each trade I executed over thelast month.  The table on the next page is broken into four weeks, and arange  of dollar amount made or lost on  each trade  1  have  executed.  Most  ofthe  battle  takes  place at the gray shaded  area where  I  expect  the  number ofwinners and losers to be very close.  As I move from the gray shaded area tothe  extremes on  both the  left and right side,  it tells me  how many BIG  win-ners  I  have  had  versus  how many BIG  losers.  This  is where the  differencebetween  good trading and bad  trading  lies.  I want the numbers on the ex-treme right to be bigger than the numbers on the extreme  left.  If there is onesecret to being successful in this business, it is simply to have more tradesexecuted  on  the  extreme  right  than  on  the  extreme  left.
Using the Areas on the table and the Total, we can learn much more aboutour trading.  First I want to answer the questions of which area is bigger:
Bl>bB2-Yes.C l > C 2 - Y e s.Dl>D2-Ycs.E l > E 2 - Y c s.Fl>F2-Yes.
Next,  I  can  calculate the  ratio  of winners  to  losers within a certain area.
B1/B2 = 2.11C1/C2 = 7D1/D2 = 2
I'd like to see a number greater than  1.75 as a ratio of area  1  divided by area2.  ( e x c l u d i ng  area  A  whore  I  expect  the  numbers  to  be  closer)
EPILOGUE
I am sure many of you are wondering what happened after the last day of thechallenge.  On Friday, which was the last day of the challenge, 1 bought1,200 shares of QQQ.  I held this position for three days, and I sold it onTuesday, April  18, 2000 for a profit of $8,806.30.  1 also bought and sold300 shares of KLAC, twice, for a total profit of $1,970.93.  Next, 1 boughtand sold 300 shares of BVSN  for a profit of $280.43.  Finally, I bought andsold 300 shares of INKT,  twice,  for a profit of $798.78.  My total profit forthe two days following the challenge was $11,856.50.  I have not executedone trade in this account since then.
It is a shame that my best week of trading the account did not make it intothe book, but the guidelines which I followed were to include only realizedprofits from the four-week period of time, so although I bought the 1,200QQQ shares on the last day of the challenge, the profits were not realized un-til two days after.
For those of you who keep score, the total amount I have made in this ac-count is $28,133.75.  That is a 56.26% return in one month.  .
Once I closed my positions, I devoted all my time to the writing of this book.One of my goals in writing this book is to show everyone, and I mean every-one, that trading stocks for a living is a legitimate business, and I hope thatthe media will finally see it this way, as well.
Once this book is finished, I will be doing what you have just witnessed inthis book, day in and day out -1 will be taking money out of the market.
TRADE  SMART!
Just when you think you have finished reading this book, I will recommendthat you read the bonus pack and appendixes.  I have spent a lot of timewriting them, and I think that there are numerous gems scattered in betweenthe lines.  All you have to do is pick them up.
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Bonus  Pack
Tips,  Guidelines,  Rules  and  Case  Studies
In  this  chapter,  I  want to  put all  the  pieces  of the puzzle together for you.We have learned great lessons over the last four weeks, and I want to put itall  in  an easy to understand and  follow format, so  if you haven't gotten yourmoney's worth yet, all you have to do is master this section.
Analyze the overall market first.  You must know the direction the market isgoing in.  It is good to take a  look at the daily chart of both the Dow and theNasdaq and see where short-term support and resistance levels lie. Writedown  these levels and monitor them throughout the trading day.
Analyze which sectors  are strong and  which  are weak.  You want to be in thestrongest sector in a bull market and short the weakest sector in a bear mar-ket.  Monitor the money  flow  from one sector to  the other.
Once you have  a CLEAR idea as to which direction  the market is  going andwhich industry is the one to be long or short, analyze individual stocks andwrite out a trading plan  for each candidate you have.  Follow the guidelinesfeatured in this book.
Always trade in your comfort level, and do not put all the eggs in one basket.
Adhere to your trading plan's price target and stop loss.  Sell at least a part ofyour position at your price target to put yourself in a win/win situation.
If a stock gaps up over your entry price, do not chase it.  If you still like it tryand buy a pullback.
