Specifically, anyone who engaged in the simple "even" strategy of buying the stocks of the S&P 500 on the day before a Fed policy announcement, selling them a week later, then buying them again the following week and sticking with the pattern until the subsequent Fed meeting generated a whopping 650% return since 1994, far outperforming the inverse "odd" strategy which shocking had a negative return over the past two decades years

Mind Over Markets - Dalton (Volume Profile)
Opening Types -

• Open Drive - 
• • if market opens above or below prior day's range or value area, then an Open Drive is dominated by responsive buying or selling
  • if market moves away from prior day's range, than the open is dominated by initiative buying or selling
  • You want to detect this early and not trade against it - OTF is active and aggressive
• Open Test Drive
• • Market opens, moves a short distance in one direction and then another advertising for someone to step in.  
  • This will usually test a prior key area and then push once it has gained conviction that nobody is left to oppose it.  
  • OTF has found an area of conviction to participate in the opposite direction
• Open Auction in range - 
• • nothing has changed between this session and the last.  
  • Market will be unfriendly to breakout traders and reward those who trade from the outside in
• Open Auction out of Range - 
• • outside of the previous traded range.  
  • There is a high probability of OTF action and these can be big days.  
  • There will be a higher level of conviction by responsive as well as initiative traders.
  • expectation is to go back into yesterday's range or value area
  • • if price does not go back in, OTF is absorbing and it will likely continue to push
    • look for test of previous high or low

Day Types - 

• Non-trend - complete balance, no OTF
• Normal - everything inside IB
• • MPD_IB_RNG >= 0.85 * (HI - LO) AND (HI = MPD_IB_HI OR LO = MPD_IB_LO) AND (HI - LO >= 18 * 1pt range)
• Normal variation - IB high / low breaks
• • IB range < 0.85 * (HI - LO) AND IB range >= 0.50 * (HI - LO) AND (HI = IB_HI OR LO = IB_LO)
• Neutral day - OTF present, so range extension on both IB
• • Neutral: HI > IB_HI AND LO < IB_LO AND CL < (IB_HI + HI)/2 AND CL > (IB_LO + LO)/2
  • X: HI > IB_HI AND LO < IB_LO AND (CL >= (IB_HI + HI) / 2 OR CL <= (IB_LO + LO) / 2)
• DD Trend - builds energy from one range and then quickly moves to another and balances
• Trend - OTF remains active throughout the day
• • MPD_IB_RNG < 0.50 * (HI - LO) AND (HI = MPD_IB_HI OR LO = MPD_IB_LO)

The Big Picture- 

• Market, Structure, Trading Logic, Time
• Time - regulates opportunity
• • Good opportunities to buy below value and sell above value will not last long
  • • If the inventory doesn't move quickly, and stays below value for longer than 'expected' value has changed and it is now being accepted lower
• Structure 
• • range extension - identifies control and helps gauge buyer / seller strength.  
  • • the stronger the control the more frequent and elongated the extension, ie:Trend day
  • 30 min auctions
  • open and close
  • profile shape
  • tails - aggressive buyer / seller enters the market on an extreme and moves prices quickly
  • • lack of tails mean lack of OTF conviction
  • initiative vs responsive
  • • initiative buying - any buying occurring within or above the previous day's value area
    • responsive buying - any buying occurring prices below value
    • • initiative selling on range extension can result in responsive buying
  • Time Frame control
  • • Day 
    • • open, mid, previous close, high and low of previous day, current day, week (only if near the current price)
    • OTF 
    • • bracket highs / lows
      • weekly/monthly high / low
      • unfilled gaps
      • common MA
      • if these are in control switch from rotation to momentum trading
    • Destination - once a directional trade is underway, look for obvious visual cue
    • • Day - phod, plod, 3d high / low, top / bottom of a gap
      • OTF - long term bracket high / low and it make take months to reach there
      • • Monitor for continuation!
  • Trending vs Bracketed Market (Trading range)
  • • Trending market
    • • must determine if trend is continuing
      • is price accepted or rejected by market - are 30m value areas overlapping or separate?
      • market profile is not as useful, since the direction is obvious
    • Bracketed
    • • Markets trend, balance, and then turn around
      • Different market participants have different views of value, and these are often conflicting
      • market profile is more useful because the composite gives the views of all these participants over several profiles
    • 
      

• Trading Logic
• • byproduct of experience, it is an understanding of why the market behaves a certain way
  • ie:if there is a large tail, and a rotation back into the tail, and TPO builds over time, trading logic says that the OTF that moved quickly is no longer present or willing to respond to those same prices
• Extra
• • Must ask the following questions:
  • • Which timeframe responded to price?
    • How strong was the response, represented by volume?
    • Were the responders the innovators, early adopters, early / late majority or laggards
    • Were the innovators responding opportunistically to the actions of the late majority or laggards?
  • Preparation
  • • Review Monthly, Weekly, Daily bars for excess / trend
  • Overnight Inventory
  • • if inventory is long and market doesn't adjust on the open, it is a strong market in the short term
    • 
      
• Markets ultimate purpose is to facilitate trade
• • Which was is the market trying to go?
  • Is it doing a good job in its attempt to go that way?
• 
  

Day Trading

• Day trader begins each day with a set of expectations that serve as guidelines, based on the market's past performance
• • Study of long term direction, recent value area placement, and opening print
• Opening Call - overnight session?
• • opening call gives an idea of what will happen the 1st 30 minutes to 1 hour of the session
• Open
• • 1st 30m of the day establishes 1 of the extremes 50% of the time
  • Directional conviction
  • • open  drive (OD)
    • • market opens and aggressively auctions in one direction
      • price never trades back through opening range
      • • price where open drive fails is important
        • if price moves back through opening range, something significant has changed
      • generally caused by OTF who have made their decisions pre-market.  
    • open test drive (OTD)
    • • similar to open-drive but market lacks the initial confidence to drive immediately after the bell
      • market usually tests beyond a known reference point (phod, plod, previous swing hi / low) and swiftly moves back through open
      • often establishes one of the day's extremes
    • open rejection reverse
    • • opens, trades in one direction w/o much conviction, reverses back through opening range
      • more common the OD and OTD
      • initial extremes hold less than 50% of the time
      • normal / normal variation day should be expected
      • ON high / low will likely be tested
      • strong moves will likely be retraced
    • open auction
    • • market randomly auctions around open w/o much movement
      • conviction depends on where the market opens relative to the previous day
      • inside previous range 
      • • non-convictional day is likely to develop
        • market sentiment from previous day is likely unchanged
        • market auctions in one direction until activity slows, then the other
        • non-trend, normal, neutral days
        • initial balance unlikely to hold
      • outside range 
      • • good potential for market  to move in either direction
        • often gives rise to double distribution days

• Open vs previous day profile
• • open out of previous day value / range indicates imbalance and more opportunity
  • acceptance (auctions within previous range for 1 hour) indicates balance
• OAIRIV - within previous value and is accepted
• • range will rarely exceed the previous day range 
  • one of the previous day's extremes will generally hold
  • • use MM from an early extreme to find the likely range
• OAIRIV - within previous value and rejected
• • drives out during the 1st 30
  • very hard to determine how far, or in what direction market will go
• OAIROV - outside previous value and accepted
• • value will generally overlap previous days value, but only on one side
  • range is reduced compared to previous day
• OAIROV - outside value and rejected
• • range potential is unlimited
• OAOR - accepted
• • as long as price does not return to previous day's range the market has accepted the breakout, even if it auctions back and forth
  • if market continues to drive in direction of breakout range potential is unlimited and Trend day usually results
• OAOR - rejected
• • market is rejected back into range
  • expect price to check accepted value
  • price range is still unlimited, but likely in the opposite direction of the breakout

• 30m Auctions
• • Auction Rotations
  • • successive 30m auctions where low < plow or high > phigh= 1 time framing (1TF) - only buyer or only seller in control
    • if the auctions overlap it is 2 time framing since both buyers / sellers are in control
    • 1TF on 30m indicates Trend day
    • 2TF on 30m indicates normal, normal variation, or neutral days
  • Extremes - Strong high  / strong low
  • • tail provide the most evidence of timeframe control
    • no tail on the extreme is significant, it indicates lack of conviction
  • Range Extension
  • • less overlap = stronger control
    • must take into account the bigger picture elements
  • Time
  • • ability to identify difference between enough time, and too much time is the key to anticipating a change in control
    • this is intuitive to each trader
• Identifying Time Frame transition
• • No transition - entire day is 1TF or 2TF
  • 1TF to 2TF
  • 2TF to 1TF
  • 1TF to 1TF
• Auction Failure
• • follow thru - when market auctions through a known reference point
  • • new initiative activity will fuel the continuation
    • auction will fail and not follow through - will often fail with speed and conviction
  • failures at longer term reference points are larger than short term reference points
• Excess
• • market auctions too far and aggressively moves in the other direction
  • only useful in hindsight - should serve as support or resistance in the future
• Point of Control (POC)
• • fairest price of the day

Profile Shapes

• Short Covering Looks like a P
• • it is old business covering their positions, and it is unlikely to break to the upside
  • usually happens after several days of selling.  Once imbalance of covering is over, trend continues down
• Long Liquidation looks like a b - it is the opposite of short covering
• Ledges - sharp drop that indicates a breakout lower after a lack of continuation
• High Volume Area
• • has tendency to attract price and slow it down
  • the longer price is away from the HVN, the less significant it becomes
• Low Volume Area
• • typical in unbalanced trending markets
  • should hold against future auction rotations
  • if pierced significantly price should move quickly through it

Directional Performance - is the market doing a good job?

