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51

YHOO Yahoo Inc. Days Reported: 377

Average Average

One-Sided

Double

High

Delay

Breakout

Percent

Breakout

Percent

Breakout

Percent

Maximum

Maximum

O.Od

$5.77"

0.00

5.82

0.27

5.82

1.06

5.65

1.33

5.31

1.86

5.08

2.39

4.95

2.65

4.74

4.24

4.59

4.77

4.49

6.10

4.53

6.63

4.38

7.16

4.23

8.22

4.13

8.49

4.12

9.02

3.99

9.02

3.99

10.61

3.96

11.41

3.90

12.47

3.84

13.00

3.95

14.32

4.01

14.59

3.96

15.38

3.97

15.38

3.95

15.65

3.85

15.92

3.83

15.92

3.79

16.71

3.76

17.51

3.73

18.83

3.70

19.63

3.70

20.16

3.65

20.69

3.55

20.69

3.53

21.22

3.53

21.75

3.61

22.81

3.57

23.34

3.54

23.87

3.48

24.67

3.42

24.67

3.36

25.46

3.42

26.53

3.41

26.79

3.39

28.12

3.42

INDEX

Absolute stop, 8

Accuracy:

in breakout system, 245 of Directional Day Filter, 245 in trading strategy, 170-171, 176

Automated systems:

applications, 253-255

charting package, 97

testing, 254-255 Average daily range, 139

Back testing, 19

Bias, implications of, 7, 40, 45,

128, 144, 191 Breakeven, 7,183 Breakout strategy:

characteristics of, 7, 223-224 Directional Day Filter

and,145 intraday range, 155-159,

235-251 time frame, 236-242 in trading theory, 159, 235-251 Buy signals:

Directional Day Filter

and, 123 in four-step process, 203, 206

Percent R, 55-57 Relative Strength Index (RSI) and, 47, 49-50, 52

sensitivity settings, 68-69

sideways market, 172-173 stochastic indicator and, 39,

41-42, 44-45 in trading theory, 156-157,

165 Buy stops:

Directional Day Filter and,

140-141, 145 dual stochastic, 114 in four-step process, 191-193,

214,216 implications of, 24-25 support and resistance, 24,

91-92, 94,107 Buy windows:

actual use in trading, 113,

179-227 defined, 111

in four-step process, 184, 197-198, 205, 212, 216

Category 1 resistance: characteristics of, 76-78, 83

formation, 77

sensitivities for entry us. exit, 91

Category 1 support: characteristics of, 78 formation, 77, 88-89



Category 1 support (Continued) sensitivities for entry us.

exit, 91 simultaneous, 86 within category 3, 87 Category 2 resistance: characteristics of, 82-84 dual stochastic and, 112-113,

115-117 exhaustion correction, 184 formation, 79 as a trailing stop, 116 Category 2 support: in actual trading, 104-105,

112-117 characteristics of, 79-82 dual stochastic and, 112,

114-115 formations, 86, 88-89 in four-step process, 182,186,

188-189, 191, 193,200, 202,

217-218 multiple, 81-82 sensitivities for entry us. exit,

90-91 simultaneous, 86 trading theory, 170 as a trailing stop, 116 Category 3 resistance: in actual trading, 107 characteristics of, 84-86 formation, 84, 218-219 in four-step process, 192,195,

198, 201, 205, 215, 218 pattern recognition, 94-95, 97,

sensitivities for entry vs. exit, 90-91 Category 3 support: in actual trading, 109 formation, 84 simultaneous, 86

Chart analyst, function of, 81 Cluster system, 13 Commissions, 6, 12, 215 Computerized charting, 97 Computerized systems, 3, 253-258 Confidence level, importance of, 11,

20,31-32,132, 141 Corrections:

defined, 149

downward, 38, 184

exhausted, in major trend, 147-178

late-day, 117

minor, 159

rallies and, 40

Relative Strength Index (RSI)

and, 51 sensitivity settings and, 70 support and resistance

and,136 Countertrend trades, 210-212,

Curve fitting, 254 Cyclone System, 12

Day trade, defined, 5

Day trading, generally: long-term, 6-12 overview, 5 short-term, 12-14 stock selection, 14-15 system development, 15-16 trader style and personality, 15, 30,116, 127

Directional Day Filter: analysis, illustration of,

190-191,198-199 applications, generally, 7, 40, 43 breakout system, 235-251 calculation of, 123-124 downward trends and, 59,162, 165

how it works, 123-131 illustration of, 181-182, 207, 229

importance of, 122-123 interpretation of, 125-136 operating theory, 120-121 purpose of, 120

research confirming accuracy of,

245-246 sideways days, 132-136 stop placement and, 141 support and resistance levels

determined by, 82, 104-106,

136-141, 144, 151, 166,

173-174 trading signals, impact on,

trading theory and, 153-154,

157, 159,163, 180-226 Dominant trend, determination of,

35, 40, 60, 119,122-123, 128,

147, 213-215 Double bottom, 86, 88, 156,

Double breakout, 242,244

Double top, 24-25, 189

Down market, 182,207. See also

Downtrending day Downtrending day:

correction of, 186

defined, 122

Directional Day Filter and, 125,

128-129, 137 dual stochastic and, 115 exhausted, 128

false signals in, 44, 52, 58-60, 71-72

implications of, generally, 35 Percent R and, 59-60 prediction of, 120 Relative Strength Index (RSI) and, 52

sensitivity settings and, 65, 71 stochastic indicator and, 40 Dual Stochastic:

in actual trading, 112-117, 149 compared to dual Percent R, 153 compared to dual RSI, 153 compared to single setting,

