The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk

224 Pages·2012·4.75 MB·English

by  Andrew Abraham

T T
HE REND
F B
OLLOWING IBLE
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T T
HE REND
F
OLLOWING
B
IBLE
How Professional Traders Compound
Wealth and Manage Risk
Andrew Abraham
Cover image: Andrew Liefer
Cover design: © Danin Tulic/iStockphoto
Copyright © 2013 by Andrew Abraham, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data
Abraham, Andrew.
The trend following bible : how professional traders compound wealth and manage risk / Andrew
Abraham.
pages cm. — (Wiley trading series)
Includes index.
ISBN 978-1-118-40774-5 (cloth); ISBN 978-1-118-42186-4 (ebk),
ISBN 978-1-118-43439-0 (ebk), ISBN 978-1-118-41763-8 (ebk)
1. Investment analysis. 2. Portfolio management. 3. Investments. 4. Risk management. I. Title.
HG4529.A27 2013
332.64 5—dc230
′
                                                                            2012043888
To my Family, Ruthie, Gabrielle, Ariel, Micael, my mother, and all those who
supported me along my journey of trend following, thank you.
CONTENTS
Foreword
Preface
Introduction
A Great Learning Lesson
Have a Plan and Follow it
A Lesson in Compounding: The Dentist
Chapter 1: Get a Savvy Start
Trading as a Profession
Trend Following Is a Journey
Make Sure You Are Properly Funded before You Start
Establish Your Trading Goals
Trading Pitfalls
It's Your Choice
Chapter 2: Getting the Most Out of This Method
There Are No Secrets!
Do You Want to Be Right or Make Money?
Basic Tenets of Trend Following
Compounding Your Way to Wealth
Requirements for Successful Trend Following
Chapter 3: Why Trend Following?
Why Not Fundamental or Even Technical Analysis?
My Answer: Trend Following
You've Got to Love That Saying!
Ed Seykota and Market Wizards
Chapter 4: How Successful Trend Followers Trade
The Trend Followers
Gurus, Geniuses, and Legends Are Not the Way to Make Money!
We Have Our Legends As Well
The Biggest Mistake Traders Make
Chapter 5: Managing the Risks when Trend Following
Risk of Ruin
The Exact Elements of Risk Management
Choose Markets to Reduce Risk
We Are Dealing with Uncertainty!
Note
Chapter 6: Your Complete Robust Trading Plan
Trend Breakout and Trend Retracement
If the Trade Starts Working
The Calculation of Average True Range
Trend Retracement Rules
Just Do It
Chapter 7: Trend Breakouts
ArthroCare Corporation
Baidu
The 30-Year U.S. Government Bond
The Canadian Dollar
Feeder Cattle
International Flavors and Fragrances
Royal Bank of Canada
TJX Companies
Cotton Trade
Eurodollar Chart
Sugar
Silver
Chapter 8: Trend Retracements
Don Steinitz's Approach
Alexander Elder's Approach
Step 1: Identify the Trend on the Higher Time Frame
Step 2: Identify the Retracement/Pullback
Step 3: Putting the Trade On
Summary
Protect Yourself
Note
Chapter 9: The Trend Follower Mindset
Make It Second Nature
Trend Following and Trading Is Not Retirement in a Box!
What Makes a Successful Trend Follower?
Sweet Simplicity
Think Probabilities
Traders Lose Because of Fear
It Is All Perception
Just Take the Trade Mode
This Will Not Be You
Chapter 10: My Trading Journal
Conclusion
Disclosure
Index