Numerics

• 1-2-3-4 criterion, securities, 158
• 10-percent strategy, 103

• 60/40 rule, 292

A

• accredited investors, 290
• accumulation phase, trends, 141
• accumulation/distribution index, money flow, 164
• algorithmic trading strategies, 77. See also program trading
• Ally Invest, 267
• American options, 190
• AmiBroker, 228
• amortizing bonds, 52–53
• Andrews, Alan, 147
• Andrews pitchforks, technical analysis, 147
• anger, managing, 255
• anomalies, market
  • calendar effects, 170–172
  • defined, 169
• anxiety, managing, 256
• arbitrage trading, 33
  • convertible arbitrage, 187
  • ETF arbitrage, 187–188
  • fixed-income arbitrage, 188–189
  • high-frequency trading, 77
  • index arbitrage, 189
  • law of one price, 180
  • market efficiency and, 74–75, 180–181
  • merger arbitrage, 189–190
  • one-price rule, 76
  • option arbitrage, 190–191
  • overview, 179–180
  • price changes, 181–182
  • risk arbitrage, 183–186
  • synthetic securities, 75–76
• Art of War, The (Sun Tzu), 259
• assets
  • arbitrage trading
    • high-frequency trading, 77
    • market efficiency and, 74–75
    • one-price rule, 76
    • synthetic securities, 75–76
  • bonds
    • listed, 54
    • over-the-counter trading, 54
    • overview, 52–53
    • trading, 53–54
    • Treasury dealers, 54
  • budget and, 43
  • commodities, 56–57
  • cryptocurrency, 25
    • Bitcoin, 65
    • blockchain, 65
    • Coinbase website, 217
    • forks, 66
    • initial coin offerings, 66
    • overview, 64–65
    • regulation, 283
    • risks, 69
    • trading, 66–69
  • currency, 55–56
  • defined, 40
  • derivatives
    • defined, 40
    • futures contracts, 71–72
    • leverage and, 89
    • options, 70–71
    • overview, 69–70
    • regulation, 281–282
    • trading, 72–73
    • warrants, 72
  • exchange-traded funds
    • defined, 26
    • overview, 60–61
    • retail shares, 61
    • risks, 64
    • strategy ETFs, 62
    • trading, 63
    • traditional ETFs, 61
  • forex
    • brokers with day trader services for, 272–273
    • currency, 55
    • defined, 25–26
    • leverage in, 25, 90
    • regulation, 283–284
  • futures contracts, 25
  • liquidity
    • frequency, 41–42
    • volume, 41
  • margin
    • overview, 43–44
    • for pattern day traders, 45
    • regulation, 45–46
  • options, 25
  • overview, 39–40
  • stocks, 26
    • ask price, 46–47
    • bid price, 46–47
    • exchanges, 47–52
  • volatility, 42–43
• ATC Brokers, 272
• at-risk rules, 306
• authorized participants, ETF, 187–188
• automatic trades, 14. See also program trading
• average true range, volatility, 161–162

B

• backing up systems, 252
• backtesting
  • comparing results with market cycles, 225–226
  • defined, 31
  • hypothesis, 224
  • program trading, 177
  • running test, 224–225
  • simulation software and, 227–229
  • thinkOnDemand, 270
• banks
  • currency trading, 56
  • Federal Reserve, 280
  • regulation, 283–284
• bars, 134
• bear market, 124, 136
• behavioral finance, 253
• benchmarks, performance, 241–242
• beta, volatility, 30–31, 162
• bid-ask spread (bid-offer), 182, 197
• bills, 52. See also bonds
• binary options, 71
• Bitcoin, 65
• blockchain, 65
• bonds
  • amortizing, 52–53
  • bills, 52
  • convertible bonds, 72
  • coupons, 52
  • discount bonds, 52–53
  • leverage in, 87
  • listed, 54
  • maturity, 52
  • notes, 52
  • over-the-counter trading, 54
  • performance bonds, 44
  • plain vanilla, 52
  • trading, 53–54
  • Treasury dealers, 54
  • zero-coupon bonds, 52
• boredom, managing, 256
• borrowing. See leverage
• bottom-up analysis, 133
• break trades, 289–290
• breaking news, reacting to, 195–196
• breakouts, 142–143
• Briefing.com, 216
• brokerage accounts
  • closing out orders, 24
  • opening, 24, 266
  • placing orders, 24
  • transferring money from, 25
• brokers
  • brokerage scams, 273–274
  • choosing
    • opening brokerage account, 266
    • overview, 261–262
    • price quotes, 262–263
    • software-based trading platform, 264
    • web-based trading platform, 264–266
  • with day trader services
    • Ally Invest, 267
    • ATC Brokers, 272
    • Charles Schwab Active Trading, 267–268
    • ChoiceTrade, 268
    • Cobra Trading, 268
    • E*TRADE, 268
    • eOption, 271
    • Fidelity Active Trader Pro, 268–269
    • Firstrade, 269
    • FOREX.com, 273
    • Infinity Futures, 271
    • Interactive Brokers, 269
    • Just2Trade, 269
    • Lightspeed Trading, 269–270
    • MB Trading, 271–272
    • OANDA, 273
    • overview, 266–267
    • ScottradeELITE, 270
    • SogoTrade, 270
    • tastyworks, 272
    • thinkorswim, 270
    • TradeMONSTER, 272
    • TradeStation, 229, 271
  • dealers versus, 47
  • defined, 21
  • margin policies, 45–46
  • program trading, 176
  • regulation
    • financial stability, 284
    • money laundering, 284–286
    • pattern day traders, 286–287
    • tax reporting, 287
• bucket shops, 276
• Buffett, Warren, 14, 35
• bull market, 124, 136
• business partners, 290
• business plan
  • choosing trade market and assets, 247–248
  • goals, 246
  • investing in business, 248
  • revising, 249
  • setting trading hours, 248
• business risk, 37
• buy orders, 119, 155, 160

