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Following Institutional
Footprints
Profit from Takeover Chatter P. 70

Better the Devil

You Know
Why You Should Trade
Volatile Stocks P. 94

Insights from Trading Legend Mark Minervini

TRADERS´ – Your Personal Trading Coach | www.tradersonline-mag.com

How to Trade Like a

Champion Market Wizard P. 30
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www.tradersonline-mag.com 08.2015 eDItorIaL

Marko graenitz
Deputy Editor-in-Chief

Learning by Doing

» there are many ways to learn about trading. Books, magazines, videos, interviews,
conferences, seminars. you name it. Most of you know what all this looks like and may
fi nally ask one defi ning question: “Where do I aquire all those absolutely necessary
trading skills in the first place?” the answer: sit down, observe the markets and go
trading.
at traDers´ we keep in touch with all those engaged in the pursuit of better
trading. We try our best to introduce all these personalities to you, and include various
interviews and articles. that is the best resource you can have. However, once you
know all the basics, it is up to you. you have to go out there and trade. It might feel hard,
but it is the only way you can make it (other than giving your money to other people to
manage it for you).
yes, you will make mistakes. Many of them. But that is a good thing as you will be able
to learn from these experiences. Just as you learned to walk as a child in spite of (and
because of) falling down. over time, you will improve. Basically, that is how greatness
develops.
In our current issue, we present a perfect example. Mark Minervini, the author
of our cover story, had to endure several years in which he did not earn a dime in the
markets. Despite his consistent efforts he even lost some money. that, however, did
not hold him back on his mission. He fi nally developed his personal trading system. He
became profi table, and he never looked back. today, he is a “Market Wizard”, having
been interviewed in Jack schwager’s book. He made it through learning by trading, and
consistently and relentlessly keeping at it.
you can do it, too. Learning by trading may be the school of hard knocks, but in the
end that is the best school you can attend. Just keep standing up over and over again,
until you learn how to profi t. Until that point, trade small and make sure to stay in the
game. Make sure you will still be there once the profi ts arrive. and do not forget to enjoy
the ride. «

good trading,

3
 taBLe oF coNteNts www.tradersonline-mag.com 08.2015

94

30

TABLE OF CONTENTS Special:

Inter view
s from the
NYC Trad
August/September 2015 ers Expo
– Par t 1
P. 51

INSIGHTS

16 TRADERS´ Talk
Emma Morris, Partnership Director at 24option talks about
their partnership deal with Boris Becker and binary options. 8
18 Alexander’s Social Trading Experiment – Part 1 News
Alexander Mantel speaks about his experiences with the Find the latest notes and
social trading platform ayondo. announcements from around the world
of trading in our “News“ section.
20 Stock Market Boom and Crash
In this article Wim Grommen shows the cause and effect of
extreme market movements.
TOOLS
24 Volume Weighted Average Prices
Dirk Vandycke looks at the balancing line of feelings of 38 New Products
people with a position. The Latest Trading Technology

28 Trading Seasonalities 40 Web Review

This time two FTSE stocks show good opportunities: Airline www.quantopian.com
EasyJet and Beverage Stock Diageo PLC.
44 Book Review
Efficiently Inefficient
COVER STORY by Lasse Heje Pedersen

30 How to Trade Like a Champion Market Wizard 46 Book Review

Winning stock traders share certain key traits required for Doug Kass on the Market
success. The good news is that you do not have to be born by Doug Kass
with them. Along with learning effective trading tactics, you
can develop the mindset and emotional discipline needed to 48 App Review
win big in the stock market. Two things are required: a desire Stock Market Wave Calculator
to succeed and a winning strategy.

