139“Deﬁne your risk” rule, 31–35Documenting thoughts and
emotions, 62“Don’t give tips,” 132“Don’t overtrade” rule, 51–55“Don’t second-guess your winners”
rule, 83–87
“Don’t take tips” rule, 129–132“Don’t trade the news” rule,
Commodity channel index (CCI),
123–127
92
Commodity Futures Trading
Commission (CFTC), 147
Communication, traders and, 52Conclusion-making process,
168–169, 170
Conﬁdence, proﬁt objective and, 
79
“Congestion” price, 38“Consolidating” price, 38, 66Consumer price index (CPI), 
33
Contrary thinking, 137–141Control, loss of, 32Corn market, 145–146CPI. See Consumer price index
(CPI)
Critical deduction, process of, 
95
Crowd behavior, 137–139Crude oil trading, 106–107Currency markets, 101Current trend, end of, 97–98Cutting losses:
deﬁning risk and, 34key to, 52selecting time frame and, 28traders and, 31trading system and, 11
Double-top formation, 72Downtrend:
end of, 103trading in, 5, 101–102typical chart, 98, 99f
Drawdown point, 65–66, 69
Educational process:prioritization of, 33risk-reduction strategy and,
161–163
Elliot Wave analysis, 150–151, 153Emotional attachment, 47Emotional needs:
traders and, 48–50trading plans and, 12Emotions, documenting, 62End of downtrend, 103End of trend, 97End of uptrend, 103Equity(ies), 144
in bull markets, 100–101withdrawing, 133–136
Execution system, 54Exit orders, 78
Family input, trading and, 33–34Fibonacci, 150, 151, 153Fibonacci Progression, 150
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Index
187
50% ratio, 150–151Financial freedom, 136Financial risk, trading plan and, 12Forced awareness, 170Forced liquidation matrix, 146fFOREX, 33, 10142% winning trades, 112–114Fundamentals and prices,
relationship between, 125
Funds, risk and, 35Future contracts, 155
Gann, W. D., 150–151, 153, 154
“Have a trading plan” rule, 9–14Hedgers:
bona ﬁde, 146goal of, 107–108markets and, 147–148selling pressure of, 145–146speculators and, 147
Herd, 169Hourly time frame price chart, 
72
Hourly time frame trader, 26Hunt Brothers, 129
Improper equity allocation, 105Industrial Revolution, 155Information:
access to, 53database, creating, 60–61overload, 161
Inner data gathering, 61–62Inside information concept, 156Interest rate traders, 33Intuition, 95
“Keep good records and review
them” rule, 59–63
Knowledge, 95, 143“Know the limits of your analysis”
rule, 91–95
“Know when to take a break” rule,
117–121
“Know your game” rule, 3–7“Know your proﬁt objective” rule,
77–81
“Know your ratios” rule, 111–115“Know your time frame” rule,
23–28
Lane, George, 92Limit orders, 5Liquidating:
to exit market, 49stops, 37
Liquidation, net order ﬂow and, 
109
Liquid market, 27Livermore, Jesse L., 153Long position, 4, 67Long-term success, 100Long-time-frame price chart, 71Long time frames, 24, 72Long vs. short time frame, 24Losing longs, 146Losing trade, 4, 49Loss:
of control, personal psychology
and, 32
over time, 47–50stop-loss orders and, 36–37trading and, 43–46
MACD. See Moving average
convergence divergence(MACD)
Margin, 106Market(s):
analysis of, 176basics of, 138breaking out to the upside, 67change to the structure of,
158–159currency, 101
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INDEX
Market(s) (Continued)
dynamic conditions of, 67–68executing into, 49hedgers and, 147–148liquid, 27overextended, 156–157overtrading and, 52, 53–54quality of, 65–66strong and weak, 139strong presence in, 134structure, basic, 144Markstein, David L., 91Momentum identiﬁers approach,
98
Money management, effective,