• Volume - once direction is known volume, is the primary means to determine performance
• • lack of volume indicates rejection
• Value Area placement 
• • higher, lower, inside, outside
• Trading Brackets
• • All trades should be placed responsively
  • Markets test the bracket extreme 3 to 5 times before moving to new levels
  • Markets fluctuate mostly in the bracket, not at the extremes
  • Must wait for price acceptance before buying breakouts
• Trend
• • the stronger the trend, the greater the beginning of the trend's move
  • must just get on in the initial stages of the trend and monitor for continuation 
  • later in the trend you enter responsively
  • volume on days against the trend will help you determine if trend is healthy
• Auction tips
• • markets need to auction too high to know they're too far
  • pay attention on these days to see if prices are accepted or rejected beyond their composite values areas

Long Term Profiles

• Start these profiles when a significant change has occurred

Special Situations

• 3 to 1 days - initiative tail, TPO count and range extension
• • following day should open within or above value
• Neutral Extreme - days are likely to open in the direction of the closing activity
• Value Area rule
• • gap outside previous value offers support / resistance against price probes
  • if price makes double TPO points within value, it is likely to test all the way through value
  • • closer distance to value makes it more likely to trade through
    • value area width is a sign of poor trade facilitation and lower volume, higher probability it will trade through
    • long term market direction
• Spikes
• • If spike occurs at the end of the day
  • • if open in or beyond the spike, most likely price was accepted, look to enter a the long at selling spike high
    • if opens in the other direction price most likely rejected
• Balance Area Breakout
• • Some of the best trades to take where risk is minimal and reward is great because it is the start of a big move
  • if the move is accepted go w/ the breakout
• Gaps
• • day gaps usually filled within the 1st hour, if not higher likelihood it will hold
  • gaps too far away usually are met with responsive activity to narrow the gap, wait for the initiative activity to return before entering

The Daily Trading Coach - Steenbarger

ch. 1 - change

• Recognizing Emotions: There is no way to block feelings / emotion.  All you can do is recognize you have them.  This will give you information into how you can shift your perspective.
• Make an emotional thermometer.  When we're most frustrated and most overconfident, is when we're likely to make our worst trading decision.
• When you identify an elevated frustration temp, turn away from your screen, and fixate your attention on something else, music or imagery.
• You must sustain the changes you make, do no relapse back to old habits.  Use whatever emotion force that makes you desire to choose trading as a career to fuel this change.

• Goals: Performing efficacious at work that is important to us generates mirror experiences of competence and self-worth
• structured pursuit of goals is one of the best means for creating positive mirrors because we generate construct opportunities for power, self-affirming emotional experiences
• goal is something you can have control over - a trading process, not profit target.  goals:
• increase size incrementally, exiting trade in stages, limit trades to setups w/ market trend
• at the end of the day, make a report card based on how you achieved the goal
• if you fail to achieve a good grade, improvement becomes the goal for the next day.  if not, make new goals
• Visualize your goal before you start trading
• Upon reaching your goals you must experience yourself as a success.  If you see yourself as successful you will feel the joys of success.  Goals are not making lots of money, goals of good trading are things like controlling position sizing, entering long positions on a pullback, ect.
• Process goals answer the question - what would make my trading day a success today, even if i don't make money?

• Confidence:
• You must prepare for the market, this will make you feel as though you deserve to win
• self-confidence is knowing that you can handle the worst - surviving the many occasions of being wrong
• Make memos of what you did wrong, send it to a trading buddy to follow up w/ you a couple days later
• Change
• You will only change when you're ready to change
• Choose 1 goal to work on intensively at a time, if you choose too many they will become watered down
• Don't relapse when you first make the change.  Double your efforts to keep the change going
• Perform specific exercises and actions that are consistent w/ the change, don't just think about it
• As you complete one goal, find the next.  You can always become a more consistent trader.  Self improvement never stops

ch. 2 - stress and distress

• Our interpretation of situations turn normal stress into distress.  Trading is always stressful, but should not turn into distress
• How to prevent distress
• Position sizing guidelines, per trade loss limits, per trade price targets, and daily loss limits
• risk per trade should be meaningfully smaller than potential reward of profit targets
• amount of money of daily loss should be a fraction of the money you make on your best days
• no single daily loss should be so large to prevent you from making money for the week
• Journal
• Every time you experience a distinctly negative emotional reaction to a market event, ask yourself, "How am I perceiving the current market as a threat"
• Identify the perceived threat and turn it into an opportunity.  Write it down in a journal
• Journal has 3 columns, it must be detailed enough to understand what is going on in your mind at that time: 
• Specific situation in the market, 
• transcribe your exact thoughts / feelings / actions taken in response to the situation, 
• consequences of the particular cognitive, emotional, or action patterns taken in column 2. => goal is to become aware, not change, do for 30 days
• You can add a 4th column, with what a friend might say to you that was positive about your thinking / trade idea
• It is an emotional exercise, not logical.  It needs to have the power of emotional force, and vigorously reject the negative thought patterns.  These thought patterns have sabotaged your trading, cost you money, and threatened your success
• Trading rules - to create repetition
• rules for risk management; taking breaks after large or multiple losses, entering at defined signal points, preparation for the day.
• review rules before trading and visualize yourself in different trading situations following the rules
• review rules during the day
• grade your rule following at the end of the day, if you get less than a B, it is an explicit goal for next days trading
• Fear
• Fear is a cue to examine your trade more deeply, not make changes.
• Make a checklist of things you look for to make sure your trade is working, and whether it makes sense to be in it.
• Performance Anxiety
• Thinking about the outcome of a your performance will interfere with the process of performing.  Focus on the doing, and the outcome takes care of itself
• Know your niche and only trade that product, time frame, and setup.  Most of the time bad trades come from trading out side your performance zone
• Label trades as A,B,C.  A are home runs, B are good setups, and C are marginal setups.  When you lose your edge or start a slump, only take the A trades are reassess the market
• Volatility will cause anxiety if you are not aligned w/ the market.  If you expect high volatility, but market is low, you will expect moves that never occur.  If it is high and you expect low, you will get stopped out too easily.  You will also not size your positions correctly
• You need many fulfilling activities in your life, so if trading isn't working out particularly well, you have other things you are being successful at
• Rate yourself on spiritual interests, artistic activities, athletic pursuits, social life, intellectual life, family, community and hobbies.  Select 1 area for cultivation to improve emotional diversification
• Maximize Confidence
• It's easier to stay in a trade if you have a defined profit target because you get less caught up in the up and down ticks of the market
• You must know the historical odds of the market acting in your favor.  Without this it is hard to have confidence in the ideas.  Markets experience normal retracements on the way to to a profit target, and those adverse excursions will be difficult to weather
• these pullbacks can be viewed as threats to paper profits or opportunities to add at favorable prices
• It takes more confidence to sit through a trade than to enter it
• Most people will choose a 100% chance of making $1000 vs 75% chance of making $1500, even though on avg you get $1125
• Processing retracements
• a lost paper profit is not a threat to your account
• most criticize themselves for missed opportunities or lapse into a state of frustration
• it is the self blame and discomfort of second guessing you are avoiding  when  you take a profit before your profit target
• Confidence is trust
• you must act on your trade ideas and see through to their planned conclusion to develop trust in your ideas.
• Leave on a small portion of your position to your intended target to help you build trust in your ideas

ch 4 - How to Journal

• How to review your trading journal to self diagnose
• divide entries into 2 clusters, successful trading and trading at your worst
• look for things such as trade frequency, trade size, coping with market challenges
• Compare best trades vs worst trades w/:
• emotional patterns - distinct differences in how you feel before and during trades
• behavior - differences in how you prepare trades, manage them 
• cognitive patterns - thought process or concentration level
• physical patterns - energy level, tension, relaxation, posture
• trading - sizing, times of the day, mode of entering (scale vs all in), instruments traded
• Watch for:
• impulsive of frustrated trades after losing ones
• risk averse / failing to take good trades after a losing period
• overconfident during a winning period w/ marginal and unplanned trades
• anxious about performance and cutting winning trades short
• oversizing to make up for losses
• ignoring stop-loss levels to avoid taking losses
• working on trading when you're losing money, but not when you're making it
• caught up in moment to moment action vs actively managing a trade, preparing for the next trade
• beating yourself up after losing trades / losing motivation for trading
• trading for excitement / activity rather than making money
• trading because you're afraid of missing market move, rather than favorable risk / reward
• Best traders continue to compete against themselves long after they have made enough to retire.  They are constantly trying to improve rather than make money
• Journaling is an emotional exercise, not a cognitive one.  You must learn to hate your worst trading habits so you do not repeat them because they disgust you.
• Keep yourself solution focused:
• What did I do well today/this week? What did I do right about this trade?
• Usually many trading problems come from 1 core problem: ie: negative self talk causes missing good trades, sizing position too conservatively, cutting winning trades too quickly
• Imagery
• Mentally summoning stressful market scenarios and imagining in detail how  we want to respond to these, we inoculate ourselves against those stresses by priming our coping mechanisms
• Visualize specific market / situation, levels, and PA.  the realism enables the exercises to substitute for real experience
• Visualize like a movie, playing out real time
• Imagine from beginning to end, until the entire situation no longer evokes emotion
• Slightly vary the scenario
• Repeat the visualization daily
• Imagine how FT or Lak would trade the same market

