TRADING with VANTAGEPOINT

One Users Perspective

By Brandon Jones

Foreword by Darrell Jobman, Editor-in-Chief, TradingEducation.com, LLC

$19.95

Copyright 2008 by TradingEducation.com, LLC. All rights reserved. Reproduction or translation of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without the permission of the copyright owner is unlawful. Requests for permission or further information should be addressed to the Permissions Department at TradingEducation.com. VantagePoint Intermarket Analysis Software is a trademark of Market Technologies, LLC. All other trademarks, service marks, or registered trademarks are the property of their respective owners. Other names, designs, titles, words, logos, or phrases in this publication may constitute trademarks, service marks, or trade names of other entities that may be registered in certain jurisdictions. This publication is designed to provide accurate and authoritative information and the views and opinions of the author in regard to the subject matter covered. It is sold with the understanding that neither the publisher, copyright holder, nor the author is engaged in (1) providing commodity trading advice based on, or tailored to, the commodity interests or cash market positions or other circumstances or characteristics of any particular client, or (2) rendering investment, legal, accounting, or other professional services. If trading or investment advice or other expert assistance is required, the services of a competent and appropriately licensed person should be sought. From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers.

Table of Contents

Foreword Preface Single-Market Analysis Intermarket Analysis The Edge Neural Networks Predicted Neural Index Introduction VantagePoint Overview Limited Premium Markets VantagePoint Tools Identify, Confirm, and Time Portfolios Markets Tree Charts and Reports Predicted Forecasts Predicted Differences The Daily Process VantagePoint Trading Strategy My Story The Work Your Work Your Strategy General Trading Rules VantagePoint Trading Rules The Balanced Way VantagePoint Trading Form One More Thought VantagePoint Tools The VantagePoint Tools Limited-Premium Markets Portfolios as Watchlists

iv 1 1 2 3 4 1 4 8 9 10 11 11 12 17 18 21 23 24 26 27 28 30 33 35 36 37 40 43 45 48

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Potential Trade Selection Potential Trade Confirmation Final Trade Selection Timing Market Conditions The End Game The Spreadsheet Tools The Spreadsheet Tools Trade Selector The Process The Spreadsheet Information Entry/Exit Control Trade Tracker The Process The Spreadsheet Information Trade Evaluator The Process The Questions The Record The Score The Comments The Truth Of it All Creativity and Intuition My Evolving Strategy My Trading Life Retirement Trading Long-Term Speculative Trading Short-Term Swing Trading My Success The Full Circle Final Thoughts

50 53 60 61 63 64 65 66 67 69 71 71 78 78 80 83 84 84 88 88 89 91 91 93 96 97 97 98 99 100 101

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Foreword
When most people start to trade actively, they tend to flounder around for a while. They may wind up losing money and dropping out of the trading game altogether soon after they start, or they may tread water, at best, for some time, wondering why they cant achieve the profits they had expected to see as a trader. Even if they have been highly successful in business or some other pursuit, they find that trading successfully can be a real challenge. So they may resort to outside sources to help them along the learning curve, attending expensive seminars or subscribing to advisory services that the promoters promise will make them rich. Thats the track Brandon Jones was on, as he describes in this book. But, unlike most wannabe traders who give up or limp along with mediocre results, he decided to make a real commitment to becoming a good trader. This book outlines two of his most important steps: 1. Developing and sticking with a trading plan. 2. Finding a trading tool that would help him formulate and implement a trading plan. As with many endeavors, the importance of having a plan when it comes to trading cannot be over-emphasized if you want to be successful. That plan should tell you why, when and where you should take a position to get into and out of the market. Sometimes, however, you may have a plan with great intentions, but it is not realistic or practical for your trading iv

situation. So you need to find some trading tool that can help you with your decision-making. In Brandons case, that search for a trading tool led him to VantagePoint Intermarket Analysis Software. VantagePoint is able to narrow his focus to the premium markets that offer plenty of trading opportunities and gives him numerous predictive indicators to help him analyze where the best of those opportunities are. Using data from intermarket analysis and neural networks to provide short-term market forecasts, Brandon is able to develop a trading program based on indicators that lead rather than lag the market. Although VantagePoint has turned out to be Brandons answer to analyze potential trades, he is quick to point out that the program is no silver bullet. No software or any other product can be that magical silver bullet when it comes to trading. But using the tools available in VantagePoint, Brandon worked hard to develop the guidelines for his trading plan. The process he explains in this book is one that many traders ought to emulate if they are looking for trading success. Then, in addition to showing you how to set up a trading plan, Brandon makes it even easier for you by presenting several spreadsheets to facilitate trade selection. You can copy, or perhaps adapt to your taste, these spreadsheets to incorporate them into your trading plan. Aside from its analysis and decision-making aids, Brandon points out another major value of VantagePoint: The confidence it can give you to make a trade. As experienced v

traders know, that can be a most important contribution to successful trading. Although Brandon doesnt have a long track record of trading yet, this is an interesting story of how one trader struggled, then searched, then found a trading tool that is helping him with his plan to be a better trader, and hes sharing the results of his quest with you.

Darrell Jobman Editor-in-Chief TraderEducation.com

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Preface
The essence of the Mendelsohn approach to trading and the heart of VantagePoint Intermarket Analysis Trading Software (VantagePoint) is, as its name suggests, intermarket analysis. But what exactly does this mean to the trader using VantagePoint? In the words of Louis Mendelsohn himself:
Intermarket analysis empowers traders to make more effective trading decisions based upon the linkages between related financial markets. By incorporating intermarket analysis into your trading strategies, rather than limiting your scope to each individual market, these relationships and interconnections between markets will work for you rather than against you.

Single-Market Analysis
Okay, intermarket analysis is touted as a good thing, but what is it, and why will it work for you in your trading? To see this clearly, you have to understand two things. 1. The purpose of analyzing markets is to forecast market directionmore simply, to identify trends. 2. The traditional market approach in forecasting trends is single-market analysis, which is divided into two analytic viewpointsfundamental and technical. Fundamental analysis forecasts market direction based on economic factors affecting a market. Technical analysis bases its forecasts of market direction on the idea that all of the internal and external factors affecting a market, at a given point in time, are factored into that markets price. 1

The problem with the single-market analytic approach is that it is archaic. Single-market analysis, the predominant approach to analyzing U.S. markets for more than 100 years, works on the assumption that markets trade independently of one another. Although this was true for financial markets, it is no longer the case. The rise of the Internet (instantaneous information transmission), computerized trading (trading simultaneous markets immediately), software market analysis (the ability to analyze multiple markets immediately), and, most important, the interconnectedness of global markets (the threaded influence of market upon market in all parts of the world) all make single-market analysis alone a less effective tool for forecasting trends. Particularly, single-market technical analysis is less effective because it relies on lagging indicators that view a market retrospectively to identify re-occurring patterns that then form trends. To be clear, single-market analysis is not wrong, nor is it irrelevant for identifying trends; alone, it is simply insufficient.

Intermarket Analysis
A more effective approach to forecast trends in todays markets is intermarket analysis because it incorporates the current influence of external factors that affect markets. This general description, however, does not completely explain the power of intermarket analysis, nor does it tell the complete story. Again, using the words of Louis Mendelsohn himself:
I prefer to forecast market direction prospectively in a manner that captures the character and nature of todays interdependent financial markets. This can be accomplished by using intermarket analysis tools comprised of leading indicators that forewarn whether an existing trend is likely to continue or is about to change direction.

The key word in that statement is prospectively. The critical idea is that leading indicators can forewarn whether a trend will continue or abate. This is the essence of intermarket analysis, and it is the heart of VantagePoint, as Mendelsohn points out:
Clearly, intermarket analysis tools that can identify reoccurring patterns within financial markets and between related global markets afford traders a broadened trading perspective and a competitive edge in todays trading environment, which has been transformed by the mounting globalization and integration of the worlds financial markets.

The Edge
Identifying trend direction is critical to successful trading; therefore, identifying and utilizing a trend-forecasting strategy as opposed to a trend-following strategy is also critical. The edge is found in intermarket analysis, the approach that relies on leading indicators, not lagging information. The leading indicators in VantagePoint derive from formulas based upon moving averages using intermarket data. I should clarify here that moving averages, from a strictly technical perspective, rely on lagging price data and are unresponsive to current market conditions. What separates VantagePoint from this traditional approach is its use of actual moving averages combined with predicted moving averages to create more complex indicators, such as the moving average crossover, which is one of the most useful tools in VantagePoint. Not only does the moving average crossover identify the anticipated direction of the trend, but it predicts the strength of the movement, as well. These two leading indicators in combination allow for more precise trade selection. 3

Time horizons also play a critical role in the success or failure of moving averages in trend forecasting. The further out the time horizon, the less reliable the forecast. This fact leads us to an important element of the overall edge VantagePoint forecasts are limited to no more than a few days, which is ample lead time to define market direction. The edge in VantagePoint exists because of the forecasting approach mentioned, but so much more makes it the valuable tool it is. If you are interested in understanding more about the underlying formulations of intermarket analysis, read Trend Forecasting with Technical Analysis by Louis Mendelsohn. In the book, he explains the why of his trend forecasting philosophy and the how of its development. Certainly, reading that book will illuminate much about all of this for you. For the purpose of this book, however, we have other things of import to get into. Before we move on to some of those things, though, I do want to explore one extremely important aspect of the underlying construction of VantagePointneural networks.

Neural Networks
The human brain is composed of hundreds of billions of cells known as neurons, which through their connections to each other relay information from one neuron to another. This process allows a person to learn relationships, draw inferences, recognize patterns, and make predictions, among other tasks. While substantially less complex than the human brain, neural networks model how it processes information and performs pattern recognition and forecasting. Louis Mendelsohn

In VantagePoint, a series of neural networks sift through enormous amounts of seemingly unrelated market data to find repetitive patterns that traditional technical analysis cannot spot. If neural networks are trained properly, they can make highly accurate forecasts based on the recognized patterns (approximately 80% accuracy in the case of VantagePoint). These neural networks, the brain of VantagePoint, are designed and trained to make specific forecasts tailored for each target market based upon the raw data from the target market and the related markets (intermarket analysis). These forecasts are based upon predicting short-term moving averages (as discussed earlier) to indicate the market direction of each target market.

Predicted Neural Index

VantagePoint is designed for each market, and the forecasts derive from a system of neutral networks, each providing one leading indicator for the specific target market. Each is powerful unto itself, but together the edge they provide is impressive. The leading indicators created from the neural networks are presented in both chart and text format. Three categories neatly divide the indicators. The categories and their constituent leading indicators are: 1. Predicted Forecasts High and Low Price Short-Term Crossover Medium-Term Crossover Long-Term Crossover Triple Crossover

2. Predicted Differences Short Term Medium Term Long Term High and Low Price Strength 3. Predicted Technical Indicators MACD Stochastic RSI (Relative Strength Index) Predicted Neural Index All of the above leading indicators are valuable and advantageous, but the most advantageous is the Predicted Neural Index (PNI). We will look closely at all of these later, but I want to plant the seed that the PNI may well be the most important of all the leading indicators. Why might this be so? Simply put, the PNI derives from all the other neural networks in VantagePoint. The result is that it predicts the trend direction of a specific target market two days out. In any trade that I consider, the first indicator I look at is the PNI. A value of 1.00 predicts that the three-day moving average of the markets typical price will rise in the next two days. A value of 0.00 predicts that the three-day moving average of the markets typical price will fall in the next two days. Long or short, the PNI is the most important leading indicator because simply identifying the current trend, while valuable, is not enough. The real edge comes when you have a tool that anticipates when a market is poised to either go higher or lower in the next two days. 2

Ultimately, when the day is done, the one thing to understand is that the combination of intermarket analysis and neural networks provides an incredibly powerful advantage for successful trading. No pun intended, but the long and the short of it in trading, as in life, is that timing is everything. And, to that end, VantagePoint provides the needed edge. To be sure, as you read this book, you will see this with greater clarity, and, more important, you will learn how to fully utilize the VantagePoint trading tool to your best advantage.
In all walks of life, timing is everything. In the financial markets, if you forecast the trend direction correctly but your timing is off (by just one day or even one hour or less), you can still end up losing money. Louis Mendelsohn

The above quote is one to remember as we get deeper into the essence of this book. As you will soon understand, VantagePoint is a timing tool and only a timing tool. So much of what you accomplish with it will depend on your expectations for the tool, how you use it, and what your mindset is as a trader.

Introduction
There are no silver bullets when it comes to trading. Trading is work, and it takes time and effort to understand a particular market, establish a strategy to trade within that market, and apply the necessary discipline to stick to the strategy. Then, and only then, will VantagePoint provide the edge needed to trade successfully.

The above quote is mine, and the essence of it formulated as my trading misconceptions and lack of a coherent trading strategy were dissolving. Pondering the direction of this book, the thoughts crystallized and the words formed. The quote expresses the direction we are going in this book and the critically important message I want you to understand. VantagePoint is an excellent tool for creating the edge one needs to be successful in todays trading environment. The issue, though, is not the value of the software; rather, it is the effort it takes to fully grasp that value and then to understand how to fully utilize the value in developing a trading strategy based on the software. In my experience, the two keys that unlock the value of the software are confirmation and timing. VantagePoint is not magic. One cannot rely solely on the crossover visuals in the chart to select a trade, nor can one simply go with the predicted highs and lows to find profitable entry and exit points. It took me some time to understand that the best trades are found when all relative leading indicators are analyzed, the most profitable entry and exit points are established, and the predicted highs and lows are utilized in accordance with the indicators analyzed. Not understanding the above realities prevented me from trading successfully with VantagePoint. Frustration crept into my emotional world as I missed profitable trades completely, entered trades too far into a 4

trend, or got stopped out early. I knew I had problems, but I did not give up because I could clearly see the potential of VantagePoint. So, I just kept practicing, talking to the helpful support staff for VantagePoint and searching for clues as to how I could fix my problems. Then, one day I was reading a book, TRADING IN THE ZONE, by Mark Douglas, and the light bulb lit. I had two technical problems and one big reality issue. I have enumerated the three below. 1. I was not fully utilizing the software to get accurate readings, i.e., confirmation of a potential trade. The VantagePoint folks helped me correct this. 2. I needed something to help me better define entry and exit points, so I developed a spreadsheet that helped with both confirmation and timing of entries and exits. 3. My third problem was the most profound and most difficult to see and solvesuccessful trading is not about software, or even the market, for that matter; it is about the traders approach to trading. As much as I do not want to admit this, I wanted VantagePoint to be a silver bullet. Because of that, success eluded me. The above problems are why I decided to write this book. I know there are many people just like me who are considering purchasing, or who have purchased, VantagePoint, and I want to reach out to them that is, to you. I knew if I could effectively transfer what I have learned, the value of VantagePoint as a trading tool would become clear for any trader, trained and seasoned, as well as those at the intermediate level, such as myself. This last thought now turns the focus to me. So who am I? I am not a professional trader, yet I want control of my portfolio. This has been tricky, though. When I took over my portfolio, I lacked the formal training to tackle 5

trading successfully, either through a fundamental or technical approach. So, I searched for a way to learn what I needed to know without having to go back to school or lose a ton of money in the process of learning. I knew I needed an advantage that would allow me to manage my portfolio successfully. I also intuitively knew that trading software would give me that advantage. Therefore, I began looking for an informal but reliable software tool that would give me the edge I needed. I tried numerous inexpensive trading software programs, but none delivered anything, really. And then I found VantagePoint. In fact, without intending to sound like a marketing mouthpiece for VantagePoint, I will say none of the other software tools I tested even came close to what VantagePoint delivers. (For clarity, I should state that currently my trading preference is stocks and I only trade long. Keep this in mind as you read specific references to my trading.). After months of practicing with VantagePoint, I discovered the value of the software becomes quite obvious, if it is utilized fully. Fully is the key word here, as the software contains so much more than just the easy-to-grasp actual and potential trend lines found in the charts. This, then, is the point of this bookto demonstrate how VantagePoint can be a valuable trading (timing) tool and can give you the edge you need to be a successful trader. To that end, some of the important the topics I will address are: 9 the scope and limitations of the software; 9 the value of concentrating on limited markets rather than having to search the market universe every day; 9 the value of trading premium markets; 9 the function and utility of VantagePoint tools and their use for developing a trading strategy; 6

9 the simple, daily process of using VantagePoint; 9 the importance of confirmation when selecting trades; 9 timing for profitably entering and exiting trades; 9 VantagePoint is not without workone has to have a strategy, a set of trading rules that work with VantagePoint, and the discipline to follow the rules; 9 all traders experience lossesthe goal is to win more than you lose, and to do this, one has to find an edge; 9 VantagePoint is that edge if fully utilized, and; 9 trusting that VantagePoint gives that edge. Before we move into the substance of this book, I want to give you another Mendelsohn gem that speaks to the reality of personal responsibility. After all, when the trade is over, you can only give praise or assign blame to one person you.
To succeed in the financial markets, you cannot treat your trading lightly, as if its a hobby. You must treat it like a business, and that means you will need to spend time and money to succeed. Do your homework and get the best analysis tools from the get-go or dont bother trading and take a trip to Las Vegas instead. You will have a lot more fun and a lot less aggravation. Louis Mendelsohn

I hope the information in this book helps you as much as it has helped me become successful in the often volatile and psychologically driven financial markets. I would say good luck, but it takes so much more than luck to put the money in the bank.