4

STRATEGIES
70 Following Institutional Footprints – Part 3
Adrian Manz shows how to profit from takeover chatter with
the intraday XRV news reversal.
74 Generate Monthly Cash Flow by Selling Stock Options
Alan Ellman creates a multi-tiered option selling strategy.
78 Trading With Cloud Charts – Part 3
Manesh Patel explains pullback entry rules.
82 Head and Shoulders Trading
Antypas Asfour presents advanced concepts for pattern trading.
BASICS
86 The Trader‘s Technical Arsenal – Part 12
Azeez Mustapha discusses common indicators in MetaTrader
– this time Volume and Williams’ Percentage Range.
90 Trader Mind – Part 3
Steve Ward shows a way to regulate your emotional
experience through the use of reappraisal.
94 Better the Devil You Know
Dave Landry looks at how to measure and gauge a stock’s
volatility and why you should trade more volatile stocks.
98 Risk and Money Management
Jens Klatt deals with the question of how traders can
improve their payoff ratio by Scaling Out.
102 Anchored VWAP Channel Indicator
Oscar Cuevas explains the technique and its application.
PEOPLE
106 The Pro‘s Process
Nick Radge
108 Oliver Klemm – Professionally Trading DAX Futures
Oliver Klemm has been trading for 33 years. Being an
experienced professional trader, he only trades his own
money today. Most of the time, he focuses on short term
intraday trading in the DAX Future, with some Bund
Futures, S&P Futures, and EUR/USD thrown in.
taBLe oF coNteNts
Publisher
Lothar Albert
Subscription Service
www.tradersonline-mag.com/subscribe;
subscribe@traders-mag.com;
Tel: +49 (0) 931 45226-15
Address of Editorial
and Advertising Department
TRADERS´ media GmbH
Barbarastrasse 31a
97074 Wuerzburg, Germany
Contact:
E-mail: advertising@tradersonline-mag.com
Phone: +49 (0) 931 45226-18
Editor-in-Chief
Lothar Albert
Editors
Katharina Boetsch, Leanne Chesterman,
Prof. Dr. Guenther Dahlmann-Resing,
Marko Graenitz, Sandra Kahle, Inessa Liss,
Rodman Moore, Najia Rasuli, Stefan Rauch,
Katja Reinhardt, Markus Schneider, Karin Seidl,
Tina Wagemann, Christine Weissenberger
Articles
Thomas Bopp, Antypas Asfour, Richard Chignell,
Oscar Cuevas, Alan Ellman, Marko Graenitz,
Wim Grommen, Oliver Klemm, Jens Klatt,
Dave Landry, Brian Lund, Alexander Mantel,
Adrian Manz, Mark Minervini, Azeez Mustapha,
Manesh Patel, David Pieper, Markus Strauch,
Dirk Vandycke, Steve Ward
Pictures
© Nyky, Dvarg, niroworld, Stephen Finn, Gina Sanders,
PHOTOMORPHIC PTE. LTD., klublu, lassedesignen, Andrew Bayda,
EasyJet, IMaster, Massimo Cavallo, Brian Jackson, opicobello,
Ayk Kokcu, lev dolgachov, Paulus Rusyanto, ra2 studio, wmedien,
olly, sergey_p, James Thew / www.fotolia.com, Sandra Binder
Price data
www.captimizer.de; www.esignal.com;
www.metaquotes.net; www.tradesignalonline.com;
www.tradestation.com
ISSN
1612-9423
Distributor / Retail:
DPV GmbH, www.dpv.de, lange.guido@dpv.de
Disclosure
The information in TRADERS´ is intended for
educational purposes only. It is not meant to
recommend, promote or in any way imply the
effectiveness of any trading system, strategy or
approach. Traders are advised to do their own
research and testing to determine the validity
of a trading idea. Trading and investing carry
a high level of risk. Past performance does not
guarantee future results.
© 2015 TRADERS´ media GmbH,
Barbarastrasse 31a, 97074 Wuerzburg, Germany
5
 cover story www.tradersonline-mag.com 08.2015

How to Trade Like a

Champion Market Wizard
Insights from Trading Legend Mark Minervini

Investing styles may differ among successful market players, but without exception, winning stock traders share
certain key traits required for success. Fall short in those qualities and you will surely part ways with your money.
The good news is that you do not have to be born with them. Along with learning effective trading tactics, you
can develop the mindset and emotional discipline needed to win big in the stock market. Two things are required:
a desire to succeed and a winning strategy. There is a big difference between making a decent return in the stock
market and achieving super performance, and that difference can be life changing. Whether you are an accountant,
a school teacher, a doctor, a lawyer, a plumber, or even broke and unemployed as the author was when he started –
you can attain super performance.

