Lesson 2 Skills Practice Complex Fractions And Unit Rates Answer Key: Fill & Download for Free

You arrive at lecture and sit perched on the edge of your seat, notebook open to a clean page and freshly-sharpened pencil in hand. You follow every word the professor says. Well, maybe you zone out a few times in the middle, but who doesn't? Besides, you're copying everything down and can review it later.That weekend, you diligently read the textbook. Maybe you skip a few parts since it's a busy week, but you definitely study the chapter summary and read all the examples. You do the homework problems, even starting three days early. When you're stuck, you go to office hours and ask the TA for help until they show you how to do it.Before the exam, you study your notes and the published homework solutions. You try the practice exam, and it seems the pieces are finally falling into place. You can solve most of the problems and remember most of the formulas and derivations! At last you take the final, referencing the single allowed sheet of notes you prepared at length the night before. You get almost every question right, or at least partial credit, and take home a well-deserved A.Three months later, you can hardly remember what the class was all about. What's going on? Why did you forget so much? Are you the only one? Should you have memorized more and worked even harder?The answer is no. A student who memorizes the entire physics curriculum is no more a physicist than one who memorizes the dictionary is a writer. Studying physics is about building skills, specifically the skills of modeling novel situations and solving difficult problems. The results in your textbook are just the raw material. You're a builder. Don't spend all your time collecting more materials. Collect a few, then build things. Here's how.The Cathedral and the StonesWhile delivering his famous set of freshman lectures on physics, Richard Feynman held a few special review sessions. In the first of these, he discussed the problem of trying to memorize all the physics you've learned:It will not do to memorize the formulas, and to say to yourself, "I know all the formulas; all I gotta do is figure out how to put 'em in the problem!"Now, you may succeed with this for a while, and the more you work on memorizing the formulas, the longer you'll go on with this method - but it doesn't work in the end.You might say, "I'm not gonna believe him, because I've always been successful: that's the way I've always done it; I'm always gonna do it that way."You are not always going to do it that way: you're going to flunk - not this year, not next year, but eventually, when you get your job, or something - you're going to lose along the line somewhere, because physics is an enormously extended thing: there are millions of formulas! It's impossible to remember all the formulas - it's impossible!And the great thing that you're ignoring, the powerful machine that you're not using, is this: suppose Figure 1 - 19 is a map of all the physics formulas, all the relations in physics. (It should have more than two dimensions, but let's suppose it's like that.)Now, suppose that something happened to your mind, that somehow all the material in some region was erased, and there was a little spot of missing goo in there. The relations of nature are so nice that it is possible, by logic, to "triangulate" from what is known to what's in the hole. (See Fig. 1-20.)And you can re-create the things that you've forgotten perpetually - if you don't forget too much, and if you know enough. In other words, there comes a time - which you haven't quite got to, yet - where you'll know so many things that as you forget them, you can reconstruct them from the pieces that you can still remember. It is therefore of first-rate importance that you know how to "triangulate" - that is, to know how to figure something out from what you already know. It is absolutely necessary. You might say, "Ah, I don't care; I'm a good memorizer! In fact, I took a course in memory!"That still doesn't work! Because the real utility of physicists - both to discover new laws of nature, and to develop new things in industry, and so on - is not to talk about what's already known, but to do something new - and so they triangulate out from the known things: they make a "triangulation" that no one has ever made before. (See Fig. 1-21.)In order to learn how to do that, you've got to forget the memorizing of formulas, and to try to learn to understand the interrelationships of nature. That's very much more difficult at the beginning, but it's the only successful way.Feynman's advice is a common theme in learning. Beginners want to memorize the details, while experts want to communicate a gestalt.Foreign language students talk about how many words they've memorized, but teachers see this as the most trivial component of fluency. Novice musicians try to get the notes and rhythms right, while experts want to find their own interpretation of the piece's aesthetic. Math students want to memorize theorems while mathematicians seek a way of thinking instead. History students see lists of dates and facts while professors see personality, context, and narrative. In each case, the beginner is too overwhelmed by details to see the whole. They look at a cathedral and see a pile of 100,000 stones.One particularly clear description of the difference between the experts' and beginners' minds comes from George Miller's 1956 study "The magical number seven, plus or minus two." Miller presented chess boards to both master-level chess players and to novices. He found that the masters could memorize an entire board in just five seconds, whereas the novices were hopeless, getting just a few pieces. However, this was only true when the participants were memorizing positions from real chess games. When Miller instead scattered the pieces at random, he found the masters' advantage disappeared. They, like the novices, could only remember a small portion of what they'd seen.The reason is that master-level chess players have "chunked" chess information. They no longer have to remember where each pawn is; they can instead remember where the weak point in the structure lies. Once they know that, the rest is inevitable and easily reconstructed.I played some chess in high school, never making it to a high level. At a tournament, I met a master who told me about how every square on the chess board was meaningful to him. Whereas, when writing down my move, I would have to count the rows and columns to figure out where I had put my knight ("A-B-C, 1-2-3-4, knight to C4") he would know instantaneously because the target square felt like C4, with all the attendant chess knowledge about control of the center or protection of the king that a knight on C4 entails.To see this same principle working in yourself right now, memorize the following. You have two seconds:首先放花生酱，然后果冻Easy, right? Well, it would be if you were literate in Chinese. Then you’d know it’s the important maxim, “first the peanut butter, then the jelly”.You can remember the equivalent English phrase no problem, but probably don't remember the Chinese characters at all (unless you know Chinese, of course). This is because you automatically process English to an extreme level. Your brain transforms the various loops and lines and spaces displayed on your screen into letters, then words, then a familiar sandwich-related maxim, all without any effort. It's only this highest-level abstraction that you remember. Using it, you could reproduce the detail of the phrase "first the peanut butter, then the jelly" fairly accurately, but you would likely forget something like whether I capitalized the first letter or whether the font had serifs.Remembering an equally-long list of randomly-chosen English words would be harder, a random list of letters harder still, and the seemingly-random characters of Chinese almost impossible without great effort. At each step, we lose more and more ability to abstract the raw data with our installed cognitive firmware, and this makes it harder and harder to extract meaning.That is why you have such a hard time memorizing equations and derivations from your physics classes. They aren't yet meaningful to you. They don't fit into a grand framework you've constructed. So after you turn in the final, they all start slipping away.Don't worry. Those details will become more memorable with time. In tutoring beginning students, I used to be surprised at how bad their memories were. We would work a problem in basic physics over the course of 20 minutes. The next time we met, I'd ask them about it as review. Personally, I could remember what the problem was, what the answer was, how to solve it, and even details such as the minor mistakes the student made along the way and the similar problems to which we'd compared it last week. Often, I found that the student remembered none of this - not even what the problem was asking! What had happened was, while I had been thinking about how this problem fit into their understanding of physics and wondering what their mistakes told me about which concepts they were still shaky on, they had been stressed out by what the sine of thirty degrees is and the difference between "centrifugal" and "centripetal".Imagine an athlete trying to play soccer, but just yesterday they learned about things like "running" and "kicking". They'd be so distracted by making sure they moved their legs in the right order that they'd have no concept of making a feint, much less things like how the movement pattern of their midfielder was opening a hole in the opponent's defense. The result is that the player does poorly and the coach gets frustrated.Much of a technical education works this way. You are trying to understand continuum mechanics when Newton's Laws are still not cemented in your mind, or quantum mechanics when you still haven't grasped linear algebra. Inevitably, you'll need to learn subjects more than once - the first time to grapple with the details, the second to see through to what's going on beyond.Once you start to see the big picture, you'll find the details become meaningful and you'll manipulate and remember them more easily. Randall Knight's Five Easy Lessons describes research on expert vs. novice problem solvers. Both groups were given the same physics problems and asked to narrate their thoughts aloud in stream-of-consciousness while they solved them (or failed to do so). Knight cites the following summary from Reif and Heller (1982)Observations by Larkin and Reif and ourselves indicate that experts rapidly redescribe the problems presented to them, often use qualitative arguments to plan solutions before elaborating them in greater mathematical detail, and make many decisions by first exploring their consequences. Furthermore, the underlying knowledge of such experts appears to be tightly structured in hierarchical fashion.By contrast, novice students commonly encounter difficulties because they fail to describe problems adequately. They usually do little prior planning or qualitative description. Instead of proceeding by successive refinements, they try to assemble solutions by stringing together miscellaneous mathematical formulas from their repertoire. Furthermore, their underlying knowledge consists largely of a loosely connected collection of such formulas.Experts see the cathedral first, then the stones. Novices grab desperately at every stone in sight and hope one of them is worth at least partial credit.In another experiment, subjects were given a bunch of physics problems and asked to invent categories for the problems, then put the problems in whatever category they belonged. Knight writes:Experts sort the problems into relatively few categories, such as "Problems that can be solved by using Newton's second law" or "Problems that can be solved using conservation of energy." Novices, on the other hand, make a much larger number of categories, such as "inclined plane problems" and "pulley problems" and "collision problems." That is, novices see primarily surface features of a problem, not the underlying physical principles.The "Aha!" FeelingIt is clear that your job as a student is to slowly build up the mental structures that experts have. As you do, details will get easier. Eventually, many details will become effortless. But how do you get there?In the Mathoverflow question I linked about memorizing theorems, Timothy Gowers wroteAs far as possible, you should turn yourself into the kind of person who does not have to remember the theorem in question. To get to that stage, the best way I know is simply to attempt to prove the theorem yourself. If you've tried sufficiently hard at that and got stuck, then have a quick look at the proof -- just enough to find out what the point is that you are missing. That should give you an Aha! feeling that will make the step far easier to remember in the future than if you had just passively read it.Feynman approached the same questionThe problem of how to deduce new things from old, and how to solve problems, is really very difficult to teach, and I don't really know how to do it. I don't know how to tell you something that will transform you from a person who can't analyze new situations or solve problems, to a person who can. In the case of the mathematics, I can transform you from somebody who can't differentiate to somebody who can, by giving you all the rules. But in the case of the physics, I can't transform you from somebody who can't to somebody who can, so I don't know what to do.Because I intuitively understand what's going on physically, I find it difficult to communicate: I can only do it by showing you examples. Therefore, the rest of this lecture, as well as the next one, will consist of doing a whole lot of little examples - of applications, of phenomena in the physical world or in the industrial world, of applications of physics in different places - to show you how what you already know will permit you to understand or to analyze what's going on. Only from examples will you be able to catch on.This sounds horribly inefficient to me. Feynman and Gowers both reached the highest level of achievement in their domains, and both are renowned as superb communicators. Despite this, neither has any better advice than "do it a lot and eventually expertise will just sort of happen." Mathematicians and physicists talk about the qualities of "mathematical maturity" and "physical insight". They're essential to moving past the most basic level, but it seems that no one knows quite where they come from.Circular ReasoningThere are certainly attempts to be more systematic than Feynman or Gowers, but before we get to that, let's take a case study. I recall that as a college freshman, I knew that the formula for the acceleration of a ball orbiting in a circle was [math]a = v^2/r[/math]. I wanted to know why, so I drew a picture:I imagined a small ball starting on the right side of the circle, heading upwards where the blue velocity vector [math]v_1[/math] is drawn. The ball moves around the circle, goes counter-clockwise over the top and then heads downwards on the left hand side, where the red velocity [math]v_2[/math] is. The ball's velocity changed, which means it accelerated. The acceleration is[math]a = \frac{\Delta v}{\Delta t}[/math][math]\Delta v[/math] is clearly [math]2v[/math], and [math]\Delta t[/math] is the time it takes to go half way around the circle, which is [math]\frac{\text{distance}}{\text{speed}} = \frac{\pi r}{v}[/math]. Hence, the