C

• CAGR (compound average rate of return), 235
• calendar effects
  • January effect, 171
  • Monday effect, 171
  • October effect, 172
  • overview, 170–171
• call options, 71, 75, 88
• CAN SLIM criteria, William O’Neil research service, 202–203
• candlestick charts, 149–150
• capital assets pricing model, 31, 162, 226
• capital gains/losses, 234, 299–300
• Capone, Al, 286
• certified public accountants (CPAs), 295
• CFTC (Commodity Futures Trading Commission), 219, 281
• channel trading (range trading), 178
• Charles Schwab Active Trading, 267–268
• chart traps, 170
• Chicago Board Options Exchange, 73
• Chicago Board Options Exchange Education Center, 207
• Chicago Mercantile Exchange, 73
• ChoiceTrade, 268
• circuit breakers, 289
• closing out position
  • investing, 123
  • position trading, 122
  • swing trading, 122
• CME Group, 207
• coaching services, 259
• Cobra Trading, 268
• Coinbase, 217
• coins, cryptocurrency, 66
• Cold Turkey app, 256
• commissions, 22, 191, 197–198, 267
  • overtrading and, 329–330
  • regulation, 276
  • taxes and, 304–305
• commodities, 56–57, 292
• Commodity Futures Trading Commission (CFTC), 219, 281
• common stock, 26. See also stocks
• compound average rate of return (CAGR), 235
• compound interest, 108
• computers, choosing, 250
• consolidation (congestion) phase, trends, 141
• continuation (main) phase, trends, 141
• contrarian trading, 178
• contrarian traps, 170
• convergence, technical analysis, 140
• convertible arbitrage, 187
• convertible bonds, 72
• corrections (retracements), 137, 141, 143
• counseling services, 259
• coupons, 52. See also bonds
• CPAs (certified public accountants), 295
• creation units, ETF, 60–61, 75–76, 187
• crossovers, technical analysis, 139–140
• cryptocurrency, 25
  • Bitcoin, 65
  • blockchain, 65
  • Coinbase website, 217
  • forks, 66
  • initial coin offerings, 66
  • overview, 64–65
  • pump and dump, 67
  • regulation, 283
  • risk, 69
  • trading, 66–69
  • wallet, 68
• cup and handle formation, technical analysis, 145–146
• currency trading, 55–56
  • regulation, 283
  • taxes, 292–293
• cutting losses, 125–126

D

• dark pools (dark liquidity), 52, 167, 262
• data mining, 221
• day trading
  • avoiding, 319–324
  • common mistakes of, 325–330
  • defined, 8
  • difficulty of, 17
  • discipline, importance of, 194
  • factors influencing volatility, 1
  • gambling versus, 16
  • handling breaking news, 195–196
  • hedging, 8–9
  • as hobby, 12–13
  • investing versus, 15
  • momentum investing, 199–203
  • as part-time business, 11–12
  • personality traits of successful day traders, 13–15
  • reasons to, 313–318
  • risk capital, 16
  • setting targets/limits, 196–197
  • short selling, 204
  • speculating, 8–9
  • success rates, 17–18
  • trade execution, 197–199
  • zero-sum market, 9–10
• Day Trading Academy, 210
• dealers, 47
• deductible expenses, taxes
  • business expenses, 308
  • investments
    • advisory services, 303
    • attorney and accounting fees, 302
    • interest paid on loans, 303
    • office expenses, 302–303
    • safe-deposit box rent, 303
    • state income taxes, 304
• delta, volatility, 100
• depression, managing, 256
• derivatives
  • defined, 40
  • futures contracts, 71–72
  • leverage and, 89
  • options, 70–71
  • overview, 69–70
  • regulation, 281–282
  • risk arbitrage, 184
  • trading, 72–73
  • warrants, 72
• discount bonds, 52–53
• distribution phase, trends, 141
• divergence, technical analysis, 140
• diversification, 96
• dividends, stock, 46
• dollar-weighted (money-weighted) return, 238
• doubling down, 104–105, 335
• doubt, managing, 254
• Dow, Charles, 147
• Dow Theory, 148
• due diligence, on research services
  • Commodity Futures Trading Commission, 219
  • FINRA BrokerCheck service, 219
  • National Futures Association BASIC, 220
  • overview, 218–219
  • questions to ask, 220–221
  • SEC, 220

