I became a full-time trader in 1965. Next to marrying my wife, it was the best decision I ever made. Through trading, I've enjoyed freedom, independence, and prosperity. I have no boss to keep happy; no employees to manage; and no customers to satisfy. Trading has given me a great life.

I work hard, but it's on my own terms. I monitor the U.S. stock market during public trading hours between 9:30 and 4:00, paying particular attention to the morning time period and the hour or so before the close when good trades are most likely to materialize. My after-market analysis takes only about 15 minutes. The rest of my time is my own.

In recent years, I've had the pleasure of teaching my trading approach in classes organized by Elliott Wave International, a company founded by my good friend Robert Prechter. For four days, I talk about trading principles and strategies and conduct live trading. Preparing for the classes and then explaining how I trade to a roomful of people is a great experience. Putting my trading rules and strategies down on slides and presenting to a group of people reinforces to me the ingredients to successful trading. Teaching about trading has made me a better trader.

I get enormous satisfaction when months or even years later an attendee tells me I helped him/her to become a successful trader. I know for a fact that trading can be taught. But not everyone is willing to put in the time and effort necessary to succeed in this business. People often look for easy answers, and, of course, there are too many charlatans in the industry promoting get-rich-quick trading services to the gullible. The truth is there is no substitute for hard work. When someone takes what I taught, works at it and makes it his/her own, and then consistently applies it in the market, I'm thrilled.

With this book, I hope to share my knowledge and experiences about trading with a wider audience and, in so doing, provide aspiring traders with a path to success. I hold nothing back here. The techniques and principles in this book are the very same techniques and principles that I use every day in the market. Utilizing this approach, I've been able to make a nice living for many years. I'm confident that anyone who diligently and faithfully applies the ideas in this book will develop into a consistently profitable trader.

First a little bit about my background.

I received an undergraduate degree from the Wharton School of Finance and an MBA from the University of Michigan. While the degrees may seem important, I didn't learn anything in college that helped with trading. My father owned seats on both the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). He focused on the NYSE seat and rarely used the AMEX seat. Following a stint in the Marines in 1960, I used his AMEX seat and began trading on the AMEX floor.

My job was to fill customer orders on the floor. Once I understood what I was doing, I found the work to be mind-numbingly dull. I pestered my father to allow me to trade my own account. I was young and aggressive. I thought I had a feel for how stocks moved and was sure I could make a lot of money trading AMEX stocks. Finally, in 1965, I got my shot.

The truth is I didn't know much about trading, although I didn't realize it at the time. I made progressively more money from 1965 to 1968. My good fortune had less to do with skill and more to do with the competitive advantages I enjoyed and overall market conditions. Trading from the floor of the AMEX allowed me to trade faster and with lower commissions than most other investors. And most important, we were in the midst of a strong bull market phase.

At the time, there were a lot of cheap stocks selling on the AMEX. My strategy—if you want to call it that—was to watch the order flow, and when a big buy order came in for one of these cheap stocks, I would jump in and take a position. I would usually get out later in the day or sometimes the following day. I would make fractions on many of the trades: one-eighth to maybe three-eighths of a point. The strategy generally worked as long as the market remained in a bull phase. Sometimes a stock would go its own way; the low-priced stocks I favored had a weak correlation to the overall market. But, even so, I was doing well.

Probably as a result of my early success, I got into some bad habits. I started holding on to losers for too long, thinking they would eventually rally. Most of the time, they did. Then one time, they didn't. It was a disaster.

In late 1968, I had positions in 15 different stocks. I held maybe 15,000 or 20,000 shares. They were all the kind of low-priced, go-go stocks that the AMEX was pushing at the time. Many of the companies no longer exist today. We went on a family vacation and I decided to let the positions ride. I didn't have stops in place and I wasn't even committed to checking on the positions while I was away. It was probably the craziest thing I ever did as a trader. You can probably guess what happened. The stock market tanked. Two weeks later, I had lost 70 percent of my trading capital.

I was at a crossroads. I sat down with my wife and discussed the situation. We decided that either I was going to do this right or I was going to find another career. We joked that if trading didn't work out, I was going to do oil changes. What pulled me through was my motivation. I never gave up the goal of becoming a successful trader. I was determined to give it my best shot.

Slowly, I changed my approach. I talked to successful traders and discovered that many of them used technical analysis. I read whatever books I could find on technical analysis at my local library and elsewhere. I subscribed to a weekly charting service and updated the charts by hand every day until the next week's charts arrived. I began to get a feel for market direction. I started shorting stocks when my analysis indicated stocks were headed lower, which is something I had never done before. Eventually, I became an acceptable short-term trader.

I also changed the stocks I traded. Instead of trading low-priced, highly volatile, “flier” stocks, I focused on large-cap stocks that tracked the overall market much more closely. Finally, I took small positions and got out quickly. As a result, my risk control improved dramatically.

They say history doesn't repeat, but it rhymes. The bull market of the 1960s was very similar in tone and substance to the bull market in the 1990s. In the 1960s, we had the so-called “nifty fifty” that drove the market higher and higher. In the 1990s, newly formed Internet companies created massive interest in the market. A lot of traders made money by betting on the long side of the market in both decades. When everything is going up, it's not hard to make money.