acceleration is[math]a = \frac{2v}{\pi r/v} = \frac{2 v^2}{\pi r} \approx 0.64 \frac{v^2}{r}[/math]This isn't quite right. The answer is supposed to be [math]v^2/r[/math]. Somehow there is an extra factor of [math]2/\pi[/math] floating around.If you already understand calculus, this is a silly and obvious mistake. But for me it took quite some time - weeks, I think - until I understood that I had found the average acceleration, but the formula I was trying to derive was the instantaneous acceleration.The way I broke out of this mental rut was to think about the case where the ball has gone one quarter of the way around, like this:Then the same approach gives[math][/math][math] a = \frac{\Delta v}{\Delta t} = \frac{2\sqrt{2}v^2}{\pi r} \approx 0.90 \frac{v^2}{r}[/math],which is closer to the right value. If you try it when the ball goes 1/8 the way around, you get[math]a = \frac{4 \sqrt{2 - \sqrt{2}}v^2}{\pi r} \approx 0.97 \frac{v^2}{r}[/math]and you're getting the idea that what you have to do is take the limit as the ball goes an infinitesimal fraction of the way around. (By the way, if I had been clever, maybe I'd have discovered Viète's formula this way, or something like it. I only recognized this now because I remembered encountering Viete's formula. So memory certainly has its place in allowing you to make connections. It's just not as central as beginners typically believe.)How do you do that "infinitesimal fraction of the way around" thing? Well, if the ball travels an angle [math]\theta[/math] around the circle, we can draw the before and after velocities asand[math][/math][math] \Delta v = [/math][math]2[/math][math] \sin (\theta/2) v[/math]which in the limit [math]\theta \to 0[/math] becomes[math][/math][math] \Delta v = \theta v[/math]and[math][/math][math] a = \frac{\Delta v}{\Delta t} = \frac{\theta v}{\theta r/v} = \frac{v^2}{r}[/math]But all of this took a long time to come together in my mind, assembling gradually, but in discrete chunks with each small epiphany. As I walk through it now, I can see there are many concepts involved, and in fact if you're a beginning student it's likely that the argument isn't clear because I skipped some steps.The main idea in that argument is calculus - we're looking at an infinitesimal displacement of the ball. To understand the entire argument, though, we also need to do a fair amount of geometry, develop the idea of sliding velocity vectors around in space so they originate at the same point, introduce the concept of an arbitrary angle of rotation [math]\theta[/math], find the time it takes to rotate by that angle for a given [math]r[/math] and [math]v[/math], use the small-angle approximation of the sine function, and maybe a couple other things I'm not seeing.That's a lot of mental exercise. It's no wonder that working all this out for yourself is both harder and more effective than reading it in the book. Just reading it, you'll skip over or fail to appreciate how much goes into the derivation. The next time you try to understand something, you want those previously-mastered ideas about geometry and calculus already there in your mind, ready to be called up. They won't be if you let a book do all the work.Today, I can solve this problem in other ways. For example, I could write down the rectangular coordinates and differentiate, describe the motion in the complex plane as [math]r e^{i\omega t}[/math] and differentiate that, or transform to a rotating reference frame and note the centrifugal force on the stationary ball and conclude it must be accelerating in an inertial frame. A cute one is to write down the position and velocity vectors by intuition, and notice that going from position to velocity you rotate 90 degrees and multiply the length by [math]v/r[/math]. To go from velocity to acceleration is mathematically identical, so rotating another 90 degrees and multiply by [math]v/r[/math] again we obtain the answer.I can argue from dimensional analysis that the only way to get something with units of acceleration is [math]v^2/r[/math], or heuristically point out that if you increase the velocity, the velocity vectors get bigger, but we also go from one to the next in less time, so the acceleration ought to scale with [math]v^2[/math], etc.I also see aspects of the problem that I didn't back then, such as that this isn't really a physics problem. There are no physical laws involved. It would become a physics problem if we included that the ball is circling due to gravitational forces and used Newton's gravitational law, for example, but as it stands this problem is just a little math.So yes, I can easily memorize this result and provide a derivation for it. I can do that for most of the undergrad physics curriculum, including the pendulum and Doppler formulas you mentioned, and I think I could ace, or at least beat the class average, on the final in any undergraduate physics course at my university without extra preparation. But I can do that because I built up a general understanding of physics, not because I remember huge lists of equations and techniques.How to Chunk ItI can do these things now because of years' of accumulated experience. Somehow, my mind built chunks for thinking about elementary physics the same way chess players do for chess. I've taught classes, worked advanced problems, listened to people, discussed with people, tutored, written about physics on the internet, etc. It's a hodgepodge of activities and approaches, and there's no way for me to tease from my own experience what was most important to the learning process. Fortunately, people from various fields have made contributions to understanding how we create the cognitive machinery of expertise. Here is a quick hit list.George Pólya's How to Solve It examines the problem-solving process as a series of stages, and suggests the student ask themselves specific questions like, "Is it clear that there enough information to solve the problem?"Scott H Young, Cal Newport, and many others give specific advice on study skills: how to take notes, how to diagram out the connections between ideas, how to test your knowledge, how to fit what you're learning into the larger scheme of things, etc.When you do need to memorize things, spaced repetition software like Anki takes an algorithmic, research-backed approach to helping you remember facts with the minimum of time and effort.K. Anders Ericsson has tried to find the key factors that make some forms of practice better than others - things like getting feedback as you go and having clear goals. He refined these into the concept of Deliberate Practice. He also believes there is no shortcut. Even if you practice effectively, it usually takes around 10,000 hours of hard work to reach the highest levels in complex fields like physics or music.Chunking and assigning meaning are your mind's ways of dealing with the information overload of the minutiae that inevitably pop up in any field. Another approach, though, is to try to expand your mind's ability to handle those minutiae. If you can push your "magical number" from seven to ten, you'll be able to remember and understand more of your physics work because it takes a bit longer to fill your cognitive buffer. Dual N-Back exercises are the most popular method of working on this. Nootropic drugs may also provide benefits to some people. Low-hanging fruit first, though. If you aren't sleeping 8-9 hours a day, getting a few hours of exercise a week, and eating healthy food for most meals, you're probably giving up some of your mind's potential power already. (There is individual variation, though.)Howard Gardner is one champion of the idea of multiple intelligences, or different learning types. When working on electric fields, for example, Gardner might advise you to study Maxwell's equations, draw pictures of vector fields and intuit their curls, get up and use your body, pointing your arms around to indicate electric field vectors, write or speak about what you're studying, learn with a friend or tutor, or maybe even create musical mnemonics to help you study, depending on where your personal strengths lie. Certainly, all students should build facility with drawing sketches, plotting functions, manipulating equations, visualizing dynamics, and writing and speaking about the material.Psychologist Carol Dweck's research studies the effect of your attitude towards learning on how much you learn, finding, for example, that children praised for their hard work are likely to press on further and learn more when given tough problems, whereas children praised for their intelligence are more likely to give up.Productivity guru David Allen helps people organize their lives and defeat procrastination with specific techniques, such as dividing complicated tasks into small, specific "next actions" and deciding when to do them, then organizing them in a planner system.Mihály Csíkszentmihályi believes that people operate best in a state of "flow", where they are so focused on the task they find it enjoyable and engrossing to the point they're innately motivated to continue. He emphasizes, for example, that the task needs to be the right level of difficulty - not too hard and not too easy - to find the flow state. (Some people think this state doesn't jibe with deliberate practice; others contend it's possible to achieve both simultaneously.)Taken together, this yields enough practical advice to chew on for months or years. To summarize, when you are learning something new:Try to figure it out for yourselfIf you get stuck, take a peek at your textbook to get the main ideaTeach the idea to someone elseOnce you've learned something, repeat the entire reasoning behind it for yourself, working through each detailAsk yourself Pólya's questions when you're stuckUse Young and Newport's techniques to map out the ideas of your class and relate them to your prior knowledgeMake Anki decks and review them a few minutes a day to retain what you've learnedMake sure your study sessions include all the principles of deliberate practice, especially feedback, challenge, and attentionBuild an image of yourself as someone motivated by learning and proud of having worked hard and effectively rather than as someone proud of being smart or renowned.Find a organizational system that lets you handle all the details of life smoothly and efficiently.Search for the flow state, notice when you enter it, and put yourself in position to find flow more and more often.Work on different subjects, reviewing both advanced and basic material. They will eventually all form together in your mind, and you're likely to have to take at least two passes at any subject before you understand it well.Take care of your physical health.This list does not include reading every page of the textbook or solving every problem at the end of the chapter. Those things aren't necessarily bad, but they can easily become rote. Building the material up for yourself while dipping into reference materials for hints is likely to be more effective and more engaging, once you learn to do it. It is a slow, difficult process. It can be frustrating, sitting there wracking your brain and feeling incredibly stupid for not understanding something you know you're supposed to have down. And strangely, once you have it figured out, it will probably seem completely obvious! That's your reward. Once the thing is obvious, you've chunked it, and you can move on. (Though you still need to review with spaced repetition.) This is the opposite of the usual pattern of sitting in lectures and feeling you understand everything quite clearly, only to find it all evaporated the next day, or acing a final only to find your knowledge is all gone the next month.That, I believe, summarizes the practical knowledge and advice about the learning process. Memorizing equations and derivations is difficult and ineffective because they are just the details. You can only handle a few details before your mind gets swamped. To cope, train yourself to the point where you process equations and physical reasoning automatically. This will free your conscious effort up to take in the big picture and see what the subject is all about.It Just Gets In The Way, You SeeSomehow, I've developed a "this is calculus" instinct, so that if I see the problem about acceleration in circular motion, or any other problem about rates of change, I know that it's talking about a limit of some kind. Where does this instinct exist in my brain? What form does it take? How does it get called up at the right time?George Lakoff believes that almost everything we understand is via metaphor. Any sort of abstract concept is understood by linking it to concrete concepts we've previously understood. For example, in Where Mathematics Comes From, Lakoff and coauthor Rafael Nuñez argue that we think of the mathematical concept of a "set" as a sort of box or container with things stacked in it. We reason about sets using our intuition about boxes, then later go back and support our conclusions with the technical details. Learning to reason about sets, then, is learning to think about the box metaphor and translate it back and forth into the formal language of axioms and theorems. This seems to fit with the introspective reports of many mathematicians, who say they build intuitive or visual models of their mathematics when finding results, then add in the deltas and epsilons at the end.This may be why we so often see beginning students asking things like, "but what is the electron, really?" If they were told it is just a tiny little ball, that would work, because it's a very easy metaphor. But instead, they're told it's not a ball, not a particle, not a wave, not spinning even though it has spin, etc. In fact, they're told to dismiss all prior concepts entirely! This is something Lakoff believes is simply impossible. No wonder students are bobbing in an ocean of confused thought bubbles, with nothing but mixed metaphors to grasp at until the last straw evaporates, across the board.Linguists like Steven Pinker believe that the language we use tells us how our mind works. Physicists certainly do have a specialized lexicon, and the ability to use it correctly correlates pretty well to general physics intuition, in my experience. In his review of Pinker's The Stuff of Thought, Douglas Hofstadter summarizes:Pinker shows, for example, how subtle features of English verbs reveal hidden operations of the human mind. Consider such contrasting sentences as "The farmer loaded hay into the wagon" and "The farmer loaded the wagon with hay." In this pair, the verb "load" has two different kinds of objects: the stuff that gets moved and the place it goes. Also, in the first sentence, the destination is the object of one preposition; in the second, the stuff is the object of another. Pinker sees these "alternations" as constituting a "microclass" of verbs acting this way, such as "spray" ("spray water on the roses" versus "spray the roses with water"). Where does this observation lead him? To the idea that we sometimes frame events in terms of motion in physical space (moving hay; moving water) and sometimes in terms of motion in state-space (wagon becoming full; roses becoming wet).Moreover, there are verbs that refuse such alternations: for instance, "pour." We can say "I poured water into the glass" but not "I poured the glass with water." What accounts for this curious difference between "load" and "pour"? Pinker claims that pouring merely lets a liquid move under gravity's influence, whereas loading is motion determined by the human agent. "Pour" and "load" thus belong to different microclasses, and these microclasses reveal how we construe events. "[W]e have discovered a new layer of concepts that the mind uses to organize mundane experience: concepts about substance, space, time, and force," Pinker writes. " . . . [S]ome philosophers consider [these concepts] to be the very scaffolding that organizes mental life. . . . But we've stumbled upon these great categories of cognition . . . by trying to make sense of a small phenomenon in language acquisition."If correct, then in order to think about physics the way an expert does, we should learn to speak the way experts do. If we try to solve physics problems using the words "load" and "pour", we may be carrying around a bunch of distracting anthropocentric baggage. If we don't recognize that, we'll get stuck, saying the problem "doesn't make sense", when really it's our linguistically-instilled expectations that are wrong. To combat this, it may be just as helpful to gain facility with the language of physics as with its equations.Five Easy Lessons provides a clear example of such difficulties: the case study of "force". As I type this, my laptop is sitting on a desk which exerts an upward force on it. Few beginning students believe this is really a force, even after they've been browbeaten into drawing arrows for the "normal force" on exam diagrams.The problem is in the way we use "force":"The robber forced the door open.""Your apology sounded forced.""