to evaporate because I thought this was the big one.
A: No. A signal is much stronger at new highs or new lows than if it
occurs in congestion. Also, multiple signals are better than one sig-
nal.
Q: Are you absolutely rigid to the rules?
A:  Yes and no. Yes in that I need structure and no because flexibility isimportant.  Let  me  explain this  further.  The  rules  state  for  Expan-
Chapter  20
sion  Breakouts  that  today  must be  a  60-day  high  or  low.  If  it's  a58-day high or low, I'll take the trade. The concept is the same, andtwo  days  aren't going to  make  a  difference in the  setup's perform-ance.
Q:  Do you focus on the bigger picture?
A: 
I am aware of it.  Obviously,  it's been easier to focus and  trade  onthe long side over the past few years than the short side. When westart trending down, my focus will be to the short side.
Q:  You  once  said  that when  you  feel  out  of  sync  with  your  trading,
you only Step hi Front Of Size to get your rhythm back. Is that still
true?
A: Yes, for me it's my bread-and-butter strategy and it provides me
with the best edge.
Q:  Then why not only trade one strategy?
A:  For  a  few  reasons.  I  get very bored  only  trading  one  setup.  Also,Stepping  In  Front  Of  Size  requires  added  focus,  and  I  sometimeslike other strategies that are a little less mentally strenuous.
Q:  What outside sources do you rely on?
A:  CNBC. It helps me gather a general framework on what's going on.
Q:  Do you ever trade off of their advice?
A:  My  father  told  me  never  to  say  never.  In  this  case,  I'll  make  an
exception: Never!
A;  As a kid, I would watch my father trade. Whenever I said "look atthat  stock  move,"  his  reply  was  always,  "Stocks  don't  move,  theyARE moved!" Time and time again, I see market manipulation. Youhave to  get a little cynical and ask who's moving this stock?  Also,time and time again, I see brokerage houses upgrade stocks only tosee the  stock gap higher and sell off.  You don't have to  think realhard as to who is doing the selling.
Q:  You are sometimes buying a stock one day and shorting it the next.
Q: You're expressing a tinge of cynicism.
Isn't mis difficult?
A: You can't personalize a stock. If you think it's going higher, you
The  Education  (fa  Stock  Trader
buy it, if you think its going lower, you short it. The toughest partis to go long, be wrong, and then stop yourself out with a loss andgo  short.  The  human  mind  is  wired  to  avoid  pain.  Once  a  stockbites you, it is  against human nature to turn around and  trade thesame stock again, but that's where some of my largest profits havecome  from.  My  best  trades  have  come  when  I was  wrong  aboutdirection,  took  the  loss,  and  turned  around  to  trade  the  oppositedirection.
Q:  Do you surf?
A: 
(Laughing)  I  thought we  were  talking about  trading,  but  I  knowwhere  you're  coming  from.  You'd  be  surprised  at the  number  ofpeople who ask me that question. Many think because the marketsclose at one  o'clock on the West Coast, I  take  off and  go play.  Myday runs from 5:00 A.M. into the early evening. I do not know manysuccessful people whose day is much different. There is a price topay, and unfortunately long hours is part of it.
Q:  Then you're obsessed?
A:  You're not far off, but again I'm not much different from other peo-
ple in this respect.
Q: Do you trade futures?
A:  No,  it's not my cup  of tea.  I  do  watch  the  S&P  and  bond  futures
closely in order to gauge the market.
Q:  What about options?
A:  From time to time. I much prefer equities, though.
Q:  How do you handle rumors and tips?
A:  Like  most people,  I used  to  pounce  on most  of  them.  1 now  only
have to review my tax returns to remind me of the consequences.
It's a bad habit which I broke years ago.
Q:  Talk more on the mind frame of taking losses.
