One If by Land, Two If by Sea

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The market is trending, the market is trending! You know from Chapter

3 that you must quantify the trend direction, duration, and

strength of the markets before you consider a trade. All things being

equal, you want the most dynamic trend possible when you place a

trade. Some day traders will say, "Every day is a trading day. I will

just follow the trend of the moment. If it moves, I will trade it." That

trader will not be around three months from now because every day

is not a high-probability trading day. When the market is strong and

the stock you selected from your screening methodology is trending,

it is time to trade. Market analysis and momentum screening is

the way a general surveys the prospective battlefield and selects

where and when to fight. Superior generals would not endanger

their troops without gathering as much information as possible

about the field of battle.

After you have ascertained the trend of the market and

checked the sector performance, you analyze the trend of the

stocks from your screens. Do not forget to consider the reward-torisk

ratio: You need a 2.5 or better ratio for the stock to be acceptable.

If the trend score and the high-probability score are favorable,

then identifying a momentum acceleration breakout is highly likely.

If the stock has a 2.5 reward-to-risk-ratio based on daily price bars,

you have a stock that has the potential to reward you on an intraday

basis with points instead of fractions. Now let us look at various tactics

and battle plans using electronic trading technology. Superior

generals learn to fight the battles of the future from tactics and methodologies learned from the past. If you can learn from the mistakes

of others and not repeat them, you have learned one of the

most valuable lessons in life and in trading.

The market is trending, the market is trending! You know from Chapter

3 that you must quantify the trend direction, duration, and

strength of the markets before you consider a trade. All things being

equal, you want the most dynamic trend possible when you place a

trade. Some day traders will say, "Every day is a trading day. I will

just follow the trend of the moment. If it moves, I will trade it." That

trader will not be around three months from now because every day

is not a high-probability trading day. When the market is strong and

the stock you selected from your screening methodology is trending,

it is time to trade. Market analysis and momentum screening is

the way a general surveys the prospective battlefield and selects

where and when to fight. Superior generals would not endanger

their troops without gathering as much information as possible

about the field of battle.

After you have ascertained the trend of the market and

checked the sector performance, you analyze the trend of the

stocks from your screens. Do not forget to consider the reward-torisk

ratio: You need a 2.5 or better ratio for the stock to be acceptable.

If the trend score and the high-probability score are favorable,

then identifying a momentum acceleration breakout is highly likely.

If the stock has a 2.5 reward-to-risk-ratio based on daily price bars,

you have a stock that has the potential to reward you on an intraday

basis with points instead of fractions. Now let us look at various tactics

and battle plans using electronic trading technology. Superior

generals learn to fight the battles of the future from tactics and methodologies learned from the past. If you can learn from the mistakes

of others and not repeat them, you have learned one of the

most valuable lessons in life and in trading.