Ch 5 - breaking old patterns

• Past relationships are the basis for your identity.  How you reacted to past relationships will affect how react to current relationships. Relationships can be with anything people or markets.
• One trader defended against loss by never getting too close.  He lost a sibling when he was young and his parents tried not to dwell on the tragedy.  He never committed to anyone, to keep his from experiencing his pain of loss, but never had a fulfilling emotional life.  He traded with ludicrously small size, and was distracted by chat rooms / reading web sites.  He avoided loss in relationships, dabbled at the edges of markets, and never achieved anything close to his potential.
• To crystallize your pattern you need to understand the underlying need.  The trader above had an overwhelming need for safety and took the safest path in relationships and trading.  He is guarding against the vulnerability of investing in oneself and losing that emotional investment.
• Patterns can be broken down:
• Need - what we are missing, what we crave
• Feeling State - distress associated with not having that need met
• Defense - what we do to cope and avoid the painful feeling state
• repetitions - how we replay defenses in current situations
• consequences - negative outcomes from our current defensive efforts
• Schemas are habits of negative thought patterns that hijack your mind and the way your process information.  You need to feel the horror of losing control of your mind / behavior
• justice - i put in my work, i should make money
• catastrophe - it would be terrible if my trade didn't work out
• safety - i can't act the market is too dangerous
• self-worth - i'm a total failure, i can't make money
• rejection - i'll look like a fool if i can't succeed at this
• Market is not about you
• When you start using "I" and "me" your attention is becoming self-directed. 
• Need to break this thought process
• Worry
• visualize worst case scenario and how you would handle it constructively.  
• What are you really fearful of?  what unresolved situation is looming?
• until you face it, it will intrude in your work and affect your mood
• worry reinforces a sense of hopelessness and helplessness in the face of those scenarios
• worry masks larger concerns
• once you anticipate the worst case scenario, you can take catastrophe out of the situation
• you don't drive on the opposite side of the road because it is dangerous, you don't have to think about it, you just do it.  You should have the same rules with trading.  Internalize the rules so you it doesn't even occur to you to do dangerous things
• make sure you are emotionally connected to the rule, ie: remember the times you violated the rule and what happened
• Common rules:
• • Position sizing
  • limiting losses - per trade, day, week
  • adding to position
  • when you stop trading or limit size / risk
  • when you increase size / risk, per trade / per day
  • entering and exiting
  • preparing for the day / week
  • diversification among position
• during every change process you will relapse to your old ways, this is common and expected, until they become automatic
• Imagine situations where you feel fear, greed, frustration, and boredom.  Imagine yourself tempted to react in your normal patterns, and the vividly envision keeping those negative patterns in check

Ch 8 - coaching as a trading business

• trade management - the market generates information once you are in the trade, use this to your advantage
• he has 6 units, and only enters trades w/ 1 or 2.  If his ideas are confirmed, he adds units on pullback
• you must cultivate an aggressive mindset when you know you have the market nailed.
• add to your position on paper after you've entered and track how well these 'nailed' positions perform
• Experienced traders know when they are right and wrong.  Beginners try to avoid being wrong.  Experienced traders know they'll be wrong on a significant portion of their trades.  Their coaching is designed to help them anticipate and manage losses

FT71

Attitude, Psychology, ect...Overcoming.mp4 

• Attitude and Psychology is the most important obstacle to consistency.  No matter what you use to enter the market, this is your biggest obstacle
• You can't watch PNL when you trade.  You entered with a setup, you exit with a setup, PNL has nothing to do with trading
• Psychology - the daily trading coach (book
• Sports psychology books are more important than trading books
• Someone who is not consistent
• Looks for confirmation in lots of other random signals (MA, lots of other charts)
• Just looking for something that they want to see to confirm whether they are a winner or a loser psychology
• if you're risk averse  - they see things working against their trade
• if you're risk seeking - they see things that will get them into a trade
• Ideally you take every trade that has a positive expectancy, without hesitation or ignoring the information that makes the situation ideal.
• You only need a couple things to get into a trade, not too many things
• Most people have too much noise in their head because they haven't done their homework.
• Trading time is not homework time.
• Business plan
• what you're gonna trade
• when you're gonna trade
• how much time you will give yourself
• what are you costs - software, charting, commission structure
• how much time will you give yourself
• Journal
• Print out chart each day after close and write down where you are short and long and you can see your trades - you will see the pattern that you trade
• Your good and bad habits will become very obvious
• http://www.simplicitytradinghost.com/Webinars/2010-10-19-Journals/10-19-10%20Sample%20Trading%20Journal.pdf
• Statistics / Research
• All setups have their statistics in excel
• Don't use the same metrics to base a trade, ie: multiple price based indicators even if different time frames will give you the same answer
• Use volume
• Price
• Internals - tick, advance decline, breadth
• These are not calculated correctly by most exchanges
• # contracts
• 10k acct w/ 1% account equity stop has 390 consecutive losses for 75% loss
• recommends 1% to 2%

Volume Profile Mp4

• Principles of Auction Market Theory
• All markets operate as an auction regardless of the sophistication, technology, or product traded
• The purpose of the market is to create a price discovery process where the maximum number of buyer and sellers will agree on price
• Price is a common measurement of what the current value is for any given product. 
• The market will auction lower/higher to invite more buyers/sellers to step in and participate.  It auctions by advertising prices up or down which are expressed by bids / offers and trades
• Market seeks value by rotating higher or lower depending on how much supply or demand is available for a given product
• Never more buyers / sellers, just more aggressive ones
• Volume Profile
• HVN - high volume node - people agree on price
• When successful Price will act as support / resistance but rotate through this area
• LVN - low volume node - people disagree on price
• When successful Price should be quickly rejected with tails on the bar chart
• Profiles
• Balanced
• Compressed Profile, expect a move
• Long Liquidation
• Trend
• Short Covering
• The sharper the profile, the more imminent the move
• POC - point of control
• Most accepted price of the day
• Most volume price of the day
• Value area
• How to use
• How Far Back
• Big Picture overview - Uses Swing High to Swing Low over a 15min period
• Marks HVN and LVN and looks out how 
• After it moves down, he uses new Swing High to current
• Note all these major levels
• Usually uses the last 5 days for Daily VPOC
• Open gaps
• Open VPOCs
• Current Day Profile
• Usually only after IB does the current day's profile matter
• Then he's interested in how the VPOC is shifting up /  down
• Where we are in context of the IB
• Yesterday Profile in Context w/ composite is more important
• Look for confluence
• Context will give clues which way it will move
• Market moves from balance to unbalance to balance
• This is commonly seen as market moving from HVN to another HVN.
• Markets tend to test the LVN to see if they will move to the next HVN or fail back to the previous HVN
• HVN / LVN on dailiy charts that are close to each other are mostly noise
• Composite is more revelant
• 1st tests react the most normally
• Setups
• Close vs VPOC
• Open vs Range
• Open vs VPOC
• Open vs proximity to several previous days VPOC
• Opening Swing, first high and first low of the day
• Before rotations take place (can be very small rotations back)
• Might be more obvious on a 25tick chart
• Scaling in (very advanced) when market moving against him
• Scales out on every rotation
• Only takes a couple of ticks of heat
• Doesn't use tick charts, only uses DOM once he's identified areas to do business
• 
  
• Homework - FT71 approach
• 3 Hypothesis when the market closes
• 2 hypothesis when overnight finished the next morning
• Visualize what the market will look like to satisfy your hypothesis in each of your areas to do business (AOB)
• Homework after market closes
• Answers these questions
• What did it do
• What is trying to do
• How good of job
• =>What is most likely to happen
• Find your spots (levels), and wait and execute only at those points
• What is the flight plan(pilot example)?  
• Don't go into a plane w/o where you going.
• QuarterBack doesn't go out on the field and wonder if the play is going to work.  Already figures out the plays and just tries to executes perfectly
• Enter on setups
• Uses the following
• Overnight
• High, Low, Overnight VPOC
• RTH VP - 15min, 3min, 2500volume bar
• Swing High / Swing Low VP - Daily Bars
• Watches as market hits the levels and see how is reacts
• First LVN of the day is important for subsequent days
• Sees which hypothesis is being confirmed by the market
• Current VP is the most important
• Understanding what the market is trying to do
• Only very balanced profiles have Value areas
• Scalping
• Look for absorption by the trade you want to take when it hits a level
• Absorption
• Prices will not move past a certain point
• Bids / Offers hold when price moves to them, and when they are hit they refresh
• VPOC outside previous days value area or range, likely means there will be a pullback
• Sp500 tick
• +250 to -275 is 95% of the dataset
• Context
• What is your time frame? scalpers dont need to look at weekly
• What will affect your time frame? scalpers may 
• OTF - Opening Swing tells what the other time frame players are doing
• How far does it push before those orders are satisfied
• Significant break of IB hi / low and we're pushing one way by the OTF