...the force of the explosion...""...the force of righteousness...""I'm being forced to take physics even though I'll never use it."Literally or figuratively, we think of "force" as implying not only motion, but intent or purpose, and also control. Force is for people pushing on things, or maybe for cars and projectiles. These things are using energy and will run down if left alone. But the desk under my laptop? It's just sitting there, totally passive. How could it be "exerting a force" when it doesn't even get tired? Needing some sort of rationalization for why the laptop doesn't fall, beginners say that it's not that the desk exerts a force on the laptop, the desk just provides something for the laptop to sit on. Or if something falls on the desk, the desk didn't exert a force to stop it. It just got in the way is all. Why doesn't the professor understand this obvious difference? A desk exerting a force? Come on...Five Easy Lessons describes how students only overcome this difficulty after seeing a classroom demonstration where, using a laser pointer and a mirror laid on the desk top, the professor demonstrates how when a heavy cinder block is laid on the desk, the surface responds by bending out of its natural shape, exerting force on the cinder block like a compressed spring would.You may need to find many such visualizations before you can reconcile your colloquial use of words with their use in physics. But this might also be dangerous, because although finding a way to make physics obey your idea about what a word means works decently in this case, in other instances it's your expectations for the word that ought to change. (Relativity, with words like "contraction", "slowing down", etc. is a good example.)Mythologist Joseph Campbell believes that we understand the world primarily through story. Perhaps we understand derivations, experimental evidence, and the logic behind physical conclusions as a sort of story, and it's in building this story that our cognitive chunks are formed.Mind The Neural Gap JunctionsYou are the pattern of neural activity in your brain. When a part of you changes, building a new memory, installing a new habit, or constructing a tool to approach a class of problems, that change must be reflected somewhere in your brain.Lesswrong user kalla724 describes this process in "Attention control is critical for changing/increasing/altering motivation"First thing to keep in mind is the plasticity of cortical maps. In essence, particular functional areas of our brain can expand or shrink based on how often (and how intensely) they are used. A small amount of this growth is physical, as new axons grow, expanding the white matter; most of it happens by repurposing any less-used circuitry in the vicinity of the active area. For example, our sense of sight is processed by our visual cortex, which turns signals from our eyes into lines, shapes, colors and movement. In blind people, however, this part of the brain becomes invaded by other senses, and begins to process sensations like touch and hearing, such that they become significantly more sensitive than in sighted people. Similarly, in deaf people, auditory cortex (part of the brain that processes sounds) becomes adapted to process visual information and gather language clues by sight.But, they caution, these neural changes occur primarily to those parts of our minds to which we pay conscious attention:A man is sitting in his living room, in front of a chessboard. Classical music plays in the background. The man is focused, thinking about the next move, about his chess strategy, and about the future possibilities of the game. His neural networks are optimizing, making him a better chess player.A man is sitting in his living room, in front of a chessboard. Classical music plays in the background. The man is focused, thinking about the music he hears, listening to the chords and anticipating the sounds still to come. His neural networks are optimizing, making him better at understanding music and hearing subtleties within a melody.A man is sitting in his living room, in front of a chessboard. Classical music plays in the background. The man is focused, gritting his teeth as another flash of pain comes from his bad back. His neural networks are optimizing, making the pain more intense, easier to feel, harder to ignore.You need to pay attention not just to doing physics, but to the right parts of doing physics - the parts most related to intuition.James Nearing gave his advice on how to do this in Mathematical Tools for PhysicistsHow do you learn intuition?When you've finished a problem and your answer agrees with the back of the book or with your friends or even a teacher, you're not done. The way do get an intuitive understanding of the mathematics and of the physics is to analyze your solution thoroughly. Does it make sense? There are almost always several parameters that enter the problem, so what happens to your solution when you push these parameters to their limits? In a mechanics problem, what if one mass is much larger than another? Does your solution do the right thing? In electromagnetism, if you make a couple of parameters equal to each other does it reduce everything to a simple, special case? When you're doing a surface integral should the answer be positive or negative and does your answer agree?When you address these questions to every problem you ever solve, you do several things. First, you'll find your own mistakes before someone else does. Second, you acquire an intuition about how the equations ought to behave and how the world that they describe ought to behave. Third, It makes all your later efforts easier because you will then have some clue about why the equations work the way they do. It reifies the algebra.Does it take extra time? Of course. It will however be some of the most valuable extra time you can spend.Is it only the students in my classes, or is it a widespread phenomenon that no one is willing to sketch a graph? (\Pulling teeth" is the cliche that comes to mind.) Maybe you've never been taught that there are a few basic methods that work, so look at section 1.8. And keep referring to it. This is one of those basic tools that is far more important than you've ever been told. It is astounding how many problems become simpler after you've sketched a graph. Also, until you've sketched some graphsof functions you really don't know how they behave.(To see the advice on graphs, along with a detailed step-by-step example, see his book, free online)Brown Big SpidersOne of the difficulties with chunks is that they're mostly subconscious. We may ultimately know of their existence, as did the chess master who told me he knew how each square of the chess board felt, but their precise nature and the process of their creation are almost immune to introspection. The study methods I've talked about above are empirically useful in creating chunks, so we have guidelines for how to make new chunks in general, but we usually don't know which ones we are creating.Lesswrong user Yvain comments on the essay Being a teacherI used to teach English as a second language. It was a mind trip.I remember one of my students saying something like "I saw a brown big spider". I responded "No, it should be 'big brown spider'". He asked why. Not only did I not know the rule involved, I had never even imagined that anyone would ever say it the other way until that moment.Such experiences were pretty much daily occurrences.In other words, the chunkiest cognitive process we have - language - develops largely without our awareness. (In retelling this story, I've met a surprising number of people who actually did know about adjective order in English, but most of them either learned English as a second language or had studied it in psychology or linguistics course.)This makes it incredibly difficult for physics teachers or textbook writers to communicate with beginners. It's inevitable that beginners will say that a certain lecturer or book just doesn't explain it clearly enough, or needs to give more examples. Meanwhile, the lecturer has no idea why what they said wasn't already perfectly clear and thinks the example was completely explicit. Neither party can articulate the problem, the student because they can't see the incorrect assumption they're making, the professor because they don't realize they've already made such an assumption.For example, once I was proctoring a test in a physics class for biology majors. A question on the test described a certain situation with light going through a prism and asked, "What is the sign of the phase shift?" A student came up to ask for clarification, and it wasn't until they'd asked their question three times that I finally got it. They thought they were supposed to find the "sign" as in a signpost, or marker. There would be some sort of observable behavior that would indicate that a phase shift had occurred, and that was the "sign of the phase shift." Until then, I was only able to think of "sign" as meaning positive or negative - did the wave get advanced or retarded?If you want to learn a language with all those rules you don't even know about, you need to immerse yourself. Endless drills and exercises from a book won't be enough, as millions of Americans a decade out of high school straining to remember, "Dondé esta el baño?" can attest. You need to read, speak, see, and hear that language all around you before it takes.To learn physics, then, read, speak, and hear it all around you. Attend colloquia. Read papers. Solve problems. Read books. Talk to professors and TA's, and expose yourself to all the patterns of thought that are the native language of the field.As you learn, you will build the right chunks to think about physics without realizing what they are. But there's a flip side to this problem, which is that when you're not doing physics, you can build the wrong chunks. They can get in the way, and again you don't realize it.In Drawing on the Right Side of the Brain, Betty Edwards discusses an exercise she gave her art students:One day, on impulse, I asked the students to copy a Picasso drawing upside down. That small experiment, more than anything else I had tried, showed that something very different is going on during the act of drawing. To my surprise, and to the students' surprise, the finished drawings were so extremely well done that I asked the class, "How come you can draw upside down when you can't draw right-side up?" The students responded, "Upside down, we didn't know what we were drawing."When we see a recognizable image, unconscious chunking immediately gets to work, interpreting, imparting meaning, and inevitably distorting. Learning to draw, according to Edwards, involves circumventing harmful chunks as much as building helpful ones.So it is with physics. The ideas about force, animation, and intent discussed in the laptop-and-desk example seem to illustrate just this problem. Five Easy Lessons lists many of the known misconceptions that students have somehow taught themselves in each topic of introductory physics - for example that electric current gets used up as it goes around a circuit. But I think it's likely that there are many more such obstructive thought patterns that we don't yet know exist. These might be more general notions about such things as cause and effect, what nature "wants" to accomplish, etc.I Feel DumbEducators are perpetually frustrated by what seems like an outrageous pattern. They explain something clearly. The students all claim to understand perfectly, and can even solve quantitative problems. Still, when you ask the students to answer basic conceptual questions, they get it all wrong. How is this possible?In this YouTube video, Veritasium explores what happens when you explain something clearly:Amazingly, the clearer the explanation, the less students learn. Humans have a huge array of cognitive biases. In general, these various biases work so that we'll keep believing whatever it was we believed to begin with, unless there's a really good reason not to. Someone giving a clear, authoritative physics lecture does not register in your mind as a good reason to check your beliefs, so you listen happily and rave about what a great lecture it was, all while maintaining your wrong ideas.However, with the right stimulus you can get your brain to throw out the old, wrong ideas. Entering such a state is a prerequisite to true learning, and fortunately we can detect it in ourselves. We call it confusion.Confusion is a message from your emotional mind (the part that tells your analytical mind what decisions to start justifying). It's saying, "Hey, something about our beliefs is very wrong, and this is actually important. Pay attention and figure it out."A great lecturer, instead of being clear, will confuse students by asking them to predict ahead of time what a demonstration will show, then do it, and the opposite actually occurs. Or they will ask students to solve questions that sound straightforward, but in fact the students can't figure out. Only after confusion sets in will the teacher reveal the trick.You want to defeat your biases, toss out your wrong beliefs, and learn physics to the Feynman level - the level where you create the knowledge as you go along. Even many specialists never fully get there, instead rising to increasingly-sophisticated levels of rehashing the same memorized arguments in a way that can carry them quite far and trick most people. The only way to avoid this is to spend many, many hours thoroughly confused.Have you ever lost an argument, only to think of the perfect retort two days later when stopped at a traffic light? This shows how your mind will continue working on hard problems in the background. It eventually comes up with a great answer, but only if you first prime it with what to chew on. This works for physics problems just as well as for clever comebacks, once you find good problems to grapple with. I conjecture that engaging this subconscious system requires a strong emotional