E

• E*TRADE, 268
• earned income, taxes on, 298–299
• earnings expectations
  • expected return, 96–97
  • probability of ruin, 97–99
• earnings momentum, 200
• electronic communications networks (ECNs), 49–50
• Elite Trader, 341
• Elliott, Ralph, 149
• Elliott Wave system, 149
• Elliott Wave website, 217
• emotions, managing
  • anger, 255
  • anxiety, 256
  • boredom, 256
  • depression, 256
  • doubt, 254
  • fear, 254–255
  • greed, 255
  • overview, 253–254
• Endicott v. Commissioner (2013), 294
• enrolled agents, 295–296
• eOption, 271
• estimated taxes, 309
• ETF arbitrage, 187–188
• ETFs (exchange-traded funds)
  • creation units, 60–61, 75–76, 187
  • defined, 26
  • ETF arbitrage, 187–188
  • overview, 60–61
  • retail shares, 61
  • risk, 64
  • shareholders, 187
  • strategy ETFs, 62
  • tracking error, 64
  • trading, 63
  • traditional ETFs, 61
• ETNs (exchange-traded notes), 61
• European options, 190
• excess margin, 44
• exchanges
  • dark pools, 52, 167, 262
  • electronic communications networks, 49–50
  • Nasdaq, 48–49
  • NYSE, 48
  • over-the-counter
    • OTC Link, 51
    • Over-the-Counter Bulletin Board, 50–51
    • penny stocks, 51
  • overview, 21–22, 47–48
  • regulation, 279–280, 282
• exchange-traded funds. See ETFs
• exchange-traded notes (ETNs), 61
• execution, trade. See trade execution
• exercise, role in work-life balance, 257
• expected returns, 96–97
• expert advisor. See program trading

F

• false breakouts, 142–143
• FCMs (futures commission merchants), 72, 282
• fear, managing, 254–255
• Federal Reserve System, 280
• fees
  • broker, 23
  • margin, 82–83
  • tax deductible, 302
• Fibonacci numbers, 148–149
• Fidelity Active Trader Pro, 268–269
• Financial Industry Regulatory Authority. See FINRA
• financial markets
  • assets, 25–26
  • brokerage accounts
    • closing out orders, 24
    • opening, 24
    • placing orders, 24
    • transferring money from, 25
  • commissions, 22
  • concentration/focus, importance of, 27
  • exchanges, 21–22
  • fees, 23
  • gambling, 36–37
  • investing, 35
  • market efficiency, 32–34
  • over the counter trades, 22
  • overview, 19–20
  • positions, 26–27
  • returns
    • opportunity cost, 31
    • risk-free rate of return, 32
    • risk-reward tradeoff, 32
    • time value of your money, 32
  • risk
    • business risk, 37
    • defined, 28
    • limited liability, 29–30
    • personal risk, 38
    • probability of loss, 28–29
    • volatility, 30–31
    • zero-sum market, 30
  • spread, 23
  • supply and demand, 20–21
  • trading, 35–36
  • zero-sum market, 23–24
• FINRA (Financial Industry Regulatory Authority)
  • margin rules, 45
  • pattern day traders, 84
  • regulation, 279
  • Rule 4210, 286–287
• FINRA BrokerCheck service, 219, 279
• Firstrade, 269
• fixed income investments, 52. See also bonds
• fixed-fractional trading, 102, 333
• fixed-income arbitrage, 188–189
• fixed-ratio trading, 102–103, 333
• flags, technical analysis, 143–144
• force index, 159
• forex (foreign exchange)
  • brokers with day trader services for, 272–273
  • currency, 55
  • defined, 25–26
  • leverage in, 25, 90
  • regulation, 283–284
• FOREX.com, 273
• forks, defined, 66
• free riding, 92–93
• Freedom app, 256
• frequency, liquidity, 41–42
• Friedman, Milton, 20
• fundamental research, 133, 320
• futures commission merchants (FCMs), 72, 282
• futures contracts
  • defined, 25
  • leverage and, 88–89
  • overview, 71–72
  • taxes, 292

