TABLE OF CONTENTS INTRODUCTION
Thinking Differently Than Others

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CHAPTER ONE
Knowing What Will Happen Next

17

CHAPTER TWO
Trading The Probabilities

20

CHAPTER THREE
Patiently Waiting

26

CHAPTER FOUR
Same Plan Another Day

30

CHAPTER FIVE
The Master

34

CHAPTER SIX
Singles and Doubles

40

CHAPTER SEVEN
Focus

44

CONCLUSION

47

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WHEN 10 IS GREATER THAN 90.
WHY 10% OF TRADERS MAKE 90% OF THE MONEY AND HOW YOU CAN TOO.

Are you not making consistent and sustainable profits in the stock market? Have you hit a plateau in your trading with little to no noticeable recent improvement? Have you tried trading system after trading system without any lasting success? Have you made money trading only to lose it just as quickly as you made it? Have you hit a streak of losers causing you to question the validity of your trading system? Is it one step forward and two steps back no matter what you do? Are you constantly seeing your losers lose more money than your winners gain?

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If you answered yes to any or all of these questions you are definitely not alone. For you see, early in my trading career I could answer yes to all of these questions and many more too numerous to mention here.

Let’s just put it this way: THERE IS NOT A TRADING MISTAKE YOU WILL MAKE THAT I HAVE NOT MADE ALREADY.

My affirmative answers to the questions above negatively affected my trading capital because I either blamed the market or my trading system (or lack thereof) for my trading losses. Fortunately, through much trial and error, I discovered that the answers to my trading problems were not to be found in the market. The answers were within me. The answer to most trading problems lies within, not without.

The 10% (successful traders) have figured out what the 90% (unsuccessful traders) have yet to discover.

Here is a major revelation. It may sound simple but is true…

THE 10% THINK DIFFERENTLY THAN THE 90%.

Let’s really consider that for a moment. The 10% possess a mindset, a perception of the

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hence my motto and the tagline for thecrosshairstrader. The professional traders want nothing more than for you to continue looking for the magic bullet. eating. further eroding confidence and increasing anxiety. drugs. Our sub-conscious thought is a formidable foe in human efforts to “kick habits” such as smoking. What’s even more frustrating is knowing how the 10% do it. as well as the focus of CROSSHAIRS TRADING. Scientists tell us that the great majority of our “logic” is filtered. the makeup of the 90% is constantly changing since the losers are being replaced by new potential losers every day! Why do you think the 10% are consistently able to make money? It is because every trading day the 90% are entering the market like pigs being led to slaughter. And while you are looking. Just think of the one irrational but firmly imbedded emotional problem that is hard to kick–looking for the magic bullet. the emotionally devastating aspects of trading. spending and. you miss the obvious. My focus then. while we are at it. but not being able to stop yourself from making the same emotional mistakes over and over again. easy trades. which allows them to take money from the other 90%. is on the market as a place of war. the holy grail of trading. And. If you are not consistently making money in the stock market blame it on the professional traders who are taking it from you without you having a clue as to how or why. The sooner you learn to think like the 10% the sooner you will become one of them.com: 5 . by our subconscious. or colored. by the way. It is a vicious cycle that only disciplined thinking can correct.market. because the longer you look the more frustrated you become.

Their newfound ability to take back what was once theirs is a direct result of a newly focused perspective on the unique nature of the market. not the other way around. If you do not possess the mental skills there is no technical skill that will save you from your ultimate defeat. you soon will when your losses start piling up and you have no explanation for it. If you haven’t figured this out yet. Successful traders were once where you may be right now: with wallets wide open.Every market day there is a constant emotional battle raging between the bulls and the bears and between the 10% and the 90%. when they are not. Now the same traders are getting their money back from the new kids on the (chopping) block. Successful traders make money in these battles based on their knowledge of market movements that. Successful traders possess superior technical skills as a result of mental discipline. 6 . Those traders who were once taken are now taking. from all appearances seem random. It is the successful traders’ intimate market knowledge of these movements and their disciplined emotions versus the amateurs’ lack of both that allows for the professionals’ consistent success.