• Psychology
• Your method is not how you make money, it is actually your psychology
• Make a plan and stick with it, most people don't ever get to profitability because they keep changing
• Trade Mechanically
• Stop once you hit your daily loss limit
• Every plan hits a losing streak
• Be confident and stick to what works for you, there is a lot of misinformation out there

DOM Reading

• Only interested in DOM at area you want to do business, otherwise it is just a casino blinking lights
• DOM only refines order entry, doesn't mean much in the bigger picture
• Useful for 40+ lot trades
• Only really interested in in the 3 inside levels
• If interested in getting short
• Watches that the offer stays firm
• Print on offer getting slower and smaller
• Poor prints on the retest
• Feel
• It's like hitting a baseball, its different every time but you get a feel of what to do
• Naked VPOC often tested
• VPOC = highest number of occurrences closest to the center of the range
• Value area is is defined by 70% around the VPOC.  This is the most common range.
• Choose greatest values closest to VPOC, keep including values until you get to the 70%
• Velocity, Size
• Bigger orders coming in w/ less frequency, and the size is getting smaller
• Fills 1 tick worse (at market), in front of bigger size or right setup
• Entries
• Does not work orders in books because you need to see at the time you enter what is going on
• In 2008 volatility was so great he 'learned' his lesson of levels holding
• Does not add to positions because he is not a trend trader
• Stops
• When he puts in stops he feels passive
• Stop is based on where you will be wrong
• Homework
• Only uses charts to find areas to do business, then he doesn't use price action or even look at charts during the day
• Only records the levels he wants to do business and wait for the market to get there

AMA

• P profiles that form where the HVN forms early in the day are unlikely to revisit it later in the day.  P that happens later in the day are more likely to move away from it by the end of the day
• 3 pieces of info you need to trade any product
• hours that volatility occurs
• range of that volatility (should be able to capture 50% of range)
• size of rotation during that volatility, targets or stops should be related to the rotation during this time
• CL respects weekly levels

What is Context?

• Context is looking at the bigger picture and relating it to what is happening now
• What is your timeframe?
• What will affect your timeframe?
• 
  
• 3 questions? 
• What has it done?
• What is it trying to do?
• How good of a job?
• =>what is it likely to do now?
• Volume profiles
• Composite is from last swing, just trying to pull in enough data to see the key areas above / below
• Micro-compsite, overlapping days  of balance to see a smaller picture
• daily profiles
• Look for confluence among these profiles
• Opening Swing - OS 
• where the first major buyers / sellers step in and what we should expect from the OTF
• IB- break shows that OTF is interested
• HVN are slow & mean price was accepted
• will probably be slow so not looking to get in on the first test
• LVN are fast and mean price was rejected
• looks to get in on first test, but could slip through
• Ex: We move from a VPOC to create an HVN above, if price moves away from HVN, if LVN fails, expect to move back to VPOC
• If we create a VPOC and then continue moving, in the same direction has a different interpretation then create a VPOC and move away
• Only do business in areas you've outlined
• he scales into trades if areas are close to each other
• learn where the areas are to do business, then use DOM to refine entry by 1 or 2 ticks.  this only matters when you're at > 50 lot

Mark Douglas Trading in the Zone

Ch. 1 - Mental Analysis

• The winners have attained a unique set of attitudes
• No longer susceptible to the common fears and trading errors that plague everyone else
• They stay disciplined, focused, and confident in spite of adverse conditions
• Best traders take risk, and accept and embrace that risk - there is a psychological gap between assuming your are a risk-taking trader and accepting that there is inherent risk in each trade
• The best traders can put on a trade without the slightest bit of hesitation and just as easily admit it is not working and get out of the trade without the slightest bit of emotional discomfort.
• If you are unable to trade without emotional discomfort, you have not learned to accept the risks inherent in trading.  You're trying to avoid something that is unavoidable 
• As traders you're confronted with being wrong and losing money constantly, and both rank very high on what people are afraid of
• Primary Trading fears that cause trading errors
• attitudes about being wrong, losing money, missing out, and leaving money on the table
• Fear causes us to mentally narrow our focus of attention to the object of our fear, this means thoughts about other possibilities, as well as info from the market, get blocked.  You will no longer think about all the rational things you've learned about the market until you are no longer afraid and the event is over.
• Logic Trap
• Because the market offers too many variables to consider you will never learn enough to fully anticipate every scenario.  There are no limits to the markets behavior because its participants can do anything at any moment to cause virtually anything to happen.
• If you are afraid of being wrong or losing money, you can never learn enough to compensate for these fears.  You therefore cannot be confident in the face of uncertainty
• Market Analysis
• When you operate from the assumption that more or better market analysis will create consistency, you will be driven to gather as many market variables as possible into your arsenal of trading tools.  However you will still be disappointed and betrayed by the markets because of something you did not see or give consideration to.  You will feel like you can't trust the markets, but the reality is you can't trust yourself
• Trading Easily
• As long as you are susceptible to rationalizing, justifying, hesitating, hoping, and jumping the gun, you will not trust yourself.  If you can't trust yourself to be objective and act in your best interest, it will be impossible to achieve consistent results.
• Until you acquire the mindset to stay confident in the face of constant uncertainty, trading will not be easy and simple.
• Your future self
• The future projection of the trader you want to be is something you will have to grow into.
• Many of the ideas will be in direct conflict with the beliefs you presently hold about the nature of trading.
• Your willingness to accept that other possibilities exist will make this process faster and more efficient

Ch. 2 - The Lure of Trading

• The underlying attraction of trading is the unlimited freedom of creative expression.  This is something that has been denied for most of us
• Emotional Pain is caused by an imbalance between your mental state and the exterior world
• When these are not balanced we experience it as dissatisfaction, anger, frustration
• As a child we are constantly denied creative expression
• Don't touch, ect...by the time we are adults we have heard several thousand denials, and thus have had several thousand denied impulses
• As a child, we reconcile these denied impulses by crying.  As an adult the denied impulses accumulate and manifest themselves in addictive / compulsive behavior habits
• ie: children who didn't feel they had enough attention, will have unresolved emotional energy that compels them to crave attention.  As adults the draw attention to themselves to satisfy the addiction
• These unreconciled denied impulses affect our ability to stay focused and disciplined while trading
• Safeguards - rules / boundaries while trading
• Trading is in constant motion with no beginning or end.  It is unlike any other activity because you are the only one who decides when it starts, how long it lasts, and when to end
• Regardless of what you have planned, psychological factors come into play.  if you become distracted, scared, or overconfident you will act in erratic and unintended ways
• Since there are no boundaries, we must act with some self control
• Problems
• Rules - Most people are resistant to rules in trading because it is a completely boundless environment 
• Responsibility - We want the freedom to make choices, but that doesn't mean we are willing to accept the responsibility of the outcome
• When we act on our own ideas, we put our creative ability on the line and get instant feedback on how well our ideas worked.  It's difficult to rationalize away any unsatisfactory results.  If we enter into unplanned, random trades, it's much easier to shift the responsibility by blaming other things
• Random rewards - monkeys will keep doing a task if the reward is given randomly, however if it is given on a consistent basis, and then it is stopped, they will stop as soon as the rewards are stopped.  
• Chemicals in our brain our released when we receive an unexpected, pleasant surprise.  If we trade randomly and get a good result, it will always be an unexpected, pleasant surprise
• External vs Internal Control
• One reason many professionals fail in the market is that they have the ability to control and manipulate their environment to fulfill their needs and desires.  As traders we have no ability to control the market externally

Ch 3 - 

• Taking Responsibility - sounds simple but is not easy to grasp or put in practice.  You must understand the ways in which you are and are not responsible for your success as a trader.
• Complete responsibility - All of your results are self generated, based on your interpretations of market information, the decisions you make and the actions you take
• Without complete responsibility you 
• establish an adversarial relationship with the market that takes you out of the constant flow of opportunity.  
• mislead yourself into believing that your trading problems can be rectified through market analysis
• Shaping Your Mental Environment - your ultimate goal is consistency.  
• Your goal has to to learn to think like a consistently successful trader.  They have eliminated the effects of fear and recklessness from their trading
• Fear based errors come from rationalizing, subconsciously distorting info, hesitating, jumping the gun, or hoping.  Once the fear is gone, there won't be a reason to make these errors and they will disappear from your trading
• Euphoria from a string of winners is also as dangerous as fear
• The Zone
• It is a carefree state of mind where there is absolutely no fear and you react instinctively.  You don't weigh alternatives or consider consequences or 2nd guess.  
• You cannot force yourself into the zone, but you can develop a positive winning attitude
• Positive winning attitude is expecting a positive result from your efforts, with the acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better
• Others get bogged down in negative self-criticism, regret, and self-pity
• Expectations are our mental representations of how some future moment in the environment is going to look, sound, feel, smell or taste.  Depending on how much energy is behind the expectation, it can hurt a lot when it isn't fulfilled.
• Blaming the market
• As children most of the time we were forced out of a state of joy or happiness by someone with more power or authority.  We had no choice (or believed to have no choice) or responsibility for what put us into emotional pain.  Thus the outside force was to blame.
• We feel betrayed because these situations were unexpected or unanticipated and we were unprepared for how some people in our lives had the potential to behave.
• If we haven't accepted and prepared for the inherent risks of trading and don't know how to guard against these natural connections between our past and present, we will end up blaming the market for our results instead of taking responsibility for them.
• The market
• The purpose of the market is to facilitate people taking money from each other.  It is trying to separate you from your money just as much as the opposite.
• If you blame / feel betrayed by the market you are expecting the collective actions of everyone participating in the market to make the market act in a way that gives you what you want.
• Consequences of avoiding pain
• Conscious level - We shield painful information by rationalizing, justifying, or making a case for staying in a losing trade.  Some typical ways we do this are to call our trading buddies, talk to our brokers, look at indicators we never use, all for the purpose of gathering unpainful information in order to deny the validity of painful information
• Subconscious - will automatically distort, alter, specifically exclude information from our conscious awareness
• Euphoria
• if losses are the result of euphoria, it doesn't matter form the streak takes, it can be any number of wins in a row.  But the overconfidence means you cannot perceive any risk because it makes you believe that nothing can go wrong.  If nothing can go wrong, there are no need for boundaries or rules to govern your behavior
• Winning Attitude
• Is leaving money on table more painful than taking a loss?  When we lose there are a number of ways to shift the blame and not accept responsibility, but we are completely responsible for leaving money on the table.
• The most efficient path to discovering what you need to be successful is a winning attitude.  It produces the kind of mindset that is most conducive to discovering something no one else has experienced
• Many traders think they have a winning attitude, when they don't or expect the market to develop the attitude for them by giving them winning trades.  No amount of market analysis will give you a winning attitude
• Stop expecting the market to give you anything or do anything for you.  If you stop fighting the market, and yourself, the market will not be your opponent.  You will quickly recognize exactly what you need to learn, and how quickly you will learn it