G

• gain per day, 116
• gain per trade, 116
• gambling
  • day trading versus, 16, 323
  • defined, 36–37
• gamma, volatility, 100
• Gann, William, 150
• Gann system, 150, 332–333
• gaps, technical analysis, 146–147
• garbitrage, 191
• ghost trading. See simulation trading
• golden ratio, 148–149
• greed, managing, 255
• Greeks, volatility, 100

H

• half Kelly trade, 104, 334
• head and shoulders formation, technical analysis, 144–145
• hedge funds, 63, 290
• hedging, 8–9
• High Yield Investment Program (HYIP), 116
• high-frequency trading, 41–42, 77
• hobby
  • day trading as, 12–13
  • role in work-life balance, 258
• HYIP (High Yield Investment Program), 116

I

• ICOs (initial coin offerings), 66
• implied volatility, 163
• Inbox When Ready app, 256
• income returns, 234. See also returns
• index arbitrage, 189
• IndexArb.com, 341
• indicators
  • defined, 138
  • momentum indicators, 141–142, 156–157
  • moving averages, 139–140
  • pivot points, 139
  • price indicators, 156–159, 166–167
• Infinity Futures, 271
• inflation, defined, 32
• information resources
  • books
    • basic trading guides, 337–338
    • history, 340–341
    • price theory, 339
    • technical analysis guides, 338–339
    • trading psychology, 340
  • mainstream media, 342
  • online, 341–342
• initial coin offerings (ICOs), 66
• insider trading, 33, 287–288
• Institute for Financial Markets, 207
• Interactive Brokers, 269
• IntercontinentalExchange, 207
• interest
  • compound interest, 108
  • margin interest, 46
  • open interest, 160–161
  • taxes and, 306
• Internet service, choosing, 250–251
• inverse ETFs, 62
• investing
  • closing out position, 123
  • day trading versus, 15
  • defined, 35
  • investors learning from day traders, 193–204
  • taxes on investment income, 299
• Investing.com, 217
• investment expenses, tracking
  • at-risk rules, 306
  • deductible, 302–304
  • interest expenses, 306
  • non-deductible, 304–305
  • passive activity, 306
  • two percent limit, 306
• Investopedia, 210–211
• Investor/RT software, 228

J

• January effect, 171
• Japanese candlestick charting, 149–150
• Just2Trade, 269

K

• Kapitall, 211
• Kelly Criterion formula, 103–104, 334

L

• law of one price (one-price rule), 74, 76, 180
• leverage
  • borrowing for trading capital, 91–92
  • defined, 16, 87, 247
  • in Forex, 25, 90
  • free riding, 92–93
  • in futures trading, 88–89
  • leverage strategies, 286
  • margin loans, 91
  • in options market, 88
  • risk, 93–94
  • risk arbitrage, 185
  • in stocks and bonds, 87
• leveraged ETFs, 62
• Libor, 82
• liens, 82
• Lightspeed Trading, 269–270
• limit orders, 118, 196, 255
• limited liability, 29–30
• liquidity
  • dark pools, 52, 167, 262
  • frequency, 41–42
  • volume, 41
• listed bonds, 54
• Litecoin, 66
• loss limits, 117

M

• main (continuation) phase, trends, 141
• mainstream media, as information resource, 342
• margin
  • brokerage firm's policies, 45–46
  • costs and fees of, 82–83
  • excess margin, 44
  • leverage, 80
  • margin agreements, 81
  • margin calls, 83
  • overview, 43–44
  • for pattern day traders, 45, 83–84
• margin loans, 91
• market capitalization, 47
• market efficiency, 32–34, 74–75, 135, 180–181
• market makers, Nasdaq, 49
• MarketDelta software, 215
• mark-to-market accounting, 307
• mark-to-market election, 296
• martingale system, 104–105, 335
• maturity, bonds, 52
• MB Trading, 271–272
• meditation, role in work-life balance, 257–258
• merger arbitrage, 189–190
• MetaStock software, 215, 228
• MetaTrader software, 273
• miscellaneous income, 301–302
• mobile trading, 252–253
• Modified Dietz method, 236
• momentum investing
  • earnings momentum, 200
  • momentum indicators, 141–142
  • momentum oscillators, 156–157
  • overview, 199
  • price momentum, 200–201
  • Value Line research service, 201
  • William O’Neil research service, 202–203
• Monday effect, 171
• money flow
  • accumulation/distribution index, 164
  • money-flow index, 165
  • money-flow ratio, 165
  • overview, 163–164
  • short interest ratio, 165–166
• money laundering, 284–286
• money management
  • earnings expectations, 96–99
  • fixed-fractional trading, 102, 333
  • fixed-ratio trading, 102–103, 333
  • Gann system, 332–333
  • Kelly Criterion formula, 103–104, 334
  • market volatility and, 99–100
  • martingale system, 104–105, 335
  • Monte Carlo simulation, 105, 335
  • opportunity cost, 101
  • Optimal F system, 106, 334
  • overview, 95, 331
  • profits
    • account withdrawals, 109–110
    • compound interest, 108
    • pyramiding, 109
    • saving, 332
  • returns, 106–108
  • stop orders, 332
  • 10-percent strategy, 103
• Money Show, 209
• money-flow index, 165
• money-flow ratio, 165
• money-weighted (dollar-weighted) return, 238
• monitors, choosing, 250
• Monte Carlo simulation, 105, 335
• moving averages, 139–140