VantagePoint Overview
It is not my intent in this chapter to explain the setup or configuration of VantagePoint. A complete Users Guide is included as part of your VantagePoint package. In addition, an excellent support staff is available to give you whatever help you need, when you need it. I did not write the preceding sentence lightly. Personally, I am extremely disillusioned about the current state of customer service here in America. Anyone who has picked up a phone or walked into a store to seek help on a purchase undoubtedly would agree with me. Be that as it may, the point I want to make is this: The customer service provided with VantagePoint has restored my hope that American business may yet see the light and get it customer service is important. Be assured you may call or email whenever you have a question of any sort related to VantagePoint and you will get prompt, competent, and genuinely friendly service. No one asked me to say this. I volunteer my thought for your benefit and to compliment and encourage the customer service folks supporting VantagePoint. The Help section in VantagePoint is also excellent. Clearly written, it thoroughly explains all that I touch upon in this chapter. Now, lets get to it VantagePoint is a powerful timing tool with 15 leading indicators and a variety of confirmation tools. In fact, the leading indicators not only provide a heads up on market direction, but they also act as trade confirmation tools. We look more closely at these in Chapter Three, but first, I want to reiterate that no matter how good VantagePoint is, the work for selecting a tradedeciding when to enter, when to exit, and where to set stopsrests with you. Good work makes good trades happen. 8

Limited Premium Markets

When I first jumped into the world of trading, my new mentor told me three things to keep at the forefront of my trading brain: Cash is king, volume plus quality equals movement, and watch and learn a market before you trade it. It took me entirely too long to truly understand and actualize that sage advice. It took working with VantagePoint for me to finally get it. Because VantagePoint provides information only for limited, premium markets, I had no choice but to learn what my mentor taught me. 1. Premium markets, as a general rule, are actively traded, providing more liquidity. 2. Premium markets, as a general rule, are high volume, providing more trading opportunity. 3. Limited-premium markets are, in effect, watchlists that allow for learning markets, rather than hopefully searching the market universe for potential trades. When I first purchased VantagePoint, I still had not incorporated my mentors teaching into my trading brain. My unsophisticated approach to finding a trade consisted of hours spent filtering through the very large universe of possible trades. I believed that the best trades were out there somewhere. All I had to do was find one. Many times, I came up with what I thought were good trades, but the perceived fundamental strength or misunderstood technical analysis fooled me. Too many times, my trade moved in the wrong direction, moved sideways in a tight range, or inched its way up or down, and I stayed with it. For some key reasons we will look at later, getting out of a trade became more difficult than getting in. The relatively small universe of VantagePoint markets and the lighting of a bulb in my brain changed all this. 9

Concentrating on a limited number of markets has done much for my trading, not the least of which is that as I reviewed the same markets repeatedly, in a variety of larger market conditions, I began to learn the individual market itself. It may sound a bit nave, but the markets in my VantagePoint trading world are becoming known entities with identifiable characteristics and behaviors that VantagePoint tools can track. To be clear, limited does not mean few. VantagePoint provides intermarket analysis for more than 600 markets, including commodities, forex, currency futures, ETFs, interest rates, and stocks. Relative to the total number of markets in the trading universe, this number is limited, but it is still quite a few markets to search as you establish your extremely tight watchlists to concentrate on as many or as few markets as you wish.

VantagePoint Tools Identify, Confirm, and Time

The relatively small universe of VantagePoint markets helped focus my trading, which improved my trading success rate. Two important lessons remained, though: Trade confirmation is as important as identifying potential trades, and timing (finding good entry and exit points) is the key to maximizing profit and minimizing loss. VantagePoint identifies market trends, true, but there are ancillary benefits equally as powerfulconfirmation of potential trades and information for timing entry and exit points. Flash back to this earlier quote, if you forecast the trend direction correctly, but your timing is off (by just one day or even one hour or less), you can still end up losing money. As well, not confirming a potential trade might end up losing you money.

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Here are the VantagePoint tools that identify trends, confirm potential trades, and inform as to the timing of entry and exits, thus leading us to the application of those tools in a successful VantagePoint trading strategy.

Portfolios
As always, the best place to start is at the beginning, and for me the beginning is the Portfolios section. The important function of the Portfolios section is to organize your markets into tight watch lists defined by your trading strategy. This is advantageous for two reasons. 1. Finding potential trades is much quicker. 2. Successful trades are more likely. How you organize the Portfolios section depends on your strategy. Later on, I will tell you what I do and why, but for now, suffice it to say that organizing the Portfolios section according to your overall trading strategy is important.

Markets Tree
Just below the Portfolios section is the Markets Tree. This is the destination for all the raw market data downloaded daily from your chosen data provider. All the information that you will see in the Charts, the Daily Report and the History Report resides here, and it becomes available whenever you open a market into a Portfolio. You can also find other information of interest and potential value in this section. Highlight a particular market, right click on that market, and then left click on Properties. Aside from the trading symbol and some other general information about the market, you will find the top 25 interrelated markets that VantagePoint utilizes to create the leading indicators for that particular market (Intermarkets tab). It is quite helpful in 11

understanding intermarket analysis to look through these and see the connections. Another potential benefit is that this information might assist you in developing your trading strategy and confirming your trades. Depending on how many and which markets you have acquired in the initial purchase of VantagePoint, you can do some simple cross checking of markets within the various categories. For example, if you are considering a potential trade and most indicators confirm the trade but you still have doubts, then you can check the related markets (Intermarkets tab) for potentially helpful information. For example, Cardinal Health is listed under Services, but in the intermarket section, you will see Wyeth from the Healthcare group and United Technologies from the Conglomerates group. A quick comparison of the leading indicators from those three markets in different industry groups just might provide some helpful information as to market direction. The important point is that the information is there, and if you can find a way to utilize the information to help you make successful trades, then you probably should.

Charts and Reports

Charts and Reports provides information in easy-tounderstand graphics and in clear, tabular formats; it lays out information you need to identify, confirm, and time potential trades. At first, the information overwhelmed me, but after I began to grasp VantagePoint, that problem disappeared. Truly, once I understood and was able to correlate the information found here, I moved from random wins and losses to consistently more wins than losses. Better news, yetmy trading skills with VantagePoint are still improving as I continue to learn information connections. The key is to stick with it, work hard, and pay attention to what you are doing.

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The Charts and Reports tool displays (overlays) both actual and predicted data.

You can customize the data in a variety of ways to assist in identifying, confirming, and timing potential trades. You can call up charts and reports from the Markets Tree or from the Portfolios section, but you can only view a market when a portfolio is open. This is another reason to define and build your portfolios according to your strategy. Customizing charts is easy, and there are many tools at your disposal. After you have devised your strategy, the tools to use will be more apparent, but, in the beginning, there is so much that it might seem overwhelming. Really, it is not. It is all good, and you will find the tools truly advantageous in identifying, confirming, and timing trades. Clicking on the Properties tab takes you to Chart Properties where you have three tabs: General, Indicators, and Line Style.

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General Tab Appearance This tool is simple and may seem to be only for cosmetic purposes, but I find that setting the background color and assigning different colors helps me see the graphic information more clearly, and it expedites my initial scan. Data Range Although you can adjust the data range in the toolbar, you can also set it here and know that you have a default range whenever you call up a chart. Settings The simple fact is that there is a lot of information in the charts. This tool helps in corralling it. Because I tend to utilize many of the tools in my efforts, I find the legend most helpful. 14

Crosshairs Going back (or forward) in time can be beneficial when identifying, confirming, and timing trades. Crosshairs make this easy to do. Note: if you want to see the predicted high and low for the next day, grab the crosshair on the current day and move it right to the next vertical line. The predicted high and low then appear in the lower left-hand corner of the status bar.

Indicators Tab Actual Market Data The value in VantagePoint is its predictive qualities, but to make good trades, the actual market data is critical. It is not enough just to anticipate where the market might go; you also need to understand where it has been and where it is at the end of the day. I often gather information about potential trades by looking back at the patterns over the last two weeks, month, three months, and so on. The actual market data provides an advantageous viewpoint you can utilize in a variety of ways for identifying, confirming, and timing your potential trades. 15

Candlesticks Candlesticks as technical indicators have a long and glorious history, going all the way back to ancient Japan. Many technical analysts are religious practitioners of the art, and they swear by candlesticks as predictive tools. I am not a professional technical analyst, but I do find the candlesticks display solid information at a glance, and they do provide excellent market information. In fact, I discuss how I rely on candlesticks as confirming indicators later in Chapter Three. Bars Bars are the default mode for graphic representation of the high/low and open/close price ranges for each market. Line on Close This indicator displays the up and down of a market. I use it specifically for that, especially when markets are extremely volatile. If I am thinking of making a quick, in-and-out trade in a volatile market, this is one indicator I review. Volume Volume is a key to successful trading. As I stated earlier, volume plus quality equals movement. This indicator is indispensable, and you should consider utilizing it to identify and confirm every potential trade. Open Interest Here you will find open interest on all contracts. Line on High This is a line drawn through each days high price. Line on Low This is a line drawn through each days low price. 16

Predicted Forecasts
The focus of VantagePoint is the forecasts. This section gives you these tools in an easy-to-use chart format, as well as text format in the Daily Report and the History Report. Both formats contain the same basic information, but the chart format gives additional information and more options.

High and Low Price This is my starting point for gauging entry and exit points for any potential trade. I also review these to get a sense of the next days market volatility.

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Short-Term Crossover This tool is valuable for identifying intraday and position trades. It is the predicted short-term trend displayed with the actual short-term trend. The crossover is the trigger. Medium-Term Crossover This tool is valuable for analyzing intraday and position trades, as well, although I rely on it more for position trading. It is the predicted medium-term trend displayed with the actual medium-term trend. The crossover is the trigger. Long-Term Crossover This tool is valuable for analyzing position and investment trades, although it is more helpful for investment trading. It is the predicted long-term trend displayed with the actual longterm trend. The crossover is the trigger for trading. Triple Crossover The only difference in this crossover series is that the double crossover charts show an actual trend with a predicted trend (short, medium, and long) whereas the Triple Crossover series displays only short-, medium-, and long-term predicted trend lines, and the number of periods in the predicted moving averages are different from the length of moving averages used in the double crossover charts.

Predicted Differences
I have found the predicted differences in the categories below are extremely valuable for identifying potential trades, confirming potential trades, and helping to determine the strength and volatility of the trend movement.

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Predicted and Actual Trends The predicted trend difference is the difference between the actual trend and the predicted trend for the specific time frame (short, medium, or long). The predicted differences anticipate the developing strength and volatility of a trend. Predicted and Actual High and Low Price VantagePoint calculates the differences between the predicted high and the actual high and the predicted low and the actual low. Predicted Strength and Actual Strength This indicator identifies strength or weakness in a market. A value close to zero means there will be little difference between the predicted and current moving averages. A value above zero means that the predicted moving average is expected to be higher than the current moving average. A value below zero means that the predicted moving average is expected to be lower than the current moving average. 19

Predicted Technical Indicators Along with the volume indicator, these technical tools are invaluable for confirming a potential trade. I can tell you that one or more of them have either moved me into a successful trade or kept out of a loser.

MACD VantagePoint predicts the MACD (Moving Average Convergence/Divergence) one day ahead. This indicator can be utilized in three ways. Crossover Reversal When the Predicted MACD line crosses above or below the Trigger line, this could indicate a reversal in the current trend.

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Overbought/Oversold If the Predicted MACD pulls away from the Trigger line, this may indicate a possible overbought/oversold condition in that market. Divergence If the Predicted MACD and the current market price diverge (move away from one another), this could indicate a change in market sentiment. Stochastic This indicator is a momentum indicator. It tells you the strength or weakness of a trend by predicting overbought or oversold conditions. Readings above 80 predict overbought conditions, and readings below 20 predict oversold conditions. When the Predicted Stochastic crosses over the Stochastic Trigger in overbought (>80) or oversold (<20) territory, this could indicate an imminent change in market direction. RSI (Relative Strength Index) Predicted RSI, a momentum indicator plotted on a scale of 0 100, compares recent gains to recent losses. Values above 70 may indicate overbought conditions while values below 30 may indicate oversold conditions. Predicted Neural Index PNI has a value of either 1.0 or 0.0. It predicts whether a simple moving average of a market will be higher or lower two days out. Again, to emphasize, it is the first tool I look at when reviewing any potential trade.

The Daily Process

The daily process of using VantagePoint could not be any simpler, compared to many other trading software packages. Truly, it is as simple as one, two, three. 21

1. Download data from provider at your specified time. 2. Open a portfolio and begin scanning for potential trades. 3. Select, confirm, and establish parameters for your trade. Now that all the VantagePoint tools have been identified and lightly explained, it is time to look at the work that goes into developing a successful VantagePoint trading strategy. We will return to the tools for a more in depth look in Chapter Three.

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VantagePoint Trading Strategy

The first question I ask whenever anyone tells me I should do something is, Why? I dont ask why because I want to be confrontational or argumentative; I ask because I truly want to know. I will assume you are of the same mindset; therefore, when I say having a trading strategy designed for VantagePoint is a must to be successful, I am certain you want to know, Why? This chapter is devoted to the why and the how of developing a VantagePoint trading strategy. I devote a certain amount of space to discussing my trading strategy so you might see what is working for me, but, equally so, I devote much space to offering thoughtful questions and information for you to consider regarding your current trading philosophy and how you might develop your own VantagePoint trading strategy. At this point, though, I would like to note two important things. The first is that, if youre a seasoned trader who already gets all of this and your trading strategy is solidly in place, then please read this with the idea that some piece of information might pop out that could help you refine your strategy to fit within VantagePoint, which will help you be successful with VantagePoint. The second is that I am no expert when it comes to trading. In fact, I would suggest that my earlier track record with trading would clearly point to another label. What I can say with certainty and relaxed confidence, though, is that my track record began to improve dramatically and has continued on that path when I finally came to understand how to fully utilize VantagePoint and developed a philosophy and strategy to follow. So, please keep this in mind as you read the information in this chapter and the following chapters. I write 23

about that which I knowthe positive change in my trading and trading results since I began using VantagePoint as my primary trading tool. More than once, I have stated emphatically that confirmation and timing are critical to successful trading with VantagePoint. This is undeniably true, but to do either well, you have to have a strategy that, for the most part, you follow unquestionably. This sounds rigid, and the words seem to leave little room for creativity or intuition, but notice that I put the words, for the most part, in the sentence. These four words do not open the door to the type of trading that I used to do (random is the word that best describes my former approach). They do, however, open the door to creativity and intuition, which I am learning can play a role in achieving success. Let me clarify the point I am making by telling you my short but enlightening introduction to the VantagePoint story.