7 . Why do I view the market as a battlefield and the trader’s duty as one of preparing for war? I will give you three reasons. If you ever meet a trader who says he has never experienced loss then he is revealing only half the truth and you do know what the other half is don’t you? The best traders have lost plenty and are now richer for it. knowing full well that those following in their footsteps will experience the same difficulties. As a result. Learning technical analysis takes time but it is relatively easy. 1. I know from first hand experience that preparation for war is essential to long-term trading success. constantly defending positions and attacking when given the opportunity. My trading account was sacrificed to the trading gods who took money from me at will. PERSONAL EXPERIENCE My experience gives me the strongest proof I need. but fortunately the price can be lessened the sooner you learn the proper way to think about trading. In my early years I was killed in the market. I began to win more battles than lose. There is no better education than that of personal experience. The best traders will admit to the difficulties inherent in trading.The change for me came when I learned to focus on trading just as a soldier focuses on battle. If I could go back to the beginning of my trading career and change just one thing it would be the way in which I thought about trading. There is no need to hide what will soon be discovered! There is a price to pay for inexperience. The sooner you possess the proper mindset the sooner you too can win more battles.

If you know yourself but not the enemy. most traders try to avoid dealing with it. Here you can see the energy raging in the candlesticks and indicators. however. who have at least done the homework to find or develop a good trading system. for every victory gained you will also suffer a defeat. It is so intensely personal. wrote the following 2500 years ago and it is just as true today: “If you know the enemy and know yourself.Learning about yourself as you adjust to market psychology is the longest and the most difficult part. The following WEEKLY chart from EXXON (XOM) is but one example. you must know yourself! 2. THE CHARTS PROVIDE VISUAL PROOF OF THE BATTLES All we have to do is look at a few examples from the charts to get a really good visual representation of the battles that take place in the market. you need not fear the result of a hundred battles. is that the 10% are in control of the thought process surrounding their system! Sun Tzu. since the sub-conscious is in control. But. If you know neither the enemy nor yourself. In fact. are using the same indicators and techniques of the 10%. The difference. most importantly. you will succumb in every battle. the trader must become master of self if he is to succeed.” You must know the market (the enemy) but. the 90%. the author of The Art of War. 8 .

2009. That is a $20.64 the last week of December 2008 and then returned to a closing low of 64. Simply trading a bigger chart does not protect you from the battle! Now let’s look at a DAILY chart during the same time period: 9 . XOM went from a closing low of 62.00 price swing from one direction to another and then back again.You would not think that a WEEKLY chart would be very volatile but look closely at the price swings.03 the first week of March.36 the first week of October 2008 to a closing high of 81.

XOM hits an intraday low of 59.51. Two days later. on October 16. Two days later. 2008 XOM closed at a high of 79.17 only to rebound to a closing high of 74.99 in another two trading days! 10 .66! But it gets even better. XOM hit an intraday low of 56.39.On October 8. Only two days after that XOM hit a high of 75.

40 on March 10.00 on February 20. It is within these price moves that the battles are waged and won by only the most skilled minds–the minds which have discipline and have subdued their subconscious emotions from blocking how their market thinking minds know how to trade.45 to a low of 37. The professional traders live for this.Within a period of just eight trading days EXXON. Let’s look at another example from a DAILY chart of Newmont Mining (NEM): Again. 2009. the largest corporation in the world. 2009 and then take out the previous low of this period to a closing low of 34. however. 11 . experienced price swings of $20. 2009 of 45.02 on January 29 only to move back up to a high of 45.00 or more! This is a raging battle between the bulls and the bears. we are able to see the daily battle raging as the bulls and the bears move NEM from a high on January 26. It does not end there. This is the sort of battlefield where the 10% slaughter the 90%.

One begins to be able to see the energy of each fighting force.40 on April 1.as NEM then roars higher over the next 16 days to close at a high of 47. Can you see where the battle lines are drawn for each of the sides? Why should NEM be any different than XOM? They are both the same. 2009.00 from low to high no less than four different times! The bulls and the bears are fighting it out once again. Over the course of 46 trading days NEM moves $13. Run your eyes along the “lines of battle”. The 10% are able to feast on the emotions of the 90% because the professionals think differently! Now let’s look at a smaller INTRADAY chart of NEM during the same time period: This intraday chart (I call it my “deployment” chart) encompasses a time period of 16 12 . They are both traded by human emotions. nothing more and nothing less.