In choppy markets, take quick profits.  In trending markets, squeezeyour winners.  Be diversified if you are taking overnight positions.
While managing your trades, keep an eye on the major indexes, including thebond market.
When your position is in the money, move your stop to break-even, do notlet a profit turn into a loss.  "In the money" is different for each and everystock, depending on volatility.  For instance, being up a point or two onJNPR is not really being in the money, because the stock can move 20 points
in  10 minutes, so a one to two point movement is a must wiggle.  However,being up  a point on  a stock like CSCO or MSFT means that you are  in  themoney, so do not let that position turn into a loss.
Trail your stop with a logical risk reward ratio.  For instance, if you buyXYZ stock at 75  and  your price target  is  95,  and the stock is trading at 90,you can't let the stock fall  back to 80.  You can't risk  10 points  to  try andcapture 5 points.  In  this  case,  you  should be stopped out at 87-88  1/2  de-pending on the volatility of the stock.
Time stops are to be placed as well.  This has to do with the opportunity costof sitting in a trade  for a long period of time.
Entry Points
A good entry point makes a trade much easier.  There are two basic types ofentries I look to make.  Buying at intraday support levels, or once a stocktraded at a higher price than  the previous day's high.
Let's  look at  IMNX.  It had a reversal  day on  big volume, closed at the top ofits  trading range and  looked good  for a  long position.  The chart below is  theexact same chart  I  saw  while doing  my research.
IMNX gaped up open the next day and sold off.  In this case, we can  identifya consolidation period between  112  1/2  to  113,  the  previous  trading day.This  consolidation  period which  was  resistance  for  the  stock,  becomes  sup-port, once it is successfully penetrated  and tested again.  So if you find astock you  like, you should  look at an  intraday chart and  identify where sup-port and resistance levels are and plan your entry accordingly.
I will use a multi-day intraday chart to find support and resistance levels.The chart on  the following page will  show the entry points.
Place your stop  loss just below  the support  level.  Now,  your reward to  risk*
previous day's high and 52-week high.  It was trading  in  a range between 373/4-39.  The  following day,  the stock took off in  the  morning  and tradedhigher than 39  1/4, and continued to 42 3/8.  In this case, it was a great playto  buy the  breakout.  The stock continued its move up  and hit 45  the nextday.  These are the two strategies I normally use to enter positions, at supportlevels or over resistance levels.  Many professional traders like to buy astock once  it trades higher than the  previous  day's  high.  I use both  methods,but prefer to buy stocks at intraday support levels as you saw in the chal-lenge.
Classic Times
Trading  the  open  is  always  dangerous.  However,  in  today's  market,  moststocks run out of the gate, at the open, and make the biggest part of theirmove, early.  The S&P futures play a major roll and determine the open ofthe market.  The  first  half an hour is very volatile.  The key  time of the day isat  10-10:30 EST.  This is the time that a reversal may occur.  A pullback islikely, so if you missed your entry point, look lo buy on this pullback.
If the market holds its initial direction, then the initial move from the open isreal  and the trend for the day might be strong.  I like to enter my positionsbetween  10-11:30.  Then comes lunch time when things slow down, but I amstill alert, looking for potential plays.  This will be the time, where I will runmy intraday scan and look for possible entry points for different candidates.
Following lunch time around  14:00-15:00 volume picks up and stocks aremoving.  The last hour is when program trading can kick in,  volatility in-creases and the last 20 minutes will clue us in as to where traders are posi-tioning themselves going into the next trading day.
During all of these times, you should monitor the support and resistance lev-els for the major indexes  and see if you can make a high percentage trade.
ratio is favorable.  The second entry point will normally be at the breakoutpoint, or the pullback from the breakout, as shown in the chart on the previ-ous page.  The stock went up to  130  1/2 three days later.
DUG broke out to a 52-week high.  Here is what happened the next couple ofclays.
The next day, the stock did not trade higher than 39 1/4 which was the
In-Depth Classic Case Study
Once I sold AMZN,  I wanted to buy the stock again at support levels.  I en-tered an order to buy AMZN on ISLD at 86  1/16.