connection to the problem, such as the frustration or embarrassment of being dumbstruck in an argument or the confusion of being stumped by a hard problem.Confusion is essential, but often also unpleasant. When you repeatedly feel frustrated or upset by your confusion, your mind unconsciously learns to shy away from hard thinking. You develop an ugh field.This could happen for different reasons. A common one arises in people who judge themselves by their intellect. Confusion for such people is a harsh reminder of just how limited they are; it's a challenge to their very identity. Whether for this reason or some other, it's common for students and academics to fall into patterns of procrastination and impostor syndrome when navigating the maze of confusion that come with their chosen path.I don't have the answer for this. I have heard many people tell their stories, but I have yet to figure out my own. Sometimes confusion feels awful, and my story in physics is a jerky, convoluted one because of how I've dealt with that. But once in a while a problem is so good that none of that matters. When I find one of these problems, it hijacks my mind like Cordyceps in a bullet ant, jerking me back to a fresh piece of scratch paper again and again, sometimes for days. If you reach this state over and over, you'll know Feynman meant by, "What I cannot create I do not understand"Get confused. Solve problems. Repeat. The universe is waiting for you.ReferencesIn order of appearance in this answerFeynman's Tips on Physics: Richard P. Feynman, Michael A. Gottlieb, Ralph Leighton: 9780465027972: Amazon.com: Bookssoft question - Memorizing theorems - MathOverflowThe Magical Number Seven, Plus or Minus Two (wikipedia)The Magical Number Seven (original paper)Google Translate (Chinese phrase)Knight, Randall. Five Easy Lessons pp 37Reif and Heller, 1982Viète's formulaHow To Solve It: A New Aspect of Mathematical Method (Amazon)How To Solve It (summary)How to Solve It (Wikipedia)Learn Faster with the Feynman Technique (Scott Young. His page is start to get spammy.)Study Hacks " About (Cal Newport)Anki - powerful, intelligent flashcardsSpaced repetition (review by Gwern)K. Anders Ericsson (Wikipedia)The Role of Deliberate Practice in the Acquisition of Expert PerformanceDual N-Back FAQ (gwern)Food Rules An Eater`s Manual (Amazon, how to eat)Core Performance Essentials (Amazon, exercise) Exercise is an interesting case because not everyone responds very well. For the majority of people it's worth the time.Howard Gardner (wikipedia)The Unschooled Mind: How Children Think And How Schools Should Teach: Howard E. Gardner (Amazon)The Perils and Promises of Praise (article by Dweck)Mindset, Dweck's book.Flow (psychology) (Wikipedia)Flow: The Psychology of Optimal Experience: Mihaly Csikszentmihalyi: 9780061339202: Amazon.com: BooksDavid Allen, Getting Things Done® and GTD®Online to-do list and task management (One possible GTD software)How to Setup Remember The Milk for GTDGeorge Lakoff (professional site)George Lakoff (Wikipedia)Where Mathematics Come From: How The Embodied Mind Brings Mathematics Into Being: George Lakoff, Rafael Nuñez: 9780465037711: Amazon.com: BooksLoaded sentences (Hofstadter reviews Pinker)The Stuff of Thought: Language as a Window into Human Nature: Steven Pinker: 9780143114246: Amazon.com: BooksThe Power of Myth: Joseph Campbell, Bill Moyers: 9780385418867: Amazon.com: BooksAttention control is critical for changing/increasing/altering motivationMathematical Tools for Physics (Nearing)Being a teacher - Less WrongDrawing on the Right Side of the Brain: The Definitive, 4th Edition: Betty Edwards: 9781585429202: Amazon.com: BooksVeritasium (channel)List of cognitive biases (wikipedia)Dunning–Kruger effect (wikipedia)Ugh fields - Less WrongUseful Quora AnswersSomeone anonymous's answer to What is it like to understand advanced mathematics? Does it feel analogous to having mastery of another language like in programming or linguistics?Satvik Beri's answer to How do math geniuses understand extremely hard math concepts so quickly?Qiaochu Yuan's answer to Why is it almost impossible to learn a mathematical concept on Wikipedia? They are very difficult to follow, especially if one doesn't have a solid background in the subject.Christopher VanLang's answer to What should I do if my PhD advisor and lab colleagues think I'm stupid?What did Richard Feynman mean when he said, "What I cannot create, I do not understand"?Debo Olaosebikan's answer to What are some words, phrases, or expressions that physicists frequently use in ordinary conversation?Paul King's answer to How does the arbitrary become meaningful? How does the human mind convert things like art into emotion and experience?What are some English language rules that native speakers don't know, but still follow?User's answer to What's an efficient way to overcome procrastination?Further ReadingI feel a little sleazy writing this answer because when I mention, for example, Carol Dweck doing research on the psychology of mindsets or K. Anders Ericsson studying deliberate practice, in fact there are thousands of people working in those fields. The ones I've mentioned are simply the most public figures or those I've come across by chance. I haven't even read the original research in most of these cases, relying on summaries instead.The answer is also preliminary and incomplete. There's lots of research left to be done, and I'm not an expert in what's out there. Still, here is a guide to some further resources that have informed this answer.For an overview of the psychology of learning, I like Monisha Pasupathi's audio course How We Learn from The Teaching Company. It covers many clever experiments designed to help you build a model of what happens in your mind as you learn.Bret Victor explores software solutions to visualizing the connection between physical world, mathematical representation, and mental models. Check outThe Ladder of AbstractionExplorable ExplanationsI think it's helpful to build an innate impression of your mind as not perceiving the world directly, but as concocting its own, tailored interpretation from sense data. All your consciousness ever gets to experience is the highly-censored version. The books of Oliver Sacks are great for making this clear by illustrating what happens with people for whom some of the processing machinery breaks down.The LessWrong Sequences were, for me, a powerful introduction to the quirks of human thought, preliminary steps towards how to work best with the firmware we've got, and what it means to seek truth.Selected BibliographyThese are some physics books to which have helped me so far. I'm not choosing them for clear exposition or specialty knowledge in a certain subject, but for how I think they helped me understand the way to think about physics generally.Blandford and Thorne, Applications of Classical PhysicsEpstein, Thinking PhysicsFeynman, Lectures on Physics------------ The Character of Physical Law------------ QED: The Strange Theory of Light and Matter------------ Tips on PhysicsGeroch, General Relativity from A to BLevi, The Mathematical MechanicLewin, Walter "Classical Mechanics", "Electricity and Magnetism" (video lectures with demonstrations on MIT OpenCourseWare)Mahajan, Street-Fighting MathematicsMorin, Introduction to Classical MechanicsNearing, Mathematical Tools for PhysicsPurcell, Electricity and Magnetism----------, Back of the Envelope ProblemsSchey, Div, Grad, Curl, and All ThatThomas and Raine, Physics to a DegreeThompson, Thinking Like a PhysicistWeisskopf, "The Search for Simplicity" (articles in Am. J. Physics)ImagesFeynman's Tips on Physics, Feynman, Gottlieb, LeightonArchitectural detail- cut stone wallFile:NotreDameI.jpg

Q. Do you have any links that teach the basics of day trading?[ TL:DR — See the Appendices near the end of this answer. ]“Learning” or “knowing” the basics is one thing — mastering the basics well enough to be significantly profitable over years, or decades is something else. . Also, the breadth and depth of what I consider to be “the basics” might be greater than what you were expecting, and the time necessary to master those basics might be longer than you were expecting.I recommend that you:Think first of learning and mastering the basics of trading as a broader subject, andThen later take a look at intraday trading as a special case.Many who are attracted to intraday trading may be better served by trading in timeframes of overnight, a few days, a few weeks, or a few months.I further recommend that you begin by reading this closely-related Quora Q & A:My son just graduated from college with a degree in business. He started day trading and wants to do it full time. What advice do you have for him?Next I recommend that you read the following two links — the first is a discussion of two well-known book authors and teachers of trading financial assets:Mark Douglas vs Van TharpHere's Why These Are My Top 5 Trading Books Ever -The following outline is framed in the context of trading stocks, but much of it can be applied to trading other assets such as options or futures.I recommend that you proceed slowly and methodically, and first read a few of the classic trading books by Mark Douglas, Van K. Tharp, William J. O’Neil, Richard D. Wyckoff, and others. . To expand your resources, I recommend doing a google search on “best stock trading books” and reading the reviews on Amazon. . See also Appendix A-4 near the end of this answer.———————————————If you want to be successful over many years, and remain successful over many decades, it is a deeper subject that it first appears. . The purpose of this outline is of the outline and introductory presentation below is not to prepare you to begin trading tomorrow or next week, but to:offer a roadmap and an overall framework for learning the subjectto present much or most of the vocabulary of technical trading in a logical, organized, and flowing manner.The numerous trading books, and other resources (including online educational resources) can fill in the details. . How long will it take you to begin trading successfully?How long would it take a gifted individual to learn how to trade stock efficiently?Following the Table of Contents are the text contents of each section.______________________________________________________________________________ Introduction to Technical Trading _____________Great passion leads to great investment of time and great perseverance.Great investment of time leads and great perseverance leads to great familiarity.Great familiarity — plus great discipline — lead to success.But the essence of your success is that you are consciously, passionately, enthusiastically engaged in the quest for ever-greater understanding your freely-chosen endeavor, “being in the flow”, and devoted to mastery of your chosen path.There is no perfectly reliable trading system, and there are few relatively reliable systems that do not frequently need refinement, or major modification, or possibly even periodic replacement.It is likely that a passion-driven, deep-studying, persevering trader can make considerably more than he loses — but it is only likely — there is no guarantee. . How do you feel about that?One definition of passion as it applies to trading is this:You want to do this so badly that you are willing to endure some losses [in a controlled, acceptable way] in order to learn what is needed to succeed.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -_____________________ Table of Contents ______________________1 — Psychology and discipline are paramount. . . 1.1 — Four reasons to go slow with — or skip — trading. . . 1.2 — Top Ten+ rules to consider2 — Chart Basics: . Price, volume, timeframes ——————————. . . 2.1 — Chart timeframes: . Short-period vs long-period. . . 2.2 — Multiple timeframes (e.g., side-by-side). . . 2.3 — Contrasting price behavior in different timeframes. . . 2.4 — Comparing two timeframes: . The timeframe multiple3 — Chart Enhancements [C/E]: . Geometric, calculated, interpretative. . . 3.1 — C/E: . Geometric constructions. . . 3.2 — C/E: . Extensive complex calculations; . Indicators. . . 3.3 — C/E: . Interpretative. . . 3.4 — Chart Enhancements: . Which ones to use (if any)?4 — Choosing stocks to trade ———————————————. . . 4.1 — Pick better-than-average volatility. . . 4.2 — Pick b-t-a volume and liquidity. . . . . . 4.2.1 — Bid Price versus Ask Price. . . . . . 4.2.2 — Liquidity. . . . . . 4.2.3 — Volume: . Intraday Trading versus Swing Trading. . . 4.3 — Pick b-t-a average sector/industry strength. . . 4.4 — Consider picking some “Story Stocks”. . . . . . 4.4.1 — “Arch Rivals”. . . 4.5 — Consider picking CER-TOY-LAL stocks. . . 4.6 — Stocks versus ETF’s5 — Choosing timeframes to trade ———————————————. . . 5.1 — Lower versus higher timeframes. . . 5.2 — A gradual approach toward intraday trading6 — Scenarios, strategies, and setups ——————————-. . . 6.1 — Scenarios: . Eleven general cases. . . 6.2 — Move from a scenario, to a strategy, to setups. . . 6.3 — Be creative, industrious, and persistent7 — Test Areas — Fertile ground for strategies and setups8 — Test Area Setups and their classification. . . 8.1 — Test Area Setups — Three key criteria. . . 8.2 — Test Area Setups — Eight different types. . . 8.3 — A Test Area Setup can await a breakout. . . . . . 8.3.1 — Intraday Opening Range Breakout. . . 8.4 — Test Area Setup: . An excellent example9 — Tharp’s List of Setups. . . 9.1 — Example #1 (Tharp): . Failed Test Setups. . . 9.2 — Example #2 (Tharp): . Climax Reversal Setups. . . 9.3 — Example #3 (Tharp): . Retracement Setups [R/S]. . . . . . 9.3.1 — R/S: . Bullish or Bearish. . . . . . 9.3.2 — R/S: . 50% retracement setups. . . . . . 9.3.3 — A setup similar to a retracement setup. . . 9.4 — Tharp: . Seven additional types of setups10 — Trending versus Mean Reversion [ Tr vs MR ] ——————————. . . 10.1 — Tr vs MR: . Visible in every channel pattern. . . 10.2 — Tr vs MR: . Be on “constant lookout” for channels11 — Buy strength? . . . Or buy weakness?12 — * * * Learn and understand FIRST * * * Strategize SECOND * * *. . . 12.1 — A General View of Strategies and Setups. . . 12.2 — Don’t overlook Volume patterns13 — RRM = Risk and Reward Management ———————————. . . 13.1 — RRM: . Alternative ways to be profitable over time. . . . . . 13.1.1 — Examples of WMO versus WLM. . . 13.2 — RRM: . When to close a losing position?. . . . . . 13.2.1 — Cutting your losses: . A horse-riding metaphor. . . 13.3 — RRM: . When to close a winning position?. . . 13.4 — RRM: . Choices for beginning or novice traders14 — Position sizing and scaling. . . 14.1 — Limit position size. . . 14.2 — Scaling into (or out of) a full position —————————15 — System trading versus discretionary trading —————————. . . 15.1 — System Trading: . List of specific steps. . . 15.2 — Two different approaches to stock selection16 — Beginners: . Trade *with* the broader market. . . 16.1 — Trade *with* the associated sector . . . & assoc. industry17 — Statistics, updrafts, and drawdowns ——————————————18 — “Herd logic” versus “Contrarian logic”19 — Intraday trading as a competitive, zero-sum game20 — How will you think about “the market”?21 — “Just watch charts”, and ideas will come to youAppendix A-1. . Eight Types of Test Area SetupsAppendix A-2. . List of stock-trading related web linksAppendix A-3. . List of some informative Quora Q&A’sAppendix A-4. . Links That Discuss Strategies and SetupsAppendix A-5. . Checklist for engaging in intraday tradingAppendix A-5. . List of important topics for further studyAppendix A-7. . Buy-and-hold Investing — Fundamental Analysis———————————————-1 — Psychology and discipline are paramount“Bulls can make money — Bears can make money — Pigs may get slaughtered.”