My Story
When I first started trading, creativity and intuition were pretty much the only tools in my toolbox. Flying by the seat of my pants was fun, as long as I made trades that came up on the positive end of things. It may or may not be true, but I have read that many beginning traders end up losers because they start out winners. They end up losers because creativity and intuition paid off in the beginning, so they learned that this approach works. As it was in my case, and probably with many others, I started out a winner utilizing this freewheeling strategy, and I saw no reason to change that is, until I became a loser. At that point, after having my trading stash cut in half, I realized I needed to either figure it out or give it up. Thus, I made a commitment: I would either learn how to

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do it successfully, or I would give it up. I made that decision in the late winter of 2006. For the remainder of the winter and into the early spring of 2007, I researched and read excellent material on trading. In that span, I realized I needed two things to succeedan edge and a strategy. I understood that to get my desired edge, I needed trading software, as I clearly lacked the training to trade successfully as a fundamental or technical trader. So, I began to try out some of the more highly-touted trading software packages. What I learned, simply stated, is they did not work for me. I became disillusionedI stopped trading. Then, as life always offers, opportunity came to me. In early May of 2007, I received a call from a delightful person who informed me that she was following up on a request I made about trading software. I did not remember the software, or even when I inquired about it, and I told her so. Not at all bothered by my admission, she politely asked if I had a few moments. My mind screamed, Please, no, not another useless pitch, but my mouth uttered, Sure, why not? And so, she did, and when she was done, what she told me seemed to make sense (intermarket analysis and neural networks). I almost gave up after the first week. I could see the VantagePoint potential, but I could not make a good trade. Then, for the second time in a little more than a week, opportunity knocked. One day, as I filtered my way through the threads at TraderChat.com, I came across a book suggestion that would first shatter and then rebuild my trading approach. The person stated that the book changed his approach and his trading status from unsuccessful to successful. Somehow, in my tortured, mental trading state, I convinced myself to buy and read the book, Trading in the Zone. 25

From the moment I opened the book until I closed it two days later, I realized the book contained the key to opening up my trading world. I understood my mental, emotional, and philosophical approach to trading had to change, and I needed a strategy. With renewed energy, I turned back to VantagePoint, and, over the next two months, I developed and implemented a philosophical mindset and a VantagePoint oriented strategy that turned my trading around. I transitioned from a random, tentative trader with little positive to show to a trader consistently posting more wins than losses. Not only did I have a new, successful approach, but creativity and intuition, the sole basis of my previous approach, transformed from a negative to a positive. In fact, as we will see in Chapters Three and Four, these two important aspects have found a place in my trading world. However, before we visit that place, I want to walk you through the development of a personal trading philosophy and a VantagePoint trading strategy. I hope this small trek helps you see how to combine a mindset and trading strategy with VantagePoint to increase your probability of success.

The Work
Each trader should have an established process that quickly highlights opportunities, and the actual management of a position should hardly take any time. The bulk of a traders time should go into defining the processes used to identify trades and manage positions. John Forman, SFO Magazine, May 2007

Forman succinctly captures two ideas: Traders need a trading strategy (established process), and it takes time to develop and implement it (time should go into defining the processes). He also states that an integral part of the established process quickly highlights opportunities. For our 26

purpose, VantagePoint quickly highlights opportunities, and it is you and your strategy that identify trades and manage positions. Success with VantagePoint comes with good effort on your part. The bulk of your work, as Forman describes it, should be, defining processes used to identify and manage positions. Translate this to mean developing a VantagePoint trading strategy. That is the work and this will be your work.

Your Work
Learning to fully utilize the VantagePoint tools takes some effort, but the effort is relatively minimal compared to developing and implementing your trading strategy. Ironically, it does not take time because developing a trading strategy is complicated; it takes time because it is so simple you think you can just implement and go. The details of the strategy are straight forward and, on paper, simple. The tough reality, as I found out, is implementing the strategy because so much of it is mental and emotional. You begin building a trading strategy when you honestly define your goals, assess your trading skill set, select your timeframe, quantify your available resources, choose your philosophical approach, and appraise your ability to stick to whatever plan you devise. The following questions give you that honest look. Once you understand your overall status, you begin developing and then implementing a trading strategy. Your work begins with the questions posed here. Your answers create the basis for your VantagePoint strategy. What are your goals? What is your skill set to achieve them? What is your time horizon to achieve your goals? How much money do you want to invest? 27

 How much money do you want to make? How much money can you afford to lose? How aggressive will you be in pursuing your goals? Do you want to trade short, medium, or long term? Are you disciplined enough to implement your strategy once it is developed? The questions above require no elaboration, except for the last. If your answer is no, then save yourself time and money. Without discipline, you are at the mercy of the markets; you will have no edge, no matter how useful VantagePoint is. If your answer is yes, then you have the prospect of success in your future. The question then becomes, what exactly is your strategy?

Your Strategy
As stated, developing your VantagePoint strategy depends on your goals, abilities, timeframe, resources, philosophy, and discipline. As well, the act of day-to-day trading requires a steady hand, a still heart, objective strength, and selfconfidence. Every time you pull the trigger for a trade, you cannot doubt or second-guess your trade. You must jump in with both feet and stick to your plan. If you lack confidence in the trade, do not do it. If you enter a trade with doubt, you open yourself up to straying from your strategy, thus removing your edge.
a trader must remain awake to the present moment, executing a pre-determined trading plan, repeatedly, without veering from that path.

Amy Farnstrom, SFO Magazine, July 2007

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I can tell you that straying from your strategy can be financially painful. I read the above quote and diligently incorporated it into my trading strategy after my first, and hopefully last, disastrous trade with VantagePoint. On July 27, 2007, I dubiously entered a trade. The overall markets had been volatile for a couple of weeks (we will look at volatility and your strategy later), but I jumped in anyway because I had twice traded this particular market successfully that month, seven of my previous ten trades were winners, and in that stretch, I nailed six in a row (all VantagePoint selections by the way). Sure enough, the market rolled up a bit and my trade went with it, but I did not take my target profit. I got greedy. I thought I could get more (my first stray). Well, predictably, the market turned back on itself, and my trade began to move rapidly in the opposite direction. When it got close to my stop, I pulled it (my second stray) because I thought the market would turn back the other way and I could still get out with a profit. As Amy Farnstrom says in her article, When you are outside your trading plan, you are wandering in the wilderness of emotions. I was wandering, so much so that I watched my trade plummet for two days and then doubled my position when I thought it had hit bottom (my final stray). It hadnt and my trade flew past the triple point of my original target loss. This proved to be my emotional limit. I pulled myself together and got out. The overarching lesson in this for me and for you is, as Ms Farnstrom puts it,
Constantly seeking to reduce risk and protect your capital must always come before making money; you must always keep this first in your mind when trading.

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General Trading Rules

Trading rules are the essence of your VantagePoint strategy. Before we explore this, though, lets quickly re-visit the weakness behind my big loss and what underlies all trading disasters. David Silverman lays it out quite accurately in the same July 2007 issue of SFO Magazine when he says,
Over the years, I have thought about this quite a bit, trying to understand the reason it is so difficult to control the emotional ups and downs that influence the decision-making process, and I have come to the almost too simple conclusion that people hate to lose, and losing is part of trading.

I hate to lose, and Ill bet you do, too, but we must accept loss, now and then. The goal is to win more than lose. With this in mind, lets look at some general rules that are helping me win more than lose. The order of these rules is important. You will see why as we explore each of them more closely. RULE 1: TRUST VANTAGEPOINT If this rule is not first, success in your VantagePoint trading will elude you. Sometimes a VantagePoint forecast will be off, and you will get stopped out. Accept this reality as absolute. Whether you rely on VantagePoint, other trading software, a trading guru, or the inside tip, the market will always do what it does, no matter how much you think you have it where you want it. The goal of VantagePoint is to give you a heads up on a developing trend, not that it will always be right. If VantagePoint, or any other forecasting method, were always right, we would all be endlessly rich. The important thing to remember, always, is that the edge is what you seek. The edge is what makes the difference. VantagePoint gives you the edge. 30

RULE 2: STICK TO YOUR STRATEGY Once you trust VantagePoint, and you have a strategy to go with VantagePoint, then the next big hurdle is sticking to your strategy. Discipline is paramount. You have to be objectively strong. If you trust VantagePoint and stick to your strategy, you will dramatically increase the probability of trading success. RULE 3: PROTECT AND PRESERVE YOUR CAPITAL Even when you follow the above two rules religiously, sometimes you will lose. When you lose, know exactly how much that will be ahead of time (see the next rule), and simply let it go. RULE 4: ALWAYS PLACE YOUR STOPS To honor RULE 3, you must practice this rule religiously. In fact, always place your stops as soon as you make your entry trade. Get in the habit of doing this, so you dont ever walk away without having placed your stops. The trick is to place your stop appropriately. If it is too close, you will find yourself stopped out more than you like. The best way to do it is figure out how much you are willing to lose on any trade (be realistic) and set your stop accordingly (1%, 2%, etc.See Chapter Four for more detail on this). RULE 5: NEVER PULL YOUR STOPS Once placed, your stop stays in. If you think you can outguess the market, you will generally be disappointed and probably lose money. Placing your stops appropriately reduces the temptation to pull or change them.

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RULE 6: HAVE CLEAR ENTRY AND EXIT POINTS Of all the rules so far, this one not only helps protect you and your capital, it also helps you maximize profits. This, also, is a rule where creativity and intuition can play a powerful, non-emotional role and where the risk of altering your strategy remains within acceptable parameters (see Chapter Four for more detail on this). RULE 7: BE PATIENT Not every trade shows immediate promise. As we well know, markets go up and they go down. Be patient and stick to your strategy. As you become more proficient in your VantagePoint trading skills and you learn your chosen markets, you will learn to wait, watch, and then act. RULE 8: DO NOT CHASE, BE ANXIOUS, OR PANIC This is a three-part corollary to RULE 7. If you miss your designated entry, do not chase the market, especially if you are short-term trading. Once you are in a trade, monitor it lightly if you cannot watch it without some level of anxiety. Anxiety serves no purpose, other than to cause stress. Sometimes, the market makes swift and sudden moves in the opposite direction of your trade. If you have your stop set, then there is absolutely no reason to panic. RULE 9: NEVER ADD TO YOUR POSITION WHEN YOUR MARKET IS HEADED IN THE WRONG DIRECTION. I have done this so many times to my regret that I can only say to you that rarely does it pay off. 32

RULE 10: NEVER FEEL YOU HAVE TO TRADE Before VantagePoint, I had the mindset I needed to trade everyday. This created a negative sense about trading and, even worse, it sometimes put me in bad trades. I learned, and you should also, that some days simply are not right for making a trade. Sometimes, you simply must bypass the markets and go have some genuinely, good fun.

VantagePoint Trading Rules

The General Trading Rules are at work for me every time I trade. It has taken me some time to incorporate them into my trading psyche, and it will take time for you, but I can tell you that every trading day that passes, I get mentally and emotionally stronger and more adapted to the rules I have put in place. They really do work. Along with my General Rules, I also have some specific VantagePoint Trading Rules that protect and preserve my capital, maximize my profits, minimize my losses, and teach me how to improve my trading. RULE 11: REVIEW OVERALL MARKET NEWS FOR THE NEXT DAY Even though I trust VantagePoint, I realize other factors can impact the markets. As a broad confirming factor, I follow the broad news on all markets, as well as specific news on potential trades. This helps me decide whether I want to enter a trade in any market, on any day.

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RULE 12: SELECT THREE POSSIBLE TRADES VantagePoint often produces quite a few potential trades. I select the three best possibilities, and then I run them through my Trade Selector spreadsheet (see Chapter Four for detail). RULE 13: CONFIRM ONE POTENTIAL TRADE Of the three trades, I only pick one, based on the analysis of Trade Selector. I have found that tracking one trade reduces my work, keeps me focused, and it allows me to closely watch and learn. I may go back to multiple trades, but for now, this is my right way to go. RULE 14: ANALYZE ENTRY AND ADJUST POTENTIAL PROFIT/LOSS My Trade Selector spreadsheet analyzes data to give a suggested entry, and it allows for adjusting potential profit or loss based on a percentage scenario input. I adjust this scenario based on any concerns (or some intuition) I might have about my specific trade. RULE 15: PLACE NO TRADE WITHIN THIRTY (30) MINUTES OF OPENING This rule helps prevent bad entries. It forces patience, and that often produces entries better than the suggested Trade Selector entry. Admittedly, missed opportunities happen, but these are less problematic than bad entries. RULE 16: PLACE STOPS IMMEDIATELY This is a rule that I never break (anymore), period. It is the best insurance to protect and preserve my capital.

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RULE 17: MONITOR THE TRADE Sometimes this means watching the trade every minute, and sometimes it means checking in. The important point is that if a trade starts to go your way quickly and with great movement, you should be ready to adjust your stop (see RULE 18) or take your profit (see RULE 19). RULE 18: REVIEW AND CHANGE STOPS AS WARRANTED I switch to a tight, trailing stop if the trade begins to move my way strongly. Sometimes this move allows me to take profit beyond my original profit target. RULE 19: BE FLEXIBLE, BUT ALWAYS TAKE PROFIT There is room for creativity and intuition here. Depending on market conditions, I either close out profitable trades early, or I run with strength past my target profit; otherwise when my target profit is reached, the trade is over. RULE 20: ANALYZE EVERY TRADE If anything propelled me to better trading, it is this. I analyze every trade, and my VantagePoint trading improved and is improving. Go figure!

The Balanced Way

For three years, I have been studying trading markets, and I have read repeatedly that two forces drive marketsfear and greed. This appears to be the commonly accepted belief. How sad and destructive. It implies we only have two ways to tradefrom a position of greed or from a position of fear. I believe we have another way, and I know that I am not alone. I argue, as do a growing chorus of reasonable voices, 35

that we should trade in a more balanced way, in our own best interest. Trading either from a position of greed or fear is not in our own best interest, nor does it serve the greater whole. Greed fosters and feeds a desire to have more than you need. It is never in your best interest to attempt to acquire more than you need. Fear fosters and feeds poor decisionmaking skills. Sticking to your trading strategy is the one thing that keeps fear at bay, and keeps you making good decisions. The Balanced Way is to trade outside your emotions, to trade, if you will, from a position of objective strength, not greed or fear. Trading from this place: makes for less mental and emotional volatility; embraces a certain calmness and acceptance with the outcome of any trade; creates space to see every trade clearly, in sharp focus; places all trading in a strong, ethical context, and; opens the door to greater probability of success. Most important, The Balanced Way returns to me more profit in the long run. Trading in this mode helps eliminate those needless, emotional errors. I have less greed-based and fear-based losses. I take profit based on my modest, pre-set targets, and I emotionally let go of a trade that hits my calculated, pre-set stop. I make my rules and stick to them.

