AbleTrend: Identifying and Analyzing Market Trends for Trading Success

Foreword xi

Preface xiii

What You Will Find in the Book xv

What You Will Find on the Web Site xvi

Disclaimer xvii

As You Begin xvii

Acknowledgments xix

CHAPTER 1 The Search for a Universal Market Law: The Rise of Able Trend 1

Complete Chaos or Hidden Order? 1

When My Interest in Trading Began 5

A Scientific Antidote to Arbitrary Market Predictions 6

First Steps: Becoming an EasyLanguage System Developer 7

The Trend: Foe or Friend? 7

The Fundamental Approach 8

The Dream of a Universal Early-Trend Indicator 9

Could the Laws of Natural Sciences Also Govern the Financial Markets? 10

The Birth of AbleTrend 10

CHAPTER 2 Advances in Market Trend Analysis 13

What Is a Trend? 14

The Setup of a Trend 16

Maturity of a Trend 18

Drawing Trendlines 24

Support and Resistance 29

The Market Defines Support and Resistance 30

How Common Methods Define Support/Resistance Levels 30

How AbleTrend Defines Support and Resistance Levels 32

AbleTrend Indicators 37

Other Trend-Following Indicators 40

Market Indications 46

Three Rules for Following Trends 49

The Golden Region of Entry: The Sweet Spot 50

Time, Price, Forecasts, Predictions, and Targets 54

Cycles and Waves 57

Summary 59

CHAPTER 3 Four Elements of Trading Success 61

Profitable Trading Systems and Methods 62

Adequate Capitalization 67

Money Management Strategy 70

Discipline or a Winning Trading Psychology 80

Conclusion 85

CHAPTER 4 Essential Philosophy of Trend Trading 87

Wisdom of the Tao 87

Trading Is a Business 98

Only Trend Following Works 100

Don’t Trade Against the Market 105

Which Market Is the Most Tradable and Why? 107

Why Voting Systems Do Not Work 110

Why $500 or 5 Percent Stops Do Not Work 110

Why the Winning Rate Is Not Important 111

Why You Cannot Pick a Top or Bottom 112

How to Let Profits Run 113

How to Cut Losses Short 113

Go the Opposite Way of the Majority 115

Trade Only the Risk Capital that You Can Afford to Lose 118

If You Want to Win, Think About Loss 118

Place Yourself beyond the Possibility of Defeat 119

Trading Is the Most Difficult Thing in the World 120

Conclusion 121

CHAPTER 5 The Applications 123

What Is the “Winning Framework” for a Trading System? 123

STM Method—Buy on Blue and Sell on Red 128

Evaluate a Trading System: Back-Testing 134

Four Important Issues for Parameter Settings 140

AbleTrend2 Stops 144

The Sweet Spot—Golden Region of Entry 147

Finding the Character of a Particular Market 150

Trend Time Frames 151

Avoid Choppy Markets 154

Breakout or Retracement 162

Day Trading versus Swing Trading 166

In Conclusion: The Five F’s of Designing a Trading System 166

CHAPTER 6 Examples of Trend Analysis 169

Stocks 169

Commodities 178

The E-Minis 189

Forex 199

Bonds 205

Conclusion 210

CHAPTER 7 Advanced AbleTrend Tools 211

Virtual Paper Trading (VPT) 211

Historical Forward Testing 213

AutoScan 216

The Percent Charts 218

The Guidance Charts 219

Stock Search Engine—Stock Picks 220

Visual or Chart Trading 222

Automated Trading Orders 224

Options Trading 224

Spread Trading 226

Portfolio Trading 227

Summary 237

APPENDIX A Interviews with AbleTrend Users 239

John Meyer 239

Bob Seifert 242

Harvey Saff 244

Gerry Wollert 245

Mike Weingart 246

Alex Kuan 247

Remco Eenink 249

Chris Anthony 251

Jim Kane 253

David Fawkes 254

APPENDIX B Quick Reference for STM 257

STM Trading Method 257

References 261

About the Authors 263

Index 265