Aiki Trading: The Art of Trading in Harmony with the Markets

Foreword ix

Preface xi

Acknowledgments xiii

Introduction 1

The Philosophy of Aiki Trading 2

CHAPTER 1 Aikido 7

History 7

The Principles and Techniques of Aikido 10

CHAPTER 2 Candlestick Charting 15

Feudal Japan’s Ethos, and its Impact on the Development of Japanese Candlestick Charting 15

The Methods of Aiki Trading 19

CHAPTER 3 The Expanded Sideways Range Pattern 25

Bulls, Bears, and Turtles 28

Observations and Conclusion 31

Codifying the Trading Rules for the Expanded Sideways Range Pattern 31

The Action Zones 31

The Entry Trigger 32

Risk and Money Management: The Stop Loss Exit 34

Qualifying the Trade 42

CHAPTER 4 The Directional Trending Pattern 51

Identifying and Trading a Type 1 Trend Pattern 61

Planning the Stop Loss Exit 66

The Structural Risk 68

The Profit Exit Strategy 68

Timeframe and the Selection of its Relevant Moving Average Value 71

CHAPTER 5 The Successful Breakout 77

Managing the Trade 92

CHAPTER 6 Using Oscillators 97

Relative Strength Index 98

The RSI Divergence Signal (or RSI Camouflage Signal) 104

The Slow Stochastic Oscillator 108

CHAPTER 7 Applying Fibonacci Numbers and Ratios in Trade Analysis 119

Assessing the Fibonacci Profit Target 127

CHAPTER 8 Trade Volume and its Interpretation 139

CHAPTER 9 Risk, Money, and Trade Management 153

The Learning Phase 153

Trading for Profits 155

The Preservation of Capital 156

Money Management: The Preservation of Our Capital 157

Risk Management Combined with the 2 Percent Money Management Rule 158

Position Sizing 161

Winning Trade Management and the Rule of 3 163

CHAPTER 10 On Trading Psychology 173

Summary 175

Beliefs About Success 175

Market Understanding 175

Risk Management, Money Management, and Trade Management 176

Winning Psychology 177

Index 181