A:  There's a certain psychology that is required to take a loss. Unfortu-nately, this mind frame is totally against the norm for most people.Let me give you an example. A surgeon is trained to be as close to
Chapter  20
perfect  as  possible.  Most  surgeons  will  be  successful  90  percent  ifnot higher in the surgeries they perform. They do not know how tolose,  and  this  is  a  wonderful  trait.  Now,  this  same  surgeon  retiresand decides he wants to spend his retirement trading. He will tradethe  same way he practiced his profession, absolutely trying to winevery  time.  Taking  a  loss  is  not  in  his  psychological  make-up.  Hewill  work  a  losing  position  as  hard  as  he  works  a  surgery  that'sgone bad. He will do everything he can to save the trade just as hehas done in surgery every day for the past 35 years.
Most successful individuals are the same, they personalize a loss
and apply an  "I am going to will this thing to succeed" approachjust  as  they  did  to  succeed  in  other  parts  of  their  life.  In  tradingthough,  this  is  a  kiss  of  death.  To be profitable  at  this  game,  youmust learn how to lose. You must be willing to take small losses 40to  50  percent of  the  time.  The  profits  will  take  care  of  themselves.It's  the  losses  that  need  to be  focused  on.  It  is  impossible  to  will  aloss  into  a  gain,  and  as  soon  as  one becomes  enlightened  to  this,
their world improves.
Q:  So, taking losses is more important than locking in profits?
A:  Exactly.
Q:  Anything more on this?
A: Yes, market opinions. The Street is cluttered with market bears who
refused to acknowledge the bull market of the 90s. These people
had  their  self-worth  so wrapped-up  in  their  opinion  that  they  notonly missed one of the greatest market moves in history, they alsogot wiped out in the process.
I have been bearish since late 1995, yet I have had some of my most
profitable years trading.
Q:  How did you do that being bearish?
A:  By going with the overall trend. Wall Street doesn't give a damn ifJeff Cooper is bearish. The market is going where the market wantsto go no matter what I think. My livelihood is dependent upon pre-dicting prices for a few hours to a few days. If I allowed my bearish
opinion to overwhelm me, I would have missed literally thousandsof profitable trades over the past few years.
133
The Education of a Stat* Trader 
Do you have the urge to pick tops and bottoms in the market?
I gave that game up years ago. It's a losing proposition.
Why  then is Wall Street  and  the public  so obsessed with trying  todo this?
Ego. There's an emotional reward by calling tops and bottoms. It's
far easier and financially more rewarding to trade short-term in thedirection of the trend.
But you do have patterns to pick off tops (and bottoms)?
That's  right,  but  they  are  mostly  one-  to  three-day  setups.  Manymajor tops and bottoms are Gilligans and Lizards, but few Gilligansand Lizards are major tops and bottoms.
Do you have losing streaks?
As time passes, they become fewer and fewer. I often have baddays but rarely bad months.
Let's go back to trading specifics. You once said that you are impa-tient with stocks. What did you mean?
If  a  stock  doesn't  move  immediately  in  my  favor,  I  am  quickly
moving up my stops. My strategies are such that a stock should
immediately become profitable. If it doesn't, I get very antsy.
So you move your stop closer, get stopped out, and then the market
explodes the way it should!
It sometimes happens. It's unfortunately part of the game.
Ever get used to it?
It used to piss me off to no end. Now I just scream and move on.
You  earlier  used  the phrase  "getting  to  know  the personality  of a
stock." What do you mean?
Stocks don't all trade the same way. Specialists move them around
differently;  some  fluctuate  around  a  commodity  price  such  as  theoil service and oil stocks, and some trend smoother than others.
How does one learn a stock's personality?
Q: Are there stocks that don't fall into this category?
A:  By  trading  it  over and  over.  It is  no  different than spending  timewith a friend. Over a long period, you get to know him or her verywell. Their behavior becomes more and more predictable.
A:  Yes. There are certain stocks I absolutely can't make money in. Gui-dant (GDI) is an example. No matter how great a setup is on thisstock, it does the opposite of what it should. There are many others,
and over time I just give up on them. Luckily, there are many that
do what they are supposed to do.
Q: How many trades do you make a day?
A:  Six to ten on average.
Q: That's healthy. Your broker must love you. And how many posi-
tions at a time?
