Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Edition
Featuring
Tricks of
the Trade
Brian Shannon
50 Pips
Linda Raschke
Joe Donohue
Charlie Burton
Joe Kunkle
Chris Kimble
IN PARTNERSHIP WITH |
1 | EDITION 01
CONTENTS
2 | EDITION 01
TRICKS OF THE TRADE
B
Paul Ryding
RIAN SHANNON STARTED my time horizon. Over the past five or might be good ideas. Each day I look
his career as a stockbroker six years I have gravitated back towards at the shortened list and seek out
at firms including Lehman swing trading. Now, I’ll only take a day what appear to be the low-risk,
Brothers in the early 1990s before trade if it’s in front of me and it’s high-probability swing-trade setups
moving on to trading full time. His first obvious; I don’t actively seek to be for the coming day.
trading gig was at a firm specialising a day trader all the time.
in leveraged trading. Next up, he I trade using multiple timeframes.
took a position at a “better-funded I primarily trade individual equities. I have a weekly chart, a daily chart,
competitor”, leading its proprietary I find my ideas by doing manual scans a 30-minute timeframe, a 15-minute
trading programme and creating a of large lists of stocks. I have some timeframe and a five-minute
series of courses. He started Alpha general parameters: they have to timeframe so I can view five
Trends as his own trading office before trade at least half a million shares on timeframes at once. This allows me
developing it into a subscription average over the past 20 days; price to see the interplay of bigger trends
insights service focused around doesn’t matter so much, but I tend to with shorter timeframe trends.
technical analysis using multiple trade most actively in stocks of $20-60
timeframes. He continues to trade per share. I don’t have a certain list of criteria
actively every day and is a prominent that I check off. What I’m looking for
voice on Twitter and StockTwits. Here I’m typically in a trade from three to is a stock that’s trending on a longer
are his tricks of the trade. eight days. Unless I’m wrong right away timeframe like a daily timeframe and
– then it will be an inadvertent day then it may have pulled back on the
I mostly swing trade. I don’t have the trade. Three to eight days is generally shorter timeframe. I’m not looking to
patience to be an investor and I don’t the point after which you start to see buy as it’s pulling back. I don’t guess,
have the concentration to be a day deeper pullbacks that I’m not I wait for evidence in the shorter-term
trader. But I understand the markets interested in holding through; it’s not timeframe to show the equity has
really well and how money moves in that I actually choose how many days stabilised and then as it begins to turn
and out of them, so that works best for to hold, I choose where to put my higher again – back in the direction
my personality; it’s active enough, an stops, and when there’s a deeper of the primary trend – I put my money
intellectual challenge and I still enjoy pullback within that trend, and then in with the stock. It’s all about looking
it – plus I make money. I’ll get bounced out. for alignment: the stock is in an
uptrend on the daily timeframe, it’s
Trading is a journey; you have to adapt to I have a master list of stocks that I pulled back, it’s gone sideways, and
your own personality. I started out as a predominantly look for ideas in. There now it’s looking like it’s ready to
swing trader, then got pretty active in are about 700 stocks on the list that re-emerge into that uptrend again.
day trading, but when I began to feel I review once a month. At the start It’s basically the concept I explore
like I’d lost my edge in day trading I of each week I whittle down the list in my book, Technical Analysis Using
listened to my results and expanded to a group of about 150 that I think Multiple Timeframes.
3 | EDITION 01
The volume-weighted average price
has become my primary analysis tool.
It allows me to say very objectively
where we are in reference to a previous
high or low, who has control, who’s
gaining control, or who’s losing control
at any given point. It’s a tool I’ve been
using for 14 years and the most
important piece of the puzzle for me
because it accurately measures true
supply and demand dynamics from any
point in time.
4 | EDITION 01
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and whether you can afford to take the high risk of losing your money.
TRICKS OF THE TRADE
6 | EDITION 01
I have plenty of down days, but I never
let them get out of hand.