N

• Nakamoto, Satoshi, 65
• Nasdaq, 48–49
• Nasdaq Capital Market, 49
• Nasdaq Global Market, 49
• Nasdaq Global Select Market, 49
• Nasdaq/OMX, 208
• National Association of Securities Dealers, 279
• National Best Bid or Offer, 198
• National Futures Association (NFA)
  • Background Affiliation Status Information Center, 220
  • Investor Learning Center, 208
  • regulation, 281–282
• need-to-make number, 255
• negative-sum game, 23
• New York Stock Exchange (NYSE), 48, 208
• news flows, 168–169
• news trading, 179
• NFA. See National Futures Association
• NinjaTrader service, 215, 229
• non-deductible expenses, taxes, 304–305
• notes, 52. See also bonds
• NYSE (New York Stock Exchange), 48, 208

O

• OANDA broker, 273
• OCO (order cancels other), 118
• October effect, 172
• OmniTrader service, 215
• on-balance volume, 160

• 1-2-3-4 criterion, securities, 158

• one-price rule (law of one price), 74, 76, 180
• online resources
  • Elite Trader, 341
  • IndexArb.com, 341
  • IRS website, 297
  • Reddit, 342
  • Trade2Win, 342
  • Trader Mike blog, 342
  • TraderInterviews.com, 342
  • Traders Laboratory, 342
  • Treasury bonds, 54
• Online Trading Academy, 211
• open interest, 160–161
• opportunity cost, 31, 101
• Optimal F system, 106, 334
• option arbitrage, 190–191
• options, 70–71
  • brokers with day trader services for, 271–272
  • defined, 25
  • leverage in, 88
  • options expiration, 41
  • taxes, 293–294
• OptionVue service, 229
• order book, 167
• order cancels other (OCO), 118
• order sends order (OSO), 119
• OTC BB (Over-the-Counter Bulletin Board), 50–51
• OTC Link, 51
• overanalyzing data, 151
• overconfidence, danger of, 126
• Over-the-Counter Bulletin Board (OTC BB), 50–51
• over-the-counter exchanges, 22
  • bonds, 54
  • OTC Link, 51
  • Over-the-Counter Bulletin Board, 50–51
  • penny stocks, 51

P

• pair trading, 179
• paper trading, 177. See also simulation trading
• part-time trading, 11–12
• passive activity, investments, 306
• pattern day traders
  • margin for, 45, 83–84
  • regulation, 286–287
• patterns, technical analysis
  • cup and handle formation, 145–146
  • flags, 143–144
  • gaps, 146–147
  • head and shoulders formation, 144–145
  • pennants, 143–144
  • pitchforks, 147
• pennants, technical analysis, 143–144
• pennies, 116
• penny stocks, 51
• People in Profit (PIP), 116
• performance, measuring
  • backtesting
    • overview, 224–226
    • software for, 228–229
  • benchmarks, 241–242
  • overview, 223
  • returns
    • analyzing, 234
    • calculating, 234–239
    • determining risk to return, 239–241
  • simulation trading
    • backtesting and, 227–229
    • overview, 226–227
  • tracking trades
    • profit and loss statement, 230–231
    • on spreadsheet, 230
    • trading diary, 232–233
• performance bonds, 44. See also margin
• personal risk, 38
• personality traits of successful day traders, 13–15
• PIP (People in Profit), 116
• pips, 116
• pitchforks, technical analysis, 147
• pivot points, 139
• plain vanilla bonds, 52
• planning trades
  • bear market, 124
  • bull market, 124
  • buy orders, 119
  • closing out position
    • investing, 123
    • position trading, 122
    • swing trading, 122
  • cutting losses, 125–126
  • knowing when to move on, 123–124
  • limit orders, 118
  • loss limits, 117
  • morning review, 114
  • order cancels other, 118
  • order sends order, 119
  • overconfidence and, 126
  • overview, 111
  • profit goals, 115–116
  • rumors, 125
  • sample order, 114–115
  • sample trading plan, 120–121
  • sell orders, 119
  • stop orders, 117–118
  • survival bias, 127
  • technical analysis, 115
  • trends, 124–125
  • what to trade, 112–113
  • when to trade, 113
• points, defined, 116
• position trading, 26–27, 122
• positive-sum game, 23
• price changes
  • arbitrage, 181–182
  • technical analysis, 135
• price discovery, 68
• price indicators, 156–159, 166–167
• price momentum, 200–201
• price quotes
  • Level I quotes, 263
  • Level II quotes, 263
  • overview, 262–263
  • TotalView quotes, 263
• price theory, 339
• prime rates, interest, 82
• probability of loss, 28–29
• probability of ruin, 97–99
• profit and loss statement, 230–231
• profits
  • account withdrawals, 109–110
  • compound interest, 108
  • profit goals, 115–116
  • pyramiding, 109
• program trading
  • adding trading platform, 176
  • arbitrage trading
    • law of one price, 180
    • market efficiency and, 180–181
    • overview, 179–180
    • price discrepancies, 181–182
  • backtesting, 177
  • brokerage firms, 176
  • contrarian trading, 178
  • convertible arbitrage, 187
  • ETF arbitrage, 187–188
  • fixed-income arbitrage, 188–189
  • index arbitrage, 189
  • limitations of, 175
  • merger arbitrage, 189–190
  • news trading, 179
  • option arbitrage, 190–191
  • overview, 173–174
  • pair trading, 179
  • range trading, 178
  • risk arbitrage
    • derivatives, 184
    • leverage, 185
    • overview, 183–184
    • short selling, 185
    • synthetic securities, 185–186
  • scalping, 182–183
  • trading modules, 176
  • transaction costs, 191–192
• pullbacks (retracements), 137, 141, 143
• pump and dump, 51, 67
• Pure Investor, 116
• put options, 71, 75, 88
• pyramid scheme, 109
• pyramiding, 109