VantagePoint Trading Form

I am increasingly becoming more balanced in my trading. I am finding that trading is actually becoming fun again, as I continually strive to assimilate my philosophy and strategic rules into this developing, trading head of mine. I now treat trading as a business. In my entrepreneurial career, one thing I have learned well is business is business 36

and personal is personal. Mixing the two often makes for poor decision-making. Trading is no different. When emotion comes into play, it often leads to bad decisions. This basic philosophy defines who I am as a trader and informs how I go about trading. Based on the above, my VantagePoint Trading Form is this: I am a short- and medium-term trader, which means that I can hold a position for as little as an hour and, generally, no longer than a couple of weeks. My preference is to keep a trade under three days, but this is subject to both specific and general market conditions. I set my profit and loss targets modestly, according to my strategy, not desiring to make more than my profit target nor fearing to lose more than my target loss. I deviate from the plan only when I am confident in my move, and I set it up so I cannot lose more than my initial target loss. My suggestion to you is that you define your VantagePoint trading form in the same simple terms I did. I believe this is important because it gives you a framed perspective within which you can generally work. Your overall trading strategy, and the rules you define, are the specific framework that will guide your specific trade choices.

One More Thought

Ive heard the maxim many times, There is nothing worse than a reformed drunk. I know numerous people who have quit drinking, and they are terrific, solid human beings. The point of the maxim is not the quality of person who has quit drinking, rather it is the problem of righteousness. I have seen the light believe what I tell you. To a minor degree, I see myself in this role in this book. I once was a random trader, wandering in the wilderness of

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emotions, but I found VantagePoint, and here I am saying to you, Believe what I tell you. The big difference between the reformed drunk and myself as the writer of this book is that what I am telling you can be verified by objective analysis in the form of results, and I am passing on the wisdom, if you will, of seasoned, successful traders who all, in one form or another, say the same things. It would seem that in the trading universe, basic truths exist, just as in any universe. As for VantagePoint, the important role it plays is actually subordinate to the role you play. If you identify your philosophy, adopt a trading strategy based upon your goals, abilities, resources, and clearly defined rules, and you learn to fully utilize the VantagePoint tools, you will become a very successful trader. This chapter is devoted to challenging you to succeed with VantagePoint. The aim is to instill in you a sense of confidence as a trader, as well as a sense of confidence in VantagePoint. As you read deeper into the book, I believe that sense of confidence will grow, and you will come to better understand how to utilize VantagePoint to your advantage. As a reminder of the key points discussed in this chapter, though, I give you just one more piece of wisdom for your consideration. This insightful passage frames this chapter nicely, and if you replace the words, signals appear with VantagePoint trade appears, the complete picture focuses sharply.
when you start trading, you need a sound trading plan that fits your level of capitalization, matches your goals and includes exit strategies to allow you to stay in the game. And you must accept that you will be wrong. Fear of failure is the No.1 enemy of confidence; it destroys the ability to learn from mistakes The successful trader knows this and has a

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set of trading rules, cultivating a habit of obedience, and commits to building skills to the point that trades are executed following a predetermined discipline, effortlessly, again and again. If making a trade becomes a reflexive action that occurs when the right signals appear, then you are, in effect, removing your mental state from the equation and simply doing what is right at the moment. Over time, the benefits will follow You must take whatever steps are necessary to overcome mental or emotional states that interfere with your trading method and weaken your discipline. Once you can do this, you will be able to consistently follow your own trading rules, radically improving the odds that you will survive and become successful. Amy Farnstrom, SFO Magazine, July 2007

I believe the twenty rules in this chapter and the general philosophical explorations will serve you well in the development and implementation of both a trading philosophy and a VantagePoint trading strategy. You may find other rules that will define how you wish to go about your trading, and it is not unlikely that you may not use some of the rules presented here. That is your choice. You might also travel different philosophical paths to achieve your goals. The point is that you need a philosophy, rules, and the discipline to follow your strategy. Keeping this in mind, lets move on to the next chapter, which focuses on the actual use of the VantagePoint tools.

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VantagePoint Tools
At about the same time my random trading began to wear me down in the late winter of 2006, I, coincidentally, had been experiencing a bad run of cards. Yes, I play poker, nolimit-hold em. I generally play in the $100-$200 cash games. Anyway, for about two months, the cards were not turning in my favor, but I kept playing, becoming more frustrated, and, of greater importance, losing more money. I kept playing because I knew it was the cards, not me, and, eventually, they would come my way, if I just kept playing. My introduction to VantagePoint in May of 2007 and my reading Trading in the Zone changed that losing way of thinking. As I went through my metamorphosis in trading, I simultaneously began to focus on the idea that playing poker was no different than trading in the stock marketrisking money to make money defined both realities. So, I began to view my card playing in the same context as my trading, and I had this wild thought: Could I also develop a strategy for poker that worked? I thought, maybe I could. So, I put myself to the test, and asked myself the questions that need honest answers. What is my goal? To win consistently. What is my skill set to achieve them? Certainly not professional but good enough. What is my time horizon to achieve my goal? No more than four hours for any game. How much money do I want to gamble per game? No more than the initial buy-in. 40

 How much money do I want to make? At least double my money. How much money can I afford to lose? Designate a set amount as my total gambling pool, and if I lose it, I am done. How aggressive will I be in pursuing my goals? I will be aggressive but careful. Am I disciplined enough to implement this strategy once it is developed? Yes. After I answered these questions, I began to apply some absolute (well, almost absolute) rules to my playing. RULE 1: TRUST MYSELF RULE 2: STICK TO MY STRATEGY RULE 3: PROTECT AND PRESERVE MY CAPITAL RULE 4: CASH OUT WHEN I DOUBLE MY MONEY RULE 5: KNOW WHEN TO GET IN AND GET OUT RULE 6: BE PATIENTCARDS WILL COME RULE 7: NEVER BET BIG ON ONE MORE CARD RULE 8: DO NOT BE ANXIOUS OR FEARFUL RULE 9: ONLY BLUFF WITH MULTIPLE OUTS RULE 10: NEVER FEEL YOU HAVE TO PLAY A HAND

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The point of this poker story is my luck changed when I actually focused on the act of playing cards, when I treated my game more seriously. My focus became winning more than losing, and to this day, my pool of gambling money is still growing. I am, no pun intended, still in the game. So how does my poker-playing story relate to VantagePoint and your success? Plenty, I might say. First, notice the similarities in the rules. Second, and most important, the point in making the comparison is for you to understand that trading, like poker, is only gambling, and nothing more, unless you understand your philosophical approach, develop and implement a strategy, and have the discipline to stick with it. If you do this, you increase your win probability because you have given yourself an edge. Turning around both my poker playing and my trading were not accidental. Both positive results came to me because of the actions I took to change a negative into a positive. True, one might argue that the actuality of implementing a strategy is the primary reason things changed, and it would be hard to disagree, but I believe there is another factor that contributed to the turnaround in my card playing and my tradingmy mindset. I will say, from my point of view, if your head is not in the right place, you will have a run of bad cards, so to speak; the markets will seem to conspire against you. If I were to pinpoint another thing that changed the direction of my trading more than anything else, it would be that I worked hard (and still am) on eliminating emotion from the game, which is, of course, part of the mindset. As soon as I was able to leave the table when I reached my target profit, I began walking out a winner. Every time I walked out a winner, I placed another brick in the formidable idea that I could win. Every time I lost, I accepted that reality, and I understood that from time to time, it would happen. On these terms, the game became enjoyable again. Each time I sit 42

down to play now, I believe I will win. Each time I enter a trade, I believe I will win, and, as Robert Frost once said, and that has made all the difference Success breeds success. I am convinced this is so, and just as it is for my poker playing, it is for my trading. I believe I will win. This attitude is consistent with winners in every competitive realm, and I tell you this now so you keep it in mind as we discuss the VantagePoint tools. I want you to understand that tools are just tools, and they only have value when we know how to use them with confidence. I would like you to believe that when you use the VantagePoint tools in conjunction with a solid trading strategy, you will win.

The VantagePoint Tools

One of the important differences between poker and trading is the set of variables particular to each. Poker relies on combinations of 52 cards to produce probable results. This is clearly a small universe. If you are trading in the market universe at large, the variables far surpass the 52 cards in a deck. In fact, the trade possibilities in the U.S. market universe are upwards of 12,000. Hoping to catch aces in the hole is quite a daunting and unforgiving possibility. Yes, it can happen, but if you have stated goals to achieve in a certain time frame, I suggest time is better spent, and the long-term gains are larger, if you reduce the variables considerably. In my old trading style, I thought I was reducing variables when I used a stock screen, researched the fundamentals, or tried to read a chart. To a small degree, I was, and in my limited experience I saw this as enough. I now understand my former approach could never reduce the variables enough to turn the probabilities more in my favor. I could never gain an edge, simply because I relied on feelings and random chance more than educated selection. 43

VantagePoint works because its balanced combination of tools give me the opportunity to make educated selections, and that is all they do. It is up to me to collate and interpret the information the tools provide. Before I understood this, though, I saw VantagePoint as a silver bullet. When I first purchased it, I believed it could do more than it could; I wanted it to do more than it could. Now, I know better because I understand that every good thing received requires work, and learning how to use the VantagePoint tools is work that has paid off in making my trading strategy work. If you learn how to fully utilize the VantagePoint tools, that work will pay off for you also. Martha Stokes, in an article titled, The Tools Of The Trade (Stocks and Commodities, October, 2006), strongly reinforces the idea that learning the tools in your toolkit is essential to success. She points to another downfall of traders as well, and that is the toolkit they rely on is not balanced.
Whenever a trader comes to me with less-than-satisfactory results, I first check his or her toolkit of indicators. Many factors can cause this trader to have disappointing results; often the primary culprit is not understanding how to use indicators. The most common problem is The toolkit of indicators is out of balance

After turning back to VantagePoint with renewed focus toward learning the tools, I came to understand that the real strength of VantagePoint is not just one or two of its tools; it is its balanced combination of indicators all working together that make it so powerful. I experienced this enlightenment because I learned each of the tools independently and then incorporated each tool into my overall strategy. And as I refined and implemented that strategy, it became clear that no one tool brought me to a successful tradeall of them in combination did. 44

Limited-Premium Markets
The first tool I came to value is the VantagePoint limitedpremium markets. This feature is a useful tool because it does the work of reducing the variables, an important factor I referred to earlier. Limited-premium markets have another plus. Because the market universe is reduced, I am getting to know the markets to which I am subscribed. This might sound odd, but it is true. As I watch and learn my markets, I find, for example, that some markets consistently react to overall market news and specific news about that market. Other markets simply absorb the news and move on. This is helpful to understand, as part of my strategy is to check overall and specific market news before I trade. Watching limited-premium markets also allows me to correlate overall market-sector movement with specific markets. Once I became able to identify quickly the sector to which a market in my watchlists belonged, I could then mentally correlate the movement of a market to my current knowledge of that sector and its movement. I began to compare certain markets in that market sector as well to see how they moved related to the sector and to each other. For example, in July and August of 2007 I traded AMD and INTC because I was following the technical sector of the overall market, and I could see at that time that each of those markets behaved differently as the technical market sector showed either strength or weakness. INTC tended toward stability, no matter what the market sector did, and AMD tended to be more volatile, moving more in synch with the market sector. Now I saw this, but I did not put the pieces together, in terms of what this might mean for my trading. Simply, I lacked the experience.

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In any case, as I watched these two markets, VantagePoint pointed to both as potential trades, and I selected AMD. I entered and exited two AMD trades in three days making a profit on each trade. As I see now, to some degree I was lucky on the second trade because the overall markets were becoming volatile. I barely got out with my profit. Now, here is where I made my first mistake. I did not apply what I had been learning about the behaviors of those two markets in the overall conditions at that time. Almost two weeks later, I entered a marginal AMD trade again, except this time the overall markets went from slightly volatile to extremely volatile. I should have never entered the trade knowing what I knew about how AMD followed the flow of the technical market sector, but I was riding on my previous success, and that was another mistake. This is the trade that turned out to be my one disaster with VantagePoint (up to this point), as I broke rule after rule, thinking I could win again with this particular market. On the other hand, during that July/August period when the overall markets (technical market sector included) were on a roller coaster, I entered a solid and profitable trade with INTC. As I said earlier, INTC seemed to go against the overall market downtrends. In the face of strong selling during this period, INTC would incrementally go up, incrementally go down, or hold steady. It never dropped like a stone or rose like a balloon. After watching this a few times, I decided to make a trade when the VantagePoint indicators pointed to movement in the direction I wanted. This time I trusted in both VantagePoint and my understanding of how INTC had been behaving in those unsteady, overall market conditions. Anyway, the opportunity came, I entered, held the trade longer than I like, and then exited when it hit my profit target. I made money on the only trade I made in those volatile weeks. 46

I held the trade for three long weeks. I stayed with the trade that long for several reasons, not the least of which is that the trade never stopped out nor did it reach my target profit. The trade went up a little and down a little. Plus I was not truly desirous of finding another trade in that extreme volatility. Everything seemed upside down, except the trade I was working. All throughout, though, I remained calm, and an important part of that sense of calm stemmed from my having watched and learned how INTC behaved during those volatile times. Ironically, part of my calm demeanor derived from my old, pre-VantagePoint thinking. I had a feeling that if the overall markets showed some steadiness, I would hit my profit target. In my eye, the unsteadiness of the overall market gave me license to go with my intuition. Sometimes, when it seems like crisis is all around you, you just have to go with what you believe you know; you just have to be creative. This trade became creative because I sensed the market would eventually get to my target profit, and that well-founded sense added to my confidence, once I passed my three-day limit. At that point, my choice became clear. Do I stay in for as long as it takes to hit my target profit, or do I get out wherever I am and get into another trade? I decided to stay with the trade for all the reasons stated, but the two that held the most sway were: I believed I knew how INTC would behave in those conditions, and my intuition just felt right. I was correct on both counts. When it finally did hit my target profit, I thought about staying in, as INTC was still showing trend strength. That thought lasted about two minutes. I realized I had had enough. I was right where I wanted to be, where I had planned to be. I decided to get out with my profit and let it go. I moved on, and so did INTC. Over the next two days, it continued to climb, but, as I have learned, that trade ended when I got out. What 47

bolstered my confidence even further then, and still does now, is that I let the trade go emotionally no regrets. On to another market in my watchlists was, and is, my attitude.

Portfolios as Watchlists
In another part of my life, I ride horses. Several years ago, I had a green horse that required some professional training. Part of that training was for me to ride the horse under the tutelage of the trainer. I will never forget a lesson he taught me about starting something off right. My Arabian, Amigo, was bouncing around, trying to wrest control of our ride. The trainer told me to stop the horse and then start again. I did, and we ended up doing the same thing. The trainer told me to do it again, except this time, he said, Make the first step a calm step. He went on to say, If he doesnt take a calm step, stop him and keep doing that until his first step is a calm step. He explained that if you start a horse out right, from the very first step, the horse will simply stay with that, and the behavior you want will follow. Well, after a million starts and stops (or so it seemed), it worked, and today we never start a ride without the first step being a calm step. The point here is that if you think about and set up your watchlists to be efficient, then your first step is an efficient step, and the next steps will follow accordingly. I have found this is the case in my VantagePoint trading. Every trade I make starts by scanning the Portfolios section, so I have organized my watchlists for efficiency and speed. How you do it is up to you, but for me Ive organized my watchlists according to price, which provides for me the efficiency and speed I want in the initial search for potential trades. I did not start this way, but this is the setup I have found to be most useful.

