Trading Without Gambling

MARCEL LINK has been involved in trading for more than twenty years and, for the last several years, has been a successful independent trader of futures and stocks. Previously, he founded LinkFutures.com, which was a discount, online brokerage firm. Link is a former member of the New York Financial Exchange. For more information, visit www.MarcelLink.com.

• Acknowledgments xiiiIntroduction 1Chapter 1 Everyone Needs a Plan 7The Hanging Curveball 7A Typical Bad Trader 9A Typical Good Trader Prepared with a Plan 9The Trading Plan and the Game Plan 11A Disclosure or Two before We Continue 13Chapter 2 The Trading Plan 15What is a Trading Plan? 15A Simple Trading Plan 16Why a Trading Plan? 17A Business Plan for Traders 18Making a Trading Plan 19Breaking Down the Trading Plan 20Closing Thoughts 23Chapter 3 The Game Plan 25Always Be Prepared 25Why a Game Plan 26The Basics of the Game Plan 27Know Yourself 27Drawing up Scenarios 27Making Your Plan Work 29Closing Thoughts 32Chapter 4 Get to Know Yourself 33Different Types of Traders 34Figuring Out Who You Are 35The Importance of Knowing Your Style 36Two Sides to Every Story 38Closing Thoughts 39Chapter 5 Trading Strategies 41Trading Strategies 41Your Strategy Needs to Fit Your Style 42Technical Strategies 42Building Systems 45Don’t Be Stubborn 50Why Should You Have a Strategy? 51What Goes into a Strategy? 51The Entry 52Exits 52Times Frames and Holding Times 54Stick to Your Trading Strategy 55Closing Thoughts 55Chapter 6 Know Your Markets 57Markets Differ 57Know What You are Trading 60What’s the Real Risk? 62Time Frames and Charting 63Who Moves the Markets? 68Know Any Correlations 69Getting the Big Picture 75Closing Thoughts 75Chapter 7 After the Close 77Let’s Review 78The Open Trades 79Thinking about Tomorrow 88The Closed Trades 89Getting Ready for Tomorrow 91Review Your Plans and Strategy 92Closing Thoughts 93Chapter 8 Before the Market Opens 95To Each His Own 95Getting the News 96Know Your Markets 97Look at Overseas Markets 98How are the Markets Opening? 98Making Adjustments 99Were There Any Big Moves Overnight? 100Look for Possible Trading Situations 101Draw Up Scenarios 103Adjusting Size 103Make Your Daily Game Plan 104Closing Thoughts 105Chapter 9 Drawing Up Scenarios 107Know Your Markets—Revisited 107Getting the Big Picture 108Getting a Better Picture 109End of the Day 113Back to Monitoring Open Positions 114Once the Trade is On 115The Day Trader 122Making Scenarios for the News 123Generic Stuff to Look at with Open Positions 125Closing Thoughts 130Chapter 10 Taking the Gamble Out of Trading 131Good Trades Can Be Losers 132Two Parts to a Trade 135Same Market, Two Views 136Going Long 136Going Short 139Waiting for the Right Opportunities 143Measure the Risk-to-Reward Ratio 143Ways to Get the Odds in Your Favor 145Closing Thoughts 148Chapter 11 Getting In 149Spotting the Opportunity 149Planning the Trade 150Drawing Scenarios for Getting into the Trade 152Don’t Chase the Market 154Timing the Trade 154Look For Patterns within the Long-Term Trade 155Knowing the Risk 159Deciding How Much to Trade 159Closing Thoughts 160Chapter 12 Getting Out 161Preestablish Your Exit Strategies 161Cutting Losses and Letting Profits Ride 162Using Stops in Your Game Plan 163Planning Your Risk 164The Setup 165Trading the Gap 167Another Trade 170A Crazy Day 171Planning Your Target 173How Will You Exit? 174The In-Between Area 175Closing Thoughts 175Chapter 13 Reviewing and Managing 177After the Trade is on 177Looking Ahead 182Reviewing Your Trading 184Keeping a Journal 188Closing Thoughts 189Chapter 14 How to Keep from Overtrading 191Why Have a Plan 192You Don’t Always Need to Be in the Market 192Stop Being in Too Many Positions 196Using a Game Plan to Help if You Trade Too Many Positions 198Keeping to Risk Management Limits 200Closing Thoughts 204Chapter 15 Money Management 207Don’t Take Risk Lightly 208Another Gambling Analogy 209The Money Management Basics 211Incorporating Your Money Management Plan into Your Trading Plan 220Incorporating Your Money Management Plan into Your Game Plan 221Establishing Money Management Procedures for Open Positions 223Closing Thoughts 223Chapter 16 Trading Rules 225Trading Rules 225Using Your Rules to Make a Trading Plan 226My Trading Rules 227Appling the Money Management Rules 228Applying the Entry Rules 229Applying Your Exit Rules 231Applying the Discipline Rules 232The Top 25 Rules 233Closing Thoughts 240Chapter 17 Focus and Discipline 241Staying Focused 242Distractions 242Have a Routine to Help You Write a Game Plan 244Following Your Plan 245How to Stay Focused if You Have Trouble Staying Focused 246Mental Side of Discipline 248Keeping Tabs 251Unwinding after the Day 253Closing Thoughts 254Chapter 18 Learning How to Win 255Clean Out Your Closet 256Don’t Blame Others for Losses 256Think of It as an Expense and Not a Loss 257Self-Destructive Behavior 257Learn from Mistakes 257Trade, Trade, Trade 258Curb Your Emotions 258Losses are in the Past 258Money Management is More Important than Trade Selection 259Treat Yourself 259Preserve Precious Capital 259Have a Cutoff Point 260Jumping in Too Soon or Getting in Too Late 260Do Not Let Big Winners Turn to Losers 260Make a List of Rules 261Trade Your Style 261Use a Proven Strategy 261Tips are for Bartenders 261Learn as Much as You Can about What You are Trading 262Keep Learning 262Read and Learn 262Trade with a Plan 264Fill in Your Own 264Final Thoughts 264About the Author 267Index 269