A: Obviously, the fewer the better. Once I get up to five or six, I begin
to lose the needed focus.
Q:  So you're in front of the screen all day?
A:  Yes, pretty much.
Q: You work out of your home. Are there distractions?
A: Not really. My wife is terrific and knows not to acknowledge my
existence until  after market hours.
Q: What about the outside day-to-day distractions? You're building a
home in Malibu as we speak.
less there's an emergency. I pretty much try to drown out most of
A: My contractor is under strict orders not to call before 1:00 P.M. un-
the world until the market closes. Focus for me is important.
Q:  Do you trade every day into the close?
A: 
If I have a big morning I call it a day. Otherwise, yes.
Q:  Vacations?
A: Two to three weeks off at the end of the year. No markets, no
quotes, nothing. I don't care if they blow Wall Street up. I'm on
vacation.
CHAPTER 21
THE BEST OF MYLEARNING SHEETS
The following are some of the actual learning sheets received by thesubscribers to my Small-Cap Trading Service. I had them photocopied, andI am sharing them with you for their educational purposes, as they rein-
worked. In the real world this is not always true. (2) I have not changed
force many of the trading principles I use to trade.
You should note three things before reading: (1) Most of these examples
a  word  from  the  original  sheets.  Therefore,  you  are  reading  them  un-proofed, warts and all.  (3) Because  these examples are up  to a year old,some  are  a  bit  faded.  I  apologize  to  you  ahead  of time.  What  is  mostimportant about these learning sheets, and what I am hoping to convey,are the insights they bring to help make you a better trader.
Chapter  21
Today's short sale on BJS was another example of Putting Pieces Together.  ® Thestock opens at 1/4 point higher and reverses triggering a Whoops and it also triggers a180 sell at 46.  © It drifts lower throughout the day, trading to as low as 44 late hi theafternoon.  Remember; The more signals in one direction a stock has, the more likely itis to be profitable,
TteBesI of My Learning Steels 
139
W  fWUHSSION  Of  BLOOmEKQ  LP.
In the Stepping In Front OFSize chapter in Hit And Run Trading, I spoke about looking for buyers inthinly traded stocks.  Everyday 1 use 5000 shares (bid) as my benchmark and become extremely excitedwhen I see bids of 10,000 shares in these stocks.
Today was one of those rare "can't miss" situations on one of our Small Cap stocks - Portugal Telecom.The stock opened with a bid for 50,000 shares (!) at 35. The bid was imnwdiately raised to 35 1/S for25,000 sharcMtriggCTir^ our buy sigiml) and a few EunutesUterwBsraiswl to 35 1/4 for 35,000' This
was the work of a very large, desperate buyer who proceeds to push the stock to as high as 36 1/2.
When you see a thinly traded stock with extremely large size bids, take advantage of it!
CCOFYWOWT coww nuowe we, tM7.
Chapter  21
profit. Your stop must be moved to at least 45 1/2 to assure locking into a solid 1 point
Starwood Lodging (HOT) triggered an Expansion Breakout buy at 44 3/8 (filled at 44
1/2).  Within 45 minutes the stock traded'to as high as 46 1/4 giving us a 1 3/4 point
gain.  If the stock continues to run, you can trail the stop up, but in the interim, it isalways best to protect yourself from a reversal.
Today we had another example illustrating the importance of using trailing stops to lockin intra-day profits.
REPRWTED  WITH  PEMWSSKM  OF  BLOOMBERG  t,P-
Chapter  21
DAILY LEARNING SHEET
COOPER TRADING  INC
25 MARCH 1997
on the good news. This led to an Expansion Pivot sell today which got triggered at 65 on
Today's learning example will discus what happens to stocks that don't go up on goodnews. Friday, Nike (NKE) announced much better than expected earnings and the stock
opened 1  1/2 points higher.  Notice how it could not sustain its gains and in feet sold off
our 64 7/8 stop.  The stock had an intra-day profit of as much as 1 3/4.  Moreimportantly, it was simply a continuation of Friday's selling.  When a stock can't go upon good news, it is giving you a loud and clear message!