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I based my first attempt at organizing my watchlists on the idea that I would watch a few promising markets over a period of days to ascertain which had the strongest possibilities. When a market showed strength, I moved it into the next watchlist called Potential Buy. If it continued to show strength, I moved it into a watchlist called Buy. This approach was a painstakingly slow way to find good, short- to medium-term trades. Well, I quickly figured this out as I entered trades only to find the trend coming to a close. This was one of many trial-and-error mistakes I made in the early days of learning how to use VantagePoint. My second attempt at organizing my watchlists fared no better. In this approach, I created watchlists based on the sectors in the Markets Tree. I simply moved all the markets under a certain section to a watchlist named the same thing (Consumer Goods, Utilities, etc.). I kept the Buy watchlist and dumped the Potential Buy watchlist. My thought was that this would save me time, and it did, but moving a market from the individual watchlist to the Buy watchlist still seemed inefficient, and it was. Determined to get efficient, I tried a third approach. This time, I organized according to sector and price, and I dumped the Buy watchlist. This improved efficiency dramatically, but soon enough, I would simplify again to where I am today, and that is, I organize all my markets according to price. $10 - $30 $31 - $50 $51 - $75 > $75

This categorization of my markets works best for me because it allows me to search my market universe in smaller segments based on price. Since I look to price as a factor in determining my trade, this is both efficient and quick. An additional reason to organize all your markets into Portfolios watchlists is the initial chart view that comes up 49

when you call up a market. If you call up a market from the Markets Tree, the chart comes up in the VantagePoint default format. This may or may not be the default format you have set up, and if it is not, then you have two options. You can go through the steps of selecting the elements of your default format for the new market or, more simply, after you call up the new market, go to an existing market in that watchlist, go into Properties, and click on Apply To All. Assuming you have your default format set up with the other markets in that particular watchlist, clicking on Apply To All will immediately switch the new market to your default format. You can avoid both these steps if you always call up a market from a watchlist in the Portfolios section.

Potential Trade Selection

Selecting a potential trade is a process that is now extremely quick for me. When I first started with VantagePoint, it was a bit cumbersome. Aside from not having my watchlists organized in a way that assisted me, I also did not really know what defined a potential trade. My initial approach was simply to find a market with a predicted trend that was approaching a crossover or had recently crossed over an actual short- or medium-term trend line. I would then look at the PNI to see if it was at 1.00 or 0.00. Given my lack of VantagePoint knowledge in the beginning, this simple approach had me looking at lots of potential trades. As I learned more, I realized that the first, and most important, indicator for me to look at for any potential trade is the PNI. As I will discuss in just a bit, the crossovers are important, but they are, for me, less important than the PNI. In my opinion, the PNI is the most accurate leading indicator of all the VantagePoint tools. It is the one that produces the 80% accuracy statistic for VantagePoint. It 50

predicts whether a three-day simple moving average of a market will be higher or lower in the next two days. This is the reason it is the first and most important indicator for me to see when I am scanning for potential trades. To scan quickly for potential trades, I open a particular watchlist, and then use the forward button (in the upper righthand corner of the Market Bar). This takes me through the markets in that watchlist one at a time, and the graphic charts quickly show me what I need to know. 1. Which markets have the PNI pointed in the right direction. 2. Which markets have a Predicted Strength headed in the right direction. 3. Which markets have three Predicted Differences (short, medium, and long) pointed in the right directionup or down and above or below the zero line. If all three indicators are correct in a particular market, I write down the symbol of that market and then move onto the next in that watchlist. When I am through all of my watchlists, I then weed my list down to the three strongest candidates. I do this by looking to the Predicted Crossover indicators. The Predicted Crossover most helpful to you will depend on your strategy. For me, as a short- and medium-term trader, the most important crossovers, naturally, are the short- and medium-term crossovers.

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What you look for specifically with the Predicted Crossover also depends on your strategy. I tend to be more aggressive in my trading strategy, so the crossover I look for is a predicted trend moving toward a crossover or a predicted trend that has just touched for a crossover. Both cases will send a potential trade to the next round. If a crossover has already happened and it is moving in a divergent direction from the actual trend, either above or below the actual trend line, I eliminate that market as a potential trade. I do not eliminate it because it is potentially a bad trade, necessarily. In fact, I have entered these trades and they have worked out. I eliminate these potential trades because my best success and quickest profits are with those trades just beginning to move into a trend. True, some trends go on for some time, and there is profit in those trades, but my perspective is short- to medium-term, so I am not interested in a trend in progress. I want to trade a market that is just about to move into a trend. You might find the opposite is true for you, and that is why it is so important to define who you are as a trader and what your strategy is to be successful. Only you can find your way down a successful trading path. In the case where more than three potential trades have met all of my criteria, I simply choose the best three of the group. I define the best three as those with all the indicators pointing and moving in the correct direction. For example, (assuming a long position), let me compare two almost identical potential trades. The first has a PNI of 1.00. the three Predicted Differences are pointing up and the Predicted Short-term Difference is below the zero line. the short- and medium-term predicted trends are pointing to an imminent crossover. 52

The second potential trade has the same characteristics except that the Predicted Short-Term Difference pointing up is above the zero line. In this hypothetical case, the second trade is the one I would select because in a long trade, I want to see the predicted difference headed above the zero line. Once I get to the final three, I then confirm all three, and the best of the three becomes my trade. This last phase is a more complicated process, but I have found that going through it raises the probability for a successful trade.

Potential Trade Confirmation

VantagePoint provides numerous tools to confirm potential trades. When I first started using the software, I did not quite understand how many different tools there were and how I could use them in combination to confirm potential trades. In all candor, I didnt even think I needed confirmation for any trade. As it turns out, an important element of my developing VantagePoint success is that I confirm all potential trades. Your trade selection process will develop as you work with VantagePoint and begin to understand what tools you need to confirm potential trades based on your strategy. In my case, I utilize all of the confirmation tools, although some carry more weight than others. By the way, as a reminder, using VantagePoint does not mean fundamental and technical analyses are obsolete. If you rely on either of those approaches, you may find them helpful in your own confirmation process. Keeping this in mind, lets look at the VantagePoint confirmation tools.

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Data Range Sometimes, what a market will do in the future relates to what it has done in the past. Although I do not use past patterns and information as confirming tools, I do consider the information when I am interested in learning about a market. I should add here that my default Data Range is two weeks. Since we are talking about detecting future patterns with VantagePoint, it makes sense to look at past patterns, especially as they relate to volume. If I have a potential trade, I look at volume rise or fall in relation to price for the past month and three months. In my strategy, anything more than this timeframe is not particularly helpful, even though it might be interesting. In any case, if price is either rising or falling on downward trending volume, this is a red flag for me. Predicted Next Day High and Low If I like a potential trade, these numbers can make or break that trade. In my short- to medium-term trading strategy, the difference between the predicted high and predicted low tells me what the potential range is for the trade. The wider the range between the two, the better I like it. It gives me more room to get in and get out that next day, and if I could have my trading world just exactly the way I want it all the time, I would have me in one, wide-range trade per day. I also consider the range between the predicted high and predicted low for the current day and the actual close of the previous day. If the range between these price numbers is small, I am less likely to enter the trade. Again, small ranges give me less room to maneuver toward my goal of hitting my target profit. The predicted high and low also help me finalize my decisions about where to enter, exit, and place stops in a trade. I discuss this more in the next chapter. 54

Predicted Differences Differences between predicted numbers and actual numbers are helpful in confirming potential trades and selecting entries, exits, and stops. VantagePoint provides these numbers for Predicted High and Predicted Low and Predicted Short-, Medium-, and Long-term trends. In both cases, if these numbers are not all above or below zero and pointing in the correct direction, then I consider the trade only if other VantagePoint tools indicate the market is moving toward a trend. Even then, I more than likely will not enter the trade until I am certain all the differences are strongly trending in the correct direction. Short-, medium-, and long-term differences all tell you the same thing within the time frame of the trend (the difference between predicted and actual); however, you should take into consideration your trading strategy when evaluating the differences for any time frame. For example, a negative difference between a predicted and actual short-term trend might mean less if you are looking at a long-term trading strategy (investment) and a positive difference between a predicted and actual long-term trend might mean less if you are trading short term (intraday). Both, however, might have some bearing if you are trading medium term (position). Actual Trends When I consider a potential trade, one of the primary things I review is the actual short-, medium-, and long-term trends. The best thing to see is the three trends all showing continuous movement over time in one direction or another. These are clear favorites for me. I like these trades. If the long-term trend is either flat or moving slightly in the opposite direction of my desired direction, I will still consider the trade, but I will only take it if all my other confirming 55

indicators point to it as a solid trade. Although this movement is a sign of a potential trend shift, I will consider this trade because, if all else is solid with the trade, I might very well be in and out before the shift occurs. If the short- and medium-term trends are diverging, I will not take the trade for obvious reasons. I want both trends to be moving in the correct direction. Volume Volume speaks volumes about price movement in a market. If VantagePoint predicts the price will go up (or down), and the volume movement is strong and developing in the desired direction, this is one of the best confirmations for me. If the volume is relatively weak (compared to past volume for that market) or is weakening, I wont trust the price movement because I believe it is unstable, and unstable does not work for me. It is simple: If the volume is trending up strongly, a whole bunch of people are buying or selling and that creates both liquidity and opportunity in a market. If the volume is trending down, interest is waning, and this creates potential volatility in price movement. Predicted Technical (Momentum) Indicators The words in the VantagePoint Users Guide give an excellent overview of what one looks for in these indicators.
Value and position of the indicator line the indicator reading on a scale between 0 and 100 typically reflects when a price trend may be weakening or strengthening by comparing the current value with previous values. Overbought/oversold if the predicted momentum indicator exceeds a prescribed boundary, this indicates the market may be becoming overbought or oversold. The

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market may be due for a correction that will bring the indicator reading back within the specified boundaries. Divergence divergence between the predicted momentum indicator and market prices may indicate upcoming changes in market sentiment.

Although the VantagePoint Users Guide also states that Momentum indicators work best when markets are trading within a range or choppy market conditions, I find them useful for confirming aggressive short- or medium-term trades, those approaching a crossover or those beginning a crossover. The indicators below predict both direction and strength of a market, and I strongly rely on all of them as a group to confirm a potential trade. I find that overbought and oversold conditions in a market often correctly point to trend direction, and, as confirming indicators, they are indispensable. MACD (Moving Average Convergence/Divergence) This indicator tells me the probable direction of a potential trend (trigger crossover) and the strength of movement in that direction (convergence/divergence). If the potential trade looks good but the MACD trigger is pointing to a change in trend direction, I may very well pass on the trade. I make my decision after I look at the other momentum indicators and assess as a group what they are telling me in reference to whether I should enter a trade or not. RSI (Relative Strength Index) This predicts strength or weakness in a trend based on the comparison of recent price gains to recent price losses, or rather, overbought or oversold conditions in a market. I place a lot of emphasis on this indicator to confirm a potential trade.

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Stochastic This indicator formulates from the position of the close, relative to the high or low of the day. It is another way to view overbought and oversold conditions. I like to use this indicator in conjunction with the RSI and the MACD. If all three are confirming, then I will move the trade on to the final selection. Predicted Strength Predicted Strength is powerful in my confirmation process. In the words of the VantagePoint Users Guide again,
... a value close to zero means that there will be little difference between the predicted and current moving averages. A relatively high Predicted Strength value indicates the predicted moving average will be much higher than the current moving average. A relatively low Predicted Strength value indicates that the predicted moving average will be much lower than the current moving average.

The further the value from zero (in the correct direction), the better I like it because I like wide ranges in my trading. Conversely, if the Predicted Strength is moving in the opposite direction of the predicted and actual trends, it is a red flag, but it does not necessarily doom the trade. The trade potential depends on the strength of the move. If the change in direction is huge, then I let the trade go. If it is minimal and the other indicators point to a good trade, I move the trade on. Candles I love my candles. Even though I truly know so little about the art of predicting markets through candlestick analysis, I nevertheless find candles extremely useful in confirming potential trades. The simple guide I use is this: If 58

VantagePoint tells me a market is moving into a trend, I generally look to have at least two, strong green or red candles in a row. By strong, I mean high volume with a wide range between high/low and open/close prices. The only exception to this rule is if all the indicators are saying that the trade is strong and I am working on the aggressive side of my strategy. The information represented by the candles is available in other forms with VantagePoint; however, I find the candles useful because they tell me what I want to know at a glance. If I see the candles are not right, I will go back and review my potential trade with all the other indicators. On the other hand, if the candles are the way I like to see them, and all the other indicators are correct, that potential trade moves onto the final round, which is my Trade Selector spreadsheet. Volatility Even though volatility is technically not a VantagePoint indicator, I still consider it a confirming tool, and here is why. In the first half of July 2007, I was having fun trading, and then, seemingly without warning, the overall markets began to bounce radically up and down, and they would continue to do so for several weeks. In this period, VantagePoint served me well. Every evening, I performed my VantagePoint ritual, and every evening I would get mixed signals on virtually every potential trade I considered. I interpreted that as instability in the markets. So, for the rest of July and through most of August, VantagePoint pretty much kept me on the sideline. I took only three trades in August (one loss, two wins). Two of the trades I entered were marginal at best (one win, one loss). I took them because I was impatient. The other successful trade I entered because all the VantagePoint indicators suggested I should (see the INTC trade discussed earlier in this chapter).

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When the indicators pointed to a solid trade, I trusted them, and it paid off. Although I only traded three times during August, I nevertheless continued my daily VantagePoint work. This was time well spent. Day in and day out, I watched the indicators compared to the markets. I watched as the Dow, NASDAQ, and S&P 500 jumped this way and that. I began to understand more about how the VantagePoint indicators and markets behaved in such volatility. In that timeframe, the functionality of the VantagePoint tools sharpened and clarified in my mind. I clearly could see their value, not just in stable markets but in any market. With this new understanding, I realized that VantagePoint clearly reflects instability in the overall markets, and that reflection acts as a confirmation tool unto itself. Clearly, the variety of VantagePoint indicators have specific roles to play in the trade confirmation process. And, clearly, each is effective in the particular information it offers. The point is that you have choices, and you will choose those tools that best fit your particular strategy and the ones you favor in your quest to succeed. Just remember, in any market on any given day, you will get mixed indicators. The real skill resides in ones ability to discern the strong indications from the weak and the relative value of all the information in total.

Final Trade Selection

This is the final phase of my VantagePoint trade selection process. In this phase, I introduce a new tool outside the realm of the software but completely in the realm of my VantagePoint trading strategy. This specific tool and two others are spreadsheets, and we will look closely at all of them in the next chapter. For now, though, I will refer primarily to

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one of those spreadsheets, as it plays a crucial role in helping me select my one trade to enter. Once I have my three strongest trade candidates, I input relevant actual and predicted data into Trade Selector, a spreadsheet I developed to help me evaluate entry and exit points. The spreadsheet also has customizable features that project number of shares to buy based on the dollar amount invested in a trade and target prices for exit and stop, and it rates the volatility and relative risk of a trade based on actual and predicted data of the market. These features help me decide which trade to enter or not enter. If I decide to enter a trade, Trade Selector allows me to adjust my entry, stop, and exit based on different percentage scenarios. It is, if you will, the final confirmation tool in my trading toolbox. The trade I finally select is picked because the information in Trade Selector has confirmed the best possible trade. I use this tool to establish timing for every trade I enter as well.