Ch 4 - Consistency - a state of mind

• What separates traders is not what they and when they do it, it is how they think about what they do and how they're thinking when they do it
• People who are truly happy don't need to do anything in order to be happy.  Traders who are consistent don't have to try to be consistent, they are consistent.  There is no struggle, they see exactly what they need to see and act on it in the moment.  
• Nothing is being blocked from your awareness, so it is effortless
• Having to try indicates that there is some degree of struggle or resistance.  The best traders don't try to get anything from the market, they take advantage of whatever the market is offering.
• Understanding Risk
• accepting the risk means accepting the consequences of your trades without emotional discomfort or fear
• possibility of being wrong, losing, missing out, leaving money doesn't cause defense mechanisms to kick in and take you out of the opportunity flow
• you make yourself available to take advantage of an opportunity, you don't impose any limitations or expectations on the market's behavior, and you are satisfied to let the market do whatever it is going to do
• Pros don't not perceive anything that the market does as threatening because of the way they view risk

Ch 5. 

• Dynamics of Perception - market doesn't generate happy or painful information, just simply information.
• When you first looked at a chart, the information was undifferentiated and although all the information about opportunities was there, they were invisible to you.  Most of us have no concept to which we are continually surrounded by invisible opportunities inherent in the information around us
• Unless you're in a completely new or unique situation, operating out of genuine openness, we won't perceive something that we haven't learned yet
• People learn to see what they want to see, until they learn to counteract the energy that blocks their awareness of whatever is unlearned and waiting to be discovered
• Perception and risk
• Boy is curious and bitten by a dog, when he sees a new dog he is afraid.  To other observers, the new dog is friendly and the boy's fear is irrational.  There is still more to be learned about dogs, but the boy is now afraid to experience it
• A top trader would say the now moment has nothing to do with your last trade.  Each on is independent, so if you feel fear it is unfounded.
• Our minds are built to associate similar things and project our feelings towards that dog onto the dog so you perceive the information the dog shows as threatening even tho the information generated by the dog is not threatening.
• The market generates information from a neutral perspective.  It provides the observer with an unending stream of opportunities to do something on your own behalf.  If what you perceive causes you to feel fear, ask yourself: Is the information inherently threatening, or are you simply experiencing the effect of you own state of min reflected back to you?
• When you hesitate on a good signal, instead of perceiving the signal from an objective, positive perspective, you experienced it from a negative one

Ch 6.

• Most traders experience the market through their last couple trades.  Pro's are not negatively / positively impacted by their last few trades
• Secret of the Nature of trading - at the core of one's ability
• trade w/o fear or overconfidence
• perceive what the market is offering from its perspective
• stay completely focused on the ' now moment opportunity flow'
• spontaneously enter the'zone' - a strong belief in an uncertain outcome with an edge in your favor.  You believe without a doubt that anything can happen regardless of what has just happened.
• The fear of being/admitting wrong causes us to place an inordinate amount of significance on the info that tells us we're right
• Not pre-defining your risk, not cutting your losses, or not systematically taking profits are the 3 most common trading errors you can make
• The reason typical traders do this is because they believe it is not necessary.  It is only not necessary if he believes that he knows what is going to happen next, based on what he perceives is happening in any given moment now
• Believing, assuming, or thinking he knows will be the cause of virtually every trading error.

Ch 7

• Thinking in probabilities
• Like a casino, you only needs odds in your favor and a large sample size.  At the micro level you don't know which hands you will win or lose (based on variables like how the individual players act, ect), only that over time you will take in the rake (game has an expected outcome)
• Trading is the same, you may have the same model that has an edge, but you don't know at the micro level how the other traders will act.
• So you must act on every edge because you will never know which edge will lead to a positive or negative outcome
• Most traders crave certainty that analysis appears to give them.  Every trader wants to be right on every single trade.   You can only be certain that certainty does not exist.
• If each moment in the market is unique, anything is possible, then any expectation that does not reflect these boundary-less characteristics is unrealistic
• Managing expectations
• protecting ourselves from mental pain is the same way we protect ourselves from physical pain.  We try to avoid physical pain by moving away or deflecting it.  We avoid mental pain by ignoring, rationalizing, justifying, excusing, getting angry, or gathering information that will neutralize the conflicting information.
• if we have an expectation, we expect it to be right.  If it comes an unfulfilled expectation we become unhappy.  If something causes us to be unhappy we use our pain avoidance mechanisms to exclude, distort, diminish our awareness to protect us
• To avoid pain, we narrow or focus and concentrate on information that keeps us out of pain, regardless of how insignificant or minute
• If we are trading counter trend, we ignore any trend continuation signals until the pressure of losing too much money becomes unbearable
• Goal is to be rigid in your rules, and flexible in your expectations
• Rules are there for self trust and protect us in an environment with few boundaries
• Flexible in expectations so you can perceive, with clarity and objectivity, what the market is communication from its perspective
• Eliminating emotional risk
• Thinking in a probabilistic environment
• Anything Can happen
• You dont need to know what is going to happen next to make money
• There is a random distribution between wins and losses for any given set of variables that define an edge
• An edge is nothing more than an indication of a higher probability of one thing happening over another
• Every moment is unique in the market
• The potential to experience emotional pain comes from the way you define and interpret the information you're exposed to.  With appropriate expectations, you will eliminate the potential to define and interpret market information as either painful or threatening
• As a trader when you are expecting a random outcome, you will always be a little surprised at whatever the market does, even if it conforms exactly to your definition of an edge and u win.  However expecting a random outcome doesn't mean that you can't use your full reasoning and analytically abilities to project and outcome.  You just can't expect to be right.  If you are right you can't expect that whatever you did last time will work next time even if the situations appear identical.  If you approach trading from the perspective that you don't know what will happen next, you will circumvent your mind's natural inclination to make the 'now moment' identical to some earlier experience.
• When I put on a trade, all I expect is that something will happen.  Regardless of how good the edge is, I expect nothing more than for the market to move or to express itself in some way.  I know from past market behavior the odds of it moving in my direction are acceptable, in relationship to how much I am willing to spend to find out if it does.  I also know how much I am willing to let the market move against my position.  There is always a point where the odds of success are greatly diminished in relation to the profit potential.  At that point it's not worth spending any more money to find out if the trade is going to work.  If the market reaches that point, I know without any doubt, hesitation, or internal conflict I will exit the trade.
• The loss does not create any emotional damage because I don't interpret the experience negatively.  Losses are simply the cost of doing business to make myself available for the winning trades.  If the trade does turn out to be a winner, I know at what point I am going to take my profits.
• The best traders are in the now moment because there is no stress.  There is nothing at risk other than the amount of money they're willing to spend on a trade.   They are not trying to be right or trying to avoid being wrong, nor prove anything.  If and when the market tells them their edges aren't working or it's time to take profits, their minds do nothing to block this information.  They completely accept what the market is offering them, and they wait for their next edge.

