Part One : The Most Important Factor In Your Success: You!
Chapter 1 : The Legend of the Holy Grail
The Holy Grail Metaphor
What’s Really Important to Trading
Modeling Market Geniuses
Chapter 2 : Judgmental Biases : Why Mastering the Markets Is So Difficult for Most People
Biases That Affect Trading System Development
Biases That Affect How You Test Trading Systems
Biases That Affect How You Trade Your System
Summary
Chapter 3 : Setting Your Objectives
Designing Objectives : A Major Part of Your System Work
Tom Basso on Objectives
Setting Your Own Objectives
Part Two : Conceptualizing Your System
Chapter 4 : Steps to Developing a System
1. Take an Inventory
2. Develop an Open Mind and Gather Market Information
3. Determine Your Mission and Your Objectives
4. Determine the Concept That You Want to Trade
5. Determine the Big Picture
6. Determine Your Time Frame for Trading
7. Determine the Essence of Your Trading and How You Can Objectively Measure It
8. Determine What Your Initial 1R Risk Will Be
9. Add Your Profit-Taking Exits and Determine the R-Multiple Distribution of Your System and Its Expectancy
10. Determine the Accuracy of Your R-Multiple Distribution
11. Evaluate Your Overall System
12. Use Position Sizing to Meet Your Objectives
13. Determine How You Can Improve Your System
14. Mentally Plan for Your Worst-Case Scenario
Chapter 5
Selecting a Concept That Works
Trend Following
Fundamental Analysis
Value Trading
Band Trading
Seasonal Tendencies
Spreading
Arbitrage
Intermarket Analysis
There’s an Order to the Universe
Summary
Chapter 6
Trading Strategies That Fit the Big Picture
The Big Picture as I See It
Factor 1. The U.S. Debt Situation
Factor 2. The Secular Bear Market
Factor 3. The Globalization of Economic Factors
Factor 4. The Impact of Mutual Funds
Factor 5. Changes in Rules, Regulations, and Taxes
Factor 6. Human Beings’ Tendency to Play a Losing Economic Game
Other Areas You Might Consider
How Will You Monitor the Big Picture?
Summary
Chapter 7
Six Keys to a Great Trading System
The Snow Fight Metaphor
Looking at Expectancy under a Magnifying Glass
Opportunity and Expectancy
Prediction : A Deadly Trap
Real Trading Applications
Determining How Your System Will Perform
Summary
Part Three
Understanding The Key Parts of Your System
Chapter 8
Using Setups to Jumpstart Your System
The Five Phases of Entry
Setups for Stalking the Market
Filters versus Setups
Setups Used by Well-Known Systems
Summary
Chapter 9
Entry or Market Timing
Trying to Beat Random Entry
Common Entry Techniques
Designing Your Own Entry Signal
An Evaluation of Entry Used in Some Common Systems
Summary
Chapter 10
Knowing When to Fold ‘Em: How to Protect Your Capital
What Your Stop Does
Using a Stop That Makes Sense
Stops Used by Common Systems
Summary
Chapter 11
How to Take Profits
Purpose behind Profit-Taking Exits
Just Using Your Stop and a Profit Objective
Simplicity and Multiple Exits
What to Avoid
Exits Used by Common Systems
Summary
Part Four
Putting It All Together
Chapter 12
There’s Money for Everyone
How Seven Traders Approach Their Craft
How Our Traders Would Look at Five Key Market Situations
Results Six Weeks Later
Results as R Multiples
Summary
Chapter 13
Evaluating Your System
Several Approaches to Take
Expectunity : Factoring in Opportunity
The Cost-of-Trading Opportunity
Peak Drawdowns
Using Newsletter Recommendations as Sample Systems
Summary
Chapter 14
Position Sizing – the Key to Meeting Your Objectives
Basic Position-Sizing Strategies
Model 1 : One Unit per Fixed Amount of Money
Model 2 : Equal Value Units for Stock Traders
Model 3 : The Percent Risk Model
Model 4 : The Percent Volatility Model
The Models Summarized
Position Sizing Used by Other Systems
Summary
Chapter 15
Avoiding Mistakes
What’s Left Now: An Interview with Dr. Tharp