Timing
Early on with VantagePoint, I experienced problems with my timing. I found myself getting into trades too late or stopping out too early. As has been stated by many voices in many areas of life (in particular with trading), timing is everything. Thus, the potential trade I select will provide the best timing of the three potential trades. It will have the best entry point. Entry Once I select my trade, the first element of timing is the entry, which is the most critical aspect of timing a trade. Based on my trading style and strategy, which is to gain the maximum profit in the shortest timeframe, entry becomes critically important; therefore, I have to get close to the 61

bottom of that days price. Where that bottom will be, though, is the rub. Sometimes, a confirmed trade is already on the move, and getting to the bottom price sometimes means getting in as quickly as I can, so no matter what my spreadsheet tells me, I have to make a creative decisionwhere do I enter? This decision is intuitive at this point, and I have to make it quickly. Not liking pressure when making a trade, more times than not, my decision is to let it go, and wait for the next trade. If I decide to take the trade, the guidance I use comes from the Predicted High and Predicted Low for that day. VantagePoint predicts the high and low prices close enough and often enough that I can rely on them as parameters for making my decision whether to enter a fast-moving trade. Assuming, though, that the trade is just starting to build momentum, I rely on what Trade Selector gives me as my entry point. In the next chapter, we will look more closely at how Trade Selector works in this regard. Exit The exit point (where I take profit) is the second element of timing a trade, and no matter where I enter a trade, this number is always pre-determined at a certain percentage. Candidly, I am still refining this aspect of my trading strategy, but I am fairly close to having the rule set. I am becoming comfortable with taking a 1%-2% profit per trade. I am finding this provides numerous benefits, but the one that stands above any other is that with a 1%-2% profit-per-trade rule, I am giving myself the opportunity to take profit on virtually every trade. Although taking profit every time doesnt happen, this strategy does set me up to close more trades as winners than losers, and that, my friends, is the ultimate point of trading. 62

Stop The third element of timing is the stop. Early on with VantagePoint, I often stopped out too early. Part of that was fear, an unwillingness to risk a reasonable amount of dollars per trade. To avoid this embarrassing problem of premature ejection from a trade, you must accept that sometimes you will lose, and you have to be prepared mentally to let go of a certain percentage of your investment money in any trade. What that percentage is depends on your strategy. The only caveat I can give you is that you have to be reasonable. My pre-determined loss ranges from 2%-5% per trade, depending on the total dollars invested, the per-share value, and my understanding of how that trade will move. Generally, if I make a trade within a volatile market, I will give the trade more leeway. If I believe a trade will move up in a steady direction with minimal volatility, I will tighten the stop to the lower end of my range. I do this because I know that if that trade begins to move rapidly in the wrong direction, then I misjudged it, and I will be okay getting out with a minimal loss.

Market Conditions
One last point to consider in the context of this chapter is the effect of market conditions on your whole approach to trading.
Market conditions, not strategies, define which indicators are best for that particular market. Do not make the mistake of trying to use a strategy and its indicators in the wrong market conditions You need to know what kind of market you are trading before you can choose the right tools to use as indicators Martha Stokes, SFO Magazine, October, 2006

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Understanding market conditions, and how to trade in them, is essential. Market conditions include volatility (which we have discussed and will discuss again), trend movement (up or down), sideways trading, consolidation in tight, horizontal price action, flat markets, and momentum markets. VantagePoint helps with some of this, but not all of it. You have to learn these conditions and develop your strategy to trade within them.

The End Game

The end game for me is to get in and get out. This trading style is referred to as guerrilla trading, and I understand why. Just a like a guerilla fighter in some jungle, to survive against a powerful adversary (and the market is your opponent), you have to seek opportunity, strike quickly, and then retreat with whatever gains you have made. This is the essence of my trading style and strategy. Although I have never been a guerilla fighter, logic dictates that, to be successful as one, you have to have an edge. For the guerilla fighter it is perhaps the cover of darkness, the element of surprise, or the fact that a small, light force can move quickly and quietly. As I have expressed, I have found my edge in VantagePoint, and that edge has nothing do with darkness, surprise, or physical movement. It does, however, have everything to do with hard work, focused attention, and having a plan. Sometimes, though, even when the edge is sharp, there is always the possibility to get it a bit sharper. That is exactly what I have done with the spreadsheet tools I developed to work alongside VantagePoint.

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The Spreadsheet Tools

In yet another life, I cooked professionally. I trained in some wonderful restaurants that emphasized quality, and the point that every chef or lead cook always emphasized is: Take care of your knives; these are the tools of your trade. In the kitchen, taking care of ones knives means keeping the edges sharp and then protecting those sharp edges. There is a clear, five-step process to doing that. First, you pull the blade over the roughest stone, just at the correct angle. Second, you pull the blade over another, less rough stone just at that correct angle. Third, you do the same on the smoothest stone. Fourth, just when you feel the knife is so sharp, you rub the blade against a steel, at just the right angle, to remove any burrs on the sharpened metal. When the process is complete, the knife will be as sharp as it can be. The fifth and final step is, after you use your knife, clean it well and then store it to protect its edge. This is a simple metaphor to introduce this chapter, but it so clearly illuminates that which I want to emphasize: There is a step-by-step, refining process to follow to maximize the use of the VantagePoint tools. We have discussed that process at some length, but a quick overview might be helpful. The following list assumes you have developed your strategy and it is in place. The process is as follows. Set up your watchlist for efficiency and speed. Scan for potential trades. Thin your potential trades. Confirm, select, enter, and exit your trades. Track and analyze your trades.

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This chapter focuses on the last two items in the above checklist, and, if I might continue the opening metaphor, these two steps are equivalent to putting the steel to your blade and cleaning and storing your knife to protect the edge.

The Spreadsheet Tools

The three spreadsheet tools I have previously mentioned are the focus of this chapter. I designed all of them to remove the burrs and protect the edge. They have served me well as the refining tools of the complete VantagePoint process. As I explained in earlier chapters, the introduction of VantagePoint into my trading life set in motion a number of important philosophical, mental, and emotional changes for me. In that flurry of learning, it quickly became clear that the rush of new ideas and plans had to be contained in some easy-to-use format. I needed to formalize everything I was learning. To me, formalizing means ordering the information in writing, and so I wrote down my strategy and began to implement it. This notion carried over to the spreadsheet tools. As you know, a host of issues plagued my early VantagePoint trading. As I implemented my strategy and focused my mind on the task at hand, which was to become a better trader, many of those issues faded. One issue that remained, however, was my timingwhen to enter and when to exit a trade. I found that simply placing my entry at or near the predicted low seemed too loose. It left too much wiggle room. I found myself entering trades too late on the uptrend, missing some of the profit run, chasing the trend, or missing opportunities altogether. At the other end, when I did get into a trade, I was more or less arbitrarily deciding where to take my profit or place my stop. I needed to formalize this part of my strategy, so I spent some time thinking about how to find the best entry and exit, and I came up with a plan. I based that 66

plan on the fact that I both wanted and needed a consistent approach to selecting entries and exits. This realization gave birth to the idea that a spreadsheet would do exactly that give me consistency. So I developed the first of three spreadsheetsTrade Selector.

Trade Selector
Getting in and out with the best entry and exit is the ultimate goal of this whole process, and my original, limited intent with Trade Selector was to do just that, and only that. But, as I began the development process, it became apparent that I had grossly underestimated the power of spreadsheets as trading tools. This thoughtful illumination brightly lit the possibilities, so I began thinking about what else I might add to Trade Selector that could help me improve my VantagePoint trading. Thus, I designed a tool that calculates: number of shares to purchase based on dollars invested per trade; target entry based on an average of actual and predicted data; adjusted entry based on the average between the predicted low and the target entry; adjusted entry based on a percentage increase or decrease in the Target Entry; target stop based on a set percentage; profit (target exit) based on a set percentage; volatility and predicted low entry risk of a potential trade derived from actual and predicted data; potential profit or loss per share and in total, based on a set percentage. 67

Trade Selector is a helpful tool because it performs all of the above functions. An equally important function, though, is one that does not show up in the spreadsheetbuilding trading confidence. Entering the data, analyzing the results, and then entering the trade all build confidence in the whole process. As referenced earlier, confidence is a key ingredient to making this all work. You have to be able to enter a trade believing that you will win. Trade Selector is the final stage in making the edge as sharp as it can be. As I am writing this chapter about specific spreadsheet tools, it occurs to me that perhaps you are not used to using spreadsheets, or you have little familiarity with them. Perhaps mathematically manipulating numbers in a spreadsheet is not where you thought you would go with VantagePoint. All of these concerns are reasonable and understandable, but if you will indulge me in this section, I will establish why you just might want to get past whatever concerns or issues you might have with spreadsheets. I will demonstrate that Trade Selector is substantive, helpful, and a contributing factor to the overall utility and strength of VantagePoint. Trade Selector is a powerful tool in my VantagePoint trading, true, but the best part of all, Trade Selector is easy to use. Believe me when I tell you that I am no mathematical wizard, and I am not looking to complicate my trading life. In fact, if you recall earlier in this book, I wrote that my search for trading software included the all-important proviso that it must be easy to use. Ease of use, or lack thereof, was a common problem in many of the other software packages I tried. Right out of the box, VantagePoint appealed to me because of its simplicity and ease of use. My underlying interest in the design of Trade Selector was to keep it simple but helpful, to make it functional and easy to use.

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The Process
The process is simple. First, enter the date and the market symbol (see excerpts below). Trade Selector automatically computes the number of shares to buy based on the Target Entry and $Trade, which we look at in the next step. Basic Data
Date 9/27/07 Market Symbol NT Shares 606

Second, set your variables in the Entry/Exit/Stop Control box. These variables are Stop, Profit, Adjust Entry %, and $Trade. Note: Enter the % variable for Adjust Entry % at the end of this process, if you decide to adjust your entry.

Variables
Entry/Exit/Stop Control
Stop 2.0% Profit 1.5% Adjust Entry % $Trade $10,000

Results from the input above are reflected in the Exit/Stop Evaluation section, which is to the far right of the spreadsheet (see next page) and the Entry Evaluation section (see next page). The Target Stop, Target Exit, Target Profit per Share (total profit as well), and Stop-Loss per Share numbers are all calculated automatically from the same data input in step three (see Exit/Stop Evaluation on next page).

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Exit/Stop Evaluation
Target Stop $16.18 Target Exit $16.76 Target Profit per Share $0.25 Target Profit Total $176.25 StopLoss per Share (0.33) Stop-Loss Total ($235.00)

Third, enter actual and predicted data from the History Report (see below). Note: You can set the output from the History Report to match the input format for these variables (go to History Report, Properties, and click on the Indicators tab).
Current Day Open $16.33 Current Day High $16.71 Current Day Low $16.25 Current Day Close $16.68 PHigh $17.06 PLow $16.20 Actual Short Trend $16.23 Actual Medium Trend $16.50 Actual Long Trend $16.61

Inputting the above data in conjunction with the Entry/Exit Control variables results in automatic calculations for Open/Close Range, Actual Hi/Low Range, Pred. Hi /Low Range, Volatility, Target Entry, and P-Low-Entry Risk. The PLow number here is taken from the input above, and it simply serves as an immediate, visual comparison for Target Entry, Adjusted Entry, and P-Low-Entry Risk. Entry Evaluation
Open / Close Range 0.35 Actual Hi/Low Range 0.46 Pred. Hi/Low Range 0.86 Volatility Safe Target Entry $16.51 PLow $16.20 P-Low-Entry Risk Risky

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If you do adjust your entry, the calculations are reflected in the Adjusted Entry/Exit/Stop/Evaluation section. Be sure to go back to the Entry/Exit/Stop control box to input the % variable for your adjusted entry, or just choose avg, which will give you an average between the P-Low and the Target Entry. Adjust Entry? is a drop-down menu that gives choices (avg, no, up, or down). Adjusted Entry / Exit / Stop Evaluation
Adjust Entry? Adjusted Entry 16.00 Adjusted Target Stop 15.87 Adjusted Target Exit 16.32 Adjusted Target Profit per Share .32 Target Profit Total $165.00 Adjuste d StopLoss per Share (0.48) StopLoss Total $173.00

All of these excerpts give you visual information about the individual sections that make up Trade Selector. I broke the spreadsheet down this way so you could see the various elements of Trade Selector and have some context when I talk more specifically about the information that the tool provides.

The Spreadsheet Information

Entry/Exit Control
Stop the percentage I use to set this price depends on the dollar amount invested, the per-share value, and my understanding of how that trade will move (high-low price ranges). Generally, I set this at 2%-5 %. Tip: The per-share value is important. For example, if I enter a trade with a $20 per-share value, a 3% stop-loss equals $300 on a $10,000 trade. The downside margin would be 60 cents ($19.40 stop), which is reasonable. Now, take the same $10,000 and 71

the same 3% stop-loss but apply that to a $50 pershare trade. The dollar loss is the same ($300), but the downside margin is $1.50 ($48.50), which is wider than it needs to be for my style of trading, so I would use a 2% stop-loss, reducing the downside margin to $1.00 ($49.00), which is reasonable. The potential dollar loss is now $200, but the profit potential remains the same. Remember, in my strategy, protecting and preserving capital is paramount. Of course, the stop-loss for both trades ultimately depends on all three criteria, including the third, and very important, my understanding of how that trade will move (high-low price margins). Target Profit (Target Exit) Currently, my profit target percentage is stable. My strategy calls for a minimum of 1.5% target profit for all trades. The profit might actually be higher or lower than the 1.5%, depending on market conditions. If a trade is moving on a strong, upward trend as I approach my target, I will risk a trailing stop to maximize profit. If a trade is weakening before it hits my target profit, I will place a tight stop or a market order to exit immediately to protect the profit. Adjusted Entry% this adjusts the entry up or down based on a percentage and the results are displayed in the Adjusted Entry/Exit/Stop Evaluation section. In the column, Adjust Entry?, choose avg, no, up, or down from the drop-down menu. Choosing avg automatically calculates an average between the Target Entry and the P-Low. Selecting any other choice gives you a new Target Entry, Target Stop, Target Exit, Target Profit per Share (total profit as well), and Stop-Loss per Share based on your pre-set percentage in the Entry/Exit Control box. At this point, you have four choices. 72

 Accept the original target entry. Accept the adjusted entry. Creatively decide on a new entry point. Forget this trade and move onto the next. $Trade simply input how much you wish to invest in a trade and the number of shares to buy will calculate automatically. As already stated, once you have set your variables according to your strategy, you then move your potential trade data from the History Report into the Predicted and Actual Data section to arrive at the information in the next section. Tip: To help avoid transposition errors when transferring data: set the output from the History Report to match the input format (click Properties, click the Indicators tab); minimize VantagePoint to show only the top line of your potential trade in the History Report; compare your input against your source. Target Entry The Target Entry derives from an average of actual and predicted data. The actual data is: current day open and close; current day high and low; short-, medium-, and long-term trends. The predicted data is the next days high and low. I selected these nine variables because I wanted a balanced blend of immediate data, simple trend data, and predicted data. 73

I excluded Predicted Short, Medium, and Long Trends and Predicted EMA Short, Medium, and Long Trends (found in the History Report) because adding them to the blend would tilt the result more in favor of prediction rather than reality. The result of these mathematical machinations is a consistently formulated target entry that shows up in the Entry Evaluation section along with Volatility and P-LowEntry Risk. Calculating the Target Entry in Trade Selector removes the arbitrary aspect of selecting an entry point. It takes away the most difficult aspect of selecting an entry point: Where do I begin? Just remember, this number is not an absolute; it is a starting point. Your entry point (and final confirmation) depends on your assessment of the Volatility and P-Low-Entry Risk, as well as those two tricky but useful elements of creativity and intuition. Volatility The first three columns in the Entry Evaluation section are a series of numerical ranges that represent the spread between the current days open and close prices, the current days high and low, and next days (predicted) high and low. The average of these numbers equals the Volatility rating in the next column (Low, Safe, or High), which is another variable in the confirmation process and the decision as to where I place my entry and stop. These three numbers tell me how much price movement to expect, which is critical. P-Low-Entry Risk The Target Entry is the starting point for selecting an entry, but the Predicted Low (P-Low) is the basis for that starting point. Everything begins with the P-Low. VantagePoint is rarely exact on this prediction, but it is close often enough to rely on it as the basis of my entry point. Thus, I developed this spreadsheet feature to quickly compare the 74