“The biggest edge an individual can have in any form of trading is risk management and emotional management.”“Being a successful trader is not about winning big, it’s about losing small.”“The whole secret to winning in the stock market is to lose the least amount possible when you’re not right.” — William J. O’Neil“The second secret to winning in the stock market is to not leave far too much money on the table when you are right.” — William J. O’Neil did not say exactly these words, but has almost certainly said something very similar.“Eighty percent of success in any endeavor is showing up, practicing earnestly and intelligently, and persevering.”IMHO, profitable trading is:40% cutting losses — strictly, unfailingly, efficiently, automatically, mechanically, without hesitation, calmly, unemotionally — in accordance with a detailed, sound, written trading plan30% being patient with winners — in accordance with a detailed, sound, written trading plan. . The most successful traders are generally those who are willing to:. . . “ride some disconcerting waves” or “ride the skittish horse”. . . witness, suffer through, tolerate and endure a few ups & downs, pullbacks (when long) or unfavorable-upmoves (when short), stagnations, and/or plateaus, during the course of many of most of their profitable trades.20% developing AND maintaining effective trading setups that are spelled out within a sound, written trading plan10% everything elseIn this outline, the most important distinction to be made, is the distinction between:the psychology, mental discipline, emotional stability, and ability to stick to a plan that is conducive to long-term successful trading, andthe technical analysis [TA], the specific trading strategies, the logistics, and the mechanics of trading.For lasting success, many traders say the former is at least as important as the latter, if not more important. . Psychology is a key factor in the remainder of Section 1, Sections 13–14, and in Sections 18–20 below.1.1 — Four reasons to go slow with — or skip — tradingIf any of the following applies closely to you, trading may not be the best idea for you:You can’t wait to start trading, winning, and making money. . You want to trade very soon, and you are easily frustrated at the work and delay of thorough, detailed, complete preparation.You cannot deal with small losses in a logical, calm, matter of fact way, even if they are more than offset by larger wins over time.You are uncomfortable with lots of ups and downs, and a continuous atmosphere of uncertainty and unpredictability.You have difficulty learning constructive lessons from mistakes and losses, even small ones, because they are so painful and/or stressful.1.2 — Top Ten+ rules to considerRule #1: . Manage your trading as a business, not as a hobby. . If you are unfamiliar with business management, learn those skills before learning to trade.Keep careful, thorough recordsKeep a detailed trading log and journal (describing the trades, the rationale, the results, mistakes made, lessons learned, and corrective actions), andSet aside a portion of your profits to cover income taxes.Rule #2: . Choose a brokerage, a trading platform, charting software, and other supporting software, that work well for you. . If you are a technical-minded person, I recommend that you try out the Thinkorswim platform at TDAmeritrade. . [Google “stock trading platform reviews 2020”.]Rule #3: . Start with a conservative approach. . I recommend that you begin by learning the basics of Fundamental Investing, and put most of your funds in medium to long-term investments in quality-name stocks, ETF’s, CEF’s, mutual funds, mlp’s [ideally, when they go on sale in a correction or pullback].In the beginning, trade only a small fraction of your overall stock market assets. . If you prove and establish yourself to be an excellent, disciplined, successful, profitable trader, you can always adjust the allocations over time.Rule #4: . Don’t use your living-expense income, your rainy-day fund, or your quality-of-life assets [home, college funds,retirement funds], to fund a trading account. . Don’t use rent money, bill-pay money, education-funding money, etc to fund a trading account. . If this is difficult for you, then you are in the wrong arena.Rule #5: . Don’t begin trading until ALL of the trading terms and terminology, vocabulary, principles, concepts, and mechanics involved are utterly familiar and crystal clear to you. . If there is something you are unclear or hazy about, you are not ready even to paper trade, let alone actually trade.Rule #6: . Practice paper trading before you engage in live, dollar-funded trading.Rule #7: . Start your trading activity with simplicity in mind. . Choose one relatively simple trading strategy, track a handful of stocks (maybe 3 to 6 to start with), and apply the strategy mechanically, consistently, diligently.Rule #8: . Set a limit on the dollar value of the position size (as a percentage of the dollar value of your trading account) of any single trade. . And adhere to it. . A 1% limit is a good starting point. . See Section 14.1Rule #9: . Set a limit on the most you will allow your account to lose in any one day, week, and month — and after that limit is reached stop trading for that day, week, or month. . And adhere to it. . If this is difficult for you, then you are in the wrong arena.Rule #10: . For the first 6 months to one year of your trading experience, do not trade with margin.Rule #11: Set aside trading on days (or during weeks or months) when your trading aptitude or skills seem weak, diminished, or impaired, or when it feels as though losses will ruin your day (or for longer).Rule #12: . Set your focus on being a skillful, accomplished, knowledgeable investor and trader, dedicated to developing the best practices and best trade execution, rather than upon achieving a certain numerical percentage of daily, weekly, monthly, or annual gains, or upon achieving a specified level of income.Trade “with the trade winds” — Income from trading, is like distance covered when sailing in a sail boat. . Or the income that a saleman earns from commissions. . Some days there is a strong wind, and your boat is carried many miles. . Some days there is no wind. . It is a great art to be patient when no good trading opportunities appear.The following rule may be the most important rule of all. . Once you have implemented Rules 1 through 11, it should not be difficult.Rule #13. . Trade with equanimity, and without fear, grief, or sadness. . Practice calmly accepting the market’s verdict in response to your trade — whether it goes in your favor, or in the opposite direction. . . . . . . Can you still be happy about life in general — or at least calm and able to easily focus on other tasks — in the afternoon, if you lose money in the morning? . . . . . . Can you still be happy — or at least calm and able to easily focus on other tasks — in the evening, if you lose money in the afternoon? . If the answer is no, then seriously ask yourself whether you are in the right arena.__________________________________________________________________________2 — Chart basics: . Price, volume, timeframesThe purpose of stock price and volume echarts is to help traders and investors buy low, and sell high.Successful trading requires developing your pattern recognition skills, and being able to read charts, chart patterns, and chart enhancements as easily, quickly, and fluently as you are able to read this sentence.Here are the building blocks of charts and chart patterns. . There are six primary elements of charts, and tons of optional enhancements:1. The ticker code-letters, or ticker symbol — such as AAPL for Apple Computer, or SPX for the S&P-500 stock index, etc. . A seasoned trader probably knows several hundred of these symbols by heart. . Do not underestimate the importance of just learning — diligently and fluently — fifty or a hundred tickers as a start, and eventually several hundred or more.2. Price candlesticks — A single candlestick shows the opening price, the low price, the high price, and the closing price for a designated period of time. . The geometry of individual candlesticks, and the sequencing of various types of candlestick forms [into candlestick patterns] is of great significance to traders.3. Gaps — Vertical gaps in pricing may occur between successive candlesticks, when prices are changing very rapidly, or when prices change a lot in premarket or afterhours. . Gaps figure prominently in many trading strategies.4. Volume bars — Volume levels, and patterns of rising or falling volume is of great significance to traders. . . . . Get into the habit — from the very beginning of your trading career (or avocation) — of ALWAYS comparing the volume action to the price action.5. The Specified Timeframe — The timeframe is the length of time used to construct a single candlestick on the chart. . The timeframe is the duration of one candlestick. . The timeframe is sometimes referred to as the aggregation period.Understanding timeframes deeply and thoroughly, and using multiple timeframes, and is especially important to successful trading. . More on timeframes in Section 2.1 below.6. The Specified Time Interval — the time span, or time window, covered by ALL of the candle sticks of the entire chartOptional “chart enhancements” — Most traders will add additional “enhancements” known as technical indications or technical indicators to their charts, but some very accomplished traders do not — they simply trade from the raw price and volume data, and years of experience. . See Section 3 (including Sections 3.1-3.4).2.1 — Chart timeframes: . Short-period vs long-periodWhen constructing a price chart, each price-candlestick represents a “standardized segment of time”, and the duration of that time segment must be chosen, before the chart can be constructed and displayed.For example, each candlestick can represent 10 minutes of price variation, or 1 hour of price variation, or 1 day of price variation, or 1 year of price variation, etc.Timeframes can range from minutes, to hours, to days, to months, to years, to decades, or even longer. . Some of the most commonly-used time frames are:For high-frequency trading [HFT]: . down to millionths of a secondFor intraday trading: . 1 minute, 5 minute, 10 minute, 15 minute, 30 minute, 1 hourFor “relatively fast” swing trading: . 1 hour, 2 hour, 4 hour, 1 day, 2 day, 3 dayFor “medium” swing trading: . 1 day, 2 day, 3 day, 1 weekFor “relatively slow” swing trading, or position trading: . 1 week, 1 month, 1 Quarter [3 months]For “buy and hold” investing: . 1 Quarter, 1 year, 2 years[ The assignment of timeframes into the above “trader categories” is somewhat arbitrary and approximate, not fixed or absolutely defined. . Notice the timeframe “overlap” between some of the categories. ]2.2 — Using multiple timeframes (e.g., side-by-side)Use of multiple timeframes — for example, in a side-by-side presentation — gives a trader greater perspective, insight and understanding, and is key to certain trading strategies.As both a learning technique and a practical part of an ongoing trading routine, consider a screen format similar to the following:Suppose that you are planning on trading mainly from a 10-minute chart of say, the 100 most recent 10min-candles. . For an ongoing awareness of the bigger picture -- consider displaying a smaller hourly chart of say, the past 100 hours, off to one side, or off in one corner of your screen.Or, suppose that you are planning on trading mainly from a daily chart of say, the 100 most recent 1-day candles. . For an ongoing awareness of the bigger picture -- consider displaying a smaller weekly chart of say, the past 100 weeks, off to one side, or off in one corner of your screen.2.3 — Contrasting price behavior across different timeframesThe beginning trader needs to become thoroughly familiar with, and accomodated to, the following phenomenon:The price can be rising within a shorter-period timeframe, while nevertheless falling over a longer-period time frame, and vice versa.This apparent contradiction is made possible by the fact that a longer-duration candlestick of a longer-period timeframe can and often does ”average out” or “smooth out” a short-duration “micro uptrend” (or wave pattern) that may be happening within the time duration of any single candlestick — while the overall pattern observed within the longer-period timeframe is a downtrend.. . Thus a day-trader might make a profit by going long on a single day, while the weekly chart shows the price dropping from one week to the next.This “trend divergence across timeframes” is can be particularly evident when the longer period timeframe is a large multiple of the shorter period time frame: . For example, if the longer period time frame is 1 week, and the shorter-period time frame is 1 hour.2.4 — Comparing two timeframes: . The timeframe multipleWhen comparing the price behavior between any two timeframes, it is helpful to be aware of the timeframe multiple,Here are some examples that illustrate the meaning of timeframe multiple:1 week [usually 5 trading days] timeframe, compared to a 1 day timeframe: . 5-to-1 timeframe multiple1 day [the 6.5 hour regular session] timeframe, compared to a 10 minute timeframe: . 39-to-1 timeframe multiple1 month [approximately 20 trading days] timeframe, compared to a 1 day timeframe: . 20-to-1 timeframe multipleThe higher the timeframe multiple, the more that countertrends and ups-and-downs seen on the shorter timeframe chart, are easily smoothed out / averaged out / cancelled out — and become either less apparent or invisible — on the longer timeframe chart.To conclude this discussion of timeframes, keep in mind the following:Whenever anyone asks the question “Which way is the price headed?”, the relevant context must be: . “In which timeframe?”Consistently reviewing a stock’s price behavior across multiple timeframes will greatly enhance your trading comfort level, “trading intuition”, trading edge, ability to conceive / develop / implement strategies, and trading success._________________________________________________________________________3 — Chart Enhancements [C/E]: . Geometric, calculated, interpretativeTraders look for patterns, as a basis for understanding the price movements of the past, and possible price movements of the future. . The search for patterns leads to three broad classes or categories of chart enhancements.Thus, Section 3 continues in three parts, as follows.3.1 — Chart Enhancements: . Geometric constructionsProbably the most common [essentially ubiquitous] of the chart enhancements are geometric. . These include:Support lines / resistance lines — horizontal price levels at which uptrends or downtrends have paused, or have been agitated, delayed, interrupted, disturbed, or — most consequentially — reversed. . Some other key, and very closely-related terms are: . consolidation, consolidation zone, floor, ceilingSupport and Resistance are the foundation of technical trading. . Every time you look at a chart, there are three things you should grasp immediately:Where is the nearest clear support in this timeframe? . [this may present a challenge for a stock setting a new low]Where is the nearest clear resistance in this timeframe? . [this may present a challenge for a stock setting a new high]Where is the current price in relation to these levels?Trendlines — up-sloping or down-sloping lines which indicate the average linear rate at which prices have been rising or falling. . A strong departure from, or a violation of, a trend line is often taken as a technical signal that an existing trend may be ending, or reversing.Channel_pattern lines: . . Upper boundary line + Lower boundary line + Central axial line — One of the single most helpful “technical indications” that can be used on a chart (in just about any and every timeframe) are channel_pattern lines.A channel pattern, or channel for short, consists of two parallel (horizontal or sloping) lines, between which 50 to 100% of the candles are distributed, plus a third parallel line that defines the central axis of the channel.The upper boundary line defines a resistance line, while the lower boundary line represents a support line.Channels can be horizontal, ascending, or descending.When the share price of a stock is outlining a horizontal channel, the share price is said to be range-bound.Examples of a horizontal channel: . Weekly chart of TSM from Sept-2017 to Sept-2019; . daily chart of HPE from April—August 2020.