Way of the Trade, + Online Video Course Tactical Applications of Underground Trading Methods for Traders and Investors

by Yu, Jea

• ISBN13: 9781118590683
• ISBN10: 1118590686
• Edition: 1st
• Format: Hardcover
• Copyright: 2013-08-05
• Publisher: Bloomberg Press

Summary

Praise for Way of the Trade + Online Video Course

"Jea Yu's Way of the Trade offers serious traders a comprehensive and compelling approach to short-term trading. Jea writes in a reader-friendly style, connecting market realities with sound trading techniques and risk management strategies. If you are dedicated to succeeding in the trading world, Way of the Trade belongs on your bookshelf."
—Toni Turner, President, TrendStar Trading Group, Inc.; author of A Beginner's Guide to Day Trading Online and Invest to Win: Earn and Keep Profits in Bull and Bear Markets with the GainsMaster Approach

"In his new book, Way of the Trade, Jea Yu does a great job explaining market truths and delivering the tools helpful for profitable trading. There is so much valuable information in this book, but the section on 'The 5 Laws of the Marketplace' alone is worth the price of this book. A must-read for the serious trader!"
—Bennett A. McDowell, President, TradersCoach.com, and author of The ART® of Trading, A Trader's Money Management System, and Survival Guide for Traders

"Jea Yu's powerful new book offers a wide range of tools, strategies, and insights to help traders at all experience levels. Combining his unique market methodology with high-powered tape reading techniques, Yu's well-written narrative presents serious-minded readers with a detailed road map to short-term profits."
—Alan Farley, Editor/Publisher, Hard Right Edge "Jea is like the Kevin Smith of trading. His knowledge and historical perspective are rivaled only by his passion for the business. From X-Men comics to Bloomberg stock pickers, Jea takes you on a journey through the culture and mind of a Wall Street trader."
—Jeremy Frommer, CEO, Jerrick Ventures; former CEO of Carlin Financial Group; former Head of Global Prime Services, Royal Bank of Canada

"Jea Yu's latest masterpiece, Way of the Trade, illuminates a path of trading success appropriate for new hopeful traders and veterans alike. Way of the Trade encapsulates the strategic wisdom of Sun Tzu with the modern street smarts of a market master. Skillful use of trading examples, along with lessons of individuals who beat seemingly impregnable odds, make Way of the Trade incredibly difficult to put down and impossible not to learn from."
—Robert Weinstein, TheStreet.com contributor, founder of Paid2Trade.com, and full-time trader

Author Biography

JEA YU is a cofounder of UndergroundTrader.com, an interactive training site for traders, fund managers, and investors, which was voted Best of the Web by Forbes magazine for four consecutive years. A popular public speaker, Yu has been quoted in USA Today, the Wall Street Journal, and the Financial Times and is also a contributing writer for TradingMarkets.com and Benzinga.com.

Table of Contents

Preface

Acknowledgments

About the Author

Chapter 1: The Mutation

The Phantom Menace

1996-1997: Pacific Rim Crisis;Scourge of the Specialist, Rise of the Daytrading

1998-2000: Rise of the Daytrader; Internet Bubble, Irrational Exuberance

2000-2003: Death of Daytrading; Internet Bubble Burst, Nasdaq Collapse, Bear Market Armageddon

2004-2007: Rise of the Bull Market and Housing Bubble

2008-2010:  Real Estate Bubble Collapse, Global Financial Crisis;Stock Market Plunge

2010-2012:  Market Recovery, European Crisis, Rise of the Algos and Dark Pools

2009-2012:  Rise of the Algorithm (Algos) High Frequency Trading (HFT) Programs; Dark Pools and the Infamous Kill Switch