Target Entry and the P-Low. Looking at these two variables and the P-Low-Entry Risk rating adds to the confirmation process, and it gives me a better idea where to set my entry point. If the distance between the P-Low and Target Entry is too wide, the spreadsheet gives me a Risky rating (otherwise it is Good or Safe). I designed this to help protect against entering a trade too far from the next days predicted low, which had been an earlier problem with VantagePoint. Now, having just said the above, I will also tell you that sometimes markets move quickly, and when you get around to entering a trade, the P-Low is long in the past. If you truly understand your potential trade, you will know where and when to enter, if at all. Tip: I will discuss After-Hours trading in the next chapter, but I will tell you this now: It might well provide a leg up on the issue of fast-moving markets. I have entered and exited a few trades in the pre (a.m.) and post (p.m.) markets and have done well. Target Stop Setting stops and honoring them might well be the toughest thing to do in trading. I know Ive had my problems with this. Remember the David Silverman quote, people hate to lose If that emotion exists in your mindset, well The interesting thing about seeing the Target Stop in Trade Selector is I no longer have an emotional connection to the idea. I suspect this sounds a bit, well, silly, but the fact remains that after I started consistently seeing a price in my Target Stop in Trade Selector, I lost any anxiety about placing stops in my trades. It simply became a number. Perhaps my earlier lack of ability to stick to my stops and my willingness to discipline myself to do it diminished my anxiety, or maybe my retreating stop-related losses fostered 75

this lack of anxiety. I cant be sure, but what I am sure about is this: Now it is an emotionless act to place my stops. It ultimately comes down to realistically establishing your threshold of financial pain. The key word is realistically. Your trading strategy should clearly define what your threshold is for every trade you enter. Maybe you will need to experience different stop-loss points to find your place, but you do have to find it because you need to be able to place your stop and forget about it until you need to move it for profit-taking purposes. Trade Selector gives you the opportunity to look at different stop-loss points by simply changing a percent variable in the Entry/Exit Control box. Target Exit Honoring a target exit can be as difficult as honoring a stop. Obviously, taking a profit is much easier to do than taking a loss, but, nevertheless, greed has hurt me, and that is exactly the emotion that comes into play when we dont honor our Target Exit. It is important to make a distinction here between greed and rational thought because sometimes you will pass your exit to take more profit. The difference is your mindset. If you have set your target profit appropriately, meaning that your pre-established target meets your trading strategy goals and you are content with those goals, then all is well. You can exit the trade without any remorse, such as, If I had stayed in, I could have gotten another 1%. You can also not exit the trade without violating your trading strategy, if you have made a provision in your trading strategy that rationally deals with this contingency. I have explained my trading strategy regarding this, but here it is again for a reminder.

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The profit might actually be higher or lower than the 1.5%, depending on market conditions. If a trade is still moving on a strong, upward trend, I will risk a tight, trailing stop to maximize profit. If a trade is weakening before it hits my target profit, I will place a very tight market stop to protect the profit.

Sometimes trades move up quickly. Just as quickly they reverse. Not taking your profit because you get excited in a fast-moving market could be a greedy mistake. Your emotion tells you let it ride, as opposed to having rational indicators (educated selection) that tell you when a stock is moving fast on volatility or it is moving fast on strength. The trading tools most brokers provide (Level II quotes, etc.) assist in this, but much of it comes from your knowledge. Adjust your Target Exit to meet your goals, and then make balanced choices. The Target Stop, like the Target Exit and the Target Profit and Stop-Loss per Share, is based on variables in the Entry/Exit Control box. All these numbers correlate with the Target Entry. If you adjust the Target Entry, Trade Selector provides an Adjusted Entry/Exit/Stop section so you can see your Adjusted Target Exit, Adjusted Target Stop, Adjusted Target Profit per Share and Adjusted Stop-Loss per Share based on your Adjusted Entry. Target Profit / Stop-Loss These values display as per-share and total numbers. This feature lets you see the potential in any trade and make adjustments. For example, if your target profit is 36 cents per share at 1.5%, you can look at your volatility rating and see how that fits. If the range between the predicted high and low is 55 cents, you are on target, and if the market approaches your target exit in a strong, upward trend, adjust your target profit. 77

At first, when you set your percentage of profit and stoploss, these numbers might seem wrong at least they did to me. The profit seemed too small and the loss seemed too big. I experimented with different scenarios to find the spot where I felt okay. Adjust the numbers until they become easy to digest and realistic. You can adjust these numbers to meet your strategic goals with entries in the Entry/Exit Control box.

Trade Tracker
If Trade Selector is the blade to the steel to remove the burrs, then Trade Tracker is the storing of your knives to protect the edge. This spreadsheet has clearly demonstrated the confidence-building power of tracking various aspects of a trade. It puts everything into a business-like and emotionless frame. Tracking trades and parsing them into components that evaluate your progress on numerous fronts is beneficial in so many ways. Utilizing Trade Tracker provides an easy way to: keep you up on your trading business books; see an accurate and timely picture of your trading life; evaluate and analyze your trading strategy; build confidence and a positive mental attitude; add focus and direction to your trading; review annual trading data for your taxes.

The Process
The process for this spreadsheet is equally as simple as Trade Selector. First, enter the amount of cash you have. The location is at the bottom of the Purchase Date column. Note: You can add or subtract from cash in any month. The running total will reflect in both the Beg. Balance (monthly) and the Cont. Bal. (annually). 78

Trade Count
1 1

Market Symbol
NT INTC CASH

Purchase Date
1/07/07 1/10/07 $10,000

Next, after you enter and exit a trade, input the Market Symbol, the Purchase Date, and Sale Date (see below). The Trade Count is automatically input when you enter the data. Trade Count
1

Market Symbol
AMD

Purchase Date
7/01/07

Sale Date
7/03/07

Next, enter the number of Shares, Entry Price, and Exit Price. The Days Held and Entry Value are calculated for you automatically.
Days Held 4 Shares 100 Entry Price $50.00 Entry Value $5,000.00 Exit Price $55.00

Next, enter the Sales Fee and Commission and you are done. Exit Value, Trade Profit, and %Gain/Loss and Win/Loss? are all calculated automatically. Wins appear as a 1 and losses appear as Loss.

CommissionRound Trip 19.98

Sales Fee $0.16

Exit Value $5,479.84

Trade Profit $479.84

% Gain / Loss 9.96%

Win / Loss? 1

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 Tip: If you partially exit a trade and then sell the remaining shares later, treat each sale as a separate trade. Adjust commission and sales fees accordingly. Tip: Days Held counts the day you enter, no matter when you enter, as one trading day. If you enter and exit a trade on the same day, that counts as one day. One thing I always do is tell myself the truth, and Trade Tracker is as truthful as I need it to be. I mathematically defined the formulas in the spreadsheet so I could continually review my trading progress to stay on top of my game. At any time, I want to see at a glance where I stand. The simplicity of the process for Trade Tracker contradicts the actuality of the results. I cannot emphasize enough the value of this spreadsheet.

The Spreadsheet Information

Monthly Stats Tracking my trading progress monthly is invaluable. Not only does it let me know where Im at, but it also gives me valuable information when evaluating my trading strategy. If something is not right, then it shows up here (see below). Monthly Stats
Beg. Balance Profit ROI Profit / trade Profit / week $10,000 $1,760 7.6% $880 $1,419 Avg $ / trd Avg shrs / trd Avg $ / shr # of trades Avg days/ trd $7,500 600 $40 2 1.0 Commissions Fees Winners Losers Winning % $40 $.16 1 1 50.0%

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Beg. Balance This is the running total pulled from the annual stats. You can change this number by simply adding cash into your balance (see p.78). Profit This number reflects your dollar profit for the month. ROI This reflects your rate of return. Profit / trade This reflects the amount of profit (or loss) per trade. Profit / week This reflects the amount of profit (or loss) per week. Avg $ / trade This reflects the average amount of dollar invested trade. Avg shrs / trd This reflects the average number of shares per trade. Avg $ shr This reflects the average amount of dollars invested per trade during the current month. # of trades This reflects the total number of trades entered. Avg days / trd This reflects the average amount of days per trade during the current month.

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Commissions This reflects the total amount of dollars spent on commissions during the current month. Fees This reflects the total amount of dollars spent on fees. Annual Stats Tracking my trading progress on an annual basis is equally as valuable as tracking it on a monthly basis. The key difference is the big picture view. The annual numbers let me know where I am at any point during the year. Annual Stats
Cont. Bal Profit ROI Profit / trade Profit / week $11,760 $2,760 15.0% $880 $556 Avg $ / trd Avg shrs / trd Avg $ / trd # of trades Avg days/ trd $27,500 600 $40.00 25 2.0 Commissions Fees Winners Losers Winning % 2 1 67.0% $500

The annual numbers track the same information as the Monthly Stats, except the Annual Stats track the information on an ongoing basis. Note: If you wish to know your Gain / Loss percentage for any month, the number is calculated at the bottom of the % Gain /Loss column. % Gain / Loss
1.52% 3.00% 1.48% 2.0%

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Trade Evaluator
When you get down to it, there is only one question that truly matters after a trade is over: Could the trade have been better? The funny thing about this question is virtually every trade could be improved, or so it would seem. Even after I have made a successful trade, perfectly fitting into my strategy, I have these twinges of greed that might say, Man, if you had just replaced your trailing stop with a market sell, you could have made another 1%. These feelings appear to be natural, at least to me. After all, even though the goal is to eliminate the emotions of greed and fear completely, I am not sure I will accomplish this goal in my lifetime. What I can do, though, is continue to reduce the influence of these emotions in my trading, and one way to do this is to look at every trade honestly. Here, then, is the important point: Trade Evaluator is a tool designed to reinforce my use of the VantagePoint tools and my adherence to my strategy. It is a simple tool, similar to the Flash Cards we used as children. This is purposeful. I wanted a quick and easy evaluative tool that could still help me improve my trading. Analyzing trades is not difficult; it is the easiest and least stressful part of the three-step trading process, which is: 9 Find a trade; 9 Make a trade; 9 Analyze the trade. In fact, now that I am thinking about it, the analysis process for me is so light that I will change the word analyze to evaluate. Here is how I evaluate my trades and the spreadsheet tool I use to help with this.

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The Process
The process for evaluating trades is so simple that it is a stretch to label it a process. Essentially, all I do is answer a series of questions (y or n), and the answers to those questions produce points. The points are then tabulated, and an overall rating is produced. I built into the spreadsheet some thoughtful reminders about my trading rules as well,. The particular reminder that displays depends on whether you answer a question y or n. I find this helpful in that it encourages me to think about every trade, and in that thoughtful state, I can clearly and calmly focus on the basic truth of all that I have discussed thus far in this bookchanging my mindset about how I trade. This is my way to assimilate the fundamental changes that are occurring in my trading head.

The Questions
When I designed the questions for evaluation, I focused less on the monetary results and more on the use (or non-use) of the VantagePoint trading tools and the adherence (or nonadherence) to my trading strategy. In my mind, these two elements are more important than the actual monetary results. Remember, if you do not fully utilize the power of the VantagePoint tools and you do not follow your strategy, the monetary results will not be what you are looking for in this program. To facilitate my evaluation, I organized the questions to match my VantagePoint trading process. I am sure that more, or at least different, questions could be asked, but I used these because they are the most important to me. The first stage of the evaluative process deals with trade selection. It is critical to utilize the VantagePoint tools to find trades that qualify, or rather, trades that will make you a profit. 84

Trade Selection Did you use the PNI as your initial selection tool? Did you use Predicted Strength as a selection tool? Did you use Predicted Differences as a selection tool? Did you use any other tools in your potential trade selection? Previously, I stated the PNI is the first indicator I look for when scanning for potential trades. Consequently, this is the first question I ask myself. The next three are important in their own right also, so if you answer each of them y, you add incremental points to your overall score. The second stage looks at confirmation of the potential trades selected. Again, Trade Evaluator looks at how fully you utilized the VantagePoint tools. Trade Confirmation Did you confirm your trade? Did you use more than one confirmation tool? Did you use more than two confirmation tools? Did you use more than three confirmation tools? If you answer y to the first question, the second question appears. If you answer y to that question, the third question appears, and so on to the fourth. An n answer to any question ends the questioning in this section. The third stage is trade execution. How well did you get in and get out of the trade and did you place your stop correctly?

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Trade Execution Entry Did you use Trade Selectors target entry? Did you go with the adjusted entry? Did you use reasonable criteria to select your own entry? Did whichever entry you chose work (make a profit)? Exit Did you use Trade Selectors target exit? Did you go with the adjusted exit? Did you use reasonable criteria to select your own exit? Did whichever exit you chose work (make a profit)? Stop Did you use Trade Selectors target stop? Did you go with the adjusted stop? Did you use reasonable criteria to select your own stop? Did you stop out because of a misplaced stop? Trade Strategy Did you place a stop immediately or soon after entering? Did you amend your strategy for this trade? Did you base your amended strategy on reasonable criteria? Did your amended strategy work out? Executing a trade is analogous to the sharpening your knife metaphor. Correctly going through each step points to solid trade execution, even with the possibility that you might decide to amend your strategy. The key parts to the execution are, of course, entry, exit, and stop. Each of the questions in this section is designed to evaluate how you handled each aspect of the execution. Note: The answer to the fourth question under both Entry and Exit is 86

calculated automatically based on the answer to the question in the Trade Profit or Loss section, Did you make a profit? The fourth stage evaluates how you kept (or didnt keep) to your strategy. This part of the evaluation takes into consideration the reality that you might have amended your trade based on reasonable criteria. Trade Strategy Did you place a stop immediately or soon after entering? Did you amend your strategy for this trade? Did you base your amended strategy on reasonable criteria? Did your amended strategy work out? The last phase evaluates monetary results. Although I have stated this is the least important of the things to review when evaluating a trade, it is, nevertheless, important, as it is the reason we trade at all. We trade to make a profit. However, the end results are what they are because of what you did, the choices you made to get to that result, whatever it may be. This is why I say that in the overall picture, evaluating the steps is more important than evaluating the results. Trade Profit or Loss Did you stop out with a correctly placed stop? Did you earn a profit? Did you move your stop to protect your profit? Did you use a trailing stop to surpass your profit target? Did you surpass your profit target? As I look at the questions in this section, it occurs to me to offer one quick thought. I have stressed in this book the notion that you might appropriately amend your strategy when you feel something that is not showing up in the numbers. There 87

are many points in the process where you might do this, but one of the safest is attempting to take profit past your Target Exit. Attempting to take profit past your profit target is safe if you lock in some or all of your existing profit.

The Record
I have also included a section for recording the results of your evaluations. This section keeps a record of the Overall Trade Rating. Input the date and the market symbol, and then choose from a drop-down menu (which does not appear here, but it is in the spreadsheet) the Overall Trade Rating found in the box of the same name at the bottom of your evaluation. Date 10/7/07 10/9/07 11/5/07 12/18/07 1/15/08 Symbol NT AMD AT S BBY Rating Perfect Good Lucky Very Lucky Work Harder

The Score
Keeping score is a way to measure success in all the areas of importance. My choices to allot high or low numbers for particular categories might well not be yours. So be it. In any case, either 0, 1, 2, or 3 points are given for every y answer. Either 0, -1, -2, or -3 points are tabulated for every n answer. All the points, plus or minus, are tabulated to give you a total score and an Overall Trade Rating.

