Mind Over Markets, Updated Edition – Power Trading with Market Generated Information

<p>Preface xiii</p>
<p>Acknowledgments xvii</p>
<p>CHAPTER 1 Introduction 1</p>
<p>CHAPTER 2 Novice 7</p>
<p>Laying the Foundation 9</p>
<p>The Auction 9</p>
<p>Organizing the Day 10</p>
<p>Challenging the Rules 15</p>
<p>The Role of the Marketplace 16</p>
<p>Going with the Crowd 17</p>
<p>Introduction to Day Timeframe Structure 19</p>
<p>Normal Day 19</p>
<p>Dynamics 19</p>
<p>Structural Characteristics 21</p>
<p>Normal Variation of a Normal Day 21</p>
<p>Dynamics 21</p>
<p>Structural Characteristics 23</p>
<p>Trend Day 23</p>
<p>Dynamics 23</p>
<p>Structural Characteristics 23</p>
<p>Double–Distribution Trend Day 25</p>
<p>Dynamics 25</p>
<p>Structural Characteristics 25</p>
<p>Nontrend Day 27</p>
<p>Dynamics 27</p>
<p>Structural Characteristics 27</p>
<p>Neutral Day 27</p>
<p>Dynamics 27</p>
<p>Structural Characteristics 28</p>
<p>Day Type Summary 31</p>
<p>CHAPTER 3 Advanced Beginner 33</p>
<p>Building the Framework 34</p>
<p>The Big Picture: Market Structure, Trading Logic, and Time 34</p>
<p>A Synthesis: Structure, Time, and Logic 35</p>
<p>Ease of Learning 36</p>
<p>Amount of Information 36</p>
<p>Recognition Speed 37</p>
<p>Trade Location 37</p>
<p>Confidence Level 37</p>
<p>Summary 38</p>
<p>Evaluating Other Timeframe Control 38</p>
<p>Other Timeframe Control on the Extremes 40</p>
<p>Tails (or Extremes) 40</p>
<p>Range Extension 40</p>
<p>Other Timeframe Control in the Body of the Profile 40</p>
<p>TPO 41</p>
<p>Initiative versus Responsive Activity 45</p>
<p>Trending versus Bracketed Markets 49</p>
<p>Key Elements A Brief Discussion 51</p>
<p>Trending Markets 54</p>
<p>Bracketed Markets 54</p>
<p>The Two Big Questions 56</p>
<p>CHAPTER 4 Competent 59</p>
<p>Doing the Trade 59</p>
<p>Section I 60</p>
<p>Day Timeframe Trading 60</p>
<p>Day Timeframe Directional Conviction 61</p>
<p>Opening Call 61</p>
<p>The Open 62</p>
<p>The Open as a Gauge of Market Conviction 63</p>
<p>Open–Drive 63</p>
<p>Open–Test–Drive 65</p>
<p>Open–Rejection–Reverse 68</p>
<p>Open–Auction 69</p>
<p>Open–Auction in Range 70</p>
<p>Open–Auction out of Range 71</p>
<p>Summary 73</p>
<p>Opening s Relationship to Previous Day Estimating Daily Range Potential 74</p>
<p>Open within Value Acceptance 75</p>
<p>Rejection (Breakout) 79</p>
<p>Open outside of Value but within Range Acceptance 80</p>
<p>Rejection (Breakout) 83</p>
<p>Open outside of Range Acceptance 84</p>
<p>Rejection 85</p>
<p>Summary 85</p>
<p>April 13,1989 86</p>
<p>Crude Oil 87</p>
<p>S&amp;P 500 87</p>
<p>Gold 90</p>
<p>Japanese Yen 92</p>
<p>Soybeans 92</p>
<p>Treasury Bonds 92</p>
<p>Summary 95</p>
<p>Day Timeframe Auction Rotations 96</p>
<p>Two–Timeframe Markets 97</p>
<p>One–Timeframe Markets 97</p>
<p>Using Auction Rotations to Evaluate Other Timeframe Control 97</p>
<p>Structure 99</p>
<p>Half–Hour Auctions 100</p>
<p>Extremes 100</p>
<p>Range Extension 101</p>
<p>Time 101</p>
<p>Identifying Timeframe Transition 102</p>
<p>December Swiss Franc, October 12, 1987 103</p>
