovidegenerallyreliablemeansofprotectingyouraccount,butunfortunately,don'tguaranteelimitingyourmaximumrisk
![Page 961: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/961.jpg)
becausepricescangapacrossstoplevels.
6. Answer10-6:C(I,II,andIII)Placingstopsoutsideofthezoneofmarketnoisehelpsreducewhipsaws.Channels,
![Page 962: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/962.jpg)
SafeZone,andATRsdrawthelinebetweennormalandabnormalswings,eachinitsownway.Notsosupportandresistance:buyingveryclosetosupportstill
![Page 963: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/963.jpg)
exposesustomarketnoise.
7. Answer10-7:D(I,II,III,andIV)Stayawayfromthecrowd:ahighlyvisiblepriceextremeattractstoomanystops.Sodoround
![Page 964: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/964.jpg)
numbers.Placeyourstopsslightlyawayfromboth.Astopisariskmanagementtool,andasatrademovesinyourfavor,youcanrelocateyourstoptoprotectashareofyour
![Page 965: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/965.jpg)
profit.Nevermoveyourstoptogivemoreroomtoalosingtrade.
8. Answer10-8:CWhengoinglong,youwanttobuyasclosetothelowofthebarandasfarfromthe
![Page 966: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/966.jpg)
highofthebaraspossible.Therangeofthedaywas$2($23minus$21).Youbought$1.50awayfromthehigh.Dividing$1.50by$2showsthatyourgradewas75%—excellent!Any
![Page 967: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/967.jpg)
buygradeabove50%isgoodbecauseitshowsthatyouboughtinthebottomhalfofthebar.
9. Answer10-9:AYouwanttosellasclosetothetopofthebarandasfar
![Page 968: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/968.jpg)
fromthelowofthebaraspossible.Therangeofthedaywas$3($29minus$26).Yousold$1awayfromthelow.Dividing$1by$3showsthatyourgradewas33%—so-so.Agoodsell
![Page 969: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/969.jpg)
gradewouldbeabove50%,meaningyousoldinthetophalfofthebar.
10. Answer10-10:BOfthethreegradesforeverytrade—buy,sell,andoveralltradegrade—the
![Page 970: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/970.jpg)
tradegradeisthemostimportant.Sincechannelsaredrawntocontain90to95%ofrecentprices,theheightofthechannelonthedayyouenterreflectsarealisticmaximum
![Page 971: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/971.jpg)
availablegain.TakingonethirdormoreofachannelearnsanAgradeforthetrade.Inthisexample,youtook$2outofa$6channel—verygood!
11. Answer10-11:C
![Page 972: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/972.jpg)
Agoodscancanfindagroupofcandidatesonwhichtofocusyourattention,butitdoesn'tguaranteeprofitabletrades.Beginbydefiningthepatterntolookfor,andthencastyour
![Page 973: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/973.jpg)
scanningnetaswideorasnarrowasyoulike.Startoutscanningasmallgroup,andyoucanexpandlater.
12. Answer10-12:AYouhaveunlimitedchoicesin
![Page 974: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/974.jpg)
settingupscanparameters.Youmayprogramittoexcludestockswhosevolumeistoolow,whosepricesareoutsideofyourpreferredrange,orwhosetrendclasheswithyourcurrent
![Page 975: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/975.jpg)
marketview.Whatyoucan'tdoisfilteroutunprofitablestocks—thisissomethingyoutakeyourbestshotatduringthefinalreviewprocess,whenyouanalyzethelistofcandidates
![Page 976: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/976.jpg)
deliveredbyyourscan.
![Page 977: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/977.jpg)
■RatingYourself
![Page 978: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/978.jpg)
1. 0-4correct:poor.Thisscoreiswaytoolowforatrader.Thismaynotmatterforatheoreticalanalyst,butatradershouldrereadthe
![Page 979: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/979.jpg)
relevantchaptersandretakethetestbeforegoinganyfurther.
2. 5–8correct:fairlygood.Therearegapsinyourunderstandingofpracticalconcepts.Itisimportantto
![Page 980: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/980.jpg)
knowhowtosetentries,targets,andstops,andhowtomeasureyourperformanceineverytrade.Pleasereviewyouranswerstothequestionsthatyoumissed,rereadthe
![Page 981: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/981.jpg)
relevantchapters,andretakethistestafewdayslater.