The Best of My learning  Sheets
143
COOPER TRADING INC
DAILY LEARNING SHEET
26 MARCH  1997
traders (the few) and everyone else. Most individuals can't stomach the thought of notmaking money on a trade and therefore allow break-even trades to turn into losers.Today, BNL CD triggered an Expansion Pivot buy at 76 3/4 ®, When the stock moved toa 3/4 point profit, you must move your slop to break-even (plus or minus an 1/8). Thisprotects us from sharp reversals as happened today <S> and it allows us to walk awayunscathed. As you know, not every trade works and it is how you handle these tradesthat will determine your long-term success as a trader.
GCOPYtoOHT COOPER TR4DWO INC., 1U7.
Let's look at the importance of scratching a trade.
KBtmrED mm pewtssiOH OF W.OOWBBW L.P.
-aS^
Scratching a trade means breaking even (plus or minus an 1/8) because the trade is nolonger moving in your favor.  This is absolutely the difference between successful
Chapter  21
COOPER  TRADING  INCDAILY  LEARNING SHEET27 MARCH  1997
discuss the importance of capitalizing on set-ups when Pieces Come Together to maximize our gains.
REHHWTED WWW PEMWSSfOM Of fLOOMOERG L.P.
One of the questions I am asked most often concerns when to add to a position.  Today's example will
The Expansion Pivot on BJS got triggered on the open today (46 1/2)®.  Shortly thereafter, size buyersshow up:  At 9:56am, there is a bid for 5,000 shares at 46 1/4 followed minutes later by a 5,500 share bidat463/8®.  AtlO:24am,anotherbuyer(oursamefriend?)jumpsinwithabidfor7,500at461/2.  The
buyers continue to leapfiog each other further confirming our original buy signal and allowing us to
the strength in the whole oil sector (i.e. DO) created a great risk-to-reward play today.
implement our Stepping In Front Of Size strategy to add to our position.  These factors combined with
When Pieces Come Together like this, it is a good time to step up to the plate with a larger than usualposition.  BJS flair stepped up cleanly all day closing on its high, and left us with an Expansion Pivotand Expansion Breakout, so at least a half position should have been held overnight.
OCCPYWOHT COOPER TRADING INC., 1UT.
The  Best  of  My  Learning  Sheets  145
COOPER TRADING  INCDAILY LEARNING SHEET17 APRIL 1997STEPPING IN FRONT OF SEE LIVESA great way to test the temperature of a stock is to watch it's behavior in market declines, whether intraday orduring a prolonged reaction such as the current market.
IGPO Screen  printed.O-DAY  CHART  MIL  US  S 
DG49  Emms  IGPO
15115
VOLUME [Y/N1 _J|
INTEWflL SIZE MINUTES) ftt 
nOV  flVG  PERIODS • •  BRR/CMiOLE  OWRT? IB/O D  VO. KOV AVG PERIODS,*!
HI  ZB'a Lo  26'a 
Vrjl 
259400  IStM 1  2V"z 
+1% N
MWL (MBil-Well) is a great example of a stock that having ignored the overall iMrketdeclioe was poised toexplode as soon the market rallied. Today, size buyer* leapfrogged each other attempting to get filled, enabling
us to profit ftora ow Stepping In Front Of Size itntegy.  Here'i the morning recap: O
9: 3 lira  Rjght  out  of  ht  box,  »  buyer  iho>vShiihafld  with  5000  wbu  vat  26
A 5,000 sbara bid at 26 1/8, and we go long.
9:32un 
Ar»awrbidfe5,OOO.tt263/4.
9:44am 
9:37un 9:42sm 
9:46am 
A bid for 10,000 sham at 26 3/8.A 5,000 share buyer bkb 26 1/2.
A 27 bid fin- 5,000 shares.
1 receive many questions regtrdiog when to lock-up a profit; and this is more of an art than a science, but perhaps
my actions on MWL will shed some light at Its highs today MWL wa» up oeariy 50% in 13 trading days; wlien
the Dow and S*P eitpk-ded late this aftonoon and MWL made no flirtber progress ®, ttii» was niy c» » ™<8the cash register.  In cases such as these where to ntbbcffband » iWtehed, I will sell « least one half rnyposition.