Ch 8

• Working with your beliefs
• Consistency is the goal, it is the result of a carefree, objective state of mind, where we are able to perceive and act upon anything the market is offering us
• carefree means confident but not euphoric.  You don't feel fear, hesitation, compulsion because you've eliminated the potential to interpret market information as threatening
• objectivity means you have conscious access to everything you have learned about the nature of the market.  nothing is being blocked by your pain avoidance mechanisms
• making yourself available = means trading from the perspective you have nothing to prove.  You aren't trying to win or avoid losing.  You aren't trying to get your money back or take revenge.  You come to the market with no agenda other than to let it unfold and be in the best state of mind to recognize opportunities it makes available
• "now moment" - there is no potential to associate an opportunity to get into, get out of, add to, detract from a trade with a paste experience that already exists in your mental environment
• Fundamental Truths
• Anything can happen - there are always unknown forces in every market at every moment
• You dont need to know what is going to happen next in order to make money - There is a random distribution between wins and losses for any given set of variables that defines an edge.  Trading is a simply a probability and numbers game.  All you need to know is:
• the odds are in your favor before you put on a trade
• how much it's going to cost you to find out if its is going to work
• The only variables you need to know is whether the variables you use to define an edge are present at any given moment.
• Every moment in the market is unique - it has never existed nor will ever exist again

Ch 9

• Nature of beliefs
• Just because you understand something is different than using it at a functional level.  Understanding is just the first step.
• Conflicting beliefs will sabotage your best intentions, and you will not be in the 'now moment'
• Now that you understand you don't have to know what's going to happen next, and that even trying to know will detract from your ability to stay objective in the moment you will have a conflict between your old and this new belief.
• It takes a considerable amount of mental work to integrate this new understanding into your mental trading environment
• Origins of Belief
• Pure memory - is only sensory information that is not organized or attached to words or concepts
• Belief - is a concept about the way the external environment expresses itself
• concepts combines sensory information with language
• They are a very important part of defining our quality of life, yet they are rarely thought about
• None of us are born with beliefs, they are acquired in many ways, usually instilled by other people.  The ones we struggle with the most are the usually the ones acquired from others without our conscious consent
• How beliefs shape our lives
• they manage our perception and interpretation of environmental information in a way that is consistent with what we believe
• they create our expectations (what we know projected onto some future moment)
• anything we do, or express, will be consistent with what we believe
• they shape how we feel about the results of our actions
• Our truth will determine:
• the possibilities we perceive in relation to what is available from the environment's perspective
• how we interpret what we receive
• the decisions we make
• our expectations of the outcome
• the action we take
• how we feel about the result of our efforts
• If we are in a good state, we can say what we perceived was consistent with our objective and what was available from the environment's perspective.  If we are unhappy we can say relative to the environmental situation, the beliefs we are operating from dont work well and are not useful.

Ch 10

• Impact of beliefs on trading
• Beliefs take a life of their own, and resist any force that would alter their present form
• All beliefs demand expression
• You must train your mind believe in the uniqueness of each moment, and deactivate any other belief that argues something different.
• Beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment

Ch 11

• 3 stages of trader development
• Mechanical
• Build self trust necessary to operate in an unlimited environment
• Learn to flawlessly execute a trading system
• Train your mind to think in probabilities
• Create a strong, unshakable belief in your consistency as a trader
• What separates the 'consistently great' athletes from everyone else is their distinct lack of fear of making a mistake.  They don't have a reservoir of negatively charged energy waiting to well up and pounce on their conscious thought process and kill them. Your mistakes help point you in the right direction, accept them as simply your current level of expertise.
• Subjective - you use anything you have ever learned about the nature of market movement to do whatever it is you want to do
• Intuitive  
• If you're going to become a consistent winner, mistakes can't exist in the kind of negatively charged context in which they are held by most people
• Work on acquiring a new set of positively charged beliefs about what it means to make a mistake, along with de-activating any negatively charged beliefs that would argue otherwise or cause you to think less of yourself for making a mistake
• How to develop self discipline
• Find a clear purpose why you want to monitor yourself
• Direct your attention to what you think, say, or do
• If you're not focused on your objective, choose to redirect your words, thoughts, or actions in a way that is consistent with what you are trying to accomplish.
• The more willfully you engage in this process, the faster you will create a mental framework that functions in a way consistent with your objectives
• Self discipline is a mental technique to redirect our focus of attention to the object or goal of our desire, when that goal or desire conflicts with some other component of our mental environment
• I am a consistent winner because:
• I objectively identify my edges - 
• objective means there's no potential to define, interpret and perceive any market information form either a painful or euphoric perspective.
• stay objective by keeping expectations neutral, always take unknown forces into consideration.  Unknown forces are other traders waiting to act on price movement
• I Pre-define the risk of every trade
• I completely accept risk or I am willing to let go of the trade
• I act on my edges without reservation or hesitation
• I pay myself as the market makes money available to me
• I continually monitor my susceptibility for making errors
• I understand the absolute necessity of these principles of consistent success and there I never violate them
• Exercise: trading like a casino
• Find a any set of mechanical market variables that defines an edge
• Find mechanical profit and stop loss targets based on this edge
• Stick with one time from to enter and exit, you can only use the others to help define the edge
• Take 1/3 profits on the scalp (1.5 - 2 pts emini or 4 ticks bonds)
• Take 1/3 profits on the profit target, Move stop to break even
• Use the carefree state to experience the 'now opportunity flow' and trade last 1/3 when it indicates to get out
• Look for 3:1 risk to reward edges
• Trade in samples sizes of 20 to determine if an edge is working or not
• Accept the risk that you can be wrong in all 20 trades.  For SPY 3 pts at 150 shares = $900
• This exercise will create a head-on collision between your desire to think objectively in probabilities and all the forces inside you that conflict with this desire.  The amount of difficulty will be in direct proportion to the degree to which these conflicts exist.  When you have a hard time, use self-discipline to refocus on your objective.  Write down the 5 fundamental truths / 7 principles of consistency so you can see while trading.  Acknowledge the conflict, and refocus on what you're trying to accomplish.

Al Brooks Videos

• No emotions.  If you feel emotion when you are going to place a trade, don't trade it.
• Trade Small enough so you feel no emotion
• Great traders 
• Only talk to support / resistance and momentum
• No indicators or candle stick patterns
• Trade Management is the most important thing to making money
• Signals only work 40 - 60% of the time
• Get used to losses
• Trends
• Pullback is a short trading range in a trend.  Breakout likely in trend direction
• Long trading range (15 - 20 bars) loses its trend direction and more likely to break out either direction
• All trends start with a spike, and transition to a channel.  
• You need to know which part in the cycle you are in, including the nested pattern within the larger pattern
• Spike phase 
• you need to get long at the market
• smaller size to accomodate wide stop
• tight channel is a strong bull
• Weak bull is a channel
• if the swings are big, trade it like a trading range.  
• Buy low, sell high
• trade both directions
• Bull Trend in trading range, 
• take normal buy signals
• sell 2nd entry shorts and other reversal patterns
• scalp
• Bull Pressure (opposite for bear)
• More bull bars and they are bigger
• Consecutive
• Small tails on the highs, and tails below bars
• Follow through after breakout
• Consecutive bears decrease and get smaller
• Within trading range
• Look for which case is stronger based on the above
• No overlap between 3 bars back
• Always In
• If you had to choose a direction to be in, at the market, which side will you choose
• Bars
• Every bar is either trend Bar or trading range bar (doji)
• Every Trend Bar (or series of trend bars) is a: ...(only context tells you which one)
• Breakout
• Climax
• Spike
• Gap
• Setups
• Context is the most important
• You need prior evidence of your position
• 80% of reversals in a strong trend will fail, dont take reversals
• Weak trend and big swings, take both sides
• Selling in a weak bull
• need strong bear signal bars
• and selling pressure
• Weak Setup
• context and signal is weak, just wait
• 2nd entry or strong breakout
• If unsure
• Use half size with wide stop
• If stopped
• Double position to normal size.  However, if stopped again dont take 3rd signal since most likely fighting a strong trend
• Take profits at 'actual risk' measured move up (price from 1 tick above to 1 tick below lowest stop that would not have been hit)
• Just because there is a reversal pattern in a bear market, that just means it is a better entry to short.  
• Traders may not cover on the first attempt at to break below their position, but most will cover on the 2nd one
• Bull Signal Bar
• At least close above midpoint and close above open
• Close well above prior bar
• Lower tail about 1/3 to 1/2 height
• Small upper tail
• Little overlap
• Follow through is also strong
• Close reverses the high of many previous bars
• 2 Bar Reversal
• do not have to consecutive, on a higher time frame chart, they form 1 bar
• All Expanding Triangles are considered major trend reversals if they're accompanied by strong reversal bar
• Pullbacks
• Strong trends usually only have 1 leg pullback
• Weak trends, have 2 pullbacks.  At most 4 pullbacks.
• The high1, high 2, ect...don't necessarily have to break above the current bar, they just need to reverse the leg down
• Pullback ends when current bar high extends at least 1 tick above the high of the prior bar
• Wedges
• Usually Low 3 and High 3, 3 push patterns (reversal patterns)
• Double bottom is a high 2 (buy setup), Double Top is a low 2 (sell setup)
• 5 min trading range can be a pullback on a higher timeframe
• Channel
• Market is always in a channel
• Micro channel is different than regular channel
• Redraw the channel as it gets broken
• Eventually it will become a trading range (even if only 1 bar)
• All channels function as the opposite trend 
• Bear channel is essentially a bull flag (it will eventually breakout to the upside)
• Shrinking stairs, breakouts are getting smaller, so you may be able to fade them because bulls/bears losing momentum