3. 9–12correct:excellent.Youhaveaworkingknowledgeofsettingupentries,targets,andstops,and
![Page 982: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/982.jpg)
measuringyourperformance.Differenttradersusedifferenttactics—pleasereviewthequestionsforwhichyouranswersdifferedfromthoseinthisbooktosee
![Page 983: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/983.jpg)
whetheryou'vemadeamistakeoritwasanhonestdifferenceofopinion.
![Page 984: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/984.jpg)
ELEVEN
GoodRecord-Keeping
![Page 985: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/985.jpg)
1. Answer11-1:CKeepinggoodrecordswillhelpyoulearnfromyourexperiences,improvediscipline,andreduceimpulsivity.It
![Page 986: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/986.jpg)
willnotpreventyoufrommakingmistakes,butit'llhelpyoulearnfromthemandstoprepeatingthem.
2. Answer11-2:BReviewingyesterday's
![Page 987: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/987.jpg)
performanceandadjustingstopsareimportant,butthepurposeofmorninghomeworkistofocusonfactorslikelytoberelevantfortoday'strading.Theymayincludethebehaviorof
![Page 988: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/988.jpg)
theovernightmarkets,reviewoffundamentalreportsscheduledforreleasetoday,andallotherfactorsmeaningfultoyourdecisionmaking.
3. Answer11-3:
![Page 989: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/989.jpg)
B(IIandIII)Therearedayswhenyourhealth,mood,andhomeworkmakeyouwell-preparedfortrading.Therearealsodayswhenyourhealthbothersyou,yourmoodis
![Page 990: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/990.jpg)
gloomy,andyou'vedonelittleifanyhomework—onthosedaysyoushouldn'ttrade.Aquickself-test,tailoredtoyourpersonality,cangiveyouanobjectivemeasureof
![Page 991: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/991.jpg)
yourreadinessfortrading.Don'tincreasetradesizewheneverythingisperfectbecauseonsuchdaysanychangecanonlybefortheworse.
4. Answer11-4:
![Page 992: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/992.jpg)
DYouneedtodefinethestrategyyou'lluseforatradeandsetupyourentry,target,andstop.Allocatingasetamountofrisktoatradewillallowyou
![Page 993: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/993.jpg)
tousetheIronTriangleofriskcontroltodecidehowmanysharesorcontractsyou'lltrade.Itisbetternottocountprofitsuntilatradeisclosed—concentrateonquality,andthemoneywill
![Page 994: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/994.jpg)
follow.5. Answer11-5:
B(IIandIV)ThestructureofatradeApgarissimple:nomorethanfivequestions,withnomorethanthreepossibleanswerstoeachofthem.
![Page 995: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/995.jpg)
AtradeApgarleadsyouonaquickreviewofwhetherastockdeservesatradeplan.Ifnot,moveontothenextcandidate,butifyes,thenworkupadetailedtradeplan.
![Page 996: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/996.jpg)
6. Answer11-6:D(I,II,III,andIV)ATradebillisakeyplanningandtrackingdocumentforatrade.Youneedtoidentifythestrategyyou'lltrade;settheentry,target,
![Page 997: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/997.jpg)
andstop;allocaterisk;andcalculatethetradesize.Italsoneedstoincludewrittenremindersoftheessentialfactors,suchasthedatesofearningsreports.
7. Answer11-7:
![Page 998: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/998.jpg)
C(I,II,andIII)It'sessentialtodocumentyourstopsaswellasthelevelsatwhichyou'llmovethemtobreakeven.Suchdecisionsarebestmadeveryearlyinatrade.Same
![Page 999: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/999.jpg)
withthediary—documentyourentrywhilethememoryisstillfresh.Itisbetternottocountprofitswhileatradeisopen—concentrateontrademanagementandcount
![Page 1000: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1000.jpg)
profitsafteryouexitatrade.
8. Answer11-8:DMostprivatetradersworkinisolationandreceivenofeedback.Thismakesreviewingyourpasttradesan
![Page 1001: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1001.jpg)
especiallyvaluablelearningdevice.ThereisaRussiansaying:“Don'tsteponthesameraketwice.”Whenyousteponarakelyinginthegrass,itstandsupandhitsyouonthe
![Page 1002: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1002.jpg)
forehead.Itcanhappentoanyone,butdon'tsteponitagain.Reviewingpasttradeshelpsyourememberwherethoserakesare.
