Long Term Secrets To Short-Term Trading

"proving" their mumbo-jumbo works. I have been on the speaking circuit with these folks as well, and 
have come to have little respect for this crowd, with some exceptions. 
Of the thousands of traders applying this cosmic logic, I have only seen two do well, Arch Crawford 
and Jerry Favors. Two out of thousands is not a great batting average. In addition, Arch and Jerry are not 
only exceptionally smart people, but well-trained, experienced traders who use more than just one 
approach. 
The bottom line problem with the "all can be known" thesis is that it causes you to throw away fear, 
to place your convictions, and money, on a thesis, not what is actually going on in the market. If your focus 
is the market, what is happening now, and not a belief that stock or commodity prices must do something, 
your chances for success will skyrocket: 
A perfect system or approach does not exist. Never has, never will. 
If there were such a thing as perfection in this business, then that would mean (1) the markets contain 
no random inputs and (2) someone else would have already found the magical solution and own most of the 
free world by now. Since we know the markets do have a high degree of random influence from 
ever-changing news, weather, traders' outlooks, and that even the best traders and funds tap out, we must 
realize that the markets are not to be traded with a 100 percent mechanical approach. Things change. 
Does this sound strange coming from someone who has just about spent his entire adult life 
developing systematic approaches to trading', Probably so, and it should not be taken to mean all my work, 
or systems and such, don't work: 
Life is a judgment call, but that call is based on having data and systems 
to make life work better. So it is with trading. I need a systematic ap 
proacb to get me into and out of trades, I need absolute stops, and I sure as 
beck need precise entry rules. 
But above all, I need to use some judgment of when to use this "stuff." Let's look at an example from 
real life. 
If you are driving down the road and a truck is dead ahead of you in your lane, do you stay in that lane 
or swerve across to the empty lane where you are not supposed to be? The rules are clear, you are not

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supposed to be over there. The system says don't do it, but reality is an 18-wheeler coming toward you in
your lane. Do we follow all the rules of safe driving, or do we adapt to the situation at hand? Survival is a 
function of adaptation. 
Reality rules. On the road, in the markets: 
The first rule of life is to survive; the second rule is that all rules can be broken if that supports the first 
rule. 
Speculation follows the same rules we use for life; they are integrally the same. Successful trading is 
the art of using knowledge (systems) at the right time. This means when it is time to use the system or rule, 
you check for an oncoming 18-wheeler. That is what thinking is all about. We do need systems of living and 
systems for trading. But it is not mandatory that you follow all systems exactly all the time. The reason is 
that systems do not adapt to any new bits of reality. That is what our mind is for, to observe, to record, to 
note changes, and then to develop an optimum use of the system. 
If you do not know what to do as you are trading, you must follow the rules because they will keep you 
alive. If you like market conditions and they fit what your rules suggest, go for it; if the rules don't fit 
conditions or conditions don't fit the rules . . . pass. You don't have to trade every day. The object of having 
systems and rules is to run them to your best advantage, and not to let them run you. 
I wish you well, I wish you good luck and good trading, and most of all I remind you to remember 
those three little words: 
Always use stops. 

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Index 
A
Brie, Doug, 58 
British Pound, 84 
Accuracy, 199 
Bullish markets, 70, 77-78 
Active traders, 73 
Bullish patterns, 95-96, 98, 101 
Adams, Richard, 108 
Buy setup, smash day, 101 
Adaptation, 247-248 
Buy signals, 109, 115-117 
Advisory services, 205 
Buy swing, 12 3 
Aggressive trading, 2, 170 
Amateur traders, 2 13 
Athletics analogy, 209 
c 
Average profit per trade, 60 
Casinos, 166-167, 172. See also Gambling: 
Games of chance 
B
Castell, Albury, 234 
Chalek, Mike, 1 
Babcock, Bruce, 114 
Channel breakouts, 235 
Bad habits, 237-240 
Chaos, 12. 19 
Balance, in price and time swings, 47-55 
Charting, generally', 11-13, 19. 43,, 60 
Bar charts, 11, 13 1. See also specific types of 
Chartists, 12-13, 15, 93 
trades 
Chase, Henry- Wheeler. 16 
Bearish markets, 3 7, 70, 72, 77 
Clinton, Hillary, 
227 
Bearish trades, 246 
Close, holding strategies and, 
Behavior of Prices on Wall Street, The 
Close-to-close relationship, 85 
Merrill 120 
Closing, hiigh/low. 39 
Belief system, 4-5, 202-203,228 
Commoditiy Futures Trading Coinmision 
Bernstein, jake, 77, 114 
(CFTC), 1 
Bias, trading on, 85-88 
Commodity- Research Bureau. 208 
Bond market 
Commodity Timing-, 
daily range breakouts, 61 
Commodiity Timing 
articles: 
long-range days, 34-35 
Art of Fly--Fishing Revisited. The. 193 
Oops' pattern, 116-117, 120 
Athletics Are Such a Parallel to Trading 
patterns, 
97-99 
209 
stock prices and, 72 
Beating Them to the Punch. 2 18-22 1 
Bottoms, 37-39, 55, 133 
Boston Marathon. 1996. 191 
Breakouts: 
Broken Nose, Cauliflower Ears. and Bad 
smash day patterns, 105 
Trades, 2 2 3 
specialists' trap, 109 
Difference Between Winners and 
volatility 
(see Volatility breakouts) 
Losers. The. 2 3 1 -2 

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