[ NOTE: . To view the examples of TSM and HPE cited above, and all such examples throughout this outline, use the free online stock charting apps such as tradingview.com, stockcharts.com, freestockcharts.com, etc. ]Fibonacci retracement levels — Lines which are drawn and used to indicate [or predict, or project] the progress and degree of a retracement. . A retracement is the reversing leg on a chart following a notable high [or low] — in a retracement, the price backtracks to earlier levels seen before the high [or low]. . . . . . . . . .. . . . . . . . . Fib enthusiasts suggest that a very important point of support or resistance occurs when the retracement leg extends 50% of the way to the previous low [or high], but not only there: . The other important points are when retracement leg reaches 23.6%, 38.2%, 61.6%, or 78.6% [based on Fibonacci ratios].3.2 — Chart Enhancements: . Extensive/complex calculations; . IndicatorsThere is a very large number of technical indicators that require extensive calculations. . Almost all modern traders rely on computers to perform these calculations, and then to display the results on the chart.The design, application, and interpretation of these types of technical indicators is an extensive — and potentially distracting — subject. . Traders have many diverse perspectives and opinions about when to use them, which ones are most “accurate” or “predictive”, and under what conditions, and even about whether to use them at all.The following technical indicators are derived from price, volume, and transaction data. . A few of the most popular examples are:Moving averages — Simple [SMA] and Exponential [EMA]. . In the terminology of mechanical and electrical engineering, moving averages are low-pass filters which can be viewed “reducing short-period noise” and enhancing the desired “signal”.I specifically recommend that a beginning or novice trader focus upon, understand, and become thoroughly familiar with the 20-period SMA [Simple Moving Average], and notice how the 20 SMA responds to changes in the stock price. . . . . . And conversely — notice how the stock price behaves as it approaches, upcrosses, downcrosses, and/or rises beyond the 20 SMA.Then gradually begin to incorporate the other “standard” moving averages commonly used by many/most traders: . the 5, 10, 50, 100, and 200 SMA and/or EMA.Moving average crossovers — based on a moving average pair. . A shorter-period moving average [the “signal” line] crosses back and forth across a longer-period moving average [the “reference” line] . For example: . An 8-day moving average line, crossing back and forth against a 20-day moving average line.MACD_(N,N,N) — Moving Average Convergence or Divergence — a way of comparing two moving averages by subtracting one from the otherPPO_(N,N,N) — Price Percentage Oscillator — similar to the MACD, but expressed as a percentage instead of in price unitsRSI_(N) — Relative Strength Index — a dimensionless number between 0 and 100, calculated from the last N periods.RSI = 0 indicates maximal negative price momentum (price is collapsing) . . . . . 50 = neutral (price is flat) . . . . . . 100 = maximal positive price momentum (price is skyrocketing)Bands and Channels —Bollinger Bands — an indicator based on combining the 20-period moving average with the Standard Deviation of the price over the past 20 periodsDonchian Channels, Keltner Channels, STARK ChannelsrVol (N), or Relative Volume (N) — an indicator that shows the ratio of the current volume to the average volume (over the last N periods) for the same time periodVWAP — Volume-Weighted Average Price — an indicator that combines volume and priceHere are many more examples of some of the more popular indicators: . . . ADX_(Average_Directional_Movement_Index) . . . . . . . . . . ATR_(Average_True_Range) . . . . . . . . . . . . . . . . . . . . . . . . . . CCI_(Commodity_Channel_Index) . . . . . . . . . . . . . . . . . . . . Heiken_Ashi_(modified candlesticks) . . . . . . . . . . . . . . . . . Historical_Volatility(N) . . . . . . . . . . . . . . . . .Ichimoku_Cloud . . . . . . . . . . . . . Momentum(N) . . . . . . . . . . . . . . . . . . . . . . . . MFI_(Money_Flow_Index) . . . . .OBV_(On_Balance_Volume) . . . . . . . . . . . . Pivot_points . . . . . . . . . . . . . . Put_Call_Ratio . . . . . . . . . . . . . . . . . . . . . . . . Short_Interest . . . . . . . . . . . . . Stochastics . . . . . . . . . . . . . . . . . . . . . . . . . . . Vortex . . . . . . . . . . . . . . . . . . . . Williams_Percent_R. . . the list can be far longer — there are hundreds, even thousands of technical indicators.Many popular technical indicators fall into one of two popular groups: . the trend indicators, and the momentum indicators.Are MACD and RSI trend or momentum indicators?The general thinking among technical analysts is that a single technical indicator should not be used as a complete rationale to open a position, but if a sufficient number of technical indicators all suggest higher (or lower) prices in the future, then the odds may have shifted in favor of a profitable trade.Here is some food for thought:“I've written many time in the past that the ideal setup for indicators is 3. . Each using a different type of reading on price and volume. . Any more than that your just looking at the same data through a different colored lens.An example would be Volume Wave, Trend Pivots and RSI Laguerre. . Each of those looks at data in completely different ways. . When they all agree you're guaranteed at least a short term indication of price direction.Those same three at higher aggregation, agreeing soon after the first set, will boost your trend signal, and again those three at another higher aggregation kicking in, will keep that trend established.3 Indicators at 3 different aggregations. . Not on the same chart but 3 different aggregate [different timeframe] charts." — staffperson at TD AmeritradeSome/many very successful traders work only from raw price and volume data.3.3 — Chart Enhancements: . InterpretativeThe following chart enhancements are somewhat qualitative and interpretative in nature, (at least compared to those in Section 3.1 and 3.2 above).Chart patterns — Bear_Flag / Bull_Flag . . . . . . . . . Bullish_Pennant / Bearish_Pennant . . . . . . . . . Rising_Wedge / Falling_Wedge . . . . . . . . . “V”_Bottom_(Pivot_Bottom) . . . . . . . . . Double-/Triple-/Quad-Top . . . . . . . . . Head_and_Shoulders_upright/inverted . . . . . . . . . Ascending_Triangle / Descending_Triangle . . . . . . . . . etc.Single-candlestick forms — Topping Tails / Bottoming Tails . . . . . . . . . Body-only_Candlesticks . . . . . . . . . Doji . . . . . . . . . Hammer / Inverted_Hammer . . . . . . . . . Shooting_Star . . . . . . . . . to name a few of the most usefulMulti-candlestick patterns — Bullish Engulfing / Bearish Engulfing . . . . . . . . . Inside Bar . . . . . . . . . Evening Star / Morning_Star . . . . . . . . . to name a few of the most usefulElliot Wave [EW] Analysis — Experienced traders are very much aware that most trends of buying (or selling) does not generally occur in long smooth ramps, but rather in “bumps”, or “jumps”. or “waves”, or “episodes”, or “spurts”. or “legs”, often forming “steps”, or “terraces”, or “flags” or “fins”, or “sawteeth” in the price chart.EW theorists suggest that these waves are driven by sentiment and crowd behavior patterns. . Elliot Wave analysts take this one step further and attempt to predict the direction of the next leg, based on chart analysis. .At the simplest level, EW theory suggests that a major, recurring pattern is 5-phases upward, followed by 3-phases downward [in a bull market] or 5 phases downward, following by 3 phases upward [in a bear market], but there are many levels, subdivisions, nuances, and complexities in actual application.It is challenging to apply objectively, as identifying the idealized EW wave patterns on real-life charts can be problematic. . But it has many devoted adherents who state that a deep understanding of the basic principles does increase their profitability.Chart notations — Many types of information can be added to charts to help the trader understand where the price may be headed. . These include earnings release data, dividend declarations and announcements, splits, company announcements, etc.3.4 — Chart Enhancements: . Which ones to use (if any)?A major challenge for traders is to “see past”, “see through”, or “see beyond” the noise at the scale of the chosen timeframe. . Therefore, for starters, I recommend that you start with support lines (floors), resistance lines (ceilings), trendlines, moving averages, and single-candlestick forms.Not always, but frequently you may find the following to be true:When the price crosses downwards through an important support level, or floor, or basal-trendline (or upwards through a resistance level, or ceiling, or upper-trendline) by a clear / sufficient / decisive margin, look for the trading action to accelerate — meaning, look for the volume and the rate-of-change of the price to increase.Similarly, when the price crosses one of the widely-used moving average lines (such as the 20-period MA or 50-period MA) by a clear / sufficient / decisive margin, the trading action may accelerate — meaning, the volume and the rate-of-change of the price may increase.Once you have mastered trendlines and moving averages, then think about expanding your “enhancement set”. . Learn to recognize Horizontal Support and Resistance Lines, Bull and Bear Flags, Bull and Bear Pennants, Rising and Falling Wedges.I recommend that you next experiment with Fibonacci Retracement Levels.After that you may wish to try out MA crossovers, RSI, or MACD (or whatever you are drawn to) for several weeks. . Keep the ones that, based on your own observations, have the clearest relationship to significant uptrends, downtrends, and reversals. . Over time, try swapping out different technical indicators, and do this for an extended period of time until you have a regular “toolkit” that makes sense to you, and that you can use skillfully and proficiently.But don’t get too wrapped up or overloaded with chart enhancements — only use what you find easy-to-use and productive.__________________________________________________________________________4 — Picking stocks : . Volatility, liquidity, sector/industry, “story stocks”, . . .4.1 — Pick better-than-average volatilityA trader should have a rock solid understanding of volatility, because volatility is what makes profitable trading possible, especially over short timeframes.Before trading, I recommend that you learn some basic concepts of statistics — including variance, standard deviation, and normal distribution. . These are not rocket science, you can learn them in 30 minutes or less:Traders and investors often want a well-defined, quantitative way to measure the degree of variation in prices among a set of asset prices representing a given time window.That is exactly what historical volatility is:historical volatility: . the standard deviation of a set of asset prices (such as stock prices) representing a specified time interval . ( There are some other types of volatility but this is the one to start with. ]Volatility increases when a stock:spikes upwards, or downwardsbegins to trend upwards (or downwards) more strongly than beforereverses direction sharplybegins to bounce up and down severely within the specified time intervalThe higher the volatility, generally speaking, the greater the potential profit that can be made by traders who are skillfully using a productive strategy. . It is very difficult to be highly profitable, when trading an extremely low volatility stock. . Hence traders regard volatility, overall, as a friend, or even as the lifeblood of their trading success, and therefore generally pick higher volatility stocks to trade.At the time of this writing [mid-2020] some examples of high volatility stocks [on the daily chart, using a 20-day volatility time window] are NKLA, AAL, and INO. . Some examples of very low volatility stocks are VZ, PG, and WMT.The volume and volatility during the regular trading session for NYSE and Nasdaq stocks [930am to 400pm ET] is generally much greater between 930am and about noon, than between about noon and 400pm.For this reason, many experienced day traders prefer to trade from about 930am to 1130am, and devote the rest of their day to other activities.Beginners and novices may wish to first begin trading in the less volatile afternoon time period, and gradually move into trading earlier in the day.The period from 930am to 1000am is the most volatile, and even experienced traders should know exactly what they are doing if they trade in this interval.When a stock nears / hits a new high, volatility tends to increase. . Or when a stock has an especially favorable or unfavorable Earnings Release.Volatility itself can be traded: . Check out the ticker symbols VIX and VXX.4.2 — Pick better-than-average volume and liquidityBefore discussing liquidity, it is necessary to discuss the bid-ask spread.4.2.1 — Bid Price versus Ask PriceAt any given time during a trading session, there are two types of prices at work in the market.When a trader buys some shares using a market order, he/she agrees to pay the ask price that a seller or market maker is asking.DO NOTE, HOWEVER, THAT: . With a limit buy order (instead of a market order), the buyer can instruct the brokerage to wait for the ask price to settle down to the target price specified by the trader’s limit order — but with the limit order, a purchase may or may not occur.When a trader sells some shares using a market order, he/she agrees to receive payment at the bid price that a buyer or market maker is offering.DO NOTE, HOWEVER, THAT: . With a limit sell order (instead of a market order), the buyer can instruct the brokerage to wait for the bid price to drift upwards to the target price specified by the trader’s limit order — but with the limit order, a sale may or may not occur. ]At any given time, the ask price is likely to be higher than the bid price, by a percentage that can vary between as little as +0.01% [and occasionally even 0.00%], to as much as +5%-or-more.Two examples serve to illustrate the general relationship between volume and bid-ask spread:Near the end of the regular session on Jul-2–2020, the volume for BAC stock