Q

• qualified purchasers, hedge fund, 290
• quote stuffing, 168
• quote-rate pirates, 168

R

• range trading (channel trading), 178
• Reddit, 342
• regulation
  • break trades, 289–290
  • brokers, 284–287
  • business partners, 290
  • circuit breakers, 289
  • derivatives, 281–282
  • exchanges, 279–280
  • Federal Reserve, 280
  • FINRA, 279
  • Forex, 283–284
  • history of, 276–277
  • insider trading, 287–288
  • overview, 275
  • SEC, 278
  • Securities Investor Protection Corporation, 280
  • short-selling restrictions, 289
  • stock and corporate bond market, 278–280
  • Treasury bond market, 280
• research resources
  • Briefing.com, 216
  • Chicago Board Options Exchange Education Center, 207
  • CME Group, 207
  • Coinbase, 217
  • conferences, 208–209
  • due diligence on, 218–221
    • Commodity Futures Trading Commission, 219
    • FINRA BrokerCheck service, 219
    • National Futures Association BASIC, 220
    • overview, 218–219
    • questions to ask, 220–221
    • SEC, 220
  • Elliott Wave website, 217
  • information resources
    • books, 337–338
    • mainstream media, 342
    • online, 341–342
  • Institute for Financial Markets, 207
  • IntercontinentalExchange, 207
  • Investing.com, 217
  • Money Show, 209
  • Nasdaq/OMX, 208
  • National Futures Association Investor Learning Center, 208
  • New York Stock Exchange, 208
  • overview, 205–206
  • prices, 212–214
    • CQG, 213
    • DTN, 213–214
    • eSignal, 214
    • Oanda, 214
    • overview, 212–213
  • School of Gann website, 217
  • Trader and Investor Summit, 209
  • TradeTheNews.com, 218
  • Trading Show Chicago, 209
  • trading strategies
    • MarketDelta software, 215
    • Metastock software, 215
    • NinjaTrader service, 215
    • OmniTrader service, 215
    • overview, 214
    • StockTwits service, 216
    • Trade-Ideas software, 216
  • training classes
    • Day Trading Academy, 210
    • Investopedia, 210–211
    • Kapitall, 211
    • Online Trading Academy, 211
    • overview, 209–210
    • TopstepTrader, 211
    • Trading Advantage, 212
  • Value Line research service, 201
  • William O’Neil research service, 202–203
• retracements, 137, 141, 143
• returns
  • analyzing, 234
  • calculating
    • compound average rate of return, 235
    • deposits/withdrawals, 235–239
    • dollar-weighted return, 238
    • Modified Dietz method, 236
    • overview, 234–235
    • time-weighted rate of return, 237
  • capital gains, 234
  • determining risk to return
    • standard deviation, 239–241
    • win-loss percentage, 239
  • effect of money management on, 106–108
  • income returns, 234
  • opportunity cost, 31
  • risk-free rate of return, 32
  • risk-reward tradeoff, 32
  • time value of your money, 32
• reversals, 141
• risk
  • business risk, 37
  • cryptocurrency, 69
  • defined, 28
  • exchange-traded funds, 64
  • leverage, 93–94
  • limited liability, 29–30
  • personal risk, 38
  • probability of loss, 28–29
  • short selling, 93–94
  • uncertainty versus, 169
  • uncorrelated risk, 63
  • volatility, 30–31
  • zero-sum market, 30
• risk arbitrage
  • derivatives, 184
  • leverage, 185
  • overview, 183–184
  • short selling, 185
  • synthetic securities, 185–186
• risk capital, 16, 284
• risk to return
  • standard deviation, 239–241
  • win-loss percentage, 239
• risk-free rate of return, 32
• risk-reward tradeoff, 32
• round lots, 43
• rumors, 125

