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The Online Trading Cookbook


The Online Trading Cookbook is a unique resource for busy online traders of all levels, addressing the need amongst the growing number of those trading and investing from home for solid, low risk trading strategies which they can incorporate into a busy lifestyle. Suitable for all levels of retail trader and is supplemented by useful advice on the best trading tools, websites and brokers, the different markets available to trade, tips on risk and money management.

The book is divided into sections based on levels of complexity and contains specific strategies used by profitable hedge funds as well as strategies used by other professionals, all of which can be implemented by private investors. The opening chapter discusses the professional tools traders will need, from multi-screen hardware, best websites, trading software, data services, brokers, trading products and the types of traders suited to each type of trading. The following chapters give concise novice, intermediate and advanced strategies for short and long term traders.

The cookbook format is one of the most popular for teaching complicated subjects. Trading skills are presented and learnt as simply as recipes. This book provides exactly that from trading strategies to risk and money management. Each page presents as ingredients what the trader needs to do, the tools and the preparation with successful examples illustrated on the facing page. Both the proven format and its simplicity are compelling and unique in their application to trading.

Written by two celebrated experts in the field, The Online Trading Cookbook is the perfect starting point for anyone wishing to learn to trade or for advanced traders wishing to further their knowledge.

Alpesh Patel launched asset management company Praefinium Partners in 2004. He is a former Visiting Fellow in Business and Industry at Corpus Christi College, Oxford University. He has written 13 books on trading, translated into 8 languages. For Bloomberg TV he co-presented shows for three years as their in-house online trading specialist. He has had over 200 columns on trading published in the Financial Times through his Diary of an Internet Trader column. He is the founder of which is an online trading education company and has his own investment software in partnership with Sharescope.

Alpesh has lectured on trading from Beijing and San Francisco to Guatemala and from Spain to India, Singapore and Hong Kong.  Alpesh is also the founder of, an online trading portal and offering FX education as well as, an online FX broker. He writes the blog.

Paresh Kiri has vast experience as a floor trader on the world’s second largest derivatives exchange LIFFE and as a Portfolio Manager. He is an FSA regulated investment manager.

Starting his career on the LIFFE floor in 1993, Paresh was one of the first traders to embrace screen trading, through the LIFFE online trading platform APT (Automated Pit Trading). Paresh was one of the founders of Kyte Securities. Since leaving Eden Financial in 1999, Paresh has been managing private client and institutional money, and developing very specific operational services going back to Kyte Group to assist the development of an Index Options Desk, and seeking ways of bringing the strategies he developed to the wider public audience by structuring managed accounts services using on-line trading platforms. Paresh regularly coaches and holds private seminars on trading the markets. He sits on the Advisory Board of Sterling Group.

Preface ix

Acknowledgements xiii

About the Authors xv

Introduction 1


Recipe 1 Uncle’s Favourite 11

Difficulty Level: Beginner

Recipe 2 What Good Dishes Taste Like - The Recipe for Trading Success 21

Difficulty Level: Beginner

Recipe 3 Trend Lines and Channelling: Mind the Bumps 31

Difficulty Level: Beginner

Recipe 4 Japanese as Easy as Sushi: Exotic but not Complicated 37

Difficulty Level: Beginner

Recipe 5 Moving Averages: Decisions Decisions 43

Difficulty Level: Beginner

Recipe 6 Breakfast at 8 49

Difficulty Level: Beginner

Recipe 7 Let’s Get a Takeaway! 55

Difficulty Level: Beginner


Recipe 8 MACD, MA and Stochastic - Mixing Cocktails 69

Difficulty Level: Beginner/Intermediate

Recipe 9 The Breakout 75

Difficulty Level: Intermediate


Recipe 10 Natural Diet: Don’t Forget Your Roughage 85

Difficulty Level: Intermediate


Recipe 11 MACD (Mac-D) and Friends 101

Difficulty Level: Intermediate/Advanced

Recipe 12 Nouvelle Cuisine: New Issues 107

Difficulty Level: Intermediate/Advanced

Recipe 13 Momentum: Short Termism Does Pay! 111

Difficulty Level: Intermediate/Advanced

Recipe 14 Turtle Soup: The Most Famous Trading Recipe of All 117

Difficulty Level: Intermediate/Advanced

Recipe 15 Pairs Trading: One of Your Five a Day! 127

Difficulty Level: Intermediate/Advanced

Recipe 16 Double Big MAC-D 135

Difficulty Level: Intermediate/Advanced


Recipe 17 English Breakfast or All-Day Lunch 151

Difficulty Level: Advanced

Recipe 18 Surfing the Waves: Fast Food 159

Difficulty Level: Advanced/Expert


Recipe 19 Coffee Options and Spreads 173

Difficulty Level: Advanced/Expert

Recipe 20 Bonds: Shaken Not Stirred 185

Difficulty Level: Advanced

Recipe 21 Buffet: Today’s Special at McDonald’s 193

Difficulty Level: Advanced


Recipe 22 Common Cooking Mistakes and How to Avoid Them 203


Recipe 23 Utensils and Common Ingredients 209

Recipe 24 If You Can’t Stand the Heat: Taking Risks in the Kitchen 221

Index 229