Many of you probably remember that the Internet-fueled bull market ended with a resounding thud in 2001. From January 14, 2000, to October 9, 2002, the market lost 31.5 percent of its value. Suddenly, many traders who did well in the 1990s weren't doing so great anymore. Markets change, and when traders don't change with them, they lose their shirts.

The 1960s were similar. From June 1962 to February 1966, the market rose 86 percent. After a sell-off for eight months in 1966, the market took off again, rising 32 percent from October 1966 to December 1968. Then, as always happens, everything changed. From November 1968 to May 1970, the market fell 36 percent. That was my Pearl Harbor, so to speak. I learned my lesson and was prepared for the next bear market.

From 1973 to 1975, the Dow lost 45 percent of its value. By this time, I was comfortable shorting stocks and keeping my bets small. I didn't get attached to losers hoping they would come back. I had begun to learn one of the most important components to successful trading: emotional control.

Flexibility is important in trading, just as it is in life. It's good to take advantage of new opportunities that arise. In 1975, the Chicago Board Options Exchange introduced options on stocks. After studying how options worked, I decided to incorporate them in my trading. At that time, they gave me leverage that I found useful for my short-term, low-risk trading strategies. Nowadays, I primarily use options when I sense a big move is afoot.

The Chicago Mercantile Exchange (CME) introduced futures on the Standard & Poor's (S&P) index in 1980. Then in 1997, the CME began trading E-mini futures, which were a scaled-down version of the S&P futures contract. Trading volume on the E-minis soared, and they quickly became my preferred day-trading vehicle. I can get in and out of the E-minis quickly and efficiently, and I can utilize the margin available on the E-minis without any complication. They are a great tool for day trading.

The advent of personal computers, electronic trading, and reduced commissions significantly leveled the playing field for independent traders in the 1990s—myself included. With a mouse click you're in or out of a trade. Compare that to the old days of calling in an order on the telephone. Despite this amazing advancement in the speed of execution, I hear people complain that big institutional traders may be able to execute trades a microsecond faster than an independent trader. Speaking for myself, this is not a problem. I get excellent fills on my trades. And I'm not trading huge size.

I don't see a dramatic difference between the price movements in the market today and when I first started in the business. Support and resistance, momentum, divergence, cycles, chart patterns—they all function in much the same way now as they did in the 1960s. No one indicator is perfect. But combining indicators intelligently allows you to read the market and identify situations where the odds are heavily in your favor. Despite what you might read elsewhere about how computers have ruined the stock market, there is an opportunity for independent traders.

Market conditions always evolve. After the Internet bubble, the market veered sideways to slightly down until 2003. We had a weak bull market from 2003 to 2007. Then from 2007 to 2009, we experienced the worst bear market since the 1930s. Starting in early 2009, the market rallied, making up all of the gains lost in the previous bear market. As I write this, the bull market continues, although it sometimes appears it is losing steam and a correction—or new market phase—may be imminent.

Although I'm primarily a day trader, I try to understand big-picture market conditions. I'm always aware of the major and secondary trends. That said, I keep my bias as slight as possible going into any given trading day. A bias is just that: a sense that the market is more likely to trend in a particular direction on a particular day, but it is not an ironclad opinion. Sometimes my bias is wrong. And sometimes things happen outside the market that completely change the complexion of the day. I stay flexible and adjust my analysis in real time in response to market action.

I don't pay too much attention to the opinions of other traders or market analysts. I do my own homework, do my own real-time analysis, and do my own trading. I think it's important to be self-reliant in this business. Yes, you can learn from other traders. But you have to integrate what you learn into your own process of analyzing the market, identifying good trades, and executing those trades. If you want to succeed in this business, you have to learn how to trade for yourself—no one else can do it for you.

After my big loss in 1969, the changes I made to my trading enabled me to adjust to the changing market climates over the next five decades. I go long or short in response to opportunities. I don't force trades. I wait for high-probability trades. And I stay flexible, which has allowed me to make money even when my long-term and medium-term analysis was off the mark.

The biggest change I've made from when I started trading in the 1960s is my attitude toward risk. As I mentioned, when I first started trading, I went after the market like a tiger stalking its prey. No more. I now consider myself a “scaredy-cat.” I respect the market: It will go where it goes, and I believe there's no one in the world who can consistently predict the market's direction. I have my templates for identifying high-probability trades. But if the trades don't work out quickly, I'm out. And when they do go in my direction, I grab my profits.

I marvel at some of the big hedge-fund operators I read about in the financial press who make huge bets on one particular idea. Sometimes they hit the jackpot. I recall one example where a trader foresaw the housing crash and shorted mortgage-backed securities and other housing-related instruments. I gather he made hundreds of millions for his fund. I understood his subsequent bets—long gold and short the Chinese stock market—were far less successful. I don't mean to diminish this individual. Obviously, this approach works for some people. It's just not the way I operate.