S

• School of Gann website, 217
• ScottradeELITE, 270
• SEC (Securities and Exchange Commission)
  • investigating research services, 220
  • National Best Bid or Offer, 198
  • regulation, 278
• securities. See also assets
  • defined, 40
  • 1-2-3-4 criterion, 158
• Securities Investor Protection Corporation (SIPC), 280
• security
  • brokerage scams, 273–274
  • virus protection, 251
• self-directed IRAs, 309–310
• sell orders, 119
• sell rule, 194
• semi-strong market efficiency, 75, 180
• setting up business
  • backing up systems, 252
  • behavioral finance, 253
  • business plan
    • choosing trade market and assets, 247–248
    • investing in business, 248
    • revising, 249
    • setting goals, 246
    • when to trade, 248
  • computers, 250
  • Internet service, 250–251
  • managing emotions
    • anger, 255
    • anxiety, 256
    • boredom, 256
    • depression, 256
    • doubt, 254
    • fear, 254–255
    • greed, 255
    • overview, 253–254
  • mobile trading, 252–253
  • monitors, 250
  • overview, 245
  • security, 251
  • support systems
    • books, 259
    • coaching, 259
    • counseling, 259
    • other traders, 259
  • walk-away money, 260
  • work-life balance
    • exercise, 257
    • friends and family, 258
    • hobbies, 258
    • meditation, 257–258
    • overview, 256–257
  • workspace, 249–250
• shareholders, ETF, 187
• short interest ratio, money flow, 165–166
• short selling, 204
  • calling back stock, 86
  • choosing shorts, 85–86
  • overview, 84–85
  • risk, 93–94
  • risk arbitrage, 185
  • short squeeze, 86
  • short-selling restrictions, 289
• simulation trading
  • backtesting and, 227–229
  • defined, 177
  • overview, 226–227
• SIPC (Securities Investor Protection Corporation), 280

• 60/40 rule, 292

• smart money, 160
• Smith, Adam, 20
• social media, 168–169, 256
• software-based trading platforms, 264
• SogoTrade, 270
• speculating, 8–9, 36
• spread, 23, 47, 267
• squawk box, 218
• standard deviation, 30, 42–43, 100, 239–241
• stocks, 26
  • ask price, 46–47
  • bid price, 46–47
  • brokers with day trader services for, 267–271
  • exchanges, 47–52
    • dark pools, 52, 167, 262
    • electronic communications networks, 49–50
    • Nasdaq, 48–49
    • NYSE, 48
    • over-the-counter, 50–51
    • overview, 47–48
  • leverage in, 87
  • taxes, 294–295
• StockTwits service, 216
• stop orders, 117–118, 196, 332
• stop-limit orders, 26, 118
• straddles, 306
• strategy ETFs, 62
• strike price, 88
• strong market efficiency, 74, 180
• subpennying, 76, 182
• substantial activity, trading, 294
• supply and demand, 20–21
• support level, trendlines, 137
• support systems, setting up, 259
• survival bias, 127
• swing trading, 8, 122, 133
• synthetic securities, 185–186

T

• tastyworks website, 272
• tax attorneys, 296
• taxes
  • business expenses, 308
  • capital gains/losses, 299–300
  • commodities, 292
  • currency trading, 292–293
  • earned income, 298–299
  • estimated taxes, 309
  • forms, 308–309
  • futures contacts, 292
  • information resources, 297
  • investment expenses
    • at-risk rules, 306
    • deductible, 302–304
    • interest expenses, 306
    • non-deductible, 304–305
    • passive activity, 306
    • two percent limit, 306
  • investment income, 299
  • mark-to-market accounting, 307
  • miscellaneous income, 301–302
  • options, 293–294
  • overview, 291
  • regulation, 287
  • self-directed IRAs, 309–310
  • stock trading, 294–295
  • tax experts, 295–297
  • tax-preparation software, 298
• technical analysis, 115
  • bottom-up research, 133
  • charting, 134–135
  • Dow Theory, 148
  • Elliott Wave system, 149
  • Fibonacci numbers, 148–149
  • fundamental research, 133
  • Gann system, 150
  • information resources, 338–339
  • Japanese candlestick charting, 149–150
  • overanalyzing data, 151
  • overview, 131
  • patterns
    • cup and handle formation, 145–146
    • flags, 143–144
    • gaps, 146–147
    • head and shoulders formation, 144–145
    • pennants, 143–144
    • pitchforks, 147
  • price changes, 135
  • top-down research, 132–133
  • trends
    • breakouts, 142–143
    • indicators, 138
    • momentum indicators, 141–142
    • moving averages, 139–140
    • overview, 136–137
    • phases of, 140–141
    • pivot points, 139
    • trendlines, 137–138
  • upward bias, 151–152
  • volume changes, 135
• teenies, 116

