Preface

How This Volume Works

Changing Your Mindset

From the outset, I stress that this volume is not a book about the advantages of any trading system over another, whether technical or fundamental, nor is it an admonishment or promotion of capitalism, consumerism, free-market, or socialism ideologies. It is absolutely not a book about how wonderful or bad globalization may be, or the promotion of emerging markets over first-world trading systems.

I have covered such topics at length in books such as Jungle Tactics and other MBA textbooks. My ultimate message is simple: to succeed in the business of trading and investing, especially in a globalized world, it is essential to note that the world is rapidly changing on all environmental fronts.

Without a trader’s ability to understand that everything in this world is connected, and thus everything in stock markets affect all other markets, his or her ability to elevate their investment skill and experience to professional status will be limited.

There is, thus, an absolute need to embrace the global environmental variables of politics, economics, business, and technology. You need to understand what these variables mean and how they affect markets, and as a consequence, securities in which you are trading. More importantly, understanding these variables means that you will be able to forecast potential changes to markets, and thus be ahead of the crowd.

As such, the professional trader cannot ignore understanding developing countries’ budgets, supply and demand factors, international peer analysis, and the risk profile of the major forces from the East, including China, India, and Japan, and less-known but powerful are Singapore, Korea, and Vietnam. The powerhouse of combining countries under one umbrella as the eurozone is a force the West cannot ignore. To do so will result in a trader’s risk profile rising, greater inefficiencies, and less profitable trades.

In addition, the aim of this volume is to reduce (even eliminate, where possible) the complexities and myriad of fundamental factors that dominate the global corporate finance world and to take the intricate mathematics out of both fundamental and technical analysis. It is a volume that suggests that—from my experience in stockbroking since 1987—both the systems of fundamentals and technicals can cohabitate to the ultimate benefit of traders, whether you are a novice trader in a select environment or an international broker operating across continents.

Here is a simple statistic: of the top 10 economies in the world (see Appendices), 40 percent are classified as emerging markets. So, if you decide to trade only first-world exchanges, you are effectively eliminating a large potential and lucrative segment of trading opportunities. Understand this, the largest economies of the world also have the largest stock exchanges, which means correlation between these becomes critical when taking your trading to the highest level possible, that is, being a global trader.

Consequently, this volume looks at how these unbelievably complex fundamentals can be simplified to produce a set of strategies that will help you to make better and more informed analytical trading decisions. As such, the principles, theories, and ideas presented in this volume call for novice and professional traders and investors to think and understand what it takes to achieve success in an increasingly growing global elite that operates on ruthless cross-border free-market ideals.

Therefore, there is a need to stress that, without an understanding of factors that affect overall markets, business, and securities movements, investors and traders alike cannot make informed decisions for the short or the long term and going short, long or conducting Pairs trades. This is even more critical if you are trading the higher-risk and geared futures or forex markets.

Among the many factors assessed, this volume can be explained in a two-fold structure: The first looks at explaining pertinent fundamental analysis and the second looks at technical analysis to enable you to develop entry and exit triggers.

More specifically, the fundamentals outlined account for correlations between various exchanges, so that the trader is able to achieve his or her desired trading targets. So far, globalization has created many millionaire traders, who are using their knowledge of global economics and business trends to make profitable trading decisions.

A word of warning: If you ignore one system, or heavily favor one over the other, it will be to your financial detriment.The issue is that many novice traders want to become full-time traders without taking the time and patience to build skill, experience, knowledge, discipline, and control. Those who do, most ultimately do become wealthy. The idea—after all—is to get you in front of a trading desk quickly, but not before you have learned the seriousness of trading in this truly chaotic world.

If you are really serious about trading, I strongly recommend that you spend as much time with drafting logical trading strategies as you do with looking at technical indicators and charts.

The preceding needs to be kept in mind throughout this volume.

Designing a Trading System

A solid trading system should compose of a set of predetermined fundamental strategies and pertinent technical triggers. Thus, I aim to personally help you to develop an evenly based system, with unbiased emphasis on fundamentals and technicals.

Fundamental Steps

The first step should always be to setup a portfolio strategy to:

The second step is to develop a filter system to eliminate securities from analysis. For instance, if you intend to trade in property, finance, and mining securities, then the analysis of industrial stocks is not required, that is, time is a critical factor in trading, so a system to choose securities to trade must be efficient, easy to use, and quick to execute.

The aforementioned is followed by an assessment of your selected securities, which now need to be investigated and understood in greater depth, that is an analysis of the company’s share price relative to its true and fair value.

Technical Steps

The first stage of setting up triggers is to assess the securities’ patterns and trends and to highlight which are dominant. These securities are then filtered down to those that have strong trends and investment patterns.

The strategy then is to look at these securities and to identify which have strength and momentum. It is pointless buying a share that has a strong trend, but the momentum of that trend is weakening.

This is followed by setting out entry and exit levels to enable the trader to optimize returns.

Application of Systems

Both fundamental and technical steps should be applied as follows:

There are many systems that do work, but traders often lack enough discipline to follow their own set of designed rules. Consequently, many end up losing serious money.

In essence, a trading system should to enable you to:

Once you have rigorously tested your trading system for at least 20 straight working days and you have consistently made profitable trades, no matter how small that profit may be, you are then ready to trade on an actual exchange.

However, you must always remember to stick to your rules and strategies. Opportunities will always arise from improved knowledge.

My question to you is:

So, this is a volume of trading strategies. I need to stress that the only way a strategy can work is if it is used in a logical and consistent manner. Always try to find the thread of logic in your decisions, follow that logic to its consequential end.

Here is a simple example: if a company announces that they would be issuing additional shares, your thread of logic would be:

Therefore, do not ignore one system or the other, but use these to your benefit and to improve your trading skills, especially with world economic forces continually moving and changing investment techniques, landscapes, and types of securities.

The question to leave you with before we start the process of becoming a day trader:

Only you can answer that.