81(approximately 10:30 the next morning) with another steady rise to a midday high of 45. The following is a DAILY chart of Amazon (AMZN) from March to June 2009.00 on February 20 only to sink all the way back down to a low of 37.16 on March 3 (just 7 days later).92 on February 10 to a high of 42. Let’s look at one more. 13 .trading days with intraday swings represented here from a low of 38.

understood and. I penned the following daily entries in my trading journal: STOCKS DOWN FOR EIGHTH DAY IN A ROW MARKET RALLIES 900 POINTS TODAY MARKET CRASHES 800 POINTS TODAY MARKET RALLIES 800 POINTS FROM LOW TO HIGH DOW DOWN 1100 POINTS IN FIVE DAYS MARKET RALLIES OVER 800 POINTS 14 . index. and ETF chart will have the same battles raging on a WEEKLY. and INTRADAY basis. most importantly accepted. solid grasp of the emotions that move stocks from one point to another. bonds. Every single stock. Can you see the flow of the battles in all of these? This is where the 10% make their money. only a good. You cannot hide from the battles. DAILY. This is why there is no “magic bullet” that you can rely on. The battles are everywhere you look and must be faced. oil. 3. the battles can be found in the headlines of the day. THE BATTLES IN THE HEADLINES Last but not least. These same battles are raging whether you trade gold.Is there really such a big difference in the business model of Amazon (AMZN) to justify the large swings in price as indicated here? Is it not obvious that stocks move more on the emotions of traders than they do on any fundamentals of the company itself. etc. Back in the fall of 2008 when the stock market was reaching volatility levels not seen in decades.

However.S. automakers. Ongoing economic weakness and uncertainty surrounding a bailout for automakers weakened equities. 15 . Your mind must be able to see the field of battle from a higher perspective. (12/12) Did you notice the dates? These were over the course of one week! The reason for the market going up one day would then become the reason for its sell-off the next. indeed from hour to hour. keen precision. (12/08) Stocks ended a choppy session with significant losses after a profit warning from an economic bellwether and signs of continued risk aversion prompted traders to take some profits following the strong gains seen since Nov. The market is indeed a war waged by emotional traders who can and do change their minds from day to day.com (one of the many news services I use) headlines from December 2008: The stock market kicked off the week on a strong note after investors were pleased with news that President-elect Obama plans to launch the largest infrastructure investment program in 50 years and word that progress is being made on a financial relief package for U. extending the prior session's losses. automakers. how do you prepare for the battles ahead? You focus on mental discipline by thinking differently. (12/09) Stocks settled with solid gains on Wednesday following a volatile session as traders digested news that an agreement had been reached over a potential aid package for the struggling U.(12/10) Investor skittishness kept stocks in check before selling pressure gained momentum and sent the major indices tumbling. A hawk doesn’t catch a field mouse by scurrying from place to place in the weeds. makes a decisive capture. comments from the Treasury and White House staff calmed concern on the matter. while commodities advanced on rising oil prices and a weaker dollar. then returns to the sky to survey the field of battle once again. helping limit selling pressure enough to give way to gains. He spots them with calm. Wall Street suffers from short term memory loss to downright amnesia! So. 21. (12/11) News that automakers won't immediately be receiving a congressionally-backed bailout drove selling in early action.S. In fact.These entries would not be too out of the ordinary until you realize they were taken over an eighteen day period! And how about some of the briefing.

16 . It is for these reasons that traders must develop winning principles in order to achieve sustainable success. But. internet services. and charts. more importantly. there is the battle raging within your mind. What follows are seven winning principles that are attributable to the success of the 10% and the corresponding seven principles that account for the failure of the 90%. television.Learn to think like the 10% and start making your fortune or keep thinking like the 90% and give your fortune (and future as a trader) away! The battles waged are reported every day on many different fronts–from headlines.

CHAPTER ONE The 90% believe they know or need to know what the market is going to do next. the 10% accept the market reality that… ANYTHING CAN HAPPEN 17 .

I just had to 18 . once you enter a trade anything can happen. no matter how perfect your set-up or pattern may be. Because of this. Keep in mind that it only takes one trader with enough capital to turn your trade around no matter the set up you use and no matter how many times you’ve successfully traded the set up in the past. however. no matter how many others may agree with your analysis. there is no temptation to double up on a loser or to go all in. That’s a scared field mouse. No need to go back to the drawing board and reconfigure my system.No matter how good your analysis. putting all your hard earned money at risk. must be allowed to change and change quickly if the evidence warrants. and no matter how many wins in a row you have had. I recall a few years ago I was in an Exxon trade on the long side (calls) and there were two large block sell trades (in the millions) that busted my trade. The 10% know that when it comes to working within the market. That’s irrational. Someone wanted out and there was no way I could have known or could do anything about it but sell at a loss. there is no such thing as a sure thing. The opinion. The 10% accept the fact that with each trade anything can happen and they act accordingly. you should be surprised every time you make money! Now that does not mean you cannot form an analysis based opinion about where you believe a stock may go over a specific time period. In fact. That’s emotional. With every tick in the market traders are making decisions about the next direction of a stock. not a hawk looking from a higher perspective.