6
 Cover story

» Consistency Wins the Race F1) Strong Breakout Trade

People buy stocks in hopes of
making money and increasing their
wealth. They dream of the great
returns that their carefully chosen
investments will yield in the future.
Before investing your hard-earned
cash, however, you had better think
about how you will avoid losing it.
If there is one thing Mark
Minervini has learned over the
years, it is that risk management is
the most important building block
for achieving consistent success
in the stock market. Notice that we
said “consistent.” Anyone can have
short term success by being in the
right place at the right time, but The stock of Repligen (RGEN) broke out dynamically in March 2015. Moving the stop to breakeven protects
your principal and keeps you with the longer term trend.
consistency is what differentiates
Source: www.tradesignalonline.com
the pros from the amateurs, the
timeless legends from the one hit
wonders.
During his career, the author has witnessed many gains like the market’s money instead of their money, and
people make millions of dollars during good times, only in due time the market takes it back.
to give it all back and even go broke. We are going to tell Let us say someone buys a stock at $20 a share. It
you how to avoid that fate. climbs to $27. Then the investor decides he can “give it
room” because he has a seven point cushion. Wrong!
It is Your Money, but Only as Long as You Protect it Once a stock moves up a decent amount from its purchase
To achieve consistent profitability, you must protect price, Mark Minervini usually gives it less room on the
your profits and principal. As a matter of fact, Mr downside. He goes into a profit protection mode. At the
Minervini does not differentiate between the two. A big very least, he protects his breakeven point. He is certainly
mistake many traders make is to consider trading profits not going to let a good gain turn into a loss.
as house money, acting as if that money somehow is At the end of each trading session, when you review
less their own to lose than their original starting capital your portfolio, ask yourself this: Am I bullish on this
is. If you have fallen into this mental habit, you need position today? If not, why am I holding it? Does your
to change your perception immediately to achieve original reason for going long remain valid? End every
superperformance. trading day with a frank appraisal of all your positions.
Let us say the author makes $5,000 on Monday. He We are not suggesting that you not allow a stock to go
does not consider himself $5,000 “ahead of the game,” through a normal reaction or pullback in price if you
free to risk that amount shooting for the moon. The believe the stock can go much higher.
account simply has a new starting balance, subject to Of course, you should give stocks some room to
the same set of rules as before. Once he makes a profit, fluctuate, but that leeway has little to do with your past
that money belongs to him. Yesterday’s profit is part of gain. Evaluate your stocks on the basis of the return
today’s principal. you expect from them in the future versus what you are
Do not fall into the faulty reasoning of amateur risking. Each day, a stock must justify your confidence in
gamblers. Through consistent play and conservative holding it for a greater profit.
wagering, a player picks up $1,500 at the blackjack table.
Then he starts to make big, reckless bets. In his eyes, he Avoid the Big Errors
now is playing with house money. This happens all the Recently, the author had a chance to speak with Itzhak
time in the stock market. Amateur investors treat their Ben-David, coauthor of the study “Are Investors ... ... ...

7
 strategIes www.tradersonline-mag.com 08.2015

Following Institutional Footprints

Part 3: Profi t with the Intraday Xrv News reversal from takeover chatter

In the last two articles in this series, we covered the expansion-of-range-and-volume (XRV) trading setup
in the form of a pre-planned day trade (TRADERS´ 02/2015), and the multi session swing trade (TRADERS´
06/2015). In this installment, we will show you how the same pattern criteria can be used in conjunction with
top-tier intraday news feeds to predict, and profit from, fast price reversals.

» Event-driven trading can be very lucrative. Anytime

adrian Manz
Adrian Manz (PhD) has been a professional
stock trader for 16 years. He is the author of
two trading books, and publishes the Daily
Income Trading Plan, a nightly blueprint for what
he will do in the markets the following day at
traderinsight.com.
adrian@traderinsight.com
there is news about a company, the market reacts swiftly.
These reactions form momentum patterns on the intraday
stock charts of the companies involved. The moves are
generally short lived, and represent a quick opportunity
for profit for nimble traders who know how to get into
and out of positions very quickly. There are many types
of news events that can be traded, but we have found

8
 Strategies

Most traders are well aware that almost

all takeover rumours will prove to be false.

that the one that is easiest to handle intraday comes in typically look for moves that exhaust at or near floor
the form of takeover chatter that generates an intraday trader pivot lines, and use pre-move baseline prices or
XRV bar. additional pivot lines as profit objectives.