T cooftt nuowa we, » m.
attractive risk-to-reward set-up, 1) The stock has been living below its 50 day moving average forapproximately a month. 2) BMS was only able to drift up to the area of the prior breakdown 2> when it
expansion coupled with the fact that the stock closed near its lows on Wednesday ® (and a new 60 day
leftuswithtnemultir^3eUsigiid(180,Expii^^ 
3}TheraDge
veil) augured for a probable follow through to the downside.
Chapter  21
COOPER. TRADING INC.
DAILY LEARNING SHEET25 APRIL 1997The Expansion Breakdown on BMS (Semis) worked out well on Thursday.  A few factors made this an
profit into a large Loss. However, as you can see often when everything looks too apparent, too easy, andtoo comfortable as would be the case with BMS when it was down 3 points today, that is usually a time
The fly in the ointment is that the first uptick occurred at 3 5  1/8.  Even so, there was as much as a 11/2point potential profit on the table and with trailing stops this was a profitable trade.  You can see why theimplementation of trailing stops is so important: it locks in the profit and protects you from turning a
to cover at least half your position.  (You must consider that there may have been traders short fromWednesday's reversal).  This is more intuitive rather than something that lends itself to teaching.
However, the discipline of trailing stops will enhance your confidence as your intuition grows over time.
CCOPYKQHT COOPER TJU0WQ WC. *HT.
Add to these pieces the size offers throughout the morning and you can see the result: BMS was down 31/4 points before turning around (and leaving us with a Lizard buy signal).
The  Best  of  My  Learning  Sheets  147
COOPER  TRADING  INC
DAILY LEARNING SHEET
7 MAY 1997
Today's (Tuesday's) set-up sheet had only one multiple signal set-up and that was Nine West Group
REPMHTEDWTTH
(NIN).  As you are aware, multiple set-ups are the best signals to trade and over time they lead to themost consistent profits.Also, NIN had a large seller at the close, making the signal even stronger.  Today, after our short salewas triggered, the company announced they were the target of an SEC investigation and the stockcollapsed more than seven points.  We are certainly lucky when this happens but also, many times thetechnicals (the 1 -2-3-4 set-up and the 180) front-run the fundamentals.Whenever possible, continue to focus on multiple signals as they lead to good things.
148
Chapter  21
COOPER  TRADING  INCDAILY LEARNING SHEET3 JUNE 1997
A few weeks ago we looked at the advanced Hit And Run strategy of Stepping In Front
Of Size when a stock makes a new high.  This again played itself out today combinedwith an Expansion Breakout on CWC.  Note die buyer desperately looking for stock thismorning.  Twenty minutes after the first signal (triggered at  11:19am) he pushed thestock up to 68 3/4.
In this type of runaway market, this strategy works especially well!
The  Best of My  Learning Sheets
COOPER  TRADING  INC
DAILY LEARNING SHEET
9 JUNE 1997
As you know, trailing stops are the cornerstone of the Hit And Run Trading methodology.Locking in profits is critical to accumulating gains.
Friday, we had a 180 buy signal trigger at 41 7/8 and within 30 minutes the stock traded up 13/4 points to 43 5/8. At this level, you must seriously consider locking in a portion of your gain
reversal. Profits of at least 1 point must never be allowed to turn into a loss!!
and at the very least, moving your protective stop to the 42 3/4 * 43 range.
As you can see, this allows you to lock in ttw profits and just as Importantly, avoid the
ccoprmem COOPER nuowa we., mr,
Chapter  21
COOPER  TRADING  INC
DAILY LEARNING SHEET
10 JUNE 1997
74 3/4 on DO and filled at 74 5/8. Our initial protective stop was at 75 3/4. 0) WhenDiamond Offshore traded at 73 3/4, we need to move our stop to breakeven (74 5/8). ®When we have a two point profit, it is strongly advised to take profits on half and move
Let's look at how to lock in intra-day gains.  Today, we had a Lizard sell short trigger at
TrailiofiSt*
the stop to 73 5/8 to lock in the gain on your remaining shares. ®  At 71 3/4, the stopshould be moved to 72  5/8 which locks in the profit on the final piece before the marketreverses.Trailing stops help lock in intra-day gains and assure that profitable trades are pocketed.
ocopvmwr COOLER nuowo «c., ww.