Instead. Just recently. Always know and believe that anything can happen and the temptation to load up or buy more of a loser will never be part of your trading strategy. You will never be tempted to throw away your trading system due to a loss because a loss is expected from time to time. sector specific news. I entered a put trade on IBM. Less than an hour later IBM raised guidance. Not only can anything happen but it can happen at any time! There are just too many variables in the market from economic news. No reason to stick around and no reason to get upset. Uncertainty is factored into the trade decision process as an absolute. It just is. 19 . Successful traders take advantage of the uncertainty and unpredictability of the market to take money from the less skilled and emotionally driven amateurs. If anything can happen then how do the 10% consistently succeed? How do the 10% find consistency amid all the uncertainty? The answer brings us to the second principle. If you factor in small losses as part of your trading plan. to big trader decisions. stock specific news. etc. The best traders simply make the uncertainty a non-issue by not fretting about those things out of their control. All I could do was sell on the news.accept the fact that anything can happen. for me to safely say I know what will happen next. they focus on the sub-conscious emotions that they can control by accepting the market limitations placed on them. then you have resolved the “anything can happen” problem. The 10% cannot accurately predict every move in the market and they don’t feel a need to.

TRADE THE PROBABILITIES 20 .CHAPTER TWO The 90% trade as if the market is predictable whereas the 10%...

In other words. Successful traders focus on the probability of a trade working based on its historical actions. then those with no common sense would be the losers and everyone else winners. If it did. It is this same greed and fear that provide the opportunities for the 10% and the greatest conflict for the 90%. then oil and oil related stocks should trade down. the market has a mind and logic all its own. If you choose not to accept this. The 90% are so focused on making sense of all the noise in the market that they miss the quiet calm of the highly probable. If a company beats its quarterly earnings the stock should go up. if downgraded then down. if a company issues upside guidance its stock should go up.Just as the 90% believe they know what the market will do next. yet oftentimes hard to understand concept: probability. if it misses the stock should go down. So. they also believe that the market is based on predictable common sense. John Maynard Keynes said “the market can remain irrational longer than you can remain solvent”. the market in all its randomness (“noise”) does give evidence of repeatable and. If a company’s stock is upgraded the stock should go up. If the weekly oil inventory report is bearish. then you do so at your own peril. market logic is found in a very simple. if a bullish report then up. Unfortunately. Instead. sell the stock (purchase put options or go short) if bearish. Oh. if trading were that easy! Buy the stock (or purchase call options) with a bullish report. what does the market run on if not common sense? It is greed and fear that causes the irrational movements in the market. Fortunately. If a company issues a warning its stock should go down. 21 . therefore. the stock market just does not work that way. tradable patterns.

The noise acts as camouflage for the 10%. So. yet finds its confirmation on a bigger chart (in this case. in the following example you will see my entries on the DEPLOYMENT chart confirmed by strong areas of support from the DAILY chart.thecrosshairstrader. Do not let this confuse you. making sense out of what the 90% cannot even bring into focus. somewhere (much like a sniper hiding from his target). Let’s look at a particular example from the Oil Services Index (OIH). the DAILY). I look for one particular pattern that sets up on the DEPLOYMENT chart. we will look at a DAILY chart and then an intraday “DEPLOYMENT” chart (the chart I use to enter a trade). It is really very simple when you have seen it as often as I have! (For an explanation of the lines used here visit my blog and read http://www. I have several rules that must be satisfied before I enter a trade and when these rules are combined they form the consistently profitable CROSSHAIRS. nonetheless see! How can you hit a target that does not exist? What the 10% see and what the 90% are searching for are the highly probable patterns that reveal themselves only to those who know how to find exactly what it is they are looking for. First.com/2009/06/understanding-stock-market-movingaverages-with-the-crosshairs-trader-and-forrest-gump/). 22 . The 10% are in there.