was 77M shares for the day, the bid was $23.30, the ask was $23.31, the spead was $0.01, or 0.004%. . A bid-ask spread in the range of 0.01% to 0.1% offers a relatively low “drag factor” or “slippage factor” for traders.However, for PRK stock, the volume was 48K shares for the day, the bid was $67.99, the ask was $71.49, the spread was $3.50, or 5.1%. . Bid-ask spreads over 0.5% or so [depending on the current level of volatility and the potential profits involved] begin to represent a significant “drag factor” or “slippage factor”, and begin to make the stock less attractive as a trading vehicle.A stock that has just recently started trading on an exchange [i.e., with a recent IPO date (Initial Purchase Offer)] may trade at a higher-than-average bid-ask spread.4.2.2 — LiquidityA highly liquid stock is one that can be sold — that is, converted to cash — relatively quickly, easily, and at minimal bid-ask spread, because there is a large number of potential buyers keeping the bid price near the ask price. . The more potential buyers there are, and the easier, faster, and cheaper the logistics of selling, the greater the liquidity.Some examples of highly liquid stocks in recent years are the common stock shares of GE, F, and BAC. . Common shares are generally far more liquid (and more volatile) than preferred shares. . Some examples of relatively illiquid stocks are: . very low volume stocks, many penny stocks, micro-cap stocks, and nano-cap stocks.4.2.3 — Volume: . Intraday Trading versus Swing TradingIntraday trading volume and volatility often reaches a maximum in the first 10 to 30 minutes of the regular 930–400p trading session. . Then it gradually tapers off in the later morning, and toward early afternoon, and there is often and end of day surge in the last 30 minutes or so.Volatility tends to be correspondingly greater in the morning, and for this reason, most serious intraday traders focus on early morning preparation that involves studying the premarket and getting ready for the 930am opening bell. . Beginning and novice day traders may want to focus on the calmer afternoon until they feel ready to tackle the latter half of the morning, and eventually the opening hour.There is no comparable phenomenon on higher timeframes, i.e., there is no consistent surge in volume and volatility on the first day of the week, or on the first week of the month, or on the first month of the quarter, or on the first quarter of the year. . In this regard, intraday trading is unique.4.3 — Pick better-than-average sector/industry strengthStocks can be classsified by sector, industry group, and industry. . When trading stocks, it is very important to be aware of:which sectors have been performing well in the past week, month, quarter, and/or year (depending on your trading timeframe), and which have been performing poorly. . There are 11 commonly recognized sectors.which industry groups have been performing well in the past week, month, quarter, and/or year (depending on your trading timeframe), and which have been performing poorly. . There are 24 industry groups (per GICS, the Global Industry Classification Standard).which specific industries have been performing well in the past week, month, quarter, and/or year (depending on your trading timeframe), and which have been performing poorly. . There are up to 200 or more industries, depending on the industry breakdown or classification system being used.A study by Ben E. King suggests that when a stock price moves:50% of the move of a stock is due to the move of the sector30% of the move is due to the move of the overall market20% of the move is due to specifics relating to the company (an exception would be an Earnings Release)As you can see, there is something to be said for trading the active sectors.4.4 — Consider picking some “Story Stocks”Another name for “Story Stock” might be “High Profile Stock”. . The following elements serve to help elevate a stock from being just an “ordinary stock” to a “story stock”:The company has a very well-known brand and clear mission to the average person (not just investors). . To the extent that the company is succeeding in achieving that mission, the world can be expected to look and feel very different to millions of “average people”.The company has a dynamic, charismatic, well-known, and maybe even controversial CEO, who is frequently in the news, and who is frequently emphasizing how the products/services are advancing the mission.Investors and shareholders tend to buy and hold the stock through ups and downs out of a belief in the mission of the company, and/or it’s CEO, more than out of rationally and methodically studying and analyzing the financial data of the company, or technically analyzing the price chart. . [This phenomenon might be comparable to “brand loyalty” at the retail consumer level.]Investors and shareholders love to talk about the product or service. . Social media, internet forums, and comment threads are buzzing with commentary and tweets about the company and its latest news. . Business journalists write and publish stories about the stock more frequently than the average stock.The stock may develop a higher than average volatility for it’s sector and/or industry.Suggested examples of Story Stocks: . AMD, AMZN, BYND, DKNG, GBTC, KO, NFLX, NKE, NVDA, PINS, PTON, TSLA, TWTR, SBUX, SFIX, SPCE, UBER, ZM4.4.1 — “Arch Rivals” can parallel “Story Stocks”Somewhat related to the Story-Stock concept is the “Arch Rivals” concept, which can become a fertile ground for traders and trading ideas:KO vs PEP . . . . . . . . SBUX vs DNKN . . . . . . . . MSFT vs APPL . . . . . . . . AMD_vs_INTC . . . . . . . . NKE vs UA . . . . . . . . WDC vs STX . . . . . . . . GM vs F . . . . . . . . AMZN vs WMT . . . . . . . . FDX vs UPS . . . . . . . . WBA vs CVS . . . . . . . . EBAY vs ETSY . . . . . . . . UBER vs LYFT . . . . . . . . etc.4.5 — Consider picking CER-TOY-LAL stocksCER-TOY-LAL is pronounced <sir toy’ lul> .CER-TOY-LAL stands for: . “Companies Especially Relevant To Your Life And Lifestyle” . [and can include the lifestyles of your family, friends, colleagues, associates, co-workers, acquaintances]Look around at yourself and others in your life, and ask yourself:What products or services (provided by publically-owned companies) might you have a greater understanding or appreciation of than the average person?Your personal knowledge or personal appreciation may be valuable clues to companies whose stock you may want to consider holding or tradingCoffee lover? — SBUX . . . . Kids (or you) love certain toys? — HAS, MAT . . . . Into your smartphone? — AAPL . . . . Frequent garage-sale shopper? — EBAY . . . . Into sports betting, the Vegas thing? — DKNG, PENN, CZR . . . . Exercise Enthusiast? — PTON, NKE, UA, LULU . . . . Warren Buffet fan? — BRK . . . . . Like RV’s? — WGO, THO . . . . Renewable energy proponent? — NEE, ENPH, FSLR . . . . Organic shopper? — FSM, NGVC, KRThis approach makes investing and/or trading more interesting, even more fun.. . . 4.6 — Stocks versus ETF’sSuppose that you would like to buy a lot of different semiconductor stocks, but you are discouraged by the thought of managing a lot of individual stocks. . You can buy an Exchange Traded Fund, or ETF, that specialized in semiconductor stocks.[ the finished version of Section 4.6 is not yet available; coming eventually ]5 — Choosing timeframes to trade ———————————————5.1 — Lower vs Higher TimeframesMany beginners want to go straight into day trading in the 10-minute, or 5-minute, or 1-minute timeframe — with visions of “fast money” and “getting rich quick”.But day trading at 10-minutes is far more challenging and far more risky than swing trading in a daily (or higher) timeframe.Lower [shorter-period] timeframes become noisier, more random, and less systematicHigher [longer-period] timeframes become smoother, less random and more systematic5.2 — A gradual approach toward intraday tradingI recommend that a beginner think long-term, and think in terms of progressive development…a — First become a successful, confident investor using a combination of fundamental and technical analysis — over a period of at least 2 years (if highly talented), but preferably 3 to 5 years (if moderately talented)b — Then become a successful, confident, longer-term swing trader — over a period of at least 12 months (if highly talented), but preferably 18 to 24 months (if moderately talented)c — Then become a successful, confident, shorter-term swing trader — over a period of at least 6 months (if highly talented), but preferably 12 to 18 months (if moderately talented)d — Then become a successful, confident, overnite trader — over a period of at least 3 months (if highly talented), but preferably 6 to 12 months (if moderately talented)e — Then finally enter the realm of day trading, maybe starting out one day a week, while maintaining a solid focus on the aforementioned swing-trading and investing.At each step of the way, with shorter and shorter timeframes . . .You can shift from relying on a combination of fundamental and technical analysis, to relying more and more heavily on technical analysis — and you must understand technical analysis extremely well.You can expect to depend more upon complex and sophisticated trading platforms and trading-oriented software.Your continued success begins to rely more and more on psychological and self-disciplinary factors, as outlined in Section 1 above.At a certain point, you may wish to seek out excellent, live-in-person mentor or coach — experienced in the shorter timeframes (be very wary and cautious about an online mentor or coach)If you do not have the temperment, or the patience, to start with Step a in the sequence above, perhaps you can at least begin at Step b, or Step c.If you are bound and determined to begin your trading project in the intraday timeframes, I would strongly encourage you to — in the beginning — learn to trade in the 1-hour or 30-minute timeframes, rather than the noisier and more chaotic 10-minute or 5-minute timeframe. ]6 — Scenarios, strategies, and setupsA trading scenario is a very general description of how the stock price is behaving as the trader considers opening a position — see Section 6.1 below.A trading strategy is a methodology, or set of instructions, that guides the search for setups. . In any given hour or day or week, there is no guarantee that a strategy will lead the trader to specific setups. . But the strategy does gives the trader clear direction in where to start, what to do next, and how to tell if a specific chart (or set of charts) is manifesting a set-up — see Sections 6.2 and 6.3 below.A trading setup is a fully-defined configuration within a specific chart [or within a specific set of closely associated charts] that meets all of the trader’s strategy and screening criteria. — see Sections 6.2 and 6.3 below.A trading system includes all of the above, plus the larger framework described in other sections of this outline.6.1 — Scenarios: . Eleven general cases — or states, settings, situations, conditions, or developments . . . from which to begin thinking about creating strategiesIn my terminology, I refer to the following eleven general cases as scenarios. . The following list is not intended to be a detailed and complete list, only a starting point and a foundation for understanding what traders do.Any of the following general scenarios can be a starting point, or foundation, for developing a strategy…1 — A strong, well-established trend [up-trend or down-trend]2 — A significant up-gap [or down-gap] . . .An up-gap can lead into an up-trend, but an up-gap will sometimes collapse into a downtrend, or level-off quickly into consolidationA down-gap can lead into an down-trend, but a down-gap will sometimes bounce into an up-trend, or level-off quickly into consolidation3 — A strong reversal of a trend [up or down]A reversal can be sharp like a hairpin turn, i.e. happening in one or two candlesticks [sometimes called a pivot, as in a pivot low or pivot high]A reversal can gradual, happening over a relatively large number of candlesticks4 — An extended, gradual, arc-like emergence [up or down] from a consolidation zone or from a support/resistance level.5 — A breakout [up or down] from a consolidation zone or a support/resistance level.If you become interested in trading breakouts, be aware that there is a concentration of breakouts at 9:30am ET Mon-Fri at the beginning of every regular trading session.6 — An uneventful consolidation zone . A trader may open a position within a consolidation zone, if he/she is anticipating a breakout [up or down], or a gradual emergence [up or down]7 — A new all time high (ATH), or new all time low (ATL). . The share price has just exceeded any and all previous prices, or has just fell below any and all previous prices.Traders also pay a lot of attention to new 52-week highs, or new 52-week lows, where the share price exceeds the highest price in the past 52-weeks. . Also, new 26-week highs, or new 26-week lows.But, any defined period of time can be used to identify new highs and new lows, [200 days, 100 hours, or 90-minutes, etc.]8 — A scheduled earnings release (ER) or earnings report . A trader may open a position shortly before or shortly after an ER, especially if he/she has good reason to expect that the release will be especially favorable or unfavorable. . [Since ER’s occur before or after the regular trading session, the trader needs to be familiar with extended hours trading (aka premarket and afterhours trading).]9 — Breaking news. . Examples include: . earnings report, new investor guidance, merger or aquisition news, stock buyback news, stock/bond offering, product announcement, product recall, research initiative, company expansion / downsizing / restructuring / layoffs, new CEO / personnel changes, federal approval for a project or product, lawsuit news, upgrades/downgrades, etc.10 — Ending/Beginning Assessments.End-of-Premarket / Beginning-of-Regular-Session Assessment — Here the trader reviews the action of the Premarket Session (in the last 15 or 30 minutes), and deploys a strategy based on an overall review of what happened during the Premarket, and will be opening positions at or near the end of the Premarket session.End of Regular Session / Beginning of Afterhours Assessment — Here the trader reviews the action of the day, and will be creating a strategy based on an overall review of what happened during the day (in the last 15 or 30 minutes), , and will be opening positions at or near the end of the regular trading session.End-of-Afterhours Assessment — Here the trader reviews the action of the Afterhours Session (in the last 15 or 30 minutes), and deploys a strategy based on an overall review of what happened during the Afterhours, and will be opening positions at or near the end of the Afterhours session.11 — A noteworthy or unusual “spread” between two comparable stocks or assets. . In a pair trade, the trader “trades the spread” (where the spread is the difference in price between two assets).If the trader expects that the spread will increase, the pair trader buys the higher-priced one, and shorts the lower priced one. . Conversely, if the pair trader expects that the spread will decrease, he/she shorts the higher-priced one, and buys the lower-priced one.Any of the above is only a starting point, or foundation, or frame-of-reference, for conceiving, investigating, researching, and developing a multi-criteria, multi-faceted strategy, which can then be used to search for and identify