105–109Morgan, J. P., 7Movable stops, 39–41Moving average convergence
News, trading, 123–127Nonattachment to markets, 134,
136
Nonattachment to trade, prices
and, 44
OHLC price bars. See “open-high-low-close” (OHLC) price bars
One trend, end of, 97Open-ended questions, trading and,
20–21
“Open-high-low-close” (OHLC)
price bars, 71Open interest, 68Open short, 5Open-trade long, 5Open-trade loss, 5, 93Open-trade proﬁt, 5, 38, 66, 73Opportunities:
divergence (MACD), 54, 91,130
perceived and actual, 53trade, 7
Multiple executions (overtrading),
54
Orange juice crop, 124–125Order ﬂow, 7. See also Net order
Multiple time frames, using, 71–75
ﬂow
“Natural time frame,” 23, 25Net losing traders, 9, 51Net order ﬂow. See also Order 
ﬂow
anticipating, 79apparent, 67–68change of, 95creation of, 139depth of, 66identifying, 39liquidation and, 109losing position and, 125loss and, 47multiple time frames and, 38, 
72–74
Net winning traders, 9, 134–135,
138
“Never add to a loser” rule, 47–50
imbalance of, 4, 5, 48losing and winning side, 46losing trade and, 31–32
Oscillators and indicators, 156–157Other people’s money concept, 
106
Overbought concept, 156–157Overextended market, 156–157Oversold concept, 156–157Overtrading, 47, 51–55
Pennant formation, 72Perceived opportunities, 53Perception:
price action and, 5, 6regarding certainties andprobabilities, 16–17
Performance, improving, 117–121Performers, top, 119
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189
Personal discipline, redeﬁninglosing trade and, 49
Personal experience of trading,
118–119
Personal ﬁnancial conditionassessment, risk and, 33Personal psychology, traders and,
3, 6, 32
“Placing a stop-loss order,” 37PPI. See Producer price index
(PPI)
Predetermined exit points, use of,
37–39Price action, 38ﬂow of, 5perception and, 5, 6phenomena of, 123predicting, 94–95psychology behind, 4strong, 80, 139weak, 139
Price charts, 71–73Prices:
actual, 107advance and decline of, 6attachment trade and, 44–45bull market and, 17–19, 18f,
43–44
fundamentals and, 125market orders and, 5potential, 107signiﬁcant, 152and time, 150
Price/time relationship, 66–67, 137Probabilities, trading and, 15–21Probability of ruin matrix, 112–114,
113f
Producer price index (PPI), 33Proﬁt management tools, 37–41Proﬁts:
letting proﬁts running, 60–61locking, 108objectives, success and, 77–81
trade and, 16–17in zero-sum markets, 6
Protective stops, 108Psychology:
behind “don’t second-guess your
winners,” 85–86
behind “don’t take tips,” 131behind “don’t trade the news,”
123–127
behind “letting proﬁts run,” 
134
behind price action, 4behind “trade with the trend,”
100
behind “using effective money
management,” 109
market, 3of traders, 3, 6, 32
“Psychology of Trading” seminar,
92, 111
Pullbacks, 108, 126, 140Pyramiding loss, 48–49
Range, 98, 99f, 100, 102, 103Ratios:
actual performance and, 111,
112, 115
calculation of, 112
Record keeping and reviewing,
59–63, 112, 114
Resting order, 78Retracement analysis, 150–151Reverse strategy, 67Review of rules, 176Richest Man in Babylon (Clason),
133
“Right now” trade, 25, 26, 27, 44Risk:
actual, 107balance and, 109deﬁning, 31–35ﬁnancial, trading plan and, 
12
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INDEX
Risk (Continued)
Subjective experience of trading,
hedgers and, 107perception of, 108trading markets and, 17–18wealthy individuals and, 106
Risk/reward ratio, 78, 97Rolling stops, 40Ruin matrix, probability of,
112–114, 113fRules, review of, 176
Self-awareness of methodology,
trading and, 45