OIH DAILY Chart: This is a typical chart in that you have up and down days with no apparent rhyme or reason for the sentiment shifts. Once I have a good grasp of the DAILY chart. Then I look for my CROSSHAIRS. Here I find certain areas of support and/or resistance which help me make my trading decisions. 23 . I next look at my DEPLOYMENT chart (the chart I use to enter a trade).

and this may be the most important point. the CROSSHAIRS not only gives me an entry point but also gives me an exit point (the horizontal crosshair) AT THE SAME TIME. 24 . and since I trade this one pattern over and over again. The CROSSHAIR itself will let me know when the trade is not working. on those rare occasions when the trade is not working I will know (remember: anything can happen). How will I know? Because my thorough knowledge of my CROSSHAIRS pattern will let me know. Since I am looking for only one pattern. In fact. Also. I know the probability for continued success is high. The opportunities are found IN THE CROSSHAIRS.OIH INTRADAY “DEPLOYMENT” Chart Once I look at my DEPLOYMENT chart. I can see the pattern set up for a trade and I can see the pattern break down as well. opportunities begin to reveal themselves to me.

I will discuss trading a single pattern further in just a moment but suffice it to say here: High probability patterns reveal themselves amid all the market randomness. 25 . And they ignore the chatter of the 90%. repeatable patterns knowing that the odds of success are in their favor. The 10% simply trade the highly probable. because the latest analyst on CNBC recommends it. And all you need to do is focus on one of them! The 10% focus on high probability patterns and trade them over and over again. because they are bored or feel they have to do something. or because the latest market guru has made the call that is 99% foolproof—all classic symptoms whose root cause is found in the trader’s inability to focus on what matters most. because their gambling instinct kicks in. This leads us to the third principle. The 90% put on a trade to see if it will work because it looks or feels like a good trade.No longer do I have a needle in a haystack approach but a black swan among white swans approach.

.CHAPTER THREE The 90% chase trades whereas the 10%.. PATIENTLY ALLOW THE TRADES TO COME TO THEM 26 .

then exploded higher.thecrosshairstrader. Let’s take a look at chasing a trade versus waiting on one.The 90% see a stock moving in one direction or another and jump on board only to find that the bus left the station a long time ago and is now slowing down or reversing course. The WAIT occurred during the consolidation period as JOYG sought to clear its 200 SMA. The following is a DAILY chart of Joy Global (JOYG) from May to June 2009. Chasing the trade would have occurred after you had already seen the move take place! The smart money had already banked a profit. For several days JOYG consolidated around its 200 Simple Moving Average (I refer to moving averages as TANKS and you can read a detailed discussion at http://www.com/2009/06/understanding-stock-market-movingaverages-with-the-crosshairs-trader-and-forrest-gump/). The 10% know this and trade accordingly. The trade entry was at the break out point for a good quick profit. 27 . The true art of trading comes from boarding the bus as it leaves the station or while it is moving toward its destination. while the dumb money chased overextended momentum.

hence the term “workaholic”. Do 28 . I mean your skills can be sharpened by studying. researching. When hunting from a tree stand the hunter most often will have to wait… and wait… and wait until a deer comes within his line of fire. Herein lay the difference between the skilled and the unskilled. leads to the 90% falling for the “I don’t want to miss the trade” mentality. The patient deer hunter waits while the impatient deer hunter chases the deer that is just too smart and too fast to be fooled. the one who brings home the deer and the one who arrives home empty handed. The very strong emotion of not wanting to be left out. the trader must allow the trade to come to him based on his rules and then–and only then–is a trade made. reading. “I must get in. etc. When those rules have been met a trade is made. Think in terms of a deer hunter. one feels the need to be constantly working. analyzing past trades. therefore. of feeling like you must do something in order not to fail.” Broaden your definition of “working” to include working on sharpening your skills as a trader. If the rules were met two days earlier and it was missed then no trade is made. Just like a patient deer hunter.The 10% patiently wait for the stock to set up based on certain predetermined rules. If those rules are yet to be fulfilled or never materialize then no trade is made.” The 10% get out when the other 90% believe they must run after the bus–just as it stops and heads the other way! Sound familiar? Here’s another habit that contributes to impulsive trading: to be successful in one’s career. this is translated to mean “I must be in a trade. of regret for not taking earlier action. By this. This could take hours or days or may not happen at all. In trading.

thecrosshairstrader.com/2009/05/sun-tzu-and-the-art-ofstock-traders-patience/. [For more on trading patience check out http://www.thecrosshairstrader. Warren Buffet puts it this way: “The stock market is designed to transfer money from the active to the patient. For a discussion of the JOYG trade see http://www. to quote Sun Tzu again. “the good fighters of old first put themselves beyond the possibility of defeat. 29 .thecrosshairstrader.com/2009/06/can-missing-a-trade-buildconfidence/ and http://www.” The question then becomes: how do you feed patience and let it grow? The answer leads us to the fourth principle of successful trading. Jumping into trades and failing propel you backward.anything but feel you have to be in a trade to be “working”. and then waited for an opportunity of defeating the enemy. Patiently waiting on a trade is most often the best form of work for the trader because patience moves you forward.” Or.com/2009/06/high-probability-trading-in-the-crosshairs/.