AMZN had a big day on  9/29/99 and sold off the next three days.  On theforth day,  10/5/99, AMZN hit 75, which was the price I was looking to entera long position.  I entered the stock at 75  1/4, my stop loss was at 74  1/4 andmy price target was 90-95.
Note that support was at 86, but I was willing to pay a  1/16 more at 86  1/16,but the stock stopped at 86  1/8 and went up to 89  1/2.  In hindsight, I shouldhave had my order at 86  1/4.
Over the next two days,  AMZN went all the way up to 90, and sold off backto 86  1/8.  I was trailing a stop and got out at 88  1/4.
Here was another great entry.  AMZN gapped up open and sold off.  It hit 831/2, which was the previous day's high.  Resistance became support in thiscase and AMZN bounced at that price and gained 5  1/2 points in 40 minutes.
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This last case study of AMZN shows many classic setups that can be usedeffectively in a bull market.
First,  AMZN  was  up  18  points on 9/29/99.  When  it pulled back  from thehighs  it set on  that  monster day,  it retraced  about  50%.  This  is  a classic  levelto  enter  a  strong  stock.
Next,  the  74-75  price  level  is  where  AMZN  consolidated  on  9/29/99.  It wasthe only  area  of support you could  find  on  the  chart,  so once  the  stock pulledback to  that  price  level,  it was  a bargain.  These  are  the kind  of setups  I  likein a bull  market.
I  had a  good  entry, which  made sitting tight  much easier.  The math of daytrading  is  very simple.  GOOD ENTRY=EAS1ER TRADE.  In  a trendingbull market,  you have to be able  to sit tight.  Unfortunately, I wasn't able touse this  strategy successfully during the  time  frame of the challenge for theobvious  reason  that the bears were controlling the Street.
Another classic setup in a bull market is when a stock gaps up open andstarts  falling down fast in the first fifteen minutes of the day, I will look tobuy  it somewhere  around the  previous  day's  high  or closing  price.  These arenormally  high  percentage  trades  with  very  favorable  risk reward  ratios.
Next,  if the stock is able to trade back up and move to a higher level than theopening price, then it is showing strength.  I would look to buy the pullbackin this  case.
It is  very common  for a stock which  enjoyed  a big run today, or over the lastfew  days,  to  have a sharp decline  between  11:00-13:00.  I  look to buy thisdecline at support levels.  I prefer to buy the stock at the price level of themorning highs set between 9:45-10:15 (if the stock did trade significantlyhigher than the morning highs prior to this last decline).
Since markets  move in cycles, it is extremely important to know whichstrategies work best at the current market you are  in.  I included this bonuspack and  special  case study, so you can  see how my trading'system works  ina bull market.  I still  follow the basic laws of Supply and Demand, Supportand Resistance, and Greed and Fear, no matter what market I  am trading.Following the challenge period, I am convinced that bulls make money,bears make  money, and pigs get slaughtered, because I truly believe that youcan play both sides of the market even  against  the overall  trend  and stillmake  money if you trade smart.  However,  he who wants to make a milliontoday,  will be hung tomorrow!  Don't be greedy - Don't be a pig!
APPENDIX 
A
Plans,  Records,  Stats,  and  More
As I have illustrated in this book, it is important that you have a plan prior toentering a trade.  Once you are in the trade, you must follow the rules andguidelines outlined by the plan.  After you close the trade, it is extremely im-portant that you keep good records.  Next, you should study the stats that aregenerated  from your trading records.  Let's go over some of these elementsstep  by  step.
First, your plan must have the following rules and guidelines:
Entry price.Target  price.The maximum amount you are willing to lose on this trade.The time frame you are willing to spend in the trade.The size of the position you want to take.
You should also know the date in which earnings will be reported by thecompany.
Next, you must be disciplined in following the plan of your trade religiously.Once you have closed your position, you should record everything about thetrade.  Write down where you wanted to enter the trade, what you expectedout of the trade, and what you actually did get out of the trade.  Make sure toinclude notes that will help you learn from the trade, reasoning what actuallytook place once you entered the trade.  Explain why the trade was a winneror a loser.  If you keep detailed trading records, you can  learn from pasttrades and increase your chances of recognizing your strengths andweaknesses.  Build on your strength and stay away from trades you havedemonstrated weakness  in.
