TRADING BY THE MINUTE

By Joe Ross

Other Books by Joe Ross: Trading by the Book Trading [s a Business "radEng the Ross Hook Trading Optures and Futions

DISCLAIMER

NO CLAIM IS MADE BY JOE ROSS OR BY ROSS TRADING INTERNATIONA INCORPORATED THAT THE TRADING METHODS SHOWN HERE WILL RESULT IN PROFITS AND WILL NOT RESULT IN LOSSES. COMMODITY TRADING MAY NOT BE SUITABLE FOR ALL REORIENTS OF THIS PUBLICATION, ALL COMMENTS. TECHNIOUES, METHODS, AND CONCEPTS SHOWN WITHIN THIS MANUAL ARE NOT AND SHOULD NOT BE CONSTRUED AS AN OFFER TO BUY OR SELL ANY OF THE COMMODITIES NAMED HEREIN. THE THOUGHTS EXPRESSED ARE NOT GUARANTEED TO PRODUCE PROFITS. ALL OPINIONS ARE SUBJECT TO CHANGE WITHOUT NOTICE. EACH TRADER IS RESPONSIBLE FOR HIS/HER OWN ACTIONS, IF ANY. PURCHASE OF THIS MANUAL CONSTITUTES YOUR AGREEMENT TO THIS DISCLAIMER AND EXEMPTS THE CREMATORS AND DISTRIBUTORS FROM ANY LIABILITY OR

LITIGATION.

To My Son Scott B. Ross who contfsbiHvd more to this book tlunf} ho trvvf know.

iading By The Minute

Copyrfght 1990 by Jog Ross Revised 1991 hird Revision and Third Printing 1994 ALL RIGHTS RESERVED

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic. mechanica[< photocopying, recording or otherwise, vithout prior writlen permission of thG publisher and the copyright holder except in the cnse of brief quotations errfbodied in critical articles and reviews.

Published by Trading Educators Ltd., P,0. Bax F 43527, Freeport, G.B,. GahRmas. I fo ation on how to order - Telephone: 1512} 259-0727 FAX: (512) 25 -0747 Office hours: 7:00 A.M, - 6:00 P.M. CST Monday throurih Tnursday Ordors by iTiiil: P.O. Box F-43427. Freepon, G.B, Bahamas

Hope lies in iho extent to which you want to eimjlato tho success of my own trading. The wise trader will seek to incorjjoroie my knuwiedrje into his own hicthod(s) and personal stylti of trading.

Most o( the trades I show wsn; enrjaged in speciMc-illy for tlie purfioses of wriitnrj ifiJs book. Although I tfddc JKgtir i/u and at lower cotninissions than rTiost, in the trades for ihis book i used the number of contracts and computed cornniissrons and costs as shown throughout. In ihc final series of trades in ihf SSiP, I show actual lot sie and costs.

WhLn tradiny for purposes of wndtsg ttio hook, ! sUty fitid wan enter trades late in the day. Tliis is not my usuat way I rarely tratie I.Jtc in the day as I do when writing lor a book. Howeurjr, I find it rujf:qisijry wtio writing becauiti of tfie tirre invested. When IVe spent an critire day w;i:ching a screLn, I pusti liartjer to come out of that day with somelhjng to bhnw for it, I want to earn my keep for the day. and ! want to have somothing to i.how my readers.

When i trade for purposes of writing a book, ! try fiard to be as mechanical as f can be ao thai rny owri Instincts and Jntufriye feetincfs are removed from the trade. I warn the rnerhod to be in the forefront of each trade. Yet. 1 find \\ is not always possible to separate my feelings from what I am doing. Wherever such is the case, I havo* endeavored to expfain my

have tned to put

thought process. There is a reason for doing vjiat I do.

my reasonino into the book whenever I have deviated from the purest form of the metfiod.

There will be instances when I stray fiorn the rnethod and there is no explanation. These are not intentional. I am \ a perfect Un<*er. I miss moves, miscuimt Liars and segmants, miscount points and muniiv, faif see various forn"iat;ons, etc.

In wriiing \his book, ihe emphasis is on lecfinique, not on the overall way I trade, (n order to teach a loiison, I am forced to have tUFinel vision.

Jn actual prociice. I filter every (ftytrade through the daily cfiart. I attempt to trade only in markets that are trending on the daily chart, f take only trades thcit are in the direction of the trend, especially wht«n a market is correcting.