Typical HFT ‘Sheep Skinning’ Cycle in 2009-2012

Algo/HFTs in 2012 and Beyond

2012 and Beyond:  Hybridization of Participants

Enter the Thunder and Tumbleweeds Market Trading Landscape

Defining Market Landscapes, Climates, and Terrains

Landscape

Climate

Dry Climates

Wet Climates

Terrain

Seasonal Macro Climates

The 5 Laws of the Marketplace

Law of Reciprocity

Law of Linearity

Law of Foreshadowing

Law of Convergence

Law of Transparency

The Profit By-Product

The Model of Excellence: Shokunin

The Excellent State of Excellence

Earnings Seasons: The Super Bowl of Momentum

Immediate Crisis Panic Landscapes

Global Influences:  Europe, China, and the World

Market Sector Tier System Mechanics

Sector ETFs as Indicators

Bearish Leveraged ETFs

Breadth Indicators

Chapter 2: The Hybrid Market Predator

The Hybrid Market Predator

Relevant Traits of the Three Skillsets

Kurt Warner: Adversity Conditioning Model

Pockets, Pockets, Pockets

Properly Aligning Your Personal Perspective

Manifesting By-Product into a Product

The House of Enlightenment: www.UndergroundTrader.com

The Passive/Assertive Portfolio Player: www.UndergroundSwingTrades.com

The 90-Minute Trading Day: Morning Profit Maker: www.MarketFy.com

The 8 Step Process to Turn Idea into Profit

Chapter 3: The Morning Ritual

Hunting for Prey:  Headliners and Corganic

The Gapper/Dumper Three Reaction Sequence

Ritual Religion

Wasted Effort

The Real Work, Don’t Skimp!

Law of Reciprocity Revisited

FAST (Fast and Simply Thorough) Chart Analysis

Step-by-Step Ritual Routine by Time

From 8am-9am EST

Evaluate the Climate

Chapter 4:  The UndergroundTrader Trading System: The Katana

Recommended Online Direct Access Broker:  Cobratrading.com

Configuring the Rifle Charts

The Role of the Bumpers: Moving Average Breakouts, Breakdowns, and Trends

The Four Parts of Trends: Consolidation-> Break-> Peak-> Exhaustion

The Role of the Bumpers: Bollinger Bands

The Slope Effect

The Weekly and Monthly Moving Averages and Bollinger Bands

The Role of the Stochastics

Spotting and Trading Fades

The Two Most Important Price Patterns: Pups and Mini Pups

The Pup Breakout Pattern

The Inverse Pup Breakdown Pattern

The Mini Pup Breakout Pattern

The Counter Candle(s) Trigger

The Mini Inverse Pup Breakdown Pattern

Stairstep Mini Pups

Pretzel Mini Pups

Mini Pup Reversal Fades to Channel Tightenings

Combination Pup and Mini Pup Pattern

Stinky 2.50 and 5 Level Defacto Price Bumpers

The (Only) Three Candlesticks I Use

Massive Volume Spikes

Mischievous Mis-tick Manipulation

The Essence of Stops

Less is More Applies More than Ever

STOPS and SPRAWLS

OPS: Offensive Pare Scaling

Slow Steady Grinds: Stop Out

Excessive Slow Grinds:  How and When to Short

Early and Mid-Stage Perfect Storms

Red-line-ing Beyond Comfort Zone Threshold

Three Levels of Stop Mindset

What to Do After a Disaster

The 3 Steps for Proper Re-Setting

Step 1:  Be the Hammer Candle

Step 2:  Be the CSI (Crime Scene Investigator)

Rogue Waves

Self-Imposed Error

Step 3:  Take The Prescription

Purposely Add More Stocks to Watchlist and Minders

Step-by-Step Healing and Recovery

The Unconditional 3 STOP Rule

DSS:  Defensive Sprawl Scaling

DSS Rules and Checklist

Chapter 5: The Perfect Storm Pattern Trade

What is a Perfect Storm?

Basic Formation

Perfect Storm Profile

The Three Stages of Perfect Storm : Dormant to Detonation

The Three Perfect Storm Outcomes

Spotting Perfect Storm Opportunities with the Anchor Time Frame

The PS Code

Safety

Volume Hungry

Determining the Boss Time Frame Chart:

The Basic Method of Playing Perfect Storms

How to Trade the Three TYPES of Perfect Storms

The Trending

How to Play Trending Perfect Storms

Trading the Sympathy/Laggard Perfect Storm

The Tightening

Tightening Reversals

How to Play Tightening Perfect Storms

The Consolidation Break

How to Play Consolidation Break Perfect Storms

Repeating Nature of Perfect Storms:

Double H-Edged Sword Sequence Trade:

How to Execute DHSS Trades

Chapter 6: Optimized Four Leveled Research Process

Level 1 Research Process: Spot Technical Analysis and Headline Search

Step 1: F.A.S.T.  Chart analysis (requires rifle charts)

Step 2:  Headline search

Level 2 Research Process:  Digging Deeper into Fundamentals

Step 1:  Gather and Screen Financial Statistics

Step 2: Check for insider buying or selling

Step 3:  News and Analyst Scan

Step 4:  Mark any unfilled gaps on the daily chart for past 6-9 months.