TRADE THE SAME PLAN EVERY DAY 30 ..CHAPTER FOUR The 90% trade a different plan every day whereas the 10%..

The 10% trade according to a set of rules developed through focused repetition. you plan to fail. There is an age old wisdom that is just as true today: If you fail to plan. success is based on a well planned strategy. No wonder it is so easy to fail.Notice the subtle distinction here because it can be transforming. The 10% have a plan and stick to it no matter what day it is. failure is based on no plan at all. one of the many pitfalls of the 90%. Over trading is the by product of the following emotionally driven errors of judgment: 31 . it is now time to be a successful trader and in order to do so you must plan to be a success. The 90% change their trading plan—if they have one—as often as they change their clothes. Everyone has succeeded at something and that something is failure! If you have been a successful failure at trading. No different than. In other words. You do not have to plan for it. for there are successful failures everywhere. the 10% protect themselves from over trading. say. If you want to find successful people look all around you. By having a clearly defined plan of action. a mechanic who changes the oil in a car: it may be a different car on a different day but the oil change is the same.

Whatever you wish to call it. 3) fear of missing out. 2) greed or excitement. After experiencing excitement or euphoria from making money on the last trade. you may need to add more filters or specialize (which we will discuss in our next topic). Without a plan the 90% are likely to trade off pure emotion which is a loser’s game and one of the many reasons for consistent failure.1) revenge trading or desperation trading. Any screening done during market hours can become contaminated with too much “noise”. The trader sees the market going in a particular direction and does not want to miss the move. Some traders call this a “watchlist” or “stocks to watch”. if your list is too large or produces too many potential trades every day. the trader quickly looks for anything to trade. 32 . I refer to it as “stocks on my radar”. These potential trades may never set up for entry or your screening may not even provide a list of potential trades for that day which is fine! In fact. Here the trader is trying to quickly make up for a recent loss. create a list for the following market day focusing only on those stocks with potential. Your goal is to produce a list of stocks for possible entry. locating those stocks that fit your criteria for a possible trade. In order to plan properly. This usually leads to another loss greater than the first as he chases a low probability trade. The list goes on and on but I am sure you get the point. it is imperative to screen stocks at night or when the market you trade is closed. jumping on board the caboose only to realize the move is over. usually leading to a return of the money gained from the previous winner as he loads up on a sure thing.

how do you decide what to trade? That leads us to the next principle of the successful 10%.Accept the fact that markets can and will function without you! If your reason for entry is not there then go do something else! Do anything but enter the market. Sometimes the best action is inaction. 33 . Since there are so many different markets to trade and various instruments within each of those markets.

.CHAPTER FIVE The 90% try to be all things to all markets and end up mastering nothing. whereas the 10%.. SPECIALIZE IN A MARKET AND BECOME MASTER TRADERS 34 .

In other words.One of the biggest mistakes I made when I began trading is a mistake most beginning traders make: I attempted to trade every market available. or on financial stocks. Trade an ETF or INDEX which represents a particular sector. C. The list could go on and on. Or even trade the DOW 30. 35 . in the need to know all things market related. For oil services stocks trade the OIH. B. trade a few oil stocks. all of them! So what are you to do? Here are just a few suggestions: A. For example. For financial stocks trade the XLF. Each of us has different abilities when managing information into a cohesive plan. Trading is a very expensive education for those who refuse to obey this principle for the learning curve can be long and difficult for just one market. Trade a few stocks in one particular sector. Trade the highest volume stocks within a particular index. There is just no way you are ever going to successfully trade every market. or focus on technology stocks. Why feed it this way? Your ego will never get enough to satisfy the hunger for the “need to know”. Attempting to trade all markets is rooted in the desire to feed the ego. The 90% believe survival is found in knowing all markets. The 10% focus on a particular market knowing that trading is a game of steady gains. nonetheless. Recognize how many variables your mind can comfortably analyze into a plan and then proceed with this knowledge. For technology stocks trade the QQQQ. Pick a sector then pick 5-10 stocks within that sector to trade. trade the stocks with the highest average volume the last three months among the S&P 500 or NASDAQ.

