What Effective Traders Act and Think: Underlying Principles and Winning Strategies for Trading

By John Miller

If you want to learn how to trade professionally on the stock exchange, you have to be aware that there is no one way and there is no holy grail of trading either. Becoming a professional trader is sometimes a hard and rocky road. But those who have walked it know that investing the time, effort, and dedication into trading is worth it.

This book explains the most important basics that are required for professional stock exchange trading. The logic of trend trading is the most important technical basis that a newcomer to the stock market must internalize. Above all, it is necessary to constantly put oneself in the position of the other market participants. Because we traders have no chance to move liquid markets. All we can do is swim with the big capital and never trade against it.

It was very important to the authors of this book to provide the reader with specific setups. But these setups won't help the reader much if they don't understand the logic behind them.

The chapters on risk management and psychology are just as important here, because many mistakes lurking here are easy to make, especially for a novice trader. If the reader is to really derive any benefit from this book, then it is necessary to read it more than once. Because if you really toy with the idea of learning professional stock exchange trading, you not only need time, but also a lot of energy.

• Language: English
• Publisher: Miller
• Release date: Apr 18, 2023
• ISBN: 9798223820765

Book preview

What Effective Traders Act and Think: Underlying Principles and Winning Strategies for Trading

John Miller

Published by Miller, 2023.

While every precaution has been taken in the preparation of this book, the publisher assumes no responsibility for errors or omissions, or for damages resulting from the use of the information contained herein.

WHAT EFFECTIVE TRADERS ACT AND THINK: UNDERLYING PRINCIPLES AND WINNING STRATEGIES FOR TRADING

First edition. April 18, 2023.

Copyright © 2023 John Miller.

ISBN: 979-8223820765

Written by John Miller.

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What Effective Traders Act and Think

Underlying Principles and Winning Strategies for Trading

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Table of Contents

THEORY PART

I

CHAPTER 1:  STOCK EXCHANGE TRADING - INTRODUCTION

II

CHAPTER 2:  SECURITIES/CAPITAL MARKET PRODUCTS

III

CHAPTER 3:  BROKER

IV

CHAPTER 4:  SOFTWARE/WORKPLACE

V

CHAPTER 5:  MARKET PARTICIPANTS

VI

CHAPTER 6:  BASICS/TECHNICAL TOOLS

VII

CHAPTER 7:  TRENDS

PRACTICAL PART

VIII

CHAPTER 8:  CONDITIONS AND OBJECTIVES

IX

CHAPTER 9:  TRADING PLAN

X

CHAPTER 10:  TRADE APPROACH

XI

CHAPTER 11:  TRADE ADMINISTRATION

XII

CHAPTER 12:  RISK AND MONEY MANAGEMENT

XIII

CHAPTER 13:  TRADE PSYCHOLOGY/BEHAVIORAL FINANCE

FOREWORD

When the trading team from ATT-Trading decided to write a book at the end of 2015, they set themselves the goal of writing a specialist book that provides a comprehensive insight into professional trading and conveys the most important basics of trading. This book is suitable not only for newcomers to the stock market, but also for advanced traders who may not yet have achieved the long-term goal of consistently trading profitably on the stock market.

At ATT-Trading, the team spirit is a very important point and that is exactly why this book was created. The authors would therefore like to thank Christian Storch and Mike Hermstedt, who helped with both the text and the graphics. Special thanks also go to Ioannis Alexiou, who has taken on intensive supervision of the ATT students over the past few months, giving the authors more time to complete this book.

The trading team at ATT Trading is certain that this book will provide great added value for your personal trading and hope you enjoy reading it.

THEORY PART

Knowledge is power

Sir Francis Bacon

I

CHAPTER 1:

STOCK EXCHANGE TRADING - INTRODUCTION

At some point in life, most people come into contact with the topic of the stock market. Dax and Co. are omnipresent in our everyday life. The developments on the financial markets are reported daily on television and in all daily newspapers. Even if you only have one appointment with your bank advisor, you can't avoid the stock market because it doesn't matter what your personal financial situation looks like: Every bank offers different products that ultimately depend on developments on the financial markets.

So in our society it is very easy to get caught up in stock market fever. And once you have started dealing with stocks or other speculative investments, it is not easy to let go of this topic again. At the same time, access to trading on the world's stock exchanges is very easy for everyone through the Internet and electronic trading. Every bank and every online broker is happy to accept new customers, even with little previous experience and small assets. Anyone can speculate on the stock exchange, regardless of whether the account has 2,000 or 2 million euros.

So there are no admission criteria for exchange trading and everyone is welcome to start trading immediately. And this is exactly where the first big problem of a trading beginner lies. He can trade pretty much any product his broker offers, from stocks and forex to futures and CFDs, without any specialist knowledge. Inexperienced customers gratefully accept this invitation, because trading can't be that difficult after all. Sometimes prices rise and sometimes they fall again. And if you position yourself accordingly, you win in both cases. The fact that the first trades on the demo account brought profits very easily also reinforces this attitude. The money is practically on the street and you only have to bend down to pick it up.

However, as soon as the beginner trader switches from the demo account to the real account and trades with his own money, he will find that suddenly everything is different. In most cases, the courses are now going against his own forecast and he no longer understands the world. Every trading beginner has this experience, because as soon as real money is on the table, you actually take part in the game of games and quickly land on the ground of facts. At this point at the latest, most newcomers to the stock market will probably realize that they may first have to acquire some specialist knowledge before they can trade successfully.