Sell orders, 4–5, 672-hour rule, 150, 151–152, 153, 157Short position, 4Short-selling, 101Short time frame, 24, 27–28, 72, 
75
Short-time-frame price chart, 71Signiﬁcant price, 152Silver market, 129–13060% winning trades, 113Size of trade, 135Speculators:
corn market and, 145–146market opportunities and, 
155
118–119
Success:
information and, 114long-term, 100proﬁt objectives and, 77–81reducing participation method
and, 12–13
traders’ personal psychology
and, 3
in trading, 173–174without analysis, 156“your ﬁrst loss is your best loss”
rule and, 43–46
Systematic trading approach, 62, 69
Technical analysis, 93–95
successful, 156
“The only indicator you need” rule,
155–159
“Think in terms of probabilities”
rule, 15–21
Thoughts documentation, 62Three-to-one reward-to-risk ratio,
78, 79
Time frame. See Trading time
frame
Time/price relationship, 107, 150,
relationship of hedgers and, 
153, 158–159
147
Stop-loss buying, 79Stop-loss orders, 10, 37–39
movable, 39–41
Stop orders, 4–5Stops:
liquidating, 37movable, 39–41placing, 38–39rolling, 40
Tips taking, 129–132, 176Top performers, 119Trade:
entering, 17losing, 49selection, 20, 45size of, 135winning, creating, 60
Traders. See also Speculatorsattachment, nonattachment
Strong market, 139“Study winning traders” rule,
161–165
trade, and, 44behavior of, 138“black box,” 157
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Index
191
communication and, 52deﬁning risk, 31–35emotional need of, 48–49hourly or weekly, 26–28market information and, 51–52,
53
net losing, 9net winning, 9, 134–135, 138reading the crowd, 140trading opportunity and, 3–7trading plan and, 9–11using “don’t second-guess 
your winners” rule,86–87
winning, 161–165
Trading plan:
creating, 11–14example of, 13–14vs. trading system, 9–11
Trading process, self-awareness in,
45
Trading systems, 9, 10–11vs. trading, 162–163
Trading time frame:
actual, 25best trades and, 27character and, 24ﬁnding congruency in, 25–26multiple, 71–75“natural time frame,” 23, 
“Trade with the trend” rule, 
25
97–104
Trading:
actual behavior and, 61approach, systematic, 62deﬁning risk of loss and, 
32
downtrend, 101–102experience of, 118–119funds, 34–35gathering hard data in, 61loss and, 43–46markets, structure of, 3–4the news, 123–127probabilities and, 15–21proﬁt objectives and, 77–81range, 102sensitivity to personal side of, 
34
uptrend, 100–101using predetermined exit points
in, 37–41
vs. trading systems, 162–163zero-sum, 4
Trading breaks, trading plan and,
12
Trading edge, 156
selecting, 24, 26–28shorter and longer, 24
Trend:
clearly appraising, 102–104, 
103f
deﬁnition of, 97–98, 100followers, 98
Trend-following strategy, 12, 66Turnover, 692:1 proﬁt/loss ratio, 115
Upside break out of the market, 67Uptrend, 5
range at the end of, 103trading, 100–101typical chart, 98, 98f
“Use effective money
management” rule, 105–109“Use multiple time frames” rule,
71–75
V/OI. See volume and open interest
(V/OI)
Volume, rise in, 69Volume and open interest (V/OI),
19–20, 158–159
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INDEX
Weekly price chart, 73Weekly time frame trader, 25–26,
“Withdraw equity regularly” 
rule, 133–136
27
Williams %R, 91Win/loss ratio, 65–66Winning approach, developing,
149–150
Winning shorts, 146Winning traders, 161–165net, 9, 134–135, 138Winning trades, 4, 65–59, 
112–114
Worst-case exit order, stop-loss
orders as, 40
“Your ﬁrst loss is your best loss”
rule, 43–46
Zero-sum markets, 4, 6, 101,
144–145
Zero-sum transaction trading, 4,
92–93
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