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Trading the Measured Move: A Path to Trading Success in a World of Algos and High Frequency Trading


Today's high-profile traders, who work for large financial institutions, have access to almost unlimited amounts of capital allocated by algorithms that are designed by skilled mathematicians to run on super computers. In Trading the Measured Move, David Halsey—founder of the website—offers individual retail traders a method for meeting the challenge of competing with these high-flying traders and shows what it takes to profit in this highly competitive marketplace.

Now traders at all levels of expertise can learn how tap into Halsey's unique approach to investment success by drawing on Fibonacci retracements (Fibs) within a series of measured moves across multiple time frames. Drawing on Halsey's personal experience as well as years of research, this important resource outlines a set of trading rules used by sophisticated traders who commonly rely on algorithmic trading strategies based on quantitative analysis.

Filled with illustrative examples, solid data, and a fresh approach to investing, Trading the Measured Move will put you in a better position to achieve financial success.

DAVID HALSEY is founder of the website, which provides trader education and market commentary. His focus is day trading and swing trading stock index futures utilizing techniques designed to stay on the right side of institutional order flow and identify short-term setups. Halsey provides a daily market analysis, predictions, and an interactive forum for his subscribers. His videos are utilized by several brokerage firms and disseminated to their clients.

Preface xiii

Acknowledgments xvii

CHAPTER 1 Today’s Trading Environment 1

Descent of the Pit and Ascent of the Screen 1

Players on the Field 2

The Algo Brothers 4

Where Are You? 7

CHAPTER 2 Inside the Hidden Market 9

Deep Roots 9

Fibonacci Basics 11

Fibs Make the Moves 15

Why Do Fibs Work? 19

Fibs in the Real World 21

In Summary 26

CHAPTER 3 Drawing a Road Map 27

Finding Direction 27

A Mountain Range of Price 28

Obstacles in the Road: Pivot Points 32

Navigating Trends 35

Long and Winding Roads 37

CHAPTER 4 More Tools for Trading Power 39

Filling the Toolbox 39

Watching the Clock (and the Calendar) 39

Tick Tock 43

The Tape and the DOM 46

The DOM (Depth of Market) 49

A Full Toolkit 51

CHAPTER 5 The 90 Percent Factor-- Executing Your Trade 53

Where the Rubber Meets the Road 53

Priorities and Job One 53

What’s the Risk, What’s the Reward? 55

A Brief Pit Stop 59

Preparing the DOM 60

Crossing the Starting Line 61

Running Off the Road 65

When Multiple Contracts Just Aren’t Possible 66

Why 90 Percent? 68

CHAPTER 6 Three Types of Trade Setups 69

The Traditional 50 Percent Measured Move 69

The Extension 50 Percent Measured Move 74

The 61.8 Percent Failure 78

Why Is This Important to Your Trading? 82

CHAPTER 7 Using Multiple Time Frames to Trade 83

Time Frames and Russian Dolls 83

The Path of Least Resistance 84

Trading the Trend 85

What Time Frame Should We Look At? 86

Why Is This Important to Your Trading? 91

CHAPTER 8 Three Entry Strategies for Retracements 93

The Goal 93

The Three Entry Strategies 95

The Progression of Entries 101

Why Is This Important to Your Trading? 101

CHAPTER 9 The Seasonality of Markets and the Best Times to Trade 103

The Big Picture 103

A Money Manager’s Year 105

The Days 107

The Hours (Best and Worst Times to Trade) 109

The Worst Times to Trade 110

The Typical Money Manager 111

Why Is This Important to Your Trading? 111

CHAPTER 10 Tools for the NYSE 113

Lagging versus Leading Indicators 113

Tools for the NYSE 114

Using All the Tools Together 121

Why Is This Important to Your Trading? 122

CHAPTER 11 Tick Extremes and Divergences 123

The Types of Tick Extremes 123

Tick Divergences 124

Why Is This Important to Your Trading? 129

CHAPTER 12 Profi ting from Gap Fills 135

What Is a Gap? 135

The Types of Gap Fill Scenarios 136

Gap Fills to Avoid 136

Gap Fill Percentages 137

The Gap Fill Workfl ow and Filter 140

Entries 141

When Gaps Don’t Fill 142

What to Do? 143

Why Is This Important to Your Trading? 144

CHAPTER 13 How to Manage Positions and Take Profits 147

The Rule for Measured Moves 147

The Distance Formula 148

Trailing a Series of Measured Moves 150

After the Confirmation of Trend 152

Using the -23 Percent Profit Target: Take Profit on the Time Frame You Entered the Trade 152

Why Is This Important to Your Trading? 155

CHAPTER 14 Risk Management (Advanced Trade Management) 157

Bob the Trader 157

Curtis the Contractor 159

Risk per Trade 160

How Many Futures Contracts Should I Trade? 160

Stop Placement 161

The Free Trade 162

The Reduced-Risk Trade 162

Why Scale Out? 162

Pick an Instrument and Focus on It 163

Trading the News Is Gambling 163

Why Is This Important to Your Trading? 163

CHAPTER 15 The Inner Trader 165

The Emotions of a Trader 165

Mentality 165

Money Management 166

Emotions 167

How Long Does It Take for a New Trader to Trade Well? 168

Attitude 169

Trading Well versus Trading for Profit and Emotional Capital 170

The Phases of Measured Moves 172

The Series of Measured Moves 174

Basic Traditional Measured Moves 174

The Progression of Measured Moves 178

Why Is This Important to Your Trading? 178

CHAPTER 16 The Trading Plan 179

Keeping Yourself Safe with Statistical-

Based Rules 179

The Four Legs of a Trading Strategy 179

Why Trading Rules 182

General Trading Account Rules 183

Gap Fill Trading Rules 185

American (NYSE) Session Trading Rules 186

European (Euro) Session Trading Rules 188

Setups 189

A Trading Journal 189

Why Is This Important to Your Trading? 190

Bringing It all Together 190

About the Author 193

Index 195