Preface xi

Acknowledgments xix

Chapter 1 The Only Constant 1

The Creation of ERISA 4

The Rise and Fall of Relative Performance 4

The Fall of the Great Bull 6

The Rise of Absolute Return 7

Succeeding in an Absolute Return Market Environment 8

Pure, Unbaised Information 10

People Change Markets, Markets Change People 13

Chapter 2 Information 15

Fundamental Information 16

Rational or Irrational? 18

Market-Generated Information 19

The Auctions 20

Fair Value 21

Market Profile Fundamentals 22

Authors’ Note 22

Demystifying Market Behavior 27

Chapter 3 Timeframes 29

Breaking Down Market Timeframes 31

Scalper 32

Day Trader 32

Short-Term Traders 32

Intermediate Traders/Investors 33

Long-Term Investors 35

Your Timeframe Is your Strategy Cornerstone 39

Chapter 4 Auctions and Indicators 41

The Search for Value 42

Concept Review 45

Key Market-Generated Indicators 48

Perfecting the Art of Visualization 56

Chapter 5 Long-Term Auctions 59

Auctions in Action 60

The Compound-Auction Process 61

The EBB and Flow of Balance 62

Where Do Trends End and Brackets Begin? 64

Clarity in the Maelstrom 66

The Big Picture 68

Asymmetric Opportunities and Risk 72

Long-Term Strategy Development 74

Assembling the Big Picture: Context within Context 75

Chapter 6 Intermediate-Term Auctions 77

Convergence and the Bracketing Process 77

Defining the Intermediate Term 79

The Transition from Bracket to Trends 80

The Transition from Trend to Bracket 82

The Convergence of Intellect and Emotion 85

Accelerate the Learning Process 86

Prelude to a Sea Change 87

Hear the Bells A-Ringing 94

Countertrend Auctions 94

The Quest to Do Better than ‘‘Normal’’ 96

Oh, the Difference a Few Points Makes 97

Chapter 7 Short-Term Trading 99

Analyzing Short-Term Markets 101

Common Mind Traps 104

When and Where to Look for Short-Term Trades 105

Opportunities Around Intermediate-Term Brackets 106

Technical Indicators 106

Your Own Worst Enemy: Your Brain 110

Seeking the ‘‘Exceptionally Tasty Patterns’’ 112

All Prices and Opportunities Are Not Equal 116

Ongoing Forensic Investigation 121

Looking for the All-Important Reference Points 124

Never Be a Laggard 129

A Golden Opportunity 130

Fade the Extremes, Go with Breakouts 132

‘‘The Expert Reasons Contextually’’ 137

Chapter 8 Day Trading Is for Everyone 141

What’s a Day Trader to Do? 142

What You Don’t Do May Be More Important than What You Do 145

The Real World in Action 146

Top Down 152

Lack of Conviction 152

Flight to Safety 153

Inventory Imbalances 154

Correction of Inventory Imbalances 155

Trend Traders’ Trap 157

Market Condition 158

Yesterday’s Trade 162

Example 1 162

Example 2 165

Example 3 167

Trader Checklist 170

The Market Is Open 171

Open-Drive 171

Open-Test-Drive 175

Open-Rejection-Reverse 178

Open-Auction 181

Day Trader’s Checklist 181

Example 1 183

Example 2 185

Example 3 188

Practice, Practice, Practice 190

Chapter 9 Profiting from Market-Generated Information 193

Timeframe Diversification 194

The New Paradigm 196

Appendix A: Market Update 199

About the Authors 201

Index 203