Anticipating Anticipation Floor Trader Pivots

Takeover chatter circulates regularly on the news wires, Floor trader pivot lines are included in most high-end
and makes for one of the most predictable XRV moves in software packages. Before we move any further we
stock price. We have all heard the adage “buy the rumour will share the calculations for the Central Pivot (P), First
– sell the fact.” The reason for the predictability is that Resistance (R1), First Support (S1), Second Resistance
the news is usually rumour based, and most traders are (R2), and Second Support (S2). This will help anyone who
looking to establish a long trade as soon as the rumour does not have resident software indicators programme
hits, and will exit that trade the moment the news is their own pivot lines. The calculations for today are
disseminated and momentum fades. Most traders are always calculated from the prior sessions data and are
well aware that almost all takeover rumours will prove as follows:
to be false. These traders are not looking to establish
long term positions. They want a fast, momentum based P = (High + Low + Close) / 3
profit opportunity. Knowing that the motivation for R1 = (P x 2) - Low
these traders is a quick profit, tells us quite a bit about S1 = (P x 2) - High
the risk tolerance of the people involved. When looking R2 = Pivot + (High - Low)
for fast profits, most traders will keep tight stops. When S2 = P - (High - Low) ... ... ...
momentum slows, buying pressure
subsides, stops are hit, price will
drop. And as progressively more F1) Altera Corp (ALTR)
traders are stopped out of a stock
on the way down, the rate of price
decline will accelerate. This scenario
allows us to profit by anticipating
anticipation, and entering a counter-
trend short position just as others
are looking to exit their longs.
A little reverse psychology
goes a long way in profiting from
momentum reversals. Since the
magnitude of the move we are
looking to profit from in the case
of takeover chatter trading is not
particularly large (usually 0.50 per
share or less), it is imperative that
we keep risk to a minimum and catch
as much of the reversal range as we When the initial rumor-based price surge subsided, the price of ALTR declined from the news-driven $44.88
possibly can. For this reason, we high (1), triggering a short sale entry at a violation of the central pivot line at $44.31 (2). ALTR triggered an exit
for a profit of $0.37 per share, moving to within 0.01 of the $43.91 S1 pivot line (3).
use very specific inflection points
Source: www.realtick.com
as triggers for reversal entries. We

9
 bASICS www.tradersonline-mag.com 08.2015

Anchored VWAP Channel Indicator

Detecting Changes in the Trend

Andrew Coles presented in his article “An Anchored VWAP Channel For Congested Markets” (Stocks & Commodities,
July  2010), this interesting tool, based on Paul Levine’ s Midas Indicator. This is an indicator which is very similar to the
Volume Weighted Average Price. Andrew Coles’ indicator includes the use of channels as a method to differentiate the
congestion zones from the trending zones. In the following article, we get deeper into that technique and explain how
to take profit out of the information it provides in order to improve our trading.

» Paul Levine´s MIDAS indicator price and volume involves a philosophy for the study of
The MIDAS indicator is a modified version of the VWAP, the change of trend based on the following details.
a very particular moving average style indicator resulting Considering the price evolution as a consequence of
from both price and the negotiation volume. The use of distribution and accumulation processes, we are going

10
 BASICS

The evolution of the indicator slope

is a trend change detection
indicator in itself.

to presume that this evolution can be quantified by using the same level, creating support and resistance. After
prices and volumes. When studying those data, certain these levels have been set, price oscillates between the
symmetry between support and resistance is revealed. one and the others. Thus, we can consider these levels
Consequently, we can use that symmetry to predict as the congestion zone limits. The channel methodology
possible future levels of support and resistance, these suggests fencing in the price range and waiting for the
levels are provided by the MIDAS indicator. breakout of this range as a leak and consequently, the
Therefore, when applying the indicator to a certain beginning of a new trend (bullish or bearish depending
asset, the result is a line following the price and showing on the direction of the breakout)... ... ...
levels, where the trends are likely to
change. In fact, the evolution of the
indicator slope is a trend change F1) MIDAS Indicator Applied to AEX Futures
detection indicator in itself.
Figure 1 is a perfect example.
Point A and Point B depict the
timing of the trend changes. After
point B begins, an extended bearish
upward movement. The longer the
movement lasts, the longer the
distance between the price and the
indicator line, as this line acts as a
long term resistance level.
Andrew Coles stated in his article
that this method earns validity when
the end of a trend coincides with the
beginning of a new trend (trend-trend),
but not when the end of the trend
turns into a bracketing market (with
accumulation or congestion process),
and this is the situation most likely to
occur (trend-congestion-trend).