7 | EDITION 01
TRICKS OF THE TRADE
Illustration:
Sam Green
8 | EDITION 01
L INDA RASCHKE STARTED her
career in 1981 on the trading
floor of the now-closed Pacific
Exchange in San Francisco, making the
markets in equity options. She became
a CTA in 1991 and a CPO shortly after,
before launching her own fund, which
she managed until 2015. “I had $150m
under management. But the regulatory
burden and costs for data and staff
were a deciding factor for me to simplify
and go back to trading for myself,” she
explains. Raschke recently wrote Trading
Sardines: Lessons in the Markets by a boundaries, a rising wedge or loss Everything is about relationships in
Lifelong Trader. She also features in Jack of momentum – that could indicate the marketplace. Is the price moving
D Schwager’s The New Market Wizards. a market is near the end of a swing, further away? Is the spread getting
or perhaps a sharp rejection spike wider? Or is it starting to contract?
I have to be very clear about what I’m that might tell me it’s time to start Because if I’m watching the price, a
going to do and why before the markets looking the other way. I use a 3/10 key thing that I want to measure is
open, because it’s easy to get tripped up moving average oscillator beneath the the current price relative to another
in cross-currents through the trading day. chart, though it doesn’t really matter data point, whether that be a moving
After the markets close each day, I what oscillator you use; they are all a average, an oscillator, previous day
log my numbers, plot the net change derivative of price. close, entry price, or the year high
and make a note on whether there’s or low.
a particular condition that would set I feel strongly that swing highs and
up a play for the next day. Can I find swing lows are the most visible points in The more time spent in the marketplace,
a directional bias for the next day? Is the marketplace. Whether it be a retail the more risk you have. It’s better to make
there an edge that tells me that I’ve trader or a huge institutional investor, a $5,000 trade in eight hours than it is
got a 65% chance the market is going everybody knows where that 20-day to make a $10,000 trade that keeps you
to trade from low to high or high to low? high is or a key swing low is. There’s in the market for four days. It’s about
nearly always an increase in play around identifying the spots I can get the most
My base indicator is a bar chart. I like these pivots. Even on the intraday bang for my buck in the least time.
price, so the first thing I do is use a bar charts you’ll see an increase in volume
chart to look for key swing highs and at swing highs and swing lows where I use the average true range (ATR) to do
swing lows as well as conditions – such algorithms and systematic strategies my modelling and define swings. Once
as established trends, trading range often enter. you’ve defined swings, you can model a
9 | EDITION 01
“It’s better to market’s structure. With my modelling,
the computer always comes up with a
definitive answer and there’s no grey
value those claiming to be a “master
trader” or saying they made millions of
dollars. It’s all nonsense. A truly great
make a $5,000 area. I always want to know what the
computer says. I make sure my models
trader wouldn’t be talking that way.
10 | EDITION 01
TRICKS OF THE TRADE
“Follow trends,
don’t make trends”
The hedge fund founder-turned trader Joe Donohue on why following trends
alongside careful diversification is key.
Illustration: Luke Waller
11 | EDITION 01
“As much as
I might love a
stock, I’ll never
allocate more
than 10% or 15%
of my portfolio
to one stock”
12 | EDITION 01
“Trying to pick top and
bottoms is a fool’s game”
usually a sea change and could signal I look for stocks that have been moving I’m big on alerts. If you’re in 20 or
the possibility of the beginning of a higher for the past seven to 10 years and 30 stocks, you need those reminders.
major long-term move. On the short are now showing a big topping pattern. If I’m getting a pullback to a level I want
side, I want to see if any key uptrend to buy, I’ll get an alert. If it hits a level
lines are being broken to the downside On the short side I’m starting to look I want to start scaling out from, I’ll get
on volume. This gives me a lot more at semiconductors and financials. For an alert. There are so many moving
confidence to enter a trade. I always the banks, I simply don’t see where parts, you must have alerts in place.
say that the stock market is the one they’re going to get the oxygen to go
place where following trends and higher in a very dovish, low interest I never try to pick a top or bottom: it is
not making them is cool. I follow the rate environment with global growth a fool’s game. The canyons of Wall
momentum and the money and try to slowing. I’m not quite there, but I think Street are littered with those who try.
identify sector rotations. there’s a strong chance the banks and I might never get the top or bottom,
semis could be a short play over the but I make as much money as I can in
I’m disciplined on when I will exit a trade. next 12-18 months. that middle zone.
