Markets in Profile: Profiting from the Auction Process
224
Markets in Profile: Profiting from the Auction Process
224Overview
This book is a bold call to action for all investors—from day traders through the longest-term individual investors, to traditional asset managers and hedge funds that control trillions of dollars. It challenges serious traders, investors, and researchers to reach beyond price-based market analysis and traditional fundamental research for a more contextual approach . . . an approach that translates the principles of behavioral finance into actionable reality by examining the relationship between price, time, and volume.
The authors take a profoundly different approach toward the traditional separation between day, short-, intermediate-, and long-term investors, pointing out that even the longest-term professional investor is a day trader on the day they enter, exit, trim, or add to a position. Lead author Jim Dalton and coauthor Eric Jones—having been heavily involved in selecting hedge funds and traditional managers for a leading Wall Street financial services firm—can attest to the importance of each basis point of performance in a world where one quarter's results can trigger financial triumph or a quick exodus.
In May of 2006, two months before the book was to be delivered to the publisher, the U.S. stock market broke eight percent in a matter of days—sending investors and the media into a tailspin. The authors saw this as an opportunity to demonstrate their theories in real-time, as opposed to cherry-picking historical events that supported their claims. The event unfolds in Chapter 6 and the authors offer sound advice and strategies on how to navigate market activity yet to unfold. The results are summarized in the Appendix, which was written after the book was submitted to the publisher. You be the judge.
Filled with in-depth insight and expert advice, Markets in Profile teaches you the market's basic auction process, redefines how to view and conduct research, separates the markets into different time frames, illustrates the importance of inventory imbalances, and, in sum, demystifies market behavior by showing you how to organize the market's auction process in a scientific, systematic way.
Product Details
| ISBN-13: | 9781118044643 |
|---|---|
| Publisher: | Wiley |
| Publication date: | 01/11/2011 |
| Series: | Wiley Trading , #278 |
| Sold by: | JOHN WILEY & SONS |
| Format: | eBook |
| Pages: | 224 |
| File size: | 3 MB |
About the Author
ROBERT BEVAN DALTON is a freelance writer and creative director for a variety of agencies, organizations, and nonprofits in the great northwest.
ERIC T. JONES has observed markets and investors throughout his twenty-three years of developing investment products and leading investment manager research teams.
Table of Contents
Preface xiAcknowledgments xix
Chapter 1 The Only Constant 1
The Creation of ERISA 4
The Rise and Fall of Relative Performance 4
The Fall of the Great Bull 6
The Rise of Absolute Return 7
Succeeding in an Absolute Return Market Environment 8
Pure, Unbaised Information 10
People Change Markets, Markets Change People 13
Chapter 2 Information 15
Fundamental Information 16
Rational or Irrational? 18
Market-Generated Information 19
The Auctions 20
Fair Value 21
Market Profile Fundamentals 22
Authors’ Note 22
Demystifying Market Behavior 27
Chapter 3 Timeframes 29
Breaking Down Market Timeframes 31
Scalper 32
Day Trader 32
Short-Term Traders 32
Intermediate Traders/Investors 33
Long-Term Investors 35
Your Timeframe Is your Strategy Cornerstone 39
Chapter 4 Auctions and Indicators 41
The Search for Value 42
Concept Review 45
Key Market-Generated Indicators 48
Perfecting the Art of Visualization 56
Chapter 5 Long-Term Auctions 59
Auctions in Action 60
The Compound-Auction Process 61
The EBB and Flow of Balance 62
Where Do Trends End and Brackets Begin? 64
Clarity in the Maelstrom 66
The Big Picture 68
Asymmetric Opportunities and Risk 72
Long-Term Strategy Development 74
Assembling the Big Picture: Context within Context 75
Chapter 6 Intermediate-Term Auctions 77
Convergence and the Bracketing Process 77
Defining the Intermediate Term 79
The Transition from Bracket to Trends 80
The Transition from Trend to Bracket 82
The Convergence of Intellect and Emotion 85
Accelerate the Learning Process 86
Prelude to a Sea Change 87
Hear the Bells A-Ringing 94
Countertrend Auctions 94
The Quest to Do Better than ‘‘Normal’’ 96
Oh, the Difference a Few Points Makes 97
Chapter 7 Short-Term Trading 99
Analyzing Short-Term Markets 101
Common Mind Traps 104
When and Where to Look for Short-Term Trades 105
Opportunities Around Intermediate-Term Brackets 106
Technical Indicators 106
Your Own Worst Enemy: Your Brain 110
Seeking the ‘‘Exceptionally Tasty Patterns’’ 112
All Prices and Opportunities Are Not Equal 116
Ongoing Forensic Investigation 121
Looking for the All-Important Reference Points 124
Never Be a Laggard 129
A Golden Opportunity 130
Fade the Extremes, Go with Breakouts 132
‘‘The Expert Reasons Contextually’’ 137
Chapter 8 Day Trading Is for Everyone 141
What’s a Day Trader to Do? 142
What You Don’t Do May Be More Important than What You Do 145
The Real World in Action 146
Top Down 152
Lack of Conviction 152
Flight to Safety 153
Inventory Imbalances 154
Correction of Inventory Imbalances 155
Trend Traders’ Trap 157
Market Condition 158
Yesterday’s Trade 162
Example 1 162
Example 2 165
Example 3 167
Trader Checklist 170
The Market Is Open 171
Open-Drive 171
Open-Test-Drive 175
Open-Rejection-Reverse 178
Open-Auction 181
Day Trader’s Checklist 181
Example 1 183
Example 2 185
Example 3 188
Practice, Practice, Practice 190
Chapter 9 Profiting from Market-Generated Information 193
Timeframe Diversification 194
The New Paradigm 196
Appendix A: Market Update 199
About the Authors 201
Index 203