E-Mini futures. For example.D. The first chart is a complex chart with multiple indicators. 36 . take a look at the following two charts over the next two pages. DIA) etc. etc. Each chart is for the same stock (AAPL) and the same time period (May/June 2009). trend lines. moving averages. Trade one particular instrument such as oil futures. Trade a limited number of stocks from a wide array of sectors thereby taking advantage of sector rotation (which is simply the transfer of money from one sector to another due to changes in investor sentiment). an ETF (such as SPY. options. equities. FOREX. Profitable trading cannot be complicated. And here is a strategy that is the most important: Trade only one pattern or edge! I know what you are saying: but how can I trade just one pattern when there are so many potentially profitable ones? The answer lies within your question: because there are so many! Just as you cannot trade all markets (and ever hope to master any of them) you can never profitably trade all possible patterns. bonds. E. Making it so is self defeating. You must determine a system that works for you and stick with it. and the other a simple CROSSHAIRS chart.

37 . AND INDECISION.CHART #1 COMPLEX CHART: ENHANCES CONFUSION. DOUBT.

but if you consult him for a possible heart condition he will refer you to a 38 . Specializing makes sense in just about any endeavor.CHART #2 SIMPLE CROSSHAIRS TRADING CHART: PROMOTES CLARITY. Now ask yourself: which one of these charts would I prefer to use when making trading decisions? Would I prefer the confusingly complex chart or the simple chart that allows me to easily locate a highly profitable pattern? If you wish to specialize and become a master trader the answer should be quite obvious. Take. SIMPLICITY. has a general knowledge of a wide range of illnesses. AND CONFIDENCE! The first chart includes various indicators from a host of different trade systems and is a good visual representation of the ego’s attempt to know everything. for example. A general practitioner. The second chart is a CROSSHAIRS TRADING chart. physicians. or your family doctor.

they focus their time and energy on where they are comfortable making successful trades.specialist. therefore. is paid a premium for knowing more about your specific illness rather than having a general knowledge of all illnesses. 39 . such as a cardiologist. Your family physician is paid well for his advice but he is well aware of his limitations. Once you understand the first five principles the sixth one makes logical sense. The choice is yours. The specialist makes more money focusing on a specific illness than the general physician who knows a little about all illnesses. however. Should a trader be a generalist or a specialist? The 10% know the limitations imposed upon them by the many and varied opportunities in the market. The 90% try to be all things to all markets and end up uncomfortably broke. The specialist.

.. FOCUS ON HITTING SINGLES AND DOUBLES OVER AND OVER AGAIN 40 . whereas the 10%.CHAPTER SIX The 90% take home run swings with every trade.

Moreover.com/article.The 10% are well aware of the Wall Street maxim “live to trade another day”. Hank Aaron and Barry Bonds. The solution? It is found in a formula I developed: BIG CHARTS + CROSSHAIRS = QUICK PROFITS Develop a profit target for each trade before the trade is entered and always take the quick. Bonds did not have a home run 12 out of 13 at bats. there is an art to exiting. it is better to enjoy the singles and the doubles than to try for the home runs risking the opportunity to play again.cfm/barry_bonds_vs_hank_aaron) Barry Bonds hit a home run every 12. hitting a home run is a rare event. for instance. In baseball. the 90% flirt with death on any given day. if not all. The 90% swing for the home run only to find that between those home runs (which rarely occur anyway) the market takes most. 41 . In other words. Take. Each player was much more likely to hit singles and doubles or even strike out than hit a home run! In fact. Bonds had over 1531 strikeouts in his career and Aaron 1383. According to a study by James Ray in May.suite101. 2007 http://baseball. the markets are not that generous. the top two home run hitters of all time.98 at bats and Hank Aaron hit a home run for every 16.38 at bats. The 10% take what the market is willing to give and nothing more. The best traders know that since anything can happen. Just as there is an art to entering a trade. Aaron 15 out of 16. easy profit. Most traders do not have deep enough pockets to swing for home runs and take the chance of coming up short time and again. Then sit back and watch the rest of the traders figure out how far to let it run. and most likely will. Let’s look at a baseball analogy. of their money.

and 3) a loss exit point. Here you will find that over the course of several days I was able to trade NEM no less than three times.If you have a good trading system like I have. Let me prove it to you. then there should be three predetermined numbers or points on the chart: 1) an entry point. which is smaller than a DAILY chart but would not be classified as a “day trader” chart. Without these three steps. taking the easy profits with each trade. it is three strikes and you are out! By focusing on singles and doubles. Why stick around? There will be another trade on another day. 42 . the 10% build confidence and a consistently rising equity curve. Let’s go back to Newmont Mining (NEM) again and look at my DEPLOYMENT CHART. 2) a profitable exit point. taking their profits over and over again.

