Street Smarts (Laurence Connors).pdf

CONTENTS

STREET SMARTS

ACKNOWLEDGMENTS

PREFACE

xiii

Chapter 1

INTRODUCTION

Chapter 2

SWING TRADING

Chapter 3

MONEY MANAGEMENT

PART ONE TESTS

Chapter 4

TURTLE SOUP

Chapter5

TURTLE SOUP PLUS ONE TM

Chapter6

80-20's

Chapter7

MOMENTUM PINBALL TM

Chapter 8

2-PERIOD ROC

PART TWO RETRACEMENTS

Chapter 9

THE "ANTI”

Chapter 10

THE HOLY GRAIL

Chapter 11

ADX GAPPER

PART THREE CLIMAX PATTERNS

Chapter12

WHIPLASH

Chapter13

THREE-DAY UNFILLED CAP REVERSALS

Chapter14

A PICTURE'S WORTH A THOUSAND WORDS

Chapter15

WOLFE WAVES

Chapter16

NEWS

Chapter17

MORNING NEWS REVERSALS

Chapter18

BIG PICTURE NEWS REVERSALS

104

PART FOUR BREAKOUT MODE

Chapter19

RANGE CONTRACTION

109

Chapter 20

HISTORICAL VOLATILITY MEETS TOBY CRABEL

115

PART FIVE MARKET MUSINGS

Chapter 21

SMART MONEY INDICATORS

122

Chapter 22

MORE WORDS ON TRADE MANAGEMENT

128

Chapter 23

BE PREPARED!

131

Chapter 24

FINAL THOUGHTS

134

Chapter 25

THE SECRETS OF SUCCESSFUL TRADING

135

APPENDIX

Historical Volatility Calculations,

203

Moore Research Center-Statistical Studies,

205

Exhibit A.1

Historical Upper 90% Statistics,

208

Exhibit A.2

Historical Upper 80% Statistics,

209

Exhibit A.3

Historical Lower 10% Statistics,

210

Exhibit A.4

Historical Lower 20% Statistics,

211

Exhibit A.5

Historical WR7 and Higher Close Statistics,

212

Exhibit A.6

Historical WR7 and Lower Close Statistics,

213

Exhibit A.7

Historical ROCRSI Buy Report,

215

Exhibit A.8

Historical ROCRS1 Sell Report,

216

Exhibit A.9

Historical Fresh ROC Buy Report,

218

Exhibit A.10 Historical Fresh ROC Sell Report,

219

Exhibit A.11 Futures 14-Period ADX Statistics,

221

Exhibit A.12 Historical Oops Buy Report,

223

Exhibit A. 13 Historical Oops Sell Report,

224

Exhibit A. 14 Historical Oops (ADX Capper) Buy Report,

225

Exhibit A. 15 Historical Oops (ADX Capper) Sell Report,

226

Exhibit A. 16 Historical Fresh ADX Buy Report,

228

Exhibit A. 17 Historical Fresh ADX Sell Report,

229

Exhibit A.18 Historical Cap Failure Buy 50% Report,

231

Exhibit A. 19 Historical Cap Failure Sell 50% Report,

231

Exhibit A.20 Historical Channel (2-Period High/Low) Report),

233

Samples of Daily Worksheets,

234

Trademarks,

236

Research Services, Software, and Charting Services,

237

Software and Books Offered by Oceanview Financial Research,

238

ABOUT THE AUTHORS

239

PREFACE

Traders talk amongst themselves, not necessarily to discuss bullish or bearish market opinions, but

rather to share insights into the nature and quirkiness of this business. The mental toll trading

exacts definitely forms bonds. When we open up it is always surprising to discover the similarity of

lessons learned, experiences shared, and how we all independently arrive at the same

conclusions. Often in talking with each other we're really looking for clues into our own heads,

hoping to understand ourselves a little better.

Despite our constant pursuit of knowledge, the market itself assures there is no shortcut to

obtaining our final degree. In the end, it is experience which is our ultimate teacher and there is no

substitute. We can only choose the attitude with which we approach this process of learning to

trade. We can accept the inevitable setbacks and learn from them, or we can yield to our natural

human stubbornness and be forced to repeat the same lessons over and over again.

This book has been written by two people who have come to enjoy the process. We've both

discovered we are not the only ones to have made certain mistakes and we've also discovered the

same secrets to success ... which we hope to share with you. The single most important secret is

this: learn to listen to the markets and do not impose your own will upon them.

Every successful trader we have known has also discovered the necessity for consistency. It is the

key to everything-you must trade with a coherent methodology. You must follow a specific trading

strategy. Although this book presents multiple strategies, each and every one has the same

essential starting point: minimizing risk first, looking to maximize gains only after risk has been

defined and controlled.

Between us we have 34 years of experience as floor traders, exchange members, traders on

institutional desks, hedge fund managers, and commodity trading advisors-trading for our own

accounts the entire time. We hit it off well because our number one guiding belief is that you must,

above all, find setups and entries which minimize exposure. The profits come on their own terms.

Finally, even though we present many different patterns, you only need ONE strategy to be

prosperous. Some of the best traders are successful because they trade only one strategy.

Hopefully, all of the patterns in the manual will increase your awareness of certain market

idiosyncrasies and will serve as a confirmation of your own market observations.

STREET SMARTS

CHAPTER 1

INTRODUCTION

Yes, Virginia, you CAN make a living from trading!

In a day when global money managers are given increasing attention and funds seem to dominate

the market arena, it might be difficult to imagine that the small speculator could have much of an

edge. Has trading become a function of computer power? Have markets changed in the last

decade? How relevant is the theoretical world in the heat of battle? The truth is, a few trading tricks

and a little common sense will get you more mileage than all the books on technical analysis

combined. Ultimately, an individual can better determine support and resistance than a computer

can. And yes, the private individual has more of an edge than he knows!

This book is written for the active trader. It is a compilation of strategies that the two of us have

been trading with for the last 15 years in both equities and futures. The strategies are conceptually

simple and have been readily adopted by our friends and colleagues. This is not a book of

technical analysis. It is a manual of precise setups that have you in the market for only a limited

amount of time. Consider it to be a collection of "surgical strikes" with a distinct methodology for

managing each one'.

Each pattern identifies a distinct market condition. After all, trading should be done on only the

most recognizable and reliable patterns. Most of the setups can be traded on any market and on

any time frame.

This manual will teach you everything we know about swing trading. By swing trading we mean

monitoring the market for support and resistance levels and actively trading around those areas.

Stops are placed just beneath support or above resistance to minimize risk. You will learn to

recognize the best setups at these levels and then how to lock in profits when trades are made.

In order for you to get the most out of trading these setups, a few points need to be covered:

• It is important to initially trade a new concept or strategy on paper. Only by seeing a pattern

over and over again will you truly feel comfortable with it. You must believe in its ability to

repeat itself. Don't be surprised if you find yourself actually becoming excited as you see the

patterns begin to set up.

• If a pattern does not make sense to you, don't trade it. If you don't have a 100 percent belief in

it, you will not be able to overcome losing streaks.

• All you need is one pattern to make a living! Learn first to specialize in doing one thing well. We

know two traders who do nothing but trade the "anti" pattern from a five-minute S&P chart.

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