• 10-percent strategy, 103

• theta, volatility, 100
• thinkOnDemand backtesting, 270
• thinkorswim, 270
• Thorpe, Edward O., 104
• ticks, 116, 158
• time value of your money, 32
• time-weighted rate of return, 237
• tokens, cryptocurrency, 66
• top-down analysis, 132–133
• TopstepTrader, 211
• tracking error, ETFs, 64
• tracking trades
  • profit and loss statement, 230–231
  • on spreadsheet, 230
  • trading diary, 232–233
• trade execution
  • costs, 197–198
  • improving, 198–199
• trade on margin, 24
• Trade2Win website, 342
• Tradecision service, 229
• Trade-Ideas software, 216
• TradeMONSTER, 272
• Trader and Investor Summit, 209
• Trader Mike blog, 342
• TraderInterviews.com, 342
• Traders Laboratory, 342
• TradeStation service, 229, 271
• TradeTheNews.com, 218
• trading, defined, 35–36
• Trading Advantage website, 212
• Trading Blox service, 229
• trading diary, 232–233
• trading in the spot market, 56
• trading indicator (trin), 158–159
• trading modules, 176
• trading psychology, 340
• trading robot. See program trading
• Trading Show Chicago, 209
• trading strategies. See also planning trades
  • anomalies
    • calendar effects, 170–172
    • defined, 169
  • money flow
    • accumulation, 164
    • distribution, 164
    • money-flow index, 165
    • money-flow ratio, 165
    • overview, 163–164
    • short interest ratio, 165–166
  • news flows, 168–169
  • order book, 167
  • overview, 153–154
  • price indicators, 156–159, 166–167
  • psychology and, 154–155
  • quote stuffing, 168
  • traps
    • chart traps, 170
    • contrarian traps, 170
    • overview, 169–170
  • volatility and, 161–163
  • volume changes, 159–161
• traditional ETFs, 61
• trailing stops, 117–118
• training classes
  • Day Trading Academy, 210
  • Investopedia, 210–211
  • Kapitall, 211
  • Online Trading Academy, 211
  • overview, 209–210
  • TopstepTrader, 211
  • Trading Advantage, 212
• transaction costs, program trading, 191–192
• traps
  • chart traps, 170
  • contrarian traps, 170
  • defined, 169
• Treasury bond market, 280
• Treasury dealers, 54
• trendlines, 137–138
• trends, 124–125
  • accumulation phase, 141
  • breakouts, 142–143
  • consolidation phase, 141
  • distribution phase, 141
  • indicators, 138
  • main phase, 141
  • momentum indicators, 141–142
  • moving averages, 139–140
  • overview, 136–137
  • pivot points, 139
  • retracements, 137, 141, 143
  • reversals, 141
  • trendlines, 137–138
• trin (trading indicator), 158–159
• two percent limit, 306

U

• uncertainty, defined, 169
• uncorrelated risk, 63
• unit investment trusts, 69
• unlimited liability, 29
• upward bias, 151–152, 247

V

• Value Line research service, 201
• vega, volatility, 100
• virus protection, 251
• VIX, 162–163
• volatility
  • assets, 42–43
  • average true range, 161–162
  • beta, 30–31, 162
  • delta, 100
  • gamma, 100
  • implied, 163
  • money management and, 99–100
  • theta, 100
  • trading strategies and, 161–163
  • vega, 100
  • VIX, 162–163
  • volatility ratio, 163
• volume
  • liquidity, 41
  • technical analysis, 135
  • trading strategies, 159–161

W

• walk-away money, 260
• wallet, cryptocurrency, 68
• want-to-make number, 255
• warrants, 72
• wash-sale rule, 293, 296, 300–301
• Watergate scandal, 286
• weak-form market efficiency, 75, 180
• Wealth of Nations, The (Smith), 20
• web-based trading platforms, 264–266
• William O’Neil research service, 202–203
• win-loss percentage (win ratio), 239
• work-life balance
  • exercise, 257
  • friends and family, 258
  • hobbies, 258
  • meditation, 257–258
  • overview, 256–257
• workspace, 249–250

Y

• yips, 245

Z

• zero-coupon bonds, 52
• zero-sum market, 9–10, 23–24, 30, 247