<p>Y to E: One–Timeframe Buying 104</p>
<p>E: Time 104</p>
<p>Y to F: Auction Test 104</p>
<p>G: Transition Confirmation 104</p>
<p>E to H: One–Timeframe Selling 105</p>
<p>H: Auction Test 105</p>
<p>I: Transition Confirmation 105</p>
<p>H–J: One–Timeframe Buying 105</p>
<p>Summary 105</p>
<p>Auction Failures 105</p>
<p>Excess 110</p>
<p>Signs of Excess 111</p>
<p>The Rotation Factor 112</p>
<p>Monitoring the POC or Fairest Price 115</p>
<p>9:30 a.m. Figure 4.30 116</p>
<p>10:00 a.m. Figure 4.31 118</p>
<p>10:30 a.m. Figure 4.32 119</p>
<p>Noon Figure 4.33 119</p>
<p>2:00 p.m. Figure 4.34 119</p>
<p>The Close 120</p>
<p>Day Timeframe Visualization and Pattern Recognition 122</p>
<p>Short–Covering Rallies 123</p>
<p>Long–Liquidation Breaks 127</p>
<p>Summary of Short Covering and Long Liquidation 128</p>
<p>Ledges 129</p>
<p>Summary 130</p>
<p>High– and Low–Volume Areas 131</p>
<p>High–Volume Areas 131</p>
<p>Identifying High–Volume Levels 132</p>
<p>High–Volume Examples 134</p>
<p>Low–Volume Areas 138</p>
<p>Low–Volume Examples 140</p>
<p>Summary 144</p>
<p>Summary Day Timeframe Trading 145</p>
<p>Section II 145</p>
<p>Long–Term Trading 145</p>
<p>Long–Term Directional Conviction 146</p>
<p>Attempted Direction: Which Way Is the Market Trying to Go? 146</p>
<p>Auction Rotations 147</p>
<p>Range Extension 147</p>
<p>Long–Term Excess 150</p>
<p>Island Days 152</p>
<p>Long–Term Tails 152</p>
<p>Gaps 155</p>
<p>Summary 155</p>
<p>Buying/Selling Composite Days 155</p>
<p>Summary 157</p>
<p>Directional Performance: Is the Market Doing a Good Job in its Attempts to Get There? 157</p>
<p>Volume 158</p>
<p>Evaluating Changes in Volume 158</p>
<p>Volume as a Measure of Directional Performance 158</p>
<p>Value–Area Placement 159</p>
<p>Evaluating Directional Performance through Combined Volume and Value–Area Placement 160</p>
<p>Value–Area Width 169</p>
<p>Summary: Long–Term Activity Record 171</p>
<p>Long–Term Auction Rotations 183</p>
<p>Brackets 183</p>
<p>Trade Location in a Bracketed Market 188</p>
<p>Rule 1: Monitor Market Direction and Location within the Current Bracket 189</p>
<p>Rule 2: Markets Generally Test the Bracket Extreme More Than Once 190</p>
<p>Rule 3: Markets Fluctuate within Bracketed Regions 190</p>
<p>Rule 4: Monitor Activity Near the Bracket Extremes for Acceptance/Rejection 192</p>
<p>Transition: Bracket to Trend 192</p>
<p>Trends 193</p>
<p>Trade Location in a Trending Market 193</p>
<p>Monitoring Trends for Continuation 196</p>
<p>Transition: Trend to Bracket 197</p>
<p>Detailed Analysis of a Developing Market 201</p>
<p>Bracket Reference Points 201</p>
<p>Region A (Figure 4.87) 203</p>
<p>Region B (Figure 4.88) 205</p>
<p>Region C (Figure 4.89) 207</p>
<p>Region D (Figure 4.90) 208</p>
<p>Long–Term Auction Failures 210</p>
<p>Long–Term Short Covering and Long Liquidation 214</p>
<p>Applications 224</p>
<p>Corrective Action 225</p>
<p>The Function of Corrective Action 226</p>
<p>Summary 228</p>
<p>Long–Term Profiles 228</p>
<p>Using Long–Term Profiles 229</p>
