Essentials of Trading: From the Basics to Building a Winning Strategy

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"This is the book I wish I had when I began a training program for new traders. John's familiarity with trading and traders is evident in this text. His incorporation of exercises and use of examples bring topics to life, maintaining the interest of even the most hyperactive traders."
—Brett N. Steenbarger, PhD, author of The Psychology of Trading

"The Essentials of Trading masterfully teaches the novice how to conceptualize, implement, and ...

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"This is the book I wish I had when I began a training program for new traders. John's familiarity with trading and traders is evident in this text. His incorporation of exercises and use of examples bring topics to life, maintaining the interest of even the most hyperactive traders."
—Brett N. Steenbarger, PhD, author of The Psychology of Trading

"The Essentials of Trading masterfully teaches the novice how to conceptualize, implement, and manage the important fundamentals that form the building blocks of successful trading. Because the book and its examples have been classroom tested at both the undergraduate and graduate levels, the pace of presentation is ideal for a full or partial classroom exposure to Internet-based trading. The book is highly recommended as a viable academic teaching tool, and equally so for the developing nonstudent practitioner."
—Dr. Gordon H. Dash Jr. Associate Professor of Finance, University of Rhode Island

"As the founder of a women's entrepreneurial networking organization, one of the most essential messages I relay to our members is the importance of understanding and managing their own personal and professional finances. John Forman's book is one that I highly recommend to all our members, because of its clear explanations and teaching style that will allow any novice to develop a solid understanding of the world of finance and investment trading."
—Sherry Thacker, President and Founder, WENS Inc.

"The Essentials of Trading is an excellent introductory book on the subject. It not only provides the critical know-how, it also manages to inspire the reader to take their first tentative steps into the trading arena. A joy to read."
—Paul Gould, Managing Director, Global Trading Community

"While trading has become more challenging, the tools have improved, and John Forman brings an up-to-date, insightful perspective on what is needed for traders of all backgrounds to absorb. With the bar having been raised for all market participants, The Essentials of Trading brings a fresh look, providing successful examples of the implements necessary to build a trading system and have confidence in your own work."
—Joel Marver, Chief Technical Analyst, IFR Division, Thomson Financial

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Product Details

  • ISBN-13: 9780471790631
  • Publisher: Wiley
  • Publication date: 4/21/2006
  • Series: Wiley Trading Series , #267
  • Edition number: 1
  • Pages: 300
  • Sales rank: 1,433,684
  • Product dimensions: 6.24 (w) x 9.09 (h) x 1.10 (d)

Meet the Author

John Forman is the Managing Analyst and Chief Trader for Anduril Analytics. He has nearly 20 years trading, investing, and analytic experience across a wide array of markets. His articles on trading methods and analysis techniques have been featured in numerous publications and his commentary has appeared in major global news media outlets. John also contributes regularly to Trading Markets and is former content editor for the Trade2Win active trader community web site. Over the last several years he has been involved in developing and presenting trading educational classes at the university level. A graduate of the Univesity of Maryland (MBA) and the University of Rhode Island (BS), John currently resides in Providence, RI.

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Table of Contents




About the Author.

Chapter 1. Introduction and Getting Started.


Getting Started.

Chapter 2. Trading Mechanics.

The Basics.

Trade Execution.

Behind the Trade.

Managing the Trade.

Chapter 3. Price Action and Its Influences.

Influences on Price.

Price Movement.

Chapter 4. Building the Trading Plan.

What’s a Trading Plan?


Personal Assessment.

The Plan.

Chapter 5. Risk and Money Management.

What Is Risk?.

Money Management – Trade.

Money Management – Portfolio.

The Plan.

Chapter 6. Market Analysis.

Analyzing the Markets.

Fundamental Analysis.

Technical Analysis.

Quantitative Analysis.

Final Thoughts.

Chapter 7. System Design and Testing.

Trading Systems Defined.

A Sample System.

Defining the System Focus.

Entry and Exit Rules.

Test I—SMA Only for Buy or Sell.

Test II—SAR Only for Buy or Sell.

Test III—SMA Enter/SAR Exit.

Test IV—SAR Enter/SMA Exit.

Additional Considerations.

8. System Results and Position Size.

Comparing Performance.

Trade Size Determination.

Monetary Comparison.

Fine Tuning.

Risk and Position Size.

The Final System.

Chapter 9. Application.

A Few Last Plan/System Points.

Go Live.

Taking It Forward.

Appendix A: Boxes.

Box Trading Strategies.

Additional Combination Strategies.

Appendix B: Sample System.

A Few Advanced Words.

Part I—Identifying the Stocks.

Part II—Going After Big Returns.


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Customer Reviews

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  • Anonymous

    Posted April 23, 2006

    Essential Guide for Traders

    What John has accomplished is, to my mind, the best general-purpose introduction to trading I have yet encountered. Having run a training program for aspiring professional traders at a proprietary trading firm, I know the questions that new traders ask and the lessons they need to learn. John has clearly addressed these in 'The Essentials of Trading'. He begins with trading mechanics: the nuts and bolts of executing and managing a trade. His discussion is accompanied by real examples, with screen shots of order tickets and trading screens. This is no academic, theoretical treatise, but a hands-on introduction to trading basics. Later chapters take up the important topics of trading plans and risk management, followed by methods for analyzing markets and designing, testing, and optimizing trading systems. Once again, practical examples abound, with clear illustrations of actual markets, positions, and systems. A nice touch are the text boxes throughout the book highlighting key concepts. Many of these are comments from traders and the lessons they've learned. Overall, I found John's writing to be clear and concise. He has served as content editor for the Trade2Win community site, and his writing experience shows. When I endorsed the book, I said that it was the text I wished I had when I started my training program. I stand by that comment: this is a great introduction to the trading world. Are there weaknesses to the book? Those will depend on readers' interests. Two full chapters are devoted to trading systems, but only part of a chapter to technical analysis. Valuable insights regarding trading psychology are scattered through the text, but there is no dedicated chapter to the topic. Conversely, the bonus sample trading system included in the appendix is worth the price of the text alone, providing an illuminating example of a trading methodology. In sum, I highly recommend 'The Essentials of Trading' for new and developing traders. From execution to planning to risk management to market analysis, it covers the basics in a clear, engaging style.

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