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MARKET MECHANICS. TREND ANALYSIS
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I'm talking here about an understanding of the floor, of the actors on the floor, of order entry, floor rules, and practical issues...X'd trades for example 2 .

If you were in the auto wholesale business and you didn't understand the insurance companies, the auctions, the dealers, the mechanics of the sealed bid, and such, how far would you get? If you were into real estate and you didn't understand the mechanics of financing and escrow procedures, how far would you get?

I run into traders all the time who know nothing about the floor, yet they use the floor six times a day trying to make money. Wake up! You need a reality check! Know the mechanics behind the business at which you are attempting to make a living.

In private seminars, I stress the importance of pit knowledge. I tell my students to get on the floor of the S&P for at least six hours. I want their legs to ache and I want them to see pit traders get spit on, trampled, and possibly even get into fights. I want them to feel the disappointment ofthe local who can't get an order offto close his profitable three-tick trade. I want my students to see the frustration of "out trades" in the making. Trading is a tough, risk management business. How can you manage a risk you are unaware of? How can you dispel misconceptions without experience? Floor traders are your colleagues. You do yourself a disservice when you make them your enemy.

What if you're not an intraday trader? That's fine. You don't need to know anywhere near as much about the pit as someone who trades intraday. You do, however, need to know more than 90% ofthe people out there who think they are going to pay their bills out of their trading profits. You need to dispel misconceptions that act as a crutch for impractical behavior.

This is a hot topic for me. When I designed my FIBONACCI, MONEY MANAGEMENT, AND TREND ANALYSIS in home trading course in 1988, I thought I had given the prospective trader everything he needed to get the job done. By relating a variety of personal experiences, I addressed this issue, but only so much could be done in a two-day workshop. I realized more needed to be done and I will endeavor to fill this void at some point in the future. I have identified the people I wish to have participate in such a work, but so far I have not been able to convince them to help me on this project. I will make constructive and appropriate reference to aspects of floor mechanics as we progress in this book. However I strongly recommend that you make it your business to seek out and befriend experienced traders, both on and off the floor. Once you have gained their trust,

2 Joe DiNapoli, "THE X'D TRADE (or Where's My Fill?)," Technical Analysis of Stocks & Commodities magazine, March 1995, page 88

IMPORTANT POINTS TO NOTE:

While it is not a formalized part of my Trading Plan, I strongly recommend you complete trade evaluation summaries. This consists of a written evaluation or self-evaluation "diary", which enables you to gain perspective and reinforce the concept of Trading Well.

The remaining chapters of the book will deal with implementation of my Trading Plan, using a variety of specific examples.

3. TREND AND DIRECTIONAL ANALYSIS

4. OVERBOUGHT AND OVERSOLD EVALUATION

5. MARKET ENTRY TECHNIQUES (LEADING INDICATORS)

6. MARKET EXIT TECHNIQUES (LEADING INDICATORS)

they will freely discuss the anatomy of the floor and you will be rewarded for your efforts throughout your trading career.

I hope you are not unduly disappointed with references to other sources of information regarding items one and two above. Be sure you check the bibliography and reference sections. The rest of the trading approach is fully and explicitly covered in the following pages.

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