There is now a very large selection of trading literature, and at the same time trading seminars are held by many brokers. And then a beginner also has the opportunity to register in the various trading forums on the Internet. At this point, a very big hurdle is already building up for the trading beginner: he is suddenly faced with an enormous mountain of specialist knowledge, because there are an incredible number of ways to analyze the markets and a corresponding number of trading strategies. Some traders trade with the trend, some trade against the trend, some use a combination of different indicators, and still others swear by the Elliott Wave theory. At the same time, traders trade on the basis of very different time units. Scalpers use the tick chart and only hold their positions for a few seconds, day traders always open and close positions on the same day and are usually only in the market for a few hours, and swing traders try to achieve performance by holding their trades for several days. After all, every trader trades a wide variety of instruments, from stocks, forex and CFDs to futures, warrants and other leveraged products.

As a beginner, you can be overwhelmed by all this specialist knowledge and the very different trading systems. Therefore, it is now important to find out which system and which trading logic suits you best. Is there perhaps even unnecessary specialist knowledge that is only sold at a high price? What is the right book for the person concerned and at which seminar does he really learn trading?

However, this is by no means the greatest difficulty. What makes trading the stock market so difficult for most people is the mental component. Trading is very often referred to as a mental game and no matter how different the trading systems of successful traders are - everyone agrees that successful trading in the stock market depends on one's own psyche.

In the history of stock exchange trading, there have always been speculative bubbles, which then ended in a crash. People are all too often guided by their emotions and greed and euphoria can very quickly turn into fear and panic on the stock market. Probably the most famous speculative bubble of all time is the tulpomania, which took place in Holland in the 17th century. Within a few years, the price of tulip bulbs rose so high that by the end of the tulip fever, you could even get a beautiful house in Amsterdam for a single bulb. Everyone participated in this speculative bubble and drove the price of tulips higher and higher for years. In the last year of the tulip fever of 1636/1637, the price of a tulip bulb increased tenfold. But at the beginning of 1637 everything came to an end very quickly. In just a few weeks, tulip prices have plummeted by over 95 percent.

It's hard to imagine these events nowadays, but history repeats itself time and time again on the stock market, only the investment objects are different now than they were back then. In the past 20 years, it was Internet stocks, US real estate with the appropriate securitized home loans and Chinese stocks that, like tulip bulbs in 17th century Holland, were traded with euphoria and greed and then fell in price very deeply . In order not to succumb to his emotions when trading, it is immensely important for a trader to have a very precise plan of how to trade every day.

This book will show you how professional stock market trading works. The reason why it is so valuable is that it was written by traders who have learned to trade professionally over the past few years and are now working in wealth management. The authors of this book know exactly where the difficulties in trading lie at the beginning and what is crucial for success in daily trading on the stock exchange. The trading approach imparted in this book is also not some invented approach, but the trading approach used in the professional institutes. At the same time, this book stands out from others because the authors go into the practice very precisely.

Trading is a craft that anyone can learn. This book will help you learn the basics of professional stock market trading step by step. However, a single book can never replace a complete education, because it takes a lot of time and hard work to learn how to trade professionally.

This is exactly why ATT-Trading also offers a long-term training concept in which the students are not left alone after an intensive week, but continue to be looked after.

II

CHAPTER 2:

SECURITIES/CAPITAL MARKET PRODUCTS

Today's globalized stock exchange trading is characterized by a large number of different financial instruments. The offer ranges from very transparent and legally regulated instruments to complex calculations aimed at special interested parties.

Financial instruments generally differ in terms of whether they can be traded directly or via a capital market product specially developed for this purpose. Trading in all of these instruments is basically divided into on-exchange and over-the-counter trading. The biggest difference here is the relatively higher security in stock exchange trading through state supervision and legal regulation. There is also transparency in exchange trading, but not in over-the-counter trading. Some of the advantages of off-exchange trading, on the other hand, lie in the large range of products, the lower capital commitment and anonymity.

Liquid and transparent financial instruments are best suited for professional trading, the prices of which are primarily determined on a stock exchange on the basis of supply and demand. These include primarily exchange-traded securities, foreign exchange and some derivatives.

1 EXCHANGE TRADED SECURITIES

Most often, a trader will encounter directly tradable securities in stock exchange trading. This includes stocks and bonds. In the case of stocks, this is due to the large number of companies listed on the global stock exchanges and the countless reports about their business. But it is also due to the fact that many individual stocks in this asset class generate high stock exchange turnover from private and institutional investors. Many listed companies also encounter the speculator in everyday life and are therefore not just an abstract numerical value. In short, the share has always been the most recognized and the most popular financial instrument.

Shares are participation rights in companies. On the stock exchange, this financial instrument is traded directly and solely on the basis of supply and demand. Numerous stocks are among the most liquid financial instruments on the stock exchanges. American and large European companies in particular are heavily traded. Many stocks are listed in popular stock indices and aggregated into a single price. Stock indices reliably reflect the general state of the stock market.

Stocks are a very good trading tool for traders for a number of reasons. There are countless sources of information on stocks that relate to the price itself or the formation of the price. For legal reasons, the fundamental key figures can be called up for each share. There are also ready-made fundamental and technical analyzes for almost all stocks. This makes it easy