<p>The Long–Term Profile in Action 229</p>
<p>Region A (Figures 4.98 and 4.99) 231</p>
<p>Region B (Figures 4.100 and 4.101) 235</p>
<p>Summary 238</p>
<p>Special Situations 238</p>
<p>3 to I Days 239</p>
<p>Neutral–Extreme Days 241</p>
<p>The Value–Area Rule 244</p>
<p>Summary 246</p>
<p>Spikes 247</p>
<p>Acceptance versus Rejection 247</p>
<p>Openings within the Spike 247</p>
<p>Openings outside the Spike 249</p>
<p>Bullish Openings 249</p>
<p>Bearish Openings 252</p>
<p>Spike Reference Points 252</p>
<p>Balance–Area Breakouts 252</p>
<p>Gaps 260</p>
<p>Day Timeframe Significance of Gaps 260</p>
<p>Summary 265</p>
<p>Markets to Stay Out Of 265</p>
<p>Nontrend Days 266</p>
<p>Nonconviction Days 266</p>
<p>Long–Term Nontrend Markets 267</p>
<p>News–Influenced Markets 269</p>
<p>Summary 269</p>
<p>News 269</p>
<p>Summary 274</p>
<p>Beyond the Competent Trader 275</p>
<p>CHAPTER 5 Proficient 277</p>
<p>Self–Understanding: Becoming a Successful Trader 279</p>
<p>Self–Observation 281</p>
<p>The Whole–Brained Trader 282</p>
<p>The Left Hemisphere 283</p>
<p>The Right Hemisphere 283</p>
<p>Combining the Two Hemispheres 283</p>
<p>Strategy 284</p>
<p>A Business Strategy 285</p>
<p>Capital 285</p>
<p>Location 286</p>
<p>Timing 286</p>
<p>Information 287</p>
<p>Know Your Competition 287</p>
<p>Know Yourself 288</p>
<p>Consistent, Daily Execution 288</p>
<p>Inventory 288</p>
<p>Risk 289</p>
<p>Goals 290</p>
<p>Record Keeping and Performance 290</p>
<p>Dedication 290</p>
<p>Applications 291</p>
<p>Summary 292</p>
<p>CHAPTER 6 The Expert Trader 295</p>
<p>CHAPTER 7 Experience 297</p>
<p>Set Aside Your Expectations 297</p>
<p>Mind over Markets in Profile 298</p>
<p>Market–Understanding and Self–Understanding 300</p>
<p>Perfect Practice Makes Perfect 300</p>
<p>Blinded by Price 300</p>
<p>Be Prepared 301</p>
<p>Perspective 302</p>
<p>Overnight Inventory 305</p>
<p>Gaps Can Be Gold 307</p>
<p>Gaining an Edge 308</p>
<p>The Fairest Price Revealed 309</p>
<p>Thinking Statistically 311</p>
<p>The Trader s Dilemma 311</p>
<p>The Most Important Omission from the First Printing in 1990 312</p>
<p>Emotional Markets 313</p>
<p>A Landscape View of the Market 314</p>
<p>Personal Evolution 315</p>
<p>Hierarchy of Information 316</p>
<p>Timeframe Control Who Is Dominating the Current Session? 317</p>
<p>Markets Are Visual 318</p>
<p>Destination Trades 319</p>
<p>The Opening 319</p>
<p>Trends 320</p>
<p>Daily Perspective 322</p>
<p>Cognitive Dissonance 322</p>
<p>Imagination 325</p>
<p>False Certainty 326</p>
<p>Anomalies 326</p>
<p>Market Logic 328</p>
<p>We Are All Day Traders 329</p>
<p>APPENDIX 1 Value–Area Calculation 331</p>
<p>Volume Value–Area Calculation 331</p>
<p>TPO Value–Area Calculation 332</p>
<p>APPENDIX II TPO versus Volume Profiles 335</p>
<p>Single Price Level Distortions 336</p>
<p>End of Day Total Volume versus Ongoing</p>
<p>Volume throughout the Day 337</p>
<p>Anomalies 337</p>
<p>Too Focused on Volume 339</p>
<p>Conclusion 339</p>
<p>Suggested Readings 341</p>
<p>About the Authors 343</p>
<p>Index 345</p>