12 - 22

• MicroChannel
• No pullbacks below the low of previous bar for 2 - 13 bars in a bull
• Weak bull you buy on 2nd entry or double bottom
• Strong bull, you buy above the high on stop, or below low with limit
• Trading Range
• Starts as a pullback, but after 20+ bars the trend has lost its direction.  Upside or downside breakout equally as likely
• 80% of breakouts in a trading range fail.  Markets will race to the top and then fail and reverse
• There will be many attempts within the trading, and its hard to tell when it will happen.  When you look back it is obvious where the trend began, but at the time it is confusing
• Vacuum effect
• Race to a support or resistance, or measured move, or trendline
• Once it hits, market will reverse back.
• Institutions waiting for the spike up because they know it will get there and can get better prices
• Beginners see the move as very strong and ignore the bars to the left and want to catch the 2nd leg
• Buy with limit order below the low of the bar
• Range Breakout
• Strong Breakout
• Weak Channel
• stop goes below breakout
• Major Trend Reversal
• TL break, retest and reversal
• On the first trend break, it often moves to the MA before continuting w/ trend and then failing w/ a higher / low top
• Final Flag
• Bull Flag that doesn't continue in a trend
• bull trend for many bears (30+).  Forms a High 2  / triangle / trading range just below resistance
• wait for failed breakout and a reversal down
• Wedges
• Down sloping wedge usually leads to a bull breakout 75% of time.  25% it fails
• Failed 
• Measured move from start of wedge to end of wedge.  Then two legs in the other direction
• Successful
• Moves to top the wedge as 1st target, and then another measured move up as 2nd target
• Wait for reversal pattern at the apex
• Double Top / Bottom
• Every double top bottom is a high 2 buy or low 2 sell.  
• Take 1/2 profits at 2x times risk (ie: stop = high + 1 tick - low *2)
• Expanding Triangle
• Always a major trend reversal
• Reverses the trend at 3rd test of trendline

23 - 32

• Climax
• Always end at support or resistance
• Nobody looking to buy for many points, or 10 - 20 bars
• Swing vs Scalp
• 40 ticks+ = swing
• Swing = profit target at 2 times risk
• Use measured moves to find where traders will take profits
• Brooks uses actual risk to find the measured move rather than initial risk

39 - 46

• Strong Bear / Bull Breakout
• Enter on stops in trend direction, look to enter on micro trendline pullbacks
• Only enter in trend direction
• Buyers / Sellers are below / above so enter on stops above / below the pullback bars or on high 2 / low 2 setups
• All will transition to channels and the channels then become a part of a larger trading range
• Stops go below swing points and below higher lows once your trade is positive 
• Take profits at reversal bars or strong resistance
• Strong Bull / Bear Channel (tight channel)
• Enter on stops. Trade in direction of bull / bear channel at obvious support or resistance of the trend channel lines.  
• Enter only in trend direction
• Wedges and triangles are also part of this group
• Use more conservative setups, ie: high 2, low 2 setups
• Stops go below entry bars  / signal bars. 
• Aim to take profits at new highs or resistance
• Weak Bull / Bear Channel and Trading Ranges
• Buy on limit orders below / above bars when you want to buy / sell
• Reward is 2x your risk
• Buy at the bottom of the range, sell at the top
• Eventually you will be wrong, but you want the number of times you were correct to greatly outnumber times you were wrong
• Opening Ranges
• You must be looser with your criteria to take trades, usually ends around 8:30pst, however 7 - 10am is total range
• 20% of the time high / low formed in first 5 mins
• 50% of the time in 1st hour
• 90% of the time in 2 hours
• Breakout or failed breakout
• most of the time it will fail
• Swing trade from the breakout or breakout pullback, or failed breakout
• Lots of 2 sided trading means it will probably be trading range days
• Climax that accelerates near the end of the day often reverses

47 - 53

• Swings in middle of the Day
• Starts after opening range swing usually after 8:30am
• Weak Channels are common, however trading range and trend from the open do occur
• 80% of reversals in a strong trend will fail
• Swings at the end of the day
• Setups
• Look at how many bull bars / bear bars have occurred in the middle of the day and in a range to give a clue how the day might finish
• Higher highs / lows
• Consolidating above / below MA
• Targets for close
• Final hour usually tests support / resistance for the day
• Look for measured move targets
• Previous days, open / close
• Prior swing high / low (and untested big trend bars)
• Trendlines, Channel lines
• trading ranges above / below
• Final hour of the week
• Open of the week
• High / Low Close of last week
• Look to take profits if there is a buy / sell climax at the low or high of the day if moving from one side of the range to the other.  It will often lead to a 10 bar / 2 leg correction
• Best Trades
• Major Trend reversals, 
• wait for TL break 
• Should retrace to the movina avg
• a 2nd entry after a higher high or higher low, enter on stop
• Breakouts
• As long as it is strong, get in immediately
• Usually a measured move target
• Trading Range Reversal
• Make sure market is actually in a range, 80% of breakouts from the range will fail
• Wait for 2nd entry so momentum in the down is fading
• Often there is a new high or new low that fails, buy after the failed new low, sell after the failed new high
• Pullbacks
• If there are pullbacks, you're in the channel phase
• swings in strong trends, scalps in weak trends/ trading ranges
• Strong trends you buy high 1
• Weak you buy high 2, wedges, or triangles

How to make money in stocks - good times and bad - O Neil

Ch1 'C' QoQ eps change

• 5 - 10% is not enough to fuel change, it needs to be above 25%
• Of all big gainers between 1970 and 1982
• Median was 34%
• Avg was 90%
• 76% were over 10%
• 75% showed eps increases avg 70% in the last report before the stocks began a major price advance
• Only 2% of stocks show this kind of gain.  Success is built on dreams
• Sales and Eps should be similar (so profit margins are still around the same)
• Omit 1 time gains
• Limit your search to QoQ of > 20%.  Apply this to one or 2 previous quarters
• Look for accelerating eps growth
• 2 qtrs of major eps decleration may mean trouble (ie: 50% to 15%)
• Industry should have at least 1 other stock showing good eps
• 4 weeks Before eps report, stocks participants start making trades for the eps report.  It may give you a clue

Ch2 'A' Annual Earnings Increases

• Each eps should be greater than prior years, 1 may be done as long as it quickly recovers
• Look  for 25% to 50%
• Stability of eps over the 5 years
• PE ratio mostly get depressed during bear markets, but the avg was 20+.  

Ch3 'N' New product, management, high

• 95% of big winners had a major new product / service, new management, or important change in their industry
• Buy on the breakout.  The stock should be close to or actually making a new high after undergoing a price correction and consolidation.  Consolidation can last from 7 - 8 weeks (normal) to 15 months.  As it emerges from this base, it should be bought just as it is starting to breakout.
• Avoid buying more than 5 - 10% off the base

Ch4 'S' Supply & Demand

• Low float is better than big float
• Large % ownership by top mangement
• Today's hot product will find sales slipping in 3 years, so management must be an entrepreneurial style
• Not many layers between CEO and customer
• small medium companies
• More than 95% of companies had fewer than 25M shares during their greatest period of eps improvement.  Avg was 11.8M and median was 4.6M between 1970 and 1982
• 3 to 1 and 5 to 1 stock splits after huge run ups make institutions sell (this doesn't seem relevant)
• Comapanies buying their stock in the open market
• Reducing debt to equity over last 2 to 3 years
• Small cap with less liquidity and no institutional sponsorship / ownership should be avoided.
• Trading volume should be light on corrections and increase significantly on rallies (50% to 100% more)

Ch 5 'L' Leader or Laggard

• Most people buy stocks they are familiar and comfortable with, like an old friend.  These will be the slowpokes rather than the leaders in the stock market.
• Buy the leading security in the industry you want to get in among the 2 or 3 best in a group
• Relative strength > 70 mean it outperformed 70% of the stocks in a comparison group over the last 6 - 12 months
• Avg for best performing equitites between 1953 and 1993 rated 87 before major increase began.
• Investors Business Daily has these numbers
• Look for charts in a bull flag or trading range and buy near the top of the range, but not more than 5 - 10% out of the range
• ...this doesn't seem like a good idea
• Once a general market decline is over, the stocks that bounce back to new highs first will generally be the leaders.

Ch. 6 'I' Institutional Sponsorship goes a long way

• At least 3 - 10 mutual fund sponsors, corporate pension funds, insurance companies, large investment counselors, hedge funds, bank trust dept, education institutions.  
• Certain mutual funds are better than others, so these will help define your quality of sponsorship
• Over owned by institutions may mean the largest moves are over

Ch. 7 'M' Market Direction

• Learn to interpret daily price and volume chart of general market averages.  You want to be on the correct side of the trend of the market, or 3 of your 4 positions will lose money.
• Market top
• General market tops are later than individual stock tops
• poor market rallies and rally failures in the SPX will occur
• Discount Rate
• When it is successively raised 3 times usually marks beginning of recession, when it is lowered usually signal end of bear market
• Wait for adam eve bottom
• Stages of stock market
• Economic indicators bottom AFTER the stock market, thus are a poor choice for stock market returns
• Big money is in the 1st 2 years.  After this expect occasionally 8% to 15% drops
• Railroad equipment, machinery, and other capital good industries are late moves in the business / stock market cycle
• Bull markets begin when institutional cash positions are higher than normal and end when cash positions are lower than normal

Ch. 9 When to Sell if your selection / timing is wrong

• After each qtr focus on the relative returns of each investment in your portfolio, not the price you paid for it.
• When you buy a stock if it is down 7 - 8% from your purchase price you should cut your loss.  However dont sell your winners if they are down 7 to 8% from their highs.  You must give your winners room to run.
• Don't avg down, don't worry about how many potential "turkey's" you had.  Your "red dress" has now turned into a "yellow one".  Get rid of that "yellow dress" and go find the "red dress"
• Self confidence
• holding losers makes you less confident.  If you cut your losses quickly and with discipline, you make the hardest decisions without wavering.
• There are no good stocks, they are all bad - unless they go up