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n Did you stop out with a correctly placed stop? y Did you earn a profit? n Did you move your stop to protect your profit? Did you use a trailing stop to surpass your profit target? y y Did you surpass your profit target? Total Score 34 Overall Trade Rating Good

0 3 (1) 1 2

The Comments
The point of Trade Evaluator is to keep my trading head in the right space. Reviewing basic thoughts, rules, and strategic issues does exactly that. The comments seen below, as well as the rest found in Trade Evaluator, are helpful. Did you have wide ranges? If less than your target, why did you exit? Be careful here. Always protect your profit. This is an excellent tactic to surpass your target profit. Accept this equally as you would accept a loss. Go back to your strategy. Lucky will not produce consistency. As stated, I designed this spreadsheet tool to help keep my trading head in the right space. My guess is that you will stop using it after a while; that is the goal. When you know without thinking the answer to Am I trading the way I want to trade? and you are profitable, then you will close this tool. I developed these tools because of my early VantagePoint troubles with entry and exit and a desire to stick to my strategic plan, to bring into sharp focus my trading behavior, and to track and analyze my profit or loss. Remember, though, 89

I designed all of these spreadsheets to assist me in my trading, so you must assess whether they have value to you in your trading. I believe they will. In any case, they are yours to explore, so please do so. You might even find a way to improve the tools, and if you do, I encourage you to contact your VantagePoint representative and tell him or her what you think might be an improvement.

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The Truth Of it All

I have told my story and made my case. Now we come to the close. In this chapter, I want to talk more loosely about some things I have discussed thus far. I want to express more candidly where I am in this whole process of learning to utilize VantagePoint to my advantage, as well as defining and refining my trading philosophy and strategy.

Creativity and Intuition

Despite the fact I have hammered the idea that establishing rules, defining a strategy, and sticking to it are fundamental and essential elements to successful trading, robotic behavior is not what I do, nor is it prudent to do when trading in markets that are dynamic and fluid. A small anecdote from my childhood illustrates this point. As an eight-year-old boy in southern California, I played baseball, and I loved it, so naturally Little League baseball was a big part of my summers. Although I was excited about joining Little League, it soon became clear that playing organized baseball was completely different from the pickup games at the park. Suddenly, clearly defined rules existed, and a coach hung around to enforce them. Practices occurred three or four days a week, and in those practices we performed repetitive batting drills, ran laps, shagged flies, and fielded grounders. None of this was as much fun as playing in the park, but I wanted to be a good baseball player, so I did it. All of this training taught me robotic type behavior on the fieldheres how you stand, heres how you hold the bat, heres how you wear your glove, heres how you catch the balland that behavior served me well as a young pup learning how to play baseball competitively. I became quite good. I excelled to the point of all-star status. 91

Through the years, though, a funny thing happened on the way to the park. I began to grow up physically, emotionally, and mentally, and I began to learn and understand the game. I started making my own decisions. Catching the ball was easier if I wore my glove differently. Lowering my hands on the bat gave me more power at the plate. I broke the rule about always catching the ball with both hands. I positioned myself less rigidly so I could move and react in a more fluid way, in a way that more closely matched my sense and feel for the action moment. I evolved into a more creative and intuitive player, which, as one climbed the age levels in organized baseball, was the only way to remain competitive. Growing up in the game did not translate into abandoning the fundamentalsquite the opposite, in fact. Becoming more mature and understanding the game brought the fundamentals into sharper focus, even though they had come to exist in the part of my head that worked on autopilot. For example, when I was eight, my coach taught me when the count is 3-0, never swing. This is a good rule, as a fourth ball gets you a free trip to first base, and the odds are in your favor at that point. As an older, more experienced player, my coaches soon learned to let me decide whether to swing or take on that 3-0 count. The reason? Through experience, I had learned the pitches I could hit, and if one came into my zone, I felt comfortable swinging away. If an inside curve didnt break, or a fastball wasnt so fast, I could intuitively decide to swing or not, depending on the conditions in that moment. No, I never abandoned the baseball fundamentals; I simply molded them to fit my need in the millions of moments actualized in those baseball summers from long ago. When the bat cracks and the ball is flying at you, the ingrained fundamentals create the frame for that instant, but it is your sense of the game that determines what you actually do, and what you do will never be far from the fundamentals 92

you learned as an eight-year-old boy or girl. The fundamentals are always in play; it is how you alter them in the moment that makes you a good player. This is no different from when you trade a market. Rules and strategy define how we learn to operate successfully in the trading environment. Creativity and intuition define the choices we make in a trading moment. Our philosophy bends, shapes, and gently molds these two opposing elements into one rather fluid and free-flowing process of thought. For me, understanding this distinction has made a profound difference in my approach to trading.

My Evolving Strategy
Yes, I have pushed hard on the notion of sticking to your strategy, once you have it in place (I honestly believe this is the foundation of all your potential success). Now, I need to tell you and I have alluded to this both directly and indirectly in various parts of this bookstick to your strategy . . . until you dont. Dont be afraid of creative and intuitive thought. The truth is, any strategy in any endeavor either works or it does not, but we cannot know which way it will go until we implement it. History is replete with countless military campaigns that relied on a strategy that did not work at first, was changed, and ended up delivering victory. This is the first point I want to make. You cannot know if your strategy is working until you try it. Fortunately, we are only talking about money, not lives in war, so we have the luxury of going at a pace we can endure. That is exactly what I have done. I began slowly with VantagePoint, risking little, and then I gradually invested more with my developing success. I encourage you to follow

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the same path, at least to this degreerisk little, learn a lot, risk more. In still another life of mine, I earned my living teaching college students how to write, and in this is the second point about strategy. Many students I encountered had problems with the first word of a writing project. They could not get started. Others could get plenty of words on paper but could not shape them into coherence. Still others could write coherently, but they did poorly in the end because they did not know how to fix those things in their writing that brought it down. Within this problematic writing concept, there is a process and a strategy to teach, and I did so. The first stage of any writing project is simply to write. Do it sparsely or flood the paper with words. Just write. Once you feel comfortable putting pen to paper (fingers to keyboard), then, and only then, start thinking about revision, which is the next stage of the process. In this stage, keep what is working, discard what is not, and then work toward making coherent what you have. Once you do this, move to clean it all up, which is the editing stage. Editing is refining. Look for and correct those things that keep you from clearly expressing yourself and keep your reader from clearly understanding your expression. The free writing, revising, and editing stages of the writing process are no different from what I am recommending to you with VantagePoint. First, jump in and just do it. Play with it, risk little, and figure it out. Begin to establish the parameters of your strategy. Second, bring some coherence to your developing strategy. Work with more tools. Try them in different market conditions. Expand your thinking, risk more, but be careful. Third, start cleaning it all up. Put the final pieces in place and settle in confidently. See what your VantagePoint strategy can do, and then trust it to do what it does. Go for it! 94

Another important thing I taught my writing students is that a good writer knows when a writing piece is complete, but a good writer never stops trying to improve his or her writing. Refinement is the essence of good writing, ultimately. As a writing teacher, a writer, and a VantagePoint trader, I practice this philosophy with clarity and purpose. Just as I am doing in this book, so am I doing in my tradingrefining all the time. Keeping the core strength and fiddling with the little things that improve my trading. One clear example is my profit percentage. I wrote earlier Currently, my target profit percentage is stable. The last trade I made, I set my exit at 1.5%. However, in that trade, I had an opportunity to exit at 3.4%, and I did not because I utilized my existing strategy of using a trailing stop to protect my existing profit if I attempt to surpass my target profit. I ended up with a 1.74% profit, which beat my target, but I also ended up with two refinement ideas one for the next time I find myself in a trade that is moving quickly in the correct direction and one for the next time I am in a trade, period. First, the next time I find myself having more than doubled my potential profit, I will simply exit at that point instead of using a trailing stop. Take my 3% or so and move on. Second, the next time I am in a trade, I will consider the market conditions and, if favorable, set my target profit at 2%. It is time for me to take more risk. It is time for me to revise my basic trading strategy regarding profit taking. Another example of my strategic refinement is the question of after-hours trading. At the start of both my short-term trading career and the use of VantagePoint, I knew about after-hours trading, but I had no inclination toward trying it. Simply, I didnt know enough about it, and I had enough on my plate to learn. Well, time has passed, and I am more comfortable and confident in my trading. In three recent trades, I either entered in the after hours or exited in the after 95

hours. In all three trades, I met or exceeded my target profit. Although not completely confirmed in my mind, I am seriously considering utilizing after-hours trading more in my trading strategy. The truth of it all is that I am confident in VantagePoint and my strategy, and from this point on, I see myself tightly refining my strategy to both take advantage of market conditions and to improve my profit goals.

My Trading Life
Because I am writing about my investing process in some detail, it appears as if it is cumbersome and complex. Really, it is not. One thing I have sought in my trading is efficiency, as I really do not want to spend an inordinate amount of time doing it. At this point in my life, I have come to see so many things as simply a means to an end, not the end itself. VantagePoint trading is one of those things, and using the software has helped me keep my trading life more simple and successful. So how simple is my trading life? When I tell you, perhaps you might not think it so simple. I dont know. What I do know is I can honestly state that I am comfortable in the skin of a trader. Six months ago, I would not have made such a statement. Now, when asked, I call myself a trader. VantagePoint is but one part of my three-part trading program listed below. 1. Retirement trading; 2. Long-term speculative trading; 3. Short-term swing (guerilla) trading.

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Retirement Trading
This aspect of my trading life actually involves little trading. Currently, I have the largest percentage of my wealth invested in a family of mutual funds. This is my retirement fund, so I am somewhat conservative with it; however, conservative does not translate into doing nothing. The trading I do is within this family, and that amounts to moving dollars from one fund to another based on what is happening in both the global markets and the U.S. markets. Perhaps I make six trades per year in this aspect of my trading life.

Long-Term Speculative Trading

In the beginning of this part of my trading life, I made a whole lot more trades than I do now, but even now I still make more trades than I do in my retirement trading. To date, I must admit I have not done as well as I thought I would when I decided to attempt this type of trading. Here is the bad news: I am still waiting for some of my speculation to come to fruition. Maybe it will or maybe it wont, but in this is the good news. Because I invested, waited, watched, and did not see any tangible results, I began to think I could be more successful as a short-term trader. I did not know how I would do that, but clearly I could see that waiting years for a speculative trade to ripen offered no satisfaction nor did it appear to be a reasonably quick way to increasing my wealth. This minor epiphany jump-started my thought process regarding the need to change in the late winter and early spring of 2006. For two years, I had traded and waited, dumped, cashed out, and otherwise flailed away at trading. During the latter part of that timeframe, though, I did have some success. I speculated on some short-term plays that paid off nicely. For example, I traded one stock four times in less than a year, and I ended up strongly on the plus side. 97

The early success I referred to in the beginning of this book involved trading that stock and a few others successfully time after time and making some money. As I write this, the notion that many traders become losers because they start out winners jumps into my head. This describes me to a T. Looking back, I see my early successes rested on a weak foundation. I possessed no real skill in trading, other than I am an intelligent and thoughtful human, which, by the way, is one important aspect to any success in life. Anyway, I succeeded enough to set me free, so to speak. I decided that I could invest more time and money into my short-term trading, and so I did, but I did this on a wing and prayer. I had no real knowledge base and no strategic plan, nor did I even know I needed one. The loss of bunches of money relatively quickly brought me forcefully to the awareness that I needed a software tool to compensate for my lack of knowledge. This hard-earned understanding was the genesis of my search for the perfect software. In that search, I soon came to realize I also needed a plan. Today, Vantage Point and a plan permit me to freely state that I am a short-term, swing trader. I still look for the long shot, and I will play it if it feels right, but for my money, day in and day out, VantagePoint trading is what I do.

Short-Term Swing Trading

When I first began with VantagePoint, the notion that I could make it by trading on the roll of dice still rested firmly within the thin skin of my trading head. The good news is that I understood this. So, when VantagePoint entered into my trading life, I did not go about wildly. I actually approached the whole concept conservatively and with great care. I really wanted VantagePoint to work for me.

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Of course, I made mistakes in the first few weeks of working with VantagePoint, but those mistakes did not cost me because I started out with a small investment profile. My original goal for my first half dozen trades or so was simply to break even on every trade. I managed to do this more than not, so I stepped up the ante. I raised my investment profile and started reaching out for a profit. Remember, as I was learning VantagePoint, I was also retraining my trading brain. This fact, I am sure, contributed to what happened next: I started losing money. Not much money, but enough to push me even harder toward finishing what I had started, which was nothing short of completely transforming my trading mindset defining my trading philosophy, developing and implementing a trading strategy, and gaining the confidence to be successful. As you know, I accomplished my mission, which has kept me in the trading game. I now trade beneath the umbrella of my philosophy. I trade with a strategy, and I am confident that I will win every trade. As to my success .

My Success
I have been candid about my trading failures within and without VantagePoint. I have given examples, and there are plenty more than what is found on these pages. Now, I want to talk more candidly about my success. Not for one minute do I want you to think that because of VantagePoint, I have become rich or that I am on my way to that in the near term. True, I am achieving more success overall in my trading life. True, my investment profile is heading in the correct direction, which is up. And true, I have now been moving in this positive direction for quite some time. These three things tell me that I am on the right track. If I continue retraining my trading brain and continue trusting VantagePoint, I can now see a much wealthier future for me. 99

Mark my words, though, I have no illusions that this will happen regardless of what I do or that simply using VantagePoint ensures my success. No, I clearly understand that if pride or arrogance causes a change in course to any degree, I am risking all I have accomplished. The pieces Ive put in place are paying off. I am willing to keep the program going because it is working, and every month that passes with this program working encourages me to increase my VantagePoint investment dollars. This is exactly what I am doing, and what I will keep doing.

The Full Circle

Irony is everywhere all the time, and this moment is no different. Ironically, writing the last pages of this book, it appears I have circled all the way back to the beginning. When I started with VantagePoint, I knew I was at the beginning. I had to both learn VantagePoint and its value as a trading tool, and I had to develop and implement a trading strategy. And so I began that process, which is, and will be, ongoing, certainly. Writing the last few paragraphs of this book, I realize that the book itself has been a major part of doing exactly what I have recommended to you in the last several paragraphs and throughout this booklearn to fully utilize the VantagePoint tools and develop, implement, and refine your strategy. Interestingly, what I presumed would be the end of the discussion for meending the bookis really just another beginning. The proverbial light now shines on the very real thought that I can do more with VantagePoint than I imagined before I wrote even one word of this project. If no other person benefits from my work here, then all is not lost because I have benefited. At a minimum, an even more 100

serious internal discussion about VantagePoint, my philosophy, and my strategy has begun and will go on vigorously, and that cannot help but make me a better VantagePoint trader.

Final Thoughts
When I decided to add this chapter, my motivation was to be crystal clear with you about my truth as it related to VantagePoint and trading in general. I want you to know what I have told you in this book is true. Perhaps, even, I want you to trust me. In my mind and in my life, trust is a big deal. I do not give it lightly, and I certainly do not want others to give it to me without careful thought. In this case, with you, the only thing I want you to trust is the truth of what I am telling you about my experiences. In no way do I want you to trust VantagePoint, until, that is, you have given it your best shot. Certainly, I have recommended trusting VantagePoint with those exact words, Trust VantagePoint. Dont misunderstand my intention, though. You only come to trust something based upon the actions, reactions, and results of your interaction with that thing. VantagePoint is no different. My desire is that you will come to trust it, and when you do, that trust will become an important part of your strategy, just as it has become an important part of mine. As my final thought regarding all of this, I would like to go back to the poker analogy I used earlier. In poker there are tells, signals that opposing players give that sometimes tip their intentions in a hand. One of the most often cited as one to watch for is weak is strong / strong is weak. Watch out when a player is acting just a bit too weak or a tad too strong because the opposite might actually be the truth.

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Without desiring to stretch this analogy too far, I believe there are tells in markets. The poker tell I referenced above points to one such market tell. Watch out when a market is looking like it is heading for the stars or, conversely, the bottom is falling out. In both cases, it might be true; then again, the opposite might be the truth. This, my friends, is the reason VantagePoint exists. Again, I would say Good Luck, but as we know now, luck has so little to do with trading success.

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