9. Answer11-9:C
![Page 1003: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1003.jpg)
Alloftheactionslistedinthisquestionareimportant,butthemosteducationaloneisreturningtoeachtradeseveralweeksorevenmonthsafteryouexitedit
![Page 1004: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1004.jpg)
andreviewinganupdatedchart.Bythen,trendsandreversalsareclear,youcanseeexactlywhatyoudidrightorwrong—andusethoselessonsgoingforward.
![Page 1005: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1005.jpg)
■RatingYourself
![Page 1006: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1006.jpg)
1. 0-3correct:poor.Goodrecord-keepingisattheheartoftradingsuccess.Pleaserereadtherelevantchapters,andretakethetest
![Page 1007: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1007.jpg)
beforegoinganyfurther.
2. 4–6correct:fairlygood.Goodrecord-keepingisdirectlylinkedtobettertrading.Itisafairlysimplebutessentialskill—don'tsettlefora
![Page 1008: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1008.jpg)
“fairlygood”rating.Reviewyouranswerstothequestionsyoumissed,rereadtherelevantchapters,andretakethistestafewdayslater.
3. 7–9correct:excellent.
![Page 1009: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1009.jpg)
Youhaveaworkingknowledgeofrecord-keeping.Pleasebesuretoimplementit—startkeepingatradingdiary.It'llrepayyoureffortsandserveyouwellforyears
![Page 1010: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1010.jpg)
ahead.
![Page 1011: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1011.jpg)
Afterword
Now that you have testedyourknowledgeoftradingby
![Page 1012: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1012.jpg)
using this book, you're betterprepared for the biggest testofall—tradinginthemarkets.Financial trading is a never-ending test of your ability tothink straight under stress,make intelligent andunemotional decisions, andstay in control of the moneyinyouraccount.This book has given youseveral rating scales formeasuring your skills; it has
![Page 1013: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1013.jpg)
provided a reading list andhasallowedyoutoretakethetests that you failed at first.Themainratingscaleofyourmarket performance will bethe slope of your equitycurve.Thebestcurvesshowasteady growth of an account,with small drawdowns. Youneed to keep track of yourequityandstoptradingfortherest of the month if it dropsmorethan6percentfromtheend-point of the preceding
![Page 1014: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1014.jpg)
month.Be sure to keep a diary ofyour trades, including notonly dates, tickers, and sizesbut also charts and yourpersonalcomments.Thiswillhelp you learn from yourexperiencesandimproveyourperformance.I keep all my records in aTrade Journal atSpikeTrade.com, whoseformat has been sharpened
![Page 1015: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1015.jpg)
and polished over the years.Even if you want to designyour own record-keepingsystem, take a good look attheTradeJournal to seehowa good system should lookandwork.Keep quiet about your tradeswhile they are open. Talkingabout open positions isdangerous because it putsyour ego on the line.Once atrade is closed out, you can
![Page 1016: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1016.jpg)
benefit from the opinions offriendsyourespect.Thefactthatyouinvestedthetime and energy in studyingand taking the tests in thisbook shows that you areserious about trading.Continue to study themarkets, keep your cool, andfocus on growing youraccount equity with minimaldrawdowns. I wish yousuccess in fulfilling your
![Page 1017: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1017.jpg)
dream—tradingforaliving.
Dr.AlexanderElderNewYork—Vermont,2014.
![Page 1018: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1018.jpg)
Sources
This Study Guide is basedontheauthor'sbookTheNew
![Page 1019: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1019.jpg)
Trading for a Living(Hoboken,NJ:JohnWiley&Sons, 2014). In addition, thefollowing books containuseful information for adeeperunderstandingofthesequestionsandanswers:1. Belveal,L.Dee,ChartingCommodityMarketPriceBehavior(1969)(Homewood,IL:BusinessOneIrwin,
![Page 1020: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1020.jpg)
1985).
2. Douglas,Mark,TheDisciplinedTrader(NewYork:NewYorkInstituteofFinance,1990).
3. Edwards,RobertD.,andJohnMagee,TechnicalAnalysisofStockTrends(1948)(NewYork:NewYorkInstituteofFinance,1992).
![Page 1021: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1021.jpg)
4. Elder,Alexander&KerryLovvorn,TheNewHigh—NewLowIndex(Alabama:SpikeTrade,2012).
5. Kaufman,Perry,TradingSystemsandMethods(Hoboken,NJ:JohnWiley&Sons,2013).
6. LeBon,Gustave,TheCrowd(1897)(Atlanta,GA:Cherokee
![Page 1022: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1022.jpg)
Publishing,1982).