I never give price targets when I’m long
or short, although I always have an Biotech is the sector I have traded most in My greatest influence has been burning
idea as to where it’s going to go, and I the last five years. It’s been a very strong myself on the oven a lot of times. I’ve
manage the trade accordingly. Say I’m performer relative to the market up been working in this industry for
up 25-30% in a name over a period of a until more recently and, despite a slight over 30 years. I’ve had tremendous
couple of weeks to a month or two, the dip, I’m still very involved in the sector. successes as well as significant failures,
first thing I’ll do is raise my stop so I’m I’m looking for significant M&A over the but that’s ok as I’ve learned from
protected if it turns lower. I’ll also begin next year or two, which should lift the every single one of them. Yes, it hurts
to sell pieces as the price increases. I’ll sector. The two ETFs I primarily trade when you lose, but learn from those
normally sell one-third at a time until are XBI and IBB, but I spend a lot of mistakes and it’s a life lesson you’ll
I’m out of the position – I raise stops time in the space on individual stocks (hopefully) never repeat again. Reading
and scale out. as well. The sector has some of the best books never helped me – you don’t
looking charts and there are always read a book to learn how to fly an
I’m net long, but I’m always a little short. great setups. It is very high risk though aeroplane. The only way you learn
As bullish as a market can be, there’s – biotech is as good as the market; if to trade is by doing it every day,
still broken stocks and chart patterns there’s a major selloff it’s one of the first putting in the hours and making
that have a hell of a time moving higher. stock groups to tank. mistakes. It’s a baptism by fire.
13 | EDITION 01
FREE! Morningstar
stock reports:
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Start trading
Spread bets and CFDs are complex instruments and come with a high risk
of losing money rapidly due to leverage. 75% of retail investor accounts lose
money when spread betting and/or trading CFDs with this provider. You
should consider whether you understand how spread bets and CFDs work
and whether you can afford to take the high risk of losing your money.
TRICKS OF THE TRADE
“Don’t choke
indicators, pattern recognition software
and assets to trade, sometimes we miss
what’s right in front of us. I had the
privilege of meeting the late Mark
Douglas [author of Trading in the
the trade”
Zone] in 2002. One of the most
memorable things he said was: ‘If
I locked you in a prison cell for six
months and gave you a 10-period
moving average, I think you could
find a way of trading profitably’. That
EzeeTrader co-founder Charlie Burton on developing always resonated with me.
the right mindset, having thick skin and knowing I swing trade and intraday trade. I’ll often
when to take a step back. use intraday opportunities to edge into
a swing trade. In my first five years I
was trading through the day and night,
but as you become a more experienced
Illustration: trader, you don’t feel like you need to be
Daniel Roozendaal watching the charts constantly.
15 | EDITION 01
My strategies are predominantly based
around reacting to other traders’ activity.
An example is targeting the point other
traders are getting stopped out. There
will always be a majority of traders
who put their stops just below a low
or just above a high, so if you look at a
daily chart for example, there tends to
be a build-up of stops below a turning
point in the market. Pairing this
sentiment with moving averages,
double bottom or double top patterns
can be very effective.
16 | EDITION 01
TRICKS OF THE TRADE
Illustration:
Bruno Mangyoku
17 | EDITION 01
“I’m not
driven by
strict rules
in managing
risk because
I monitor
the markets
24/7”
18 | EDITION 01
“Whether the last one was documents, see what markets they’re
attacking, check the size of that
market, then extrapolate their
good or bad, you have to move valuation based on their available
market and revenue trajectory. There’s
onto your next play” a lot that goes into it, but if you do the
work there’s no better way to make
money, in my opinion.
19 | EDITION 01
TRICKS OF THE TRADE
Illustration:
Luke Brookes
20 | EDITION 01
21 | EDITION 01
rising bottoms. The odds of it breaking
out to the upside are 2 to 1. If you can
use the statistics to keep the losses
small, they can become insignificant
to your overall performance.
22 | EDITION 01
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Spread bets and CFDs are complex instruments and come with a high risk
of losing money rapidly due to leverage. 75% of retail investor accounts lose
money when spread betting and/or trading CFDs with this provider. You
should consider whether you understand how spread bets and CFDs work
and whether you can afford to take the high risk of losing your money.