Study of Lateral Movements.
The author raised the notion that the
ranging movements of the market
were formed by several prices at
The MIDAS indicator changes its slope into positive at A, indicating a change of direction. B also works as a
pivot point, coinciding with a change of slope. The longer the movement, the farther away the price breakout
level, as it can be noticed in the bearish movement started after noon.
Source: Visual Chart

11
 PeoPLe www.tradersonline-mag.com 08.2015

oliver Klemm
Professional trading of DaX Futures

Oliver Klemm has been trading for 33 years. He began his career at Deutsche Bank where he completed
a comprehensive training programme. He went on to work in the bank’s US equity trading department
before joining other departments and finally changing sides to become a broker. This path led him to
founding his own securities firm, which he eventually sold in 2004. Since then, he has only been trading
his own money. He runs the website www.ridingthedax.com and for a year he has been offering a
webinar and chat based training programme to a small group of traders. At “Trading Coach Oli”, he also
makes material available on Facebook and YouTube. Mr Klemm lives and trades in the Cypriot city of
Larnaka. Marko Graenitz interviewed him via Skype and talked to him about his trading.

12
 People

» TRADERS´: You have been trading F1) Trend Trade

for more than three decades. Can you
remember how it all began?
Klemm: Yes, I can – in fact, I
remember it very well. I would sit
with my father at the kitchen table,
having breakfast together. Every
day, he would read the newspaper,
in particular the sports section,
which was of special interest to him.
I would sit opposite him, looking at
the back of the newspaper. That is
where the business section was,
and you can imagine the rest of the
story. I started to ask questions and
became more and more interested in
the subject. Figure 1 shows a short set-up for a trend trade in the 1-hour chart of the DAX. A distinctive high first needs to
be followed by three lower highs. After that, a new low needs to be formed which is below the lows that have
been reached since the distinctive high. At this point, the short entry will be made (see red arrow).
TRADERS´: How did you get into
Source: www.tradesignalonline.com
trading then?
Klemm: I completed a comprehensive
training programme at Deutsche
Bank in Frankfurt and right after that applied for a job in technical levels among countless stocks. It is hard enough
the bank’s equity trading department. That was in 1982 as it is to find the right setups in a market.
or 1983 when the bull market was about to get going. The
market situation was so good that they were desperately TRADERS´: Did you use to trade other strategies as well?
looking for people, so I wasted no time getting on board. Klemm: Yes, just about anything. Relative strength
models on stocks, arbitrage between futures and the
TRADERS´: Did you have any previous experience? corresponding equity baskets, trading second-tier stocks,
Klemm: No, but from the very beginning I learned to and so on.
trade in a professional environment. I traded US stocks
on commission, for example filling customer orders. In TRADERS´: How do you find your setups?
part, I also traded positions for the bank. Klemm: I have a technical approach that I call “intelligent
trend following.” The analyses I have conducted cause
TRADERS´: You were in many different jobs that finally led me to have the market structure down pat and to know
you to the broker’s side of the business. Were you able to the supports and resistances. I like to analyse pullbacks to
continue trading your own account on the side? find out how strong a movement really is. The following is
Klemm: Yes, but no stocks because I felt that there was true here: The smaller the pullback, the stronger the trend.
a too high risk of conflicts of interest with customer Fibonacci retracements and the use of the Elliott Wave
orders. Instead, I traded futures and options on futures, Theory give me additional guidance. I identify my setups on
where high volume made it impossible for prices to be the basis of high-low sequences that I monitor and analyse
manipulated. – let us call it a mental “map”. For this I use Bollinger Bands
to find overbought and oversold zones as well as moving
TRADERS´: Since 2004, you have been trading solely your averages (MAs) for orientation. Now and then, I also use
own account. Which instruments do you use? the parabolic indicator. In addition, I use charts indicating
Klemm: I trade the DAX, bund and S&P futures as well market profile, all of which gives me the statistical advantage
as occasionally the EUR/USD. Primarily, though, I trade of going long or short at the right points.
the DAX. All these instruments are liquid and work much
more simply than stocks since you do not need to analyse TRADERS´: So you are convinced of purely technical
any fundamentals and do not have to look for the best concepts? ... ... ...

13
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