61-67 defined, 61-62 with Directional Day Filter,

179-233 parameters of, 68 trading accuracy, 147-178 trading frequency, 147-178

Early range breakout, 27-28, 251 with Directional Day Filter, 141, 143,235 Earnings: news, 120 warnings,20 ECNs (electronic communication

networks), 30 Entry strategies:

breakout system, 224, 240-241, 256

conservative, 176 early entry, 169-170 high-probability entry, 194 optimal, 187

support and resistance, impact on, 107-108, 186 Equity, stop loss and, 101 Equity curve, 11-13, 21 eSignal, 260, 263 Exhaustion, 3 1

of corrections, 45, 149-151, 156, 178

in day trading, 34-36, 179-233 as identified by RSI, stochastic,

Percent R, 34, 179-233 illustration of, 33



Exit strategies:

breakout system, 224, 256 conservative, 173, 213 determination of, 236,

242-244 Directional Day Filter and, 142

importance of, 159,185

reversals, 199

stochastic indicator and, 41

timing exit, 210

trailing stop, 186, 198

Fading, 110,189 Fast D indicator, 63-66, 68 Fear, 17-18, 22 Follow-through trading, 6 Four-step process, trading strategy: entry point, defined, 35,179 exit strategy, determination of,

35,179 illustrations of, 180-230 major trend, determination of,

35, 179,181 minor trend, determination of,

35,179 multiple signals in, 193 overview, 179 Fundamentals, 120 Fundamental trading, 26-27

Genesis Financial Data Services, 262

Government reports, 120 Greed, 17-18, 22

High-percentage trading, 104 High-probability trades, 140, 177,

179,194 Historical charts, 61, 91, 95,

Historical data, significance of,

243,254 Historical highs, 53

Interest rate, 120 Intraday high, 163, 213 Intraday low, 163, 165-166,

168, 183, 212-213, 219, 223

Intraday range, 139, 144,155, 176,

238, 248-249 Investor psychology, 15

Lane, George C., 38

Linear regression, 265

Long-term day trading, 6-12

Losses, generally: dealing with, 19-20 in four-step process, 227 multiple, 11

in real-time trading, 14 trends and, 7,10-11

Major trend(s):

determination of, 35, 179, 181

Directional Day Filter and,

131-132 exhausted corrections,

147-178 Percent R indicator, 59-60 Relative Strength Index (RSI)

and, 51 signals against, 209-210 Market makers, 30 Market noise, 34, 46, 218 Market orders, 24, 104, 225 Market swings, impact of, 173 Minor trend, determination of, 35, 179

Momentum, 145

Money management stops, 49

Money management strategies, 133

Multiple Sensivity Settings:

as a filter, 62

parameters of, 63

signal accuracy, 70

system, using stochastic, 68

trading signals, frequency of, 61-65, 70

various thresholds, using 62-66 Multiple signals, 193

Nasdaq, 247 News, impact of, 27, 120 Nontrending days, see Sideways days

Offset prices, 234 Omega Research, 263, 265 Online indicators, 1 alternate use of:

with Directional Day Filter, 180-226

with dual Percent R, 151, 156,

160, 164,177 with dual RSI, 153,157, 160 with dual stochastic, 149-150,

158, 163, 166,176 with support and resistance levels, 170, 180-226 conventional use of, 37-61 exhausted corrections,

identification within major trend, 147-178 Percent R, 52-60 Relative Strength Index (RSI),

46-52 stochastic, 38-46 Online trading, 1, 259 Opening range breakout, 7-8,

235-252 Order entry, electronic, 116

Oscillators, defined, 37. See also

Online indicators Oscillator indicators,

characteristics of, 34-35, 38,

44, 47

Gut-of-sample routine, 254, 258 Overbought conditions, implications

of, 34, 38, 40-41, 43, 45, 47,

53-56, 62-63, 66, 181, 229 Overbought theory, 44 Oversold conditions, implications

of, 34, 39, 40-41,43,45, 47,

53-56, 62-63, 66, 229 Overtrading, 2 1

Panic, 117, 247

Parallel Function Technology, 29, 266

Pattern recognition, 91-97 Percent R indicator:

applications, 35, 37

buy signals, 55-56

characteristics of, 52-53

development of, 52

dual signals, implications of, 151-153, 156-157, 160-161, 164, 166, 169,173-174, 211, 217,227

illustration of, 56-60

reversal system, using, 56-60

sell signals, 55-56

sensitivity settings and, 73

theory, 53 Personality, stocks and commodities, 27-30 Price(s):

human factor in, 23-25

patterns, 26 Price movement, generally:

accelerated, 100

in four-step process, 210

random, 34, 46, 218



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