Step 5:  Add Fibonacci retracement levels on daily charts

Step 6: Quick Peer Check

Level 3 Research Process: Mining Perspectives

Step 1: Gauge the Sector and Peers

Step 2: Read Articles and Message Boards

Step 3:  Check for any upcoming catalysts

Step 4: Check Options Activity

Level 4 Research Process:  The Juicer: Full Immersion

Step 1: Read latest 10-Q and 8-K Results of Financial Operations and Conditions report

Step 2: Review latest conference call transcript

Step 3: Find the Sexy

Step 4: Process the Juice

The Afterglow Effect

Chapter 7: How to Prey for Playable Stocks to Trade

Stocks Are Battlegrounds and Participants Prey

Playability: Internal and External Factors

Internal Playability: Familiarity + Comfort Level

Internal Factor: Comfort Level

The Danger of Fixed Dollar Allocation

Familiarization Process

External Playability: Correlation + Catalyst

Catalyst

Sector Correlations

The Two Types of Playable Stocks: Headliners and Corganic

Headliners: Gappers and Dumpers

Most Significant News Situations

Corganic Stocks:  Core Vehicles and Post Headliners

Where to Find Playable Stocks: Sources for Ideas

Newsfeeds

Scanners and Screeners

Stock Research

Financial Television Channels

Chapter 8: Stalking Prey

Aging: Waiting For the Pattern to Form

Stalking: Setting an Alerts Minder on Your Trading Platform

Chapter 9: The Encounter from Start to Finish

Anxiety: Bad versus Good

React, Don’t Panic

Distinguishing Trade Entry Stages: Early, Impact, Late

General Rules for Entry Stages:

Scaling Requires Per Share Pricing

The Complete Trade Sequence

Pre-Trade Process: Information Gathering and Analysis

Trade Execution Process:  Entering the Position

Trade Management Process:  Monitoring and Exiting the Position

Identifying Maladies in Your Trading

Malady: Made a profit, but left too much on the table!

Malady: I stepped in too early and got stopped out before the bounce! I lost money and got slapped afterwards!  Grrr.

Malady: Market is just chopping me!  Made some profits off the open but giving it back now and getting chopped.  Everything I touch backfires on me!

Malady: I’m getting chopped out constantly on my trades.  Stock will move up a little but then sell off and stop me right out.

Malady: I played a perfect storm breakout this morning for nice profits but got chopped out twice on the same set-up in the midday.  Then it took off when I finally decided not to play it again!  I feel like a sucker, the market chopped me twice and then broke out when I wasn’t in ?!?!

Post Trade Sequence Analysis

Reconstruct the Trade and Conditions Accurately

Summary

Chapter 10: Portfolio Trading: The Skill Set of the Evolved Hybrid Market Predator

Market Calibrated Portfolio Creation and Management

General Capital Allocation

Activity Allocation = General Capital Allocation

Risk Adverse Nature of Intra-Day Trading

Her Majesty, Queen Leverage

Application of Well-Managed Allocation Management

truTV ‘It’s Bot Reality. Actuality’

Constructing the Portfolio

General Macro Market Analysis and Allocation Assessment

Qualifying the Three Types of Trade Considerations

Daytrading Considerations

Intra-Day Trade Profiles

SCALP Trade

Case Study:  RIMM short scalp on perfect storm breakdowns

Case Study:  RIMM long scalp on perfect storm breakout

RANGE Trade

Case Study:  MGAM Range trade long on breakout

Position Trade Profiles

Adjusting Position Allocation Percentages

SWING Trade

Case Study:  UA Jan 45 Call options Swing Trade

CORE Trade

Case Study:  APP Swing trade to Core Long Term position trade

Active Portfolio Management

Options Strategies

Delta Neutral Hedging

Covered Calls: Creating Your Own Dividend

Bullish Call Debit Spreads

Bearish Call Debit Spreads

Portfolio Trading Schedule of Activity

Harnessing Your Hybrid Evolution

Chapter 11: Conclusion: Cultivating Your Personal Evolution

Acknowledging the Spirit

Elements that Effect One’s Spirit

Broken Spirits Blowout

Nourish Your Spirit

Continuing Your Progress

Appendix A:  My Trading Tools and Anatomy of Pattern Trades (Suri Duddella)

Index