Long Term Secrets To Short-Term Trading

Figure 9.6 has all the trend reversals marked off, so you can begin paper trading by looking for the buy 
and sell entries and exits. I suggest you walk through this chart to get a sense of how one can trade this very 
short-term approach. Note these are 15-minute bars, but the concept will work on 5minute to 60-minute bars 
as well. 
A New Indicator for Short-Term Traders ... Will-Spread 
Markets move for real reasons, not because of technical whirling dervishes. Things happen in life 
because there are consequences to actions. Charts do not move the markets. Markets move the charts. In 
keeping with that, I also think short-term swings occur because of some external factor. Price never rallies 
because it is rallying, the rally is the symptom of a cause. Detect that cause and we are several light years 
ahead of the average short-term or day trader. 
One of my favorite causative indicators is my Will-Spread index, a measure of the flow of price 
between the primary market we are trading and a secondary market that influences the primary. As you 
know, Bonds influence stocks, and Gold influences Bonds; Will-Spread allows us to spot the inner workings 
of these market relationships. The index is constructed or calculated by first dividing the price of the market 
we are trading, the primary market, by the secondary market and multiplying by 100. This creates a spread 
between the two markets allowing a basic comparison of market interaction. 
For short-term trading on 15-minute bar charts in particular, and most other time frames as well, I then 
create a 5-period exponential of the spread and subtract that from a 20-period exponential of the spread. By 
so doing, we can see when one market is heating up over another and get a better sense of these inner-market 
influences. Granted, this is not a perfect system, but the only perfect approach to day trading I have ever 
seen are those myriad of ads in commodity magazines and newspapers. You can absolutely trust me on this: 
those are 90 percent hype and 10 percent substance. If anyone really had such an outstanding system, he or 
she could make 100 times more money trading without the hassle of having to deal with the public. In 
addition, the tax advantages of trading are gargantuan compared with hawking systems. I have 

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yet to see a totally mechanical day trading system that consistently makes money. Day trading is an art 
form that must be based on good concepts to be successful. 
An Actual Example 
Figure 9.7 shows a 30-minute bar chart of the June 1998 Treasury Bonds. Will-Spread, based on 
the spread between Gold and Bonds, is the index at the bottom of the chart. Our trading strategy should be 
to look for market rallies whenever this index moves from negative territory, below the zero line, to above 
it into positive land. A sell is just the opposite; when the index has been positive and then falls below the 
zero line, it is probably time to sell. 
I do not use this index as a be-all, know-all system. I use it as a tool to keep me in correct alignment 
with the true trend of the market I am trading. In this case, we are looking at Bonds versus Gold. Once 
price goes from being negative to positive, I will most always wait for one more thing to happen. 
I want the very next trading bar to rally above the high of the bar that switched the index from negative to 
positive. I am looking for final confirmation that the trend is still alive.