151
The Best if My Learning Sheets 
COOPER TRADING INC
How To Tell When A Stack Will Get Killed
DAILY LEARNING SHEET12 JUNE 1997
When another large offer of 10,000 shares appears jusl minutes later (at 10:29), this is the tip off toset! at least half any long position. From this point on persistent size sellers show up. Here's the
Yesterday's buyer of BVF followed through this morning driving the price higher. ® (There was a 5,000share bid at 33)  However, at 10:26, a large seller showed up with 10,000 shares for sale at 33 1C. <2>
recap:
20,000 offered at 33 1/425,000 offered ai 33 1/835,000 offered at 33
5,000 offered at 32 3/4
7,500 offered at 32 7/8
10:3510:3810:3910:4010:40
action) and technicals usually front run the fundamentals. When the stock goes negative on the day, itis a good time to consider me possibility of a short sale if you're an aggressive trader. ® As it
"cushions' or failsafe levels.
Breaking Ihe early buyer's bid of 33 is the last straw.  Remember, we want to use the initial size bids as
With this kind of relentless size for sale, someone probably knows something as the patterns (price
REPRINTED WITH PERMISSION OF PLOOHBERG L.F.
happens, a negative news story was finally released at 2:03 pm EST. ®The critical lesson to be learned is: you must always trade with trailing stops.  Not only will they lock inprofits, but they will protect you from disasters.
QCOPYmGHT COOPER  TRADtHG INC.,  1037.
COOPEH TRADING INC
DAILY LEARNING SHEET20 JUNE 1997
The Few Times 1 Use News
the company announced they would have a solid and better than expected 1997. Shortly
Today, we had a 180 buy set-up on Delta and Pine (DLP).  The stock was dormant until
thereafter, our set-up was triggered taking the stock to new highs.
As I have mentioned before, many times, our set-ups front-run the news (i.e. FLH from
Monday) and by being alert for these news stories, you can gain an even greater edge.
CQOP&t TMNNa IHC., *M7,
COOPER TRADING INCDAILY LEARNING SHEET
IBM  TICK  CHART
24 JUNE 1997
The  Best of My Learning Sheets 
153
Once Bitten, Twice...Profits hie
THP£fnttSSK>HOFBL0(H*B£mi-P.
Friday's Lizard set-up on IBM was triggered early Monday ® and the stock did notfollow through — it traded sideways for a good hour before hitting our protective stop ®and running up to test Friday's highs.® When a stock comes back in (particularly aftertesting resistance and failing) and triggers our signal a second time. <3> the trade should
be taken.  Often this can be more profitable than the original signal-  Most traders rail todo this, but in my experience, in the markets, often the hard thing to do pays off.
CCOPYMOHT  COOPER  nUOWfl  WC-,  *M7,
154 
Chapter 21
COOPER  TRADING  INCDAILY  LEARNING SHEET1 JULY 1997
There You Go Again - RONAs I am sure you noticed, an old friend, RON (that has appeared as a Learning Example before), wasadded to the Hit Ust this weekend-  The oil service group was quite strong Friday and you want to bealert to any size bids from institutions who weren't filled on orders Friday.  Right off the bat 5600 sharesisbidforat441/eat9:41am  Then at 9:44am, the bid is raised to 44 5/16.  This is the first tip-off  At
9:51am, with the stock at new highs,' 5000 is bid for at 45 1/4 and at &58am 10000 shows up at 453/8. Again, persistent buyers appear:
10:20  5000 bid for at 451/410:25  10000 bid for at 451/212:21  10000 bid at 45 5/8Raised to 45 3/4 at 12:21And again raised to 45 7/8 at 12:22.
At 12:23