Basic Day Trading Techniques By Michael S. Jenkins I the fw Secondary BuyPREFACE During the past 36 years as a professional trader I have come to know a great many traders of all types and abilities. Their styles were as varied as was their success but most were disciplined and knew how to take a loss at the appropriate time. I have noted on many occasions that the success that many traders found was often luck, or due to some belief in a system, which was not always proven, but for many months at a time worked perfectly. Many of these traders made and then lost fortunes but I was always a keen observer of the few who always made money and rarely lost. These traders limited their trading to specific situations, which were familiar to them, and they never had the urge to trade everything everyday. They also followed certain principles as to entry and exit and always used stops. During the bubble mania that culminated with the 2000 top I was affiliated with perhaps the worlds largest day trading firm which had over a thousand traders and many offices across the country, and I taught an evening class for some and often had many stop by my office to see what I was trading and get some advice. ‘What was always a shock to me was that there were an enormous number of traders who were trying to trade for a living and most hadn’t the slightest idea what they were doing. They had money and read a book or two and used some kind of crossover moving average or oscillator, but they didn't know the basic principles behind why charts worked or the well-known square root basis for all market movement. Also during this time, I had the opportunity to teach my private personal seminars to many people who had the money and experience not afforded ordinary traders but who nevertheless also didn’t seem to know the basic principles of trading. Most had read a popular book, or went to extensive seminars but most didn’t realize that there are very basic principles that work all the time and can make money for you under any circumstances if followed. This book is an effort to teach these principles. There are more advanced concepts in my other books and seminars, but for those who are having a difficult time just plain making money every single month, then those advanced ideas may be somewhat wasted until they can appreciate the more basic money making skills. This book will teach what I think are the basic postulates to trading. I will not get into elaborate entry and exit systems but will show how they develop from basic principles of trend determination. I will demonstrate some simple approaches using basic tools but Will develop them into the most advanced concepts of money making when applied Correctly to any chart. The end result should be your greatly improved skills and confidence in your ability to make money in any situation on any type of trading vehicle. In this age of easy money and high leverage it should be possible for any- one who can discipline themselves to follow rules, to make a great deal of money without ever having to listen to any other persons advice. Since this book gives the appearance of being a ‘basic’ or beginning book, please fight the temptation to skip through chapters, which seem too basic for you. The ideas developed herein come in a logical sequence and just as we teach addition and subtraction before multiplication and division, you will need to absorb the theory as to why “the low of the high bar” has meaning and what the implications of such meaning are. To just conclude that it’s just a price level that causes a breakdown would be to miss many finer implications of the theory that can be applied on many levels. Although these are principles, the very fact that there are such things is news to the vast majority of the investing public. If you never learn to add or subtract it will be hard to become a NASA rocket designer. While I’m not designing rockets here, if you can’t easily make $500 a day most days of the week, you will probably never get to the point where you can make $10,000 to $50,000 per day. If you learn the basics the money will take care of itself. June 7, 2007 Michael S. JenkinsTable Of Contents Preface Where To Begin..........sccesesesseereereeeee StOPS.....ssceccreeeees seeseeeaaeeseecenasveoeee ee Measured Moves.........ssecersseeeeee seseeee Support & Resistance......... seeeeeeeeeeeees Square Roots In Time..........ssecseseveee ANgles.......seeeeeeeees dese eeeeeeeeeeen sees seen Part Two- Developing Trading Strategies Business Plan.. Basic Overlap Methods........... teseenanee Basket Program Arbitrage...............+ OPtiONS........cccseecersesecccersseeonenes seeeee How Do they Get Out?............ seteeeeeee Volume.. 12 18 24 27 31 37 41 46 50 57 60 What Goes Round Comes Round........... 63 Gimmicks: Short Time Exposure.........scsseeseeeeeeeees 65 Pattern Trades.......... seseceeenanoees seeeeeees 7” Flags, Pennants & Triangles... 73 Characteristics of Market Players......... 76 Basic Time Cycles........ssccsssssssereeeeeeees 83 Part II Putting our Game Plan Together.. 92 Moon Cycles.....ssssecsseesesseeeeneenees a eseeee 100 Review of Charts: Entry & Exits...........+ 103 The Jenkins Time Conversion Bar........- 122 Recap Of Basic Trading Steps..........--++ 128