Preface

The Key To Success

I’m often asked, “What do great traders have in common?” There’s one primary trait and it’s not unique to trading. It is common to every professional who’s at the top of their field or sport. The answer is passion. When you “find your calling” it is all you can think about. There’s nothing that can stand between you and success. You are relentless in your pursuit of perfection.

Great traders stay up late studying price patterns, reading headlines, analyzing their recent trades and searching for the next edge. Their not watching the clock and they’re not thinking about how many hours they’ve put in. Trading is not glamorous and much of the time it is a real grind. It’s certainly not exciting either. My goal is to make sure that trading is boring. If it’s exciting, something went wrong.

Learning how to trade is going to take at least a couple of years and my advice is that you start out trading one share of stock. You will remain at that level until you have a 75% win rate for at least a few months consecutively. Then you will be ready to increase your size.

“How’s anyone supposed to make money trading one share of stock?” You won’t make any money. The goal is not to lose money while you are learning. There will be many mistakes and we want to keep your “tuition” as low as possible.

If you were looking for a quick path to riches, you should close the cover and put this book back on the shelf. This writing is intended for people who have a passion for trading. I can’t guarantee your success, but I can say with confidence that if you follow what’s in this book, your odds will improve significantly.

The First Step

Time is precious and this “space” (trading) is littered with people who want to teach you their “secrets”. A few of them are legitimate, but most of them are fake.

We can’t move forward until I gain your trust. You are going to put an enormous amount of time and effort into learning this system and you need to know that it works. Trust but verify.

My Journey

When I started trading professionally in 2002 I plopped myself in front of the computer, turned on my screen and thought… now what? I had over a dozen years of industry experience, but it was focused on the mechanics of option order execution on the trading floors. Sure, I knew all of the strategies and I had been swing trading for many years with decent success, but this was a whole new ball game. The books I’d read were highly regarded, but they didn’t teach me how to trade. I was lost.

From the start I kept daily trading journals and they helped me identify key puzzle pieces. Over time, the pieces started to fit together and eventually groups of pieces fit together. I finally got to see the entire picture a few years later. Once I reached that point, it became a matter of experience and repetition. Along the way, my win rate improved and so did my confidence. I was able to gradually increase my trading size and now I can solve that puzzle in an instant.

Until 2018 my time had been split between trading, developing trading software and educating traders in my chat room. I was working 70+ hours a week and something had to give. There was a fork in the road and I had to make a decision. I could dedicate myself entirely to trading or I could focus on educating traders. Without question, trading was the more lucrative path and it is the one that almost every successful trader takes. When I looked back at how difficult my journey was I wondered, “How can I let all of this knowledge die with me?” I didn’t want others to struggle like I did and that’s when I decided to write this course.

I Predict Price Movement

You might be skeptical, no one can predict the future. That’s a healthy mindset so let me approach this another way. I’m going to teach you how to predict the flight of a bird with a great degree of accuracy. You’ve seen birds in random flight, how is this remotely possible? Is this some secret NASA algorithm? No, I’m not that smart and the solution is quite simple.

First of all, I get to pick the bird. If I selected a sparrow, my task would be virtually impossible, but not completely. If the sparrow is close to a bird feeder, the odds are high that it is the destination and that the bird will take the most direct path to it. I’m not going to pick a sparrow, I’m going to pick a goose. No, not the one flying around the neighborhood pond. I’m going to pick the goose that’s flying at an altitude of 5,000 feet in a tight “V” formation. I won’t stop there. If it’s March, I’m going to focus on one that’s heading north. If it’s October, I’m going to focus on the one that’s flying south. Both the sparrow and the goose are motivated. The sparrow is hungry and the goose is migrating. Their flight path is predictable because I know their intentions.

“Hey, that’s cheating!” No it’s not. I didn’t say that I was going to predict the flight path of every bird, I get to choose. I also get to pick the timing and the conditions. The same is true for stocks and I’m going to pick the ones that are in a nice, tight, orderly up trend. If I can’t find one with that pattern, I’ll keep looking. That type of price movement indicates that buyers are aggressive and their motive is clear – greed.

I’m a directional trader. The rewards are bigger with this style of trading and that’s why I do it. The risks are also greater and that’s why I’ve worked diligently to create a system that increases my odds for success. The approach you are going to learn can be applied to longer-term swing trading or short-term day trading. There is a very powerful edge to trading stocks and you will learn it later in the course.

How I Measure Success

When I show you a pattern that was helping me predict future price movement, that’s what I was seeing and that is how I was actually trading at the time.

This book has taken over three years to write and I’m glad I did it. My decision making process was more complicated than I realized. When I dissected the subject and I prepared to write it, there were many subconscious influences that surfaced. I wasn’t even aware of them and now they are recorded.

I no longer measure my success by how much money I can make trading. It doesn’t matter that I know how to trade. All that matters is that I can teach you how to do it. My chat room members post their personal track records all the time and I take great pride in knowing that I’ve helped many traders complete their journey. This book and your success will be my trading legacy.

Why Do We Need A System?

Let’s start with the most basic question. What is a system and why do I need one? A system is a standardized decision-making process and it serves many purposes: it prioritizes the steps, it eliminates errors, it removes emotion, it can be refined and most importantly, it can be replicated. 

I use technical analysis to determine how aggressive buyers are. I do that for the market on a long-term basis and a short-term basis. Then I find stocks that are strong relative to the market (relative strength/relative weakness). That’s a sign that institutions are buying and our goal is to follow the smart money. I am trading the market, but I’m riding the fastest horse.

If you’ve been aimlessly trying to figure this out, take a deep breath. I’ve been there. Study these articles; learn my systematic approach and let’s turn chaos into clarity!