43 .The reason I take the easy profits over and over again is twofold: 1) I can bank money over and over again building my account and my confidence at the same time. Why not eliminate the worry all together? Look at trade #3 above. I would then have to make a decision: is this going down to my loss target for a pullback test or will it break the horizontal CROSSHAIRS line? Either way. Building confidence requires taking responsibility for all that we have discussed and leads us to our final principle of successful trading. and 2) I eliminate the emotional roller coaster of staying in a trade too long where I would then have to decide whether the stock is in pullback mode or ready to reverse. Why try to hit a homerun when a single would be perfect? In the example above. not a home run. I hit three perfect singles. This has everything to do with how you think about trading. as in trades #1 and #2. I am taking a chance on losing all the money I made on the previous two trades. If profits were not taken quickly.

CHAPTER SEVEN The 90% focus on the last trade. whereas the 10% … FOCUS ON THE NEXT TRADE 44 .

The best golfer in the world. In other words. You can’t hit the shot again. I also realize that once I’ve hit a poor shot my only recourse is to hit a better shot on the next swing. and 3) searching for another trade when there is not one (a symptom of overtrading). The focus now is on the recovery shot. Why do you think Tiger is so good at recovering from a bad shot? While setting up for the current shot is he thinking about why he just hit the ball in the water or in the woods? No. Have you learned how to trade it and forget it? 45 . can teach us a thing or two about our next trade.” (TIGER WOODS: HOW I PLAY GOLF. There’s no sense dwelling on a mistake. “I’ve hit a variety of snipes. 2) not entering the next trade due to the fear of another loss. 3) second guessing the trade set-up because something did not work the last time. 2) impatiently entering another trade before the rules for entry are met (known as “jumping the gun”). In Tiger’s own words he says. even though the rules for entry have been met. If the last trade was a winner then the errors include: 1) trading a larger position than usual due to overconfidence.The 90% make costly errors when they focus on the last trade whether a winner or a loser. Tiger Woods. If the last trade was a loser then the errors include: 1) loading up on the next trade in order to make up for a previous loss. so forget about it. quacks and shrimps in my lifetime. 268). I realize that a poor shot is just a swing away. I’ve learned how to hit it and forget it. p. That shot has already been made and there is no need to think about the past. and if I continue to play I’ll hit plenty more.

All of these factors contradict the way the average person thinks because the average person has not taught himself to believe in these things. That would just take too much time and effort. Don’t fool yourself and lose all your money. 2) probability is better than predictability. 46 . 3) patience is rewarded.The 10% focus on the next trade because of the following beliefs: 1) anything can happen. Surely the market will come around. 4) successful trading is repetitious. and 6) home runs are better left for the baseball field. “Why change the way you think?” the 90% reason. 5) specializing beats generalizing. If the 90% did. The 90% do not want to believe in the way the market behaves. then their whole perception of the market would be turned upside down.

TO BE PART OF THE 10%. Is it not time for you to switch sides? David Blair “The Crosshairs Trader” has developed a system of trading based on simple technical analysis that can be used by long term and short term traders alike.com. Once attained. while helping the trader maintain control over various emotionally based errors of judgment. So it is with the difference between the 10% and the 90%. The difference is found in the way the top 100 think about the game. Changing the way you think and changing your trading method takes effort and requires that you practice every principle mentioned here. All professional golfers are very talented or they would not be professionals. 47 . You can read more about Crosshairs Trading and The Crosshairs Trader at www. the effort becomes a habit and the habit becomes a lifestyle. Is this difference attributable to differences in talent? Most likely not. Crosshairs Trading is based on a very specific methodology grounded in sound thinking with the ultimate goal of promoting the confidence you desire so that you may join the successful 10%. then you must change your thinking and change your trading methods.thecrosshairstrader. Think of it this way: the difference between the top 100 golfers in the world and all the other professionals is only a few strokes a tournament.CONCLUSION When taken together. The choice is up to you. If your goal is to be a consistently successful trader. The 10% adhere to a few simple yet profoundly effective principles that the 90% have not developed the discipline to believe. This system was developed over years of study and provides the trader opportunities to locate high probability set-ups for profitable trading. all of these principles clearly define the difference between the successful 10% and the unsuccessful 90%.

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