When writing, I Ccinnot take such a broad view, in that sense, the trades ahown are out of context with the reatity of the broader market. In some instances, \ purposefully took trades that were not in trendinr? markets, in order to illustrate a point.

In my own trading I am very selective. 1 choose only trades that 1 feel are very strong - io my mind, virtually sure things.

In addition to my technical signals, i look for unusual things m tlie market that might tip rne off as to the very best selection. Such e;<lriincous matters go far beyond the scope of this book. Much as Id like to include them here, the impracticality of doing so has be a factor. I have neither ihe time nor the wiilingness to sit down to write a ten-thousand page tame expounding every last detaj] of the way I trade. Perhaps ,somG dtiy [Ml do a video of rfiy trading so lliat much of what I (Jo cari 1 seen vsgII ,-js heard.

TlKJSO readers vMd isre familiar with my tutonru] jind siJiminars k..ow ih.Jt Im tcrri])le witfi arithmetic. When Tr[icJi(uj niake ;errih[e and Cijreless , I seem to have a very had ti.me wiiJi fractionii, My antiiriietic shoricorninys flcvc been there since my earliest cliiUihood nieniones, ] am dyslexic. I iritjke lot uf mistnkej? - I thirk I have nh-jde u prohi vvliE/n

e ;

e tou JULiny or

havfnt, I ti4nk I hnve tiken luss vAnjn \. havent, Of TtJG lew cuniiaefs to cover ros!s tjetwise of aritfirnetie ( . Arnaziriyfy. it has never really affected my trading, 1 fust p:ow along fio;ng JMy thiiiuj, and soriefiow at thii etuj of the Wcek, nty vvife, who -;1. my books fir mnre a[:curf!toly ihan I ever cotrki, toils mc Ive done nk;-ty "Wituiuver it youre doieitj," she s;ty.s, "k»;cp nj) tl-c good 4\Oik."

n Ihe [laris of the inunlving bar aiirJ 5;egm(;m !., ! !], I hlllfdi> to sproatlinrj my positifin nvrrmght in a hack ruonth. Ifi*; p.iriicijlar ubieet goes tDeyond the scope of ifus book. Suflice it to say tlun I uHen hedge rny positions tn niarkets that tfade overnight by sprcadinn of by eri-enny stops iii the cash and/or loreign futures markets. This is a concept :hat ;u!illv confuses miany of niy readers cind certainly of my icrninor siudents. As stated, it goes tar beyond the scope of this bouk, but for i..e reader wtjo is familiar with such tactics, plen.se understand dihi J do thiis to protect niy posifiun. For (he reader vwIkj does jot know what Im tLiikirKj ab(jlii, ih,is shoulfl be an encouragement to attend a seminar to luarn 1 ; s-,c:h ihings before, not after, suffering large losses of capital

About This 1 Revision

Wiien I fir;>i wrote thib book, I wanted to den ns al a very [jecitic wiiy of {Jaytrading eertiererl aretund the concept of n"iatclimcj cof.gestions. In piacdce, ihis hn.s proved <Jil{cu!t for mosi o* ruy studant. They siniply (io ! hnve the expenencze iicioded to perceive anci trade tlnjsi: niiithing

formations profitritily. Yet, theie are some v;hc liave dQin-: well withi tiiis way of trading. In part, matching congestions ure ])ercoiveci diroirnfi the eye of the beholder, Trading itKjrn is somewhat irituitive, Descriltmg how to reciognire tlum is tiefirlitely sulj;ceiivo.

In tfiis jevision tJiey jn: prcisenied again for diosc .vho have tfie tleptfi of experience in the markets to trade thorn well.

In addition, 1 Iiave inetutied methods lor driytrading thi- leave little or no room at al! for iniGrprevaiion. I lead the reader step by step into thje segment couiting metiiod. This method is so [irecjse tfiat it couid be automated under some foriii of artdicial intelligence. li tias definite ancf eonsistent fLiles. In my ojinion, it is best done in ligisi of fiurr.nn reason arid udgment. This method lEikes uf) tfie greater part of tfie manuii!, and foNovvS ifie concepts fjresented fa; matching congestrons. If matciiiny congestions seems too difficult, then trade with the scnmont count method. It has proved successful for over 100 years of position tradnig. end is still successful regardless of time frame as long as a de:iriitivc chart is availdt>kj.