very specific setups.I recommend that an aspiring trader spend a lot of time just looking at a lot of charts and:Learning to quickly recognize Scenarios #1 - 7, andObserving how they interconnect and inter-relate on a stock chart, andUnderstanding how Scenarios #1 - 8 represent the “primary phases” or “core elements” of stock charts.With growing familiarity and experience, he/she will learn to quickly and instinctively recognize each scenario, and also begin to develop a sense of the relative strength of each example encountered, and it’s potential value as a trading opportunity.With growing familiarity and experience, the novice trader can begin to decide if he/she wants to specialize in one or two of these scenarios, or develop trading skill in all of them.6.2 — Moving from a scenario . . . to a strategy . . . to a setupThe logistical challenge of trading is that the shorter the timeframe, and in the absence of dramatic news, the more likely that price movements are random.The short-term trader is looking for opportunities to trade that tilt the odds in his/her favor. . Exactly HOW and WHEN a trader should a trader open a position to improve their odds to better than random chance?A common approach among traders is to define, as precisely as possible, the price pattern(s), technical indicator pattern(s), and/or volume pattern(s) that one expects in order to improve the odds, and then either:1) . . . wait for that “setup” to appear, in one or more of the stocks that one is tracking, or2) . . . find a suitable setup quickly by scanning hundreds or thousands of stocks using scanning softwareWhat is the difference between a strategy and a setup?A strategy is the framework, or set of conditions, or set of criteria, that informs and guides the search for setups.A hypothetical, idealized, or “perfect” setup meets or satisfies a complete set of conditions and circumstances the trader is looking for, and expects to occur over the course of time . . The setup description constitutes a complete set of conditions that must be satisfied before opening a position or entering a trade.An actual setup meets most or all of these conditions to a degree that the trader requires, in order to open a position. .The goal is to find setups in which subsequent price movement is likely to behave in a systematic way rather than randomly.————————————As an analogy, consider a Human Resources Director looking through a stack of resumes, and conducting interviews for a new position in the company . After developing a list of criteria and screening the applicants, a candidate meeting all the criteria and judged to be an excellent candidate is hired.For a trader, finding a good setup and opening a position based on that setup, is analogous to the H/R director finding and hiring the best candidate for the job.For a trader, developing an effective strategy is somewhat analogous to the H/R director assembling a list of the skills, qualifications, attributes, etc. that the candidate should have.6.3 — Important points for strategies and setupsWhen traders employ a strategy that leads them to setups, for which the track record of success is consistently significantly greater than 50% [random], they generally do not publicize the strategy or the setups — it is generally up to a trader to come with their own viable strategies and setups.Effective strategies often incorporate the use of multiple timeframesA potentially profitable strategy should be back-tested, to demonstrate that, at least in the past, it finds setups with a greater-than-even-chance of being profitable.An alternative, or a supplement, to back-testing, is paper-trading.Paper-trading allows you to test a strategy without using real money. . Some brokerages allow the trader to switch back and forth from paper-trading to live trading.Successful strategies often do not remain successful, or vary in their degree of success over time. . They may work for awhile and then stop working, and they may start working again at a later date. . So trading is always a work in progress, so traders are continuously tweaking or revamping old strategies, or developing entirely new ones.Are you a detail-oriented and analytical person who can: . a) work diligently on maintaining effective strategies and b) patiently wait for your setups to happen — or do you impatiently insist on trading impulsively in less favorable (or unfavorable) situations?__________________________________________________________________________7 — Test Areas: . Fertile ground for strategies and setupsAny line of resistance in the chart, any line of support, any trendline, or any of the major moving average lines (5,10,20,50,100.200) in the chart can be viewed a Test Area, when the price approaches that line or that price level. . The trader will then be wondering:How will the price — and price trend over the next several periods — likely change upon entering the Test Area?A Test Area is an especially significant price level or relatively narrow price range at which:the upward momentum of a current uptrend may be diminished, halted or reversed — or —the downward momentum of a current downtrend may be diminished, halted or reversedAs a price trend approaches an important Test Area, traders naturally ask themselves (and maybe other traders as well) the following question :Do market conditions and sentiment favor the continuation of the initial trend through and beyond the test area, or the reversal of the initial trend?8 — Test Area Setups: . ClassificationIf the trader determines [either from Fundamental Analysis, or from Technical Analysis, or from back-testing, or from any other perspective] that the probability of a continuation is significantly greater than the probability of a reversal — or vice versa — then the Test Area can potentially be used as the basis for creating a Test Area Setup.8.1 — Test Area Setups: . Three key criteriaTest Area Setups can be logically classified by three criteria:1 — Initial Trend Direction: . Uptrend vs DowntrendIs the share price in an uptrend, as it approaches a Test Area of Potential Overhead Resistance from below?Or, is the share price in a downtrend, as it approaches a Test Area of Potential Underlying Support from above?2 — Expectation (of outcome): . Continuation vs ReversalIs the trader expecting a continuation of the primary trend through the Test Area?Or, is the trader expecting a reversal of the trend?3 — Timing (of entry): . Anticipated Entry (or Early Entry) versus Confirmed Entry (or Later Entry, or Signaled Entry)Suppose the trader has a clear expectation for the outcome, and wants to trade the price action in this Test Area.Is the trader going to anticipate the reversal, and trade the Test Area relatively early?Or is the trader going to wait for some confirmation, signal, or indication of the directional outcome, and thus trade the Test Area somewhat later?If the trader is awaiting some signal of the directional outcome, it is highly advantageous to be using a trading platform that allows the trader to preset and receive an alert.8.2 — Test Area Setups: . Eight different typesApplication of the three criteria above leads to eight different combinations — and thus eight different cases, or types — as follows:8.2.1 — ACTOR Setup: . Uptrending / Continuation / Anticipated EntryThe share price is trending upwards into a test area of past overhead resistance. . A test of that overhead resistance is about to commence.The trader expects, anticipates that the price will soon successfully breach the resistance and the uptrend will continue — either gradually, or as an upside breakout.ACTOR Setup = Anticipated_Continuation_Through_Overhead_Resistance SetupThe trader who is using this setup would be opening (or adding to) a long position.With similar “combination logic”, there are seven more types , as follows (see also Appendix A-1):8.2.2 — CCTOR Setup — Confirmed_Continuation_Through_Overhead_Resistance8.2.3 — ARAOR Setup — Anticipated_Reversal_Against_Overhead_Resistance8.2.4 — CRAOR Setup — Confirmed_Reversal_Against_Overhead_Resistance8.2.5 — ACTUS Setup — Anticipated_Continuation_Through_Underlying_Support8.2.6 — CCTUS Setup — Signaling_Continuation_Through_Underlying_Support8.2.7 — ARFUS Setup — Anticipated_Reversal_From_Underlying_Support8.2.8 — CRFUS Setup — Confirmed_Reversal_From_Underlying_SupportRefer to Appendix A-1 for a closer look at these eight different types of Test Area Setups.8.3 — Breakouts from test areasWhen the share price approaches and enters a Test Area, the share price can change in a gradual manner, or it can surge or spike in the form of an upside or downside breakout.Get into the habit — from the very beginning of your trading career — of ALWAYS comparing the volume action to the price action [can’t stress this enough!], and of viewing price/volume action on multiple timeframes.A pattern of strongly increasing volume in the periods leading up to a potential breakout, or a spike in volume right at the period of the breakout, strongly increases the chances that a strong and tradeable breakout is happening [as opposed to a “false breakout”], and that it will be a profitable entry point for a trade.EXAMPLES of breakouts: . The upside breakout in Sept-2017 by TSM through the ceiling of it’s 2-year horizontal channel on the 2017 to 2020 weekly chart, and a second upside breakout in early July of 2020. . The upside breakout of GNMK on heavy volume on the daily chart on Jun-15–2020. .8.3.1 — Intraday Opening Range BreakoutOne well-known strategy in intraday trading is the opening range breakout (ORB) strategy.The “range” in the phrase “opening range” is established by a ceiling and floor that may develop over the first few periods following the 930am opening of the regular trading session.Examples of Opening Range Breakout: . ADS, AMD, XRX at ~11 am ET on their 10-minute charts of 07/24/2020.8.4 — Test Area Setup: . A fine, polished exampleThe following link . . .What % of swing traders can: (a) View 20 to 50 stock charts . . . ?. . . is to a Question and Answer published on Quora in 2019.The Answer that was posted by “Benjamin Carson, lives in Kansas / Answered June 26, 2019”, describes very well a specific example of a setup that looks for breakouts in bullish stocks with very specific criteria.With regard to the 8-fold classification described in Section 8.2 above, his setup corresponds to:Case 2 — CCTOR Setup = Confirmed_Continuation_Through_Overhead_Resistance SetupHis setup also resembles the STAR setup described in Section 9.3.3 below9 — Tharp’s List of SetupsVan K. Tharp — one of the leading, internationally-recognized traders and authors of books about stock trading — wrote a book entitled Super Trader, published by McGraw-Hill in 2009. . I recommend that you read the entire book.pages 146–147 of the book is a list of 10 general types of setups. . I do not claim this list is complete, but it is a pretty good place to start.[ Tharp calls them setups, but none of them are complete, specific, and “fully ready to trade” — all are lacking important specifics. . I would call them “general entry/exit strategies”. ]A serious student of trading should become familiar with this list, then choose one, and then do the nuts and bolts work of “building it out” into a complete, specific, turn-key strategy suitable for you and your personal aptitudes and preferences. . [ Once that first one is working to your satisfaction, consider choosing another, and expanding your “toolbox”. ]- - - - - - - - - - - - - - - - -Sections 9.1, 9.2, and 9.3 below present the first three of Tharp’s 10 general types of setups; . each section begins with a direct quote from Super Trader.- - - - - - - - - - - - - - - - -9.1 — Example #1 (Tharp): . Failed Test Setups“1. Failed Test Setups [Failed Test Area Setups]. These setups occur when the market wants to test some area [test some price level]. . For example, the Turtles used to trade 20-day breakouts, and so a 20-day high is considered a test area, and its failure to continue [i.e., the price might temporarily exceed the high but soon reverses] is what might be called a failed test setup.”————————————-Background info: . Many trading strategies involve defining and monitoring a trailing window that includes the most recent 20 days, and creeps forward with each passing day. . (The Turtles’ window-length is 20 days, but the window length can be 10, 30, 50, etc.)20-day high (or 20-day low) means: . the highest price (or lowest price) of the 20-day window.20-day upside breakout means: . On the day of a 20-day upside breakout, the price exceeds the 20-day high.20-day downside breakout means: . On the day of a 20-day downside breakout, the price falls below the 20-day low.The Turtle Traders were comparing the current price to the high and low price within that trailing 20-day-window, and making that comparison the key element of their setup. . For the entire fascinating and remarkable story, do a Google search using “Turtle Traders, Richard Dennis”.————————————-By no means do all Test Setups fail. . Tharp is, however, suggesting that a lot of them do fail, and as soon as a trader recognizes a Failed Test Setup, there is a good chance that the trader may be able to profit from it.Tharp’s Failed Test Setups correspond to the following two of the eight cases [listed in Section 8.2 above and described more fully in Appendix A-1]:Case 3 = ARAOR = Anticipated Reversal Against Overhead_Resistance SetupCase 4 = CRAOR = Confirmed Reversal Against Overhead_Resistance Setup. . . because the word “Failed” in “Failed Test Setup” is referring to the failure of the asset price to continue trending upward through overhead resistance. . In Tharp’s “Turtle example”, it is the failure of the price to continue trending upward beyond the 20-day high.[ If Tharp’s failed test setups category is interpreted to also include “failure of a downtrending price to continue beneath and beyond a 20-day low”, then one could also state that those additional failed test setups would correspond to the following two additional cases of the eight cases [listed in Section 8.2 above and described more fully in Appendix A-1:7 — ARFUS Setup = Anticipated_Reversal_From_Underlying_Support Setup8 — CRFUS Setup = Confirmed_Reversal_From_Underlying_Support Setup ]—————————————-Section 9.2 beginning immediately below presents the second of Tharp’s 10 general types; it begins with a direct quote from Super Trader:9.2 — Example #1 (Tharp): . Climax Reversal Setups“2. Climax Reversal Setups. Here the price goes parabolic to a new high and then falls. These setups are often the start of big moves in the opposite direction.”Examples: . Stock ticker CSCO in 1998–2001; . ACB from June 2017 into August 2018; . NAT for April-May 2020; . HTZ from June 3–16, 2020; . SRNE from May 14 to June 4, 2020; CIG/C for June 22, 2020; . NBR in May-June 2020; . NIO from Jan-Apr 2019; . FSLY from July 28-Aug 11, 2020; . KODK from July 28–Aug 14, 2020MACD and RSI are useful indicators for detecting and catching the early emergence of a parabolic rise. . Knowing and using candlestick forms, candlestick patterns, gaps, and moving average crossovers are very important in judging when a “post-peak” collapse is beginning.* * * * * * * * * * * * * * * * *“Section 9.3 — Retracement Setups”, beginning immediately below, is IMHO one of the MOST IMPORTANT logistical sections of this outline. . It presents the third of Tharp’s 10 general types; it begins with a direct quote from Super Trader:9.3 — Example #3 (Tharp): . Retracement Setups . * * * * * * * * * * * * * * * * *“3. Retracement