Around the Horn: A Trader's Guide to Consistently Scoring in the Markets

10/01/2007 12:00 am EST

Focus:

Adrian Manz

Co-Founder and Daily Contributor, TraderInsight.com

The framework for the 2003 edition of Around The Horn was to explain specific tradable market patterns that the author, Dr. Adrian F. Manz, had observed and traded himself. The names of the patterns are all related to baseball as the author feels that the skills needed to play baseball are similar to those needed to be a successful trader. These traits include having a strategy as well as the discipline and mental outlook to succeed. The patterns he discussed have been updated to reflect the realities of the 2007 markets.

This is a trading book done in the popular “large book” format, which means there are quite a few examples of each trade setup with an accompanying chart that is large, well annotated, and easy to follow. In the first section of the book the focus is on the mental game and determining the ground rules which means developing and following a game plan. Adrian has a well thought out spreadsheet to track the daily action in the major market averages, sectors as well as the market internals. Also included are a brief, but valued packed review of how to find trading candidates, calculating pivot points, scanning for pattern entries, as well as how to set both stops and profit targets.

In section II, the focus is on daily patterns and there are seven that he covers including: fast ball, infield fly, line drive, 3-2 pitch, backdoor slider, switch-hitter, and double header. For each, the entry and exit rules are well defined but for some there are some additional suggestions that one might use to fully evaluate the pattern. An example is the switch hitter, “a pullback pattern that establishes a position after profit-taking has caused a one-to five day correction in a trend.” This correction should be accompanied on decreasing volume and retrace 50-61.8% of the previous rally. Adrian also suggests you look at the relative strength of the stock in Investor’s Business Daily and for long candidates it should have a reading of 60 or better, for short sales 30 or less. For this trade setup he also suggests that you look at the price behavior of the most closely correlated sector, something that most professional traders do but is not frequently discussed.

Intraday patterns are covered in the third section of the book and they are also referred to by baseball terminology. One that stood out for me was the “Baltimore Chop”, an intra-day pattern that uses five-minute bars to identify an “overreaction opening to find a high probability turning point.” An example would be a sharply higher or lower stock opening in reaction to earnings or futures trading. An extreme opening is when a stock opens at least two standard deviations above or below the previous day’s high or low range on low volume. The statistically extreme opening causes some short-term traders to establish new positions in direction of the opening, but they are ultimately forced to exit on the snap back rally while those trading the Baltimore chop are profiting.

The final section of the book reviews past trades as Adrian, like other successful traders feels that only meticulous record keeping of their trades will allow one to correctly evaluate and therefore improve their trading. If you trade based on setups either daily or intra-day this book will provide you with some concrete trading ideas and the glimpse inside the mind of a professional trader is well worth the investment.

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