Ch. 10 When to sell and take your profit

• Most good investors / hedge fund managers sell on the way up.  They dont buy at the low and sell at the top
• Jesse Livermore
• Pyramid and buy more as it goes up.  You want to make a lot of money when you're right, and cut your loss quickly when wrong
• Revised profit plan
• sell 20% profits (except with the most power of all stocks.  If it goes up 20% in < 8 weeks, then hold at least 8 weeks.  If it is still very strong, you will want to hold for 6 months)...Take your 8% loss
• buy exactly at the breakout pivot buy point, do not pyramid 5% beyond the buy point
• Selling pointers
• Buy at the right time.  This will solve half your problems
• Buy off a proper base structure, do not chase or pyramid when the price is too extended past your buy point.  You will be able to sit through most corrections
• Beware of big block selling.  The best stocks can have sharp selloffs for a few days or a week.  You shouldn't get shaken out in a normal pullback
• If the price is extended from a proper base, its price closes for a larger increase than on any previous up days, watch out! this climax is at or very close to the peak
• Ultimate top may occur on the heaviest volume day
• Big investors like to sell on big run ups when there is liquidity
• new highs on low volume means there is temporarily no demand for that level and selling may soon overcome
• after and advance, heavy volume w/o further upside price movement means distribution
• Look for clear reversal days (low at the previous days low after an up day on several days.)
• Sell if a stock breaks badly
• Consider selling  a stock if it takes off for a good advance for several weeks and then completely retraces the advance
• When qtrly eps increase slowly or decline for 2 consecutive qtrs, in most cases sell
• Consider selling if there is no confirming strength by another important member of the same group
• If a stock declines 8% from its peak, check if it is just a normal pullback.  If it declines 12% to 15%, you may want to sell
• If a stock has made an extended advance, and suddenly makes its greatest 1 day drop since the beginning of the move, consider selling if confirmed by other signals
• When you see heavy selling near the top, the next recovery will either follow through on weak volume, show poor price recovery, or last a short number of days.  Sell on the 2nd or 3rd day of the poor rally.  It will be the last good chance to sell
• Sell a stock if it closes the end of the week below major lon term uptrend line or breaks key support on overwhelming volume
• Number of up days vs down will change will change after stock starts down
• Wait for 2nd confirmation of major changes to market avgs.  Don't buy back stocks you just sold because they are cheaper
• Learn you mistakes by plotting past trades on charts
• Sell quickly before it becomes completely clear a stock should be sold.  Selling after an obvious support level break could be a poor decision.
• In a few cases you should sell a the trend channel line overshoot
• Sell when your stock makes a new high in price of it's 3rd of 4th stage
• Sell on new highs off a wide and loose erratic chart price formation
• When to be patient
• Have a line on ur chart below your buy point where you must sell if price is touched.  Raise this as the prices move below the low of the 1st normal correction.  Don't move too close because any weakness will stop you out.  If your stock increases 15% after purchase, move the sell line up to less than 5% below pivot purchase
• Objective is to buy the best stock with the best eps at exactly the right time and hold until you've been proven right or wrong.  Give 13 weeks after your first purchase before you conclude that it was a faulty selection (if not stopped out first)
• Any stock up 20% should not be allowed to drop into a loss.
• Always pay attention to the general market.  If the markets are topping, most breakouts will fail
• Major advances take time to complete.  Dont take profits during the 1st 8 weeks unless there is serious trouble or there is a rapid run up on a split.  If the stock shows 20% gain in 4 or 5 weeks, it is capable of a 100% to 200% move.  Only go for these long term moves after you are up for the year
• Try to hold through the 1st correction if you already have a profit
• Investors who can be right and sit tight are uncommon.  It takes time for a stock to make a  large gain

Ch 11 - Diversify, Invest for Long Pull, Margin, Short

• Portfolio > 3M should have 6 to 7 stocks.  Most people should have 4 to 5.
• No well run portfolio should have losses carried for more than 6 months
• Use margin after you have experience and you're young and still working.
• Margin should never be 100% all the time, you must carefully choose when to use margin
• Never add cash to meet margin call.  Sell the position
• Real Estate - buy it at the right time
• Dont buy in:
• Area that is not growing or deteriorating
• At inflated prices after several boom  years and just before a severe economic setback in the economy or geographic area where the real estate is (major industry layoffs or closing of a plant).  
• Mortgage is greater than the rent
• Frequent natural disasters

Ch 15 Patterns

• Cup and Handle
• 7 to 65 weeks, peak to low point is 12% - 33%
• Shouldn't correct more than 2.5x the general market
• Handle is 1 to 2 weeks and has a price shakeout, volume should be very low on the pullback phase of the handle
• Should consolidate above 200dMA
• Handles that don't properly shakeout (10% - 15%) are prone to failure
• Pivot Point
• Line of least resistance should be broken with volume at least 50% > normal.
• If you try to buy before this point, the stock will never get to the buy point.  If you buy 5 - 10% after you are too late
• Objective is to buy a the right time before the move, not the cheapest price
• Not necessarily the old high, could be a trendline from the old high
• Double Bottoms
• Likes when 2nd bottom is lower than 1st to get a shakeout
• Flat Base
• Usually after a run up from cup w/ handle, saucer, or double bottom.  Moves sideways for 6 - 7 weeks and does not correct more than 10% - 15%.
• Tight Flag
• Occurs after 100% move in a short period of time
• Corrects sideways w/ no more than 10% - 20% decline.
• Only occurs a couple times / year
• Overhead supply
• After a run up and significant pullback there is now overhead supply.  When the stock moves up again, you have to be able to tell where the overhead supply is using the charts

Ch. 16 - How to make money reading financial pages

• Investors Business Daily 'New America' Articles show new companies
• Find stocks in the top 80% of all performers
• Look for large volume flowing into stocks
• Review leading industries.  S&P classificiations of industries is not correct, you should use revere

Ch 18 - picking the best industry groups / subgroups / sectors

• There are many more industry sub groups that are actually related than those categorized by S&P.  You should use these sub groups to find the performance rather than the industry group.
• Only pick industries of the future
• A stock's weakness can spill over to the rest of the group, so be aware
• especially the best stock in the sector
• avoid buying stocks unless there is one other important stock in the same group that shows strength and attractiveness
• this doesn't apply to companies that are completely unique (he gives Disney as an example)
• 
  
• Follow on stocks
• If oil prices rise, oil stocks go up, but so do oil service stocks.
• When new efficient jet aircraft took off, airline stocks did well.  So did hotel stocks.
• Cousin Theory
• Suppliers of the main group will do well
• Boeing sold new jet lines, and its Monogram (sold toilets for airplanes) did well
• Fleetwood (RVs) helped Textone because it supplied vinyl clad paneling and cabinets
• Defensive stock cues
• If you see increased buying of defensive stocks after a couple years of bull market, it may indicate a near top.
• Gold, Silver, Tobacco, Foods, Grocery, Electric / Telephone Utilities
• Prolonged weakness in the Utility Average could also forecast increasing interest rates and bear market ahead
• Look at $spx, $util, $tran in stock charts
• Stocks require a wall of worry, doubt, and disbelief to climb
• Generally masses are wrong, so are investment managers
• Stock market is about 8 to 9 months ahead of economic indicators
• Fed, Tax Policy, and Interest rates are most important
• 
  

Ch 20 - Most Common Mistakes

• Most investors do not use a good selection criteria
• Miserable results will follow buying on the way down in price
• Even Worse is to avg down your buying than average up
• Low priced stocks (< $10)are low because they are inferior in the past or something wrong happened recently
• 1st time speculators want to make a killing too fast without doing the necessary study and preparation
• Don't buy on tips, rumors, stories, or advisory service recommendations.  People are willing to risk their money on what someone else says instead of knowing for sure what they are doing themselves.  
• Investors buy 2nd rate stocks because of dividends or low P/E ratios.  Dividends are not as important as EPS.  Low P/E is most likely because it is inferior
• People buy company names they are familiar with.  Many of the best stocks will be newer names you won't know well but could and should know if you do a little studying / research
• Most people don't know anything about the market, so their advice is probably worthless
• 98% of people are afraid to buy a stock that is beginning to go into new high ground, pricewise.  It just seems too high to them.
• The majority of unskilled investors stubbornly hold onto their losses when the losses are small and reasonable.  They could get out cheaply, but being emotionally involved and human, they keep waiting hoping until their loss gets much bigger and costs them dearly.
• Investors take profits too easily and hold their losers, they exact opposite of correct investment procedure
• Investors worry too much about taxes and commissions.  Key objective is to make a profit.
• Dont focus on short term options.  Don't sell naked options.  Focus on longer-term options
• Just use market orders, you are going for large gains not 1/8 and 1/4 of a point
• Most investors who are unable to buy or sell have no plan because they do not know what they are doing.  You need a plan, a set of principles
• Most investors cannot look at stocks objectively.  They have favorites, are always hoping, have personal opinions rather than paying attention to the opinion of the marketplace
• Investors are influenced by things that are not crucial - splits, increased dividends, news announcements, advisory recommendations

Parting Advice - Have courage, be positive, and don't even give up.  Anything is possible with hard work.  It can be done and your own determination to succeed is the most important element.

pg.181