AboLrt Contrary Sots

In the first presentation nf contract sets I skjggesied u!ing multiples of three contracts. In ihts. fev;;ion, 1 suggest using at leasi a twJ contract set, then tfiree, four, or five Beyond five contracts. I recorrimr.nd using increrricnts of live. Ihss would give ten. fiJieen, twenty, twt.-ntv-five, etc.

What nufst be cojisirlnred i& which gives tlie best resuUs over a entering The market with ocJd-lot, or exiting ihe market with n odd-lot.

Rased on my ovjn lecords, ifie better result cornes by exitiiK) the .narket vsith an odddoi.

This vviN make more sense as t[ie rest of die material in ihe bonk is absorbed. As the trades unfold, nsk "Is it belter to enter Ihn market with a nine lu!. ar.d liquidate a four 3ot lo cover costs, leaving an exit for profit with a five (round) lot, or ps U bctier to enter with ten (round) lot, lirjitidE-ite a four nt 10 covrr costs, and exit wilh six (otld) !ot?"

he odd lot is going to resuft in more slinpnge for tJio fill. U has proveci belter exit on the odd-lot, and give up slippage on the profit end of a irade, lhan to enter on ihc odd-)nt, and give tip slippage on the cost end ol the trade. In tfic lofui run, tlie reader will iiavc to decide ihis for himself within the co!Ue;it of firs own trading style.

About This 1S92 Second Printing

fiave Jitlrlnti a mon «:(Hiipret(! driscripticm of die variou: ways \n spot a trend Ml iis in[;epion.

I have made rninot corrections throuQiiout for Ihe purpose of cinrdy and lo correct rTiirior pifljlishing errors.

Cbj]tcr 1

Ihe Triidi U tho Tridit

Although 1 fiave wrltter; this book Irom the orientation of Ifie mtraday chart, the things I do and show here can easily be extratiolnted to die daily chart. Wliere I show the relationsfiip between a daily cfiart and an intraday chart, ihose who are not daytraders can do tho same thing in the context of the relaiionsfiifi between a weekly chart and a doily chart.

In osser.ce. vvitf. a few eceptioiis, a cfiart is a chrjrt rs a chari.

Wfiat I sfiov/ in the eady pans of this book centers almost entirely around congestion areas which may be seen on any chart in nny time frame. In the later paits of the book, the things 1 will show center around trending formations, it is important to be able to spot the very beginning of a trend, and also be able to enter existing and established trends with great success.

The major differences between trading tfie intraday chart versus trading the daily chart Ivnve to do witfi lime and volatility.

A more definijivc compadsun between tfic five minute chart and the daily chart is given just ahead.

Decisions must l)e made more Quickly using ifie intraday cb.arts, and the tradable patterns term more quickly on tlie intraday cfiarts,

Other than that, trading is cisser-iially the same. Later in the book, in a chapter entitled "Full Circle," I will dernonstrate the truth of what I have just said.

t is important to realise tfiat tf-io use of live data feed, m moyt instances, gives cedain advantages to itio daytrnder over the rJaify trader, when it comes to the rriaLter of optimizing eniry and enit, VVtion used roperly daytrading can result in no! leaving nearly so mucii rtioney on the table as can daily trading V/ithout imraday entry, Hovv-cver, proper use of intraday data is very difficult to achieve. It takes great discipline to utilize ft properly so as not lo end up ovrsrtrading,

Definrlion of Daylrading

At this poin:, I v.ani to defjpc daytrading as it v\;ill be used thirougiiout tfiis hook. Pjly definition may be different from lhat of others, so I warn to cbirify exactly vhat I mean, Typicfilly, dnyiradJnri is defined as cniering a market at oi alcv tfie opcr,. and exiting at or before tfie close. In addilion, my definition oi (Jaytrading is any meifiotl or system dii uses a live, rtjal-ime data source "o deiermane entry [irdi exit signals to and from any market, This would include fiand held Quote drivices, watching an electronic quote board, or even one of die aid oleciricDl clacker boards.

know it is possible to "dayirnde" without a live data feed. I iiave met some vho rEo tfiat. I know of two men who titerally drive iheir brokers jy calling in every fovj rriinutes to fn,d out tfie prices of Ifie contracts they trade intraday, By my definition, tl.is is not daytrading, Nor is trading from a delayed da-.a feed dnytroding, by my definition