After reading some of John Carter's articles in Stocks, Futures and Options Magazine I was looking forward to reading his then upcoming book "Mastering the Trade: Proven Techniques for Profiting from Intraday and Swing Trading Setups". It was obvious from his articles that John had some good insights into how the markets work and that comes across even more so in the book. "Mastering the Trade" covers a lot of ground including writing a business plan (something that too few books cover), how to choose the proper hardware and software, an introduction to futures and currency trading (Forex) , an overview of trader psychology, a premarket checklist, a variety of trading setups and seven key internals to monitor in order to gauge intraday market strength & direction.
The book is divided into three sections. The first, called "Trader's Boot Camp", contains a lot of information that both novice and experienced traders will find useful. The introduction to futures was very helpful to me. John provides an overview and explains the advantages and disadvantages of some of the most popular contracts including the Mini-sized Dow (YM), the E-Mini-S&P (ES) and the E-Mini Nasdaq.
The final chapter of section one is one of my favorites. In it John lays out seven indicators to watch to help gauge intraday market direction. He explains how and why he uses TICKS, TIKI, TRIN, the put/call ratio, pit noise and a sector list. (John's article on TICKS is what convinced me to start watching that indicator.)
The next section contains various trading setups and is appropriately titled "Specific Intraday and Swing Trading Setups for Futures, Stocks, Options and Forex". John presents twelve setups that range from intraday scalps up to trades that you may hold for weeks or longer. One of the things I like best about the book is John's view on reward:risk ratios. We often hear that traders should only take setups with potential for a minimum 2:1 or 3:1 ratio. My favorite setup from the book, the gap fade, is only 1:1 or 1: 1.5 depending on the size of the gap. The key here is that it's a high percentage setup, so over time the expectancy is positive even though the reward:risk is so low.
Another of John's setups that I like is the TICK fade -- when conditions are right, fade the market when $TICK reaches +1,000 or -1,000. This is another "risk 1.5 to make 1" setup and it can be scary to execute especially for momentum traders. I'm still trying to get comfortable with this setup.
The third and final section of the book covers important topics for those who are serious about trading as a business. John walks the reader through his pre-market and weekly checklists. He goes on to provide guidance on writing a detailed business plan. That's something that too few so-called serious traders have.
I always enjoy books that give me a different perspective on things. After reading "Mastering the Trade" I'm considering adding futures trading to my account so that I can trade setups like the TICK fade without using all my buying power. It's also made me broaden the types of setups I focus on. After doing some of John's gap fades I realized that I could do well to go after some other setups that I often see that may only return a 1:1 risk-to-reward ratio. I think that traders of all levels would do well to have "Mastering the Trade" in their libraries. Newer traders will find value throughout the book and more seasoned traders should be able to find some new setups to exploit.
John Carter and his trading partner Hubert Senters were kind enough to hook me up with their Professional Trader's Workshop DVDs "How We Trade for a Living" to review. The DVDs are of a live seminar that they do in Chicago. There are 12 discs that cover much of what's in "Mastering the Trade". The DVDs go deeper than the book in many areas though. One of the things that I found most interesting was how John and Hubert manage their trades differently although using the same setups. They do some live trading at the seminar in which you can see how these two traders have adjusted the setups to fit their own personalities. Hubert, is much quicker to scale out (take profits) than John. It was also enlightening for me to see how they use pit noise to help read the market. You also get a a lot of nuances that aren't in the book from the Q&A sessions.
The DVDs aren't cheap but I guess they're cheaper than taking a trip to Chicago and paying to attend the seminar in person. If you're looking for a seminar the DVDs may be worth considering.
"Another of John’s setups that I like is the TICK fade — when conditions are right, fade the market when $TICK reaches +1,000 or -1,000. This is another “risk 1.5 to make 1″ setup and it can be scary to execute especially for momentum traders. I’m still trying to get comfortable with this setup."
A long time ago I used to do something that sounds similar. The "plan" was to watch the TICK or the DOW (or something or other) for signs that program trades were kicking in, then using index options "fade" the market. For a number of reasons (ugly option spreads, reaction time, inexperience, maybe it was a bad "plan," etc.), things never seemed to go according to "plan."
Today there is a webinar with John at CBOT: "Why Stock Index Futures Traders Will Love Trading Corn, Wheat and Soybeans"
By the way, tomorrow he will discuss his trading live and in real-time: Dow Trading Into the Close
I agree this was a great book, in terms of the variety and sheer number of trading setups and ideas in it. One of my favorites was watching for when bollinger bands push through keltner channels. This is also the book that introduced me to pivot points.
I was very impressed with the trading plan section of the book, though I'm ashamed to say that writing one is still on my "do real soon" list after quite some time.
I read Martin Schwartz’s book Pit Bull on my last vacation and he notes that these tools (TICKS, TIKI, TRIN, the put/call ratio) are some of his most important although he doesn’t go into too much detail on how to use them.
Mike, it must be interesting to read your futures trading postings later:)