Then, you should study your records in more depth.  You should look at yourwin/loss ratio, and you should create a performance chart like the one I illus-trated on page  229.
There is another type of study I conduct on all individual stocks I trade.  Forexample, let's use  the records of the challenge and create a table for all thedifferent stocks I have traded in my MB Trading account.
Trading  Record  by  Security  3/20/00-4/19/00
watch list.  There is no purpose for me to follow a stock on a daily basis if Icannot trade  it well.
If you noticed, I have crossed out two stocks off the list.  I use two cut-offfilters to determine if I will drop a stock out of my Constant watch list.  Thefirst one is a total dollar amount which I have lost on the stock.  Next, I wantto see how many winners versus losers I executed for that stock.
The reason I crossed INTC out was because  it  represented my biggest losingstock for the month.  The reason I crossed QCOM out is that I have executedthree trades on the stock without a single winning trade.  1 lost on each andevery trade I executed on QCOM.  This will be the time I will say, "GoodBye."
It is really easy to keep good records if you enter all your trades into a pro-gram such as Quicken.  MB Trading has made my life much easier,  becausethey create a Quicken file for their customers, on a daily basis.  I candownload and import this file into my program at my convenience.  Once Ihave all the data imported to Quicken, I can generate reports and graphs thatgive me a clear picture of my trading performance.
The above table totals all my profits and losses for each stock I have tradedover the last month.  First, you can see that I traded 38 different stocks.Next, you can see that I turned a profit on 27 out of the 38 stocks I traded.  1lost money on 11 out of the 38 stocks in the above table.
What I am interested  in  the most while studying this table,  is which individ-ual stocks contributed to most of my gains and which ones contributed tomost of my losses.  This data will help me make adjustments to  my Constant
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APPENDIX
Creating  a  Constant Watch  List
When you first start out, it is really hard to know which stocks to follow.  Inthis section I will try and guide you how to make your own Constant watchlist.  First, you will need to determine the criteria a stock must have in orderto make your watch list.  The most important criteria is liquidity.  I likestocks that trade at least 1.5 Million shares.  Next, I will eliminate all stocksthat pay dividends in excess of 1%.  Then, I will look at the volatility, whichI measure by monthly, weekly, and daily trading range in points.  I likestocks with large point swings.  I have no prejudice against high-pricestocks.  I do, however, like the stocks on my Constant watch list to be over$50.00 a share.  There are some exceptions though.
Once you have created a preliminary list, pick as many stocks as you feelcomfortable following.  You should have a minimum of five stocks and amaximum of forty on that list.  When you start trading, you will makechanges to  the  list when needed.  My Constant list has generated the vastmajority of my trades in the challenge, so it is an essential piece of my over-all trading system.
Here  is  my Constant watch  list:
AAPL CIEN LSI ORCL TXN 
ALTR CSCO MOT PHCM XRX 
AMAT INKT MSFT PMCS YHOO 
BVSN JDSU MU RMBS DUG
CHKPKLACNVLSSUNW
Recent  Additions:
VRSN RATL
MRVC 
NXTL 
CREE 
CNXT
Recent  Scratches:
QCOM EBAY 
INTC CMGI
DCLK 
NSOL 
PCLN
APPENDIX
Creating Baskets
I  have  featured  the  advantages  and  disadvantages  of trading baskets  of stocksthat track certain sectors.  The following are baskets of stocks which I havecreated for the purpose of trading a hot sector.