7. Lefevre,Edwin,ReminiscencesofaStockOperator(1923)(Greenville,SC:TradersPress,1985).
8. Mackay,Charles,ExtraordinaryPopularDelusionsandtheMadnessofCrowds(1841)(NewYork:CrownPublishers,1980).
![Page 1023: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1023.jpg)
9. Murphy,JohnJ.,TechnicalAnalysisoftheFinancialMarkets(NewYork:NewYorkInstituteofFinance,1999).
10. Neill,HumphreyB.,TheArtofContraryThinking(1954)(Caldwell,ID:CaxtonPrinters,1985).
11. Pring,MartinJ.,TechnicalAnalysis
![Page 1024: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1024.jpg)
Explained,5thedition(NewYork:McGraw-Hill,2013).
12. Vince,Ralph,PortfolioManagementFormulas(Hoboken,NJ:JohnWiley&Sons,1990).
![Page 1025: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1025.jpg)
AbouttheAuthor
Alexander Elder, MD, is a
![Page 1026: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1026.jpg)
professional trader andteacher of traders. He is theauthorof severalbest-sellers,considered modern classicsamong traders. He has alsowritten books about RussiaandNewZealand.Dr. Elder was born inLeningrad and grew up inEstonia, where he enteredmedical school at the age of16.At23,whileworkingasaship's doctor, he jumped a
![Page 1027: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1027.jpg)
Soviet ship in Africa andreceived political asylum intheUnitedStates.HeworkedasapsychiatristinNewYorkCity and taught at ColumbiaUniversity.Hisexperienceasa psychiatrist provided himwith unique insight into thepsychologyoftrading.Dr. Elder is an active trader,buthecontinuestoteachandis a sought-after speaker atconferences in the United
![Page 1028: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1028.jpg)
States and abroad. Dr. Elderis the originator of Traders'Camps—week-long classesfor traders.He is the founderof SpikeTrade group, acommunity of traders whosemembers share their beststock picks each week incompetitionforprizes.Dr. Elder's websites arewww.elder.com andwww.spiketrade.com.
![Page 1029: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1029.jpg)
WILEY END USERLICENSEAGREEMENT
Go towww.wiley.com/go/eula toaccessWiley’sebookEULA.
![Page 1030: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1030.jpg)
TableofContents
ABOUT THIS STUDYGUIDE
PART I: QUESTIONSRATINGSCALES
IntroductionONE: IndividualPsychologyTWO: MassPsychology
![Page 1031: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1031.jpg)
THREE: ClassicalChartAnalysisFOUR:ComputerizedTechnicalAnalysisFIVE: Volume andTimeSIX: GeneralMarketIndicatorsSEVEN: TradingSystemsEIGHT: TradingVehicles
Note
![Page 1032: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1032.jpg)
NINE: RiskManagementTEN: PracticalDetailsELEVEN: GoodRecord-Keeping
PART II: ANSWERS ANDCOMMENTS
IntroductionRatingYourself
ONE: IndividualPsychology
Rating
![Page 1033: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1033.jpg)
YourselfRecommendedReading
TWO: MassPsychology
RatingYourselfRecommendedReading
THREE: ClassicalChartAnalysis
RatingYourselfRecommended
![Page 1034: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1034.jpg)
ReadingFOUR:ComputerizedTechnicalAnalysis
RatingYourselfRecommendedReading
FIVE: Volume andTime
RatingYourselfRecommendedReading
![Page 1035: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1035.jpg)
SIX: GeneralMarketIndicators
RatingYourselfRecommendedReading
SEVEN: TradingSystems
RatingYourselfRecommendedReading
EIGHT: TradingVehicles
![Page 1036: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1036.jpg)
RatingYourself
NINE: RiskManagement
RatingYourselfRecommendedReading
TEN: PracticalDetails
RatingYourself
ELEVEN: GoodRecord-Keeping
![Page 1037: STUDY TRADING FOR A LLIVING - DropPDF1.droppdf.com/files/1XLW3/the-new-trading-for-a-living... · 2015. 8. 26. · outperform masses of. competitors. The majority must lose in order](https://reader035.fdocuments.in/reader035/viewer/2022063022/5fe7ef2b9568eb75891e51df/html5/thumbnails/1037.jpg)
RatingYourself
AfterwordSourcesAbouttheAuthorEndUserLicenseAgreement