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FIRST EDITION

With 140 Chart Examples

MARK R. CONWAY AARON N. BEHLE



We shape our buildings,

and afterwards Our buddings shape us. Winston Churchill

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1090.00



Preface

The most incomprehensible thing About the world is that It is at all comprehensible.

Albert Einstein

The beginning of a trading career is filled with excitement - independence, freedom, and the potential to make money. After building up a starting stake and reading as many books about the market as possible, the new trader is ready to wade into an ocean of stocks with a raft of ideas. As the trader soon discovers, however, a good idea does not always translate into a good trade. A long string of losing trades will have the trader jumping from one idea to another without realizingthat having a "system" isjust a single cornerstone oftrading success.

The most popular trading books focus on technical analysis and pattern identification, suggesting an underlying order to the stock market. Unless the trader has a framework for trading these patterns, the process oftrading can be both subjective and overwhelming. When certain patterns stop working, the trader will abandon them just before they resume working again, resulting in a never-ending quest for profits.

This is the first book to give a trader a complete, automated framework for trading stocks: a model that encompasses money management, position sizing, order entry, and a set oftrading systems. Nothing is left to chance during the execution process, while the trader is freed to create. The model imposes discipline on the mechanics oftrading, not on the creative aspects of system design.

The reader should have several years oftrading experience and a background in technical analysis. Proficiency in either trading systems development with a language such as EasyLanguage® or software development using a computer programming language such as Visual Basic will complete the experience.

Chapter 1 is a presentation of the trading model and its components. First, we present a summary of the trading systems. Then, we establish the system standards for position sizing, trade entry and exit, and filtering. Finally, we



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