BIOTECHIMNX, AMGN, BGEN, MEDI, PDLI
COMPUTER  MAKERSDELL, CPQ, SUNW, IBM, HWP, AAPL, GTW, MU
INTERNETAOL, YHOO, CMGI, DCLK, VRSN, AMZN, RNWK, EBAY, CHKP,1NKT, BVSN
CYCLICAL STOCKSC, DE, F, IP, CHA, AA, UK, UTX, HON, CAT, GT, DOW
TELECOMT,  WCOM, NT, LU, BEL, NXTL,  SBC,  PCS, GTE, USW, FON
NETWORKCSCO, NT,  LU,  COM3,  TLAB,  CIEN,  ADCT, ADPT,  CS,  ALA, NN
OIL  SERVICESHAL, SLB, BHI, RIG, GLM, FLC, TDW, NE, MAVK,  CHV, RD
PHARMACUITICLESPFE, AMGN, SGP,  LLY, MRK, BMY, ABT,  WLA, AHP, JNJ
BROKERSSCH,  MER,  LEH,  GS,  PWJ,  MWD
AIRLINESAMR, DAL, NWAC,  ALK,  UAL
SEMICONDUCTORSINTC,  AMAT,  MOT,  MU,  KLAC,  PMCS,  LSI,  TXN,  ALTR,  NVLS,  AMD
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APPENDIX
Real-Time and Overnight Scans
Although  most of the  trades  I  have  executed  during  the  challenge  time  framecame from my Constant watch list, there are market conditions in which theresults of real-time and overnight scans will  generate most of my trades.This is very true in a trending bull market.
You may run a scan when  the market is  closed  or open  to  find  candidates  forpotential  trades.  The  following scans  can be used both  when  the  market isclosed or in real-time when the market is open.  I  look  for the following cri-teria in stocks.
Volume Spike Scan:
Please find all stocks which trade more than 750,000 shares on average andhave  traded more  than  1.5  times  their average daily volume  today.  The stockmust have a net change of 5/8 and be priced between 40 - 200.
Breakout Scan:
Please find all stocks which trade more than 400,000 shares on average andhave traded more than  1.7 times their average daily volume today.  The stockmust  have  a  net change of 5/8  and be  priced between 40 -  200.  The  last trademust be  a  four-week high.
Fullback Swing Trade:
Please find all stocks which trade more than 750,000 shares on average andhave traded down over the last three trading days.  The stock must be pricedbetween 40 -  200  and trading  higher than  yesterday's  low.
Power Scan:
Please  find  all  stocks  which  trade  more  than  350,000  shares  on  average  andhave traded more than  1.5  times their average daily volume today.  The stockmust have a net change of 5/8  and be priced between 40 -  200.  The last trademust be in the top  13% of the day's trading range.
You will  get numerous  candidates using  each one  of these  scans.  You must
study the charts and see if a high probability trade can be made.  In otherwords,  not every result is a  high  probability candidate.
The formulas for the scans on the previous page were published in the book,Stock Trading Wizard.  I have also published a companion to the book, TheStock Trader, on the Internet.  You can visit us on the web at:www.stockjunkie.com/companion.htm to learn more about effective scan-ning strategies and scanning software.  The companion is free to everyone,and  it will  include  updated  formulas,  which  you  can  use  with different  thirdparty scanning software.
APPENDIX
Basics of Level II Quotes
Level II  is a quotation system for Nasdaq stocks which displays bids and of-fers by Market Makers in a particular stock.  You can see exactly whichMarket Maker is bidding for shares or offering shares  for sale.  You can seeat which price he is interested in buying or selling, and how many shares heis interested in buying or selling at that price.  The example below will showa Level  II  Quote  screen.
Left Window = Buyers Demand 
Right Window = SellersSupply
The Level II montage is divided into two windows: a left window and a rightwindow.  Each window has three columns in it.  The window on the left sideis the Bid window.  All Market Makers listed in that window are bidding forthe stock.  The window on the right is the Ask window.  All the MarketMakers in that window are offering the stock for sale.
Name:  The name  is a 4  letter code which represents a Market Maker in thatsecurity.
Bid:  This is the price that the Market Maker is willing to buy the stock for.
Size:  This number indicates how many shares the Market Maker is willingto buy at that price.  The Size is quoted in  100 share lots.  So a Size of 8 willbe 8X100 = 800.
Ask:  The right window works  the same way,  but instead of bidding,  MarketMakers are offering shares for sale at the price listed in the Ask column.
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You might have noticed that there are different color ranges in both the Bidand Ask windows.  These colors will vary depending on how the quotationsoftware is set up.  The use of colors in a Level II montage is nothing morethan a visual aid.  It helps you identify how many Market Makers and/orECNs are at each price level.
APPENDIX
Direct  Access  Order  Routing  and  My  Setup
SUPER SOES:  An  automated  trading system that lets  SOES  participants en-ter and  execute orders  in  active  SUPER SOES-authorized NASDAQ  securi-ties.  SOES  participation is mandatory for Market Makers  in the Nasdaq Na-tional Market.  You may enter a SUPER SOES market order and/or market-able SUPER SOES limit order.  SUPER SOES orders are executed againstMarket Makers at the inside quote in rotation.  Once a SUPER SOES orderhas been  entered,  SUPER SOES  follows these steps to execute the order:
1.  Identifies the Market Maker quoting the best price and who is first in line
for  SUPER  SOES  executions.
2.  Executes the order.3.  Delivers trade report to the order-entry firm and the executing Market
Maker.
The  Market  Makers'  displayed  quote  size  reduces  after each  SUPER  SOESexecution.  Market Makers can elect to update quotes automatically or manu-ally after their displayed quote size is reduced to zero. They have.five* sec-onds to update their quote or they will be eligible to get hit with another or-der.  Market Makers accept SUPER SOES  executions  up to the size of theirdisplayed quote.
SelectNet: When you enter a limit buy or sell order via SelectNet, you arebroadcasting your order to all Market Makers.
SelectNet  Preference:  SelectNet  allows  order-entry  firms  and  Market Mak-ers to direct orders to specified Market Makers, including ECNs.  If a Select-Net order is directed to a specific Market Maker, and is at the MarketMaker's current bid or offer at the time the order was received, the MarketMaker is subject to the Firm Quote Rule and has liability for his quoted priceup to  his displayed size,  A Market Maker may respond to a preference orderwhich is delivered to his trading terminal by:1.  Accepting the order.2.  Price improving the order.3.  Declining the order.4.  Countering or accepting a portion of the order.5.  Allowing the order to expire or time out.
You mav use this type of order to go out-of-market.
ISLD (Island): This order routing matches orders from buyers and sellerstogether and executes them against each other.  ISLD allows subscribingmembers to post bids and offers for a stock.  Non subscribers may not postbids and offers on ISLD, but they may enter an order to buy or sell from anISLD subscnber who 1S posting a bid or an offer for a stock via a SelectNetPreference order.  Subscribers to ISLD are similar to Market Makers as theyare able to post bids and offers.  The best bid and best offer currently on16LU are posted on a Level II montage.** 
,
ARCA: A unique order execution system made of a set of formulas whichmakes a decision in how to route an order.  When an order is entered onARCA  the first thing ARCA will do is look for an ECN at your specifiedprice.  If ,t finds an ECN that meets your price it will execute your orderagamst that ECN.  If there is no ECN found at the specified price it will de-termine how and to who your order will be routed to.  ARCA's first priorityis to get you the best possible price.
ISI: A direct link to super-dot for listed stocks.
You can see my trading station setup on the following pages.  I run a dual-monitor trading station.  If you are interested in seeing these setups in coloror obtaining them free of charge, you may visitwww. stockjunkie. com/Pages1. htm.
Page 257 shows the setup I have on my left monitor.  I can follow and tradetour stocks on this monitor, while monitoring the intraday charts for the in-dexes.
Page 258 shows the setup I have On my right monitor.  1 can research anystock on that monitor, while monitoring all my watch lists.
'Super SOES is a proposed new execution system that will replace the cur-rent SOES system and SelectNet.  It has been delayed a couple of times al-ready.  Currently, a Market Maker has 15 seconds to refresh his quote.
** I can also use both the INCA (Instinct) and the REDI (Redibook) ECNso post bids and offers through my MB Trading order entry software.  I usehem the exact same way as I use ISLD.
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APPENDIX
Advanced Features of MBTrader™
MB Trading continues to lead the industry in the active trader brokeragearena with software, support, and service that provides the investor and ac-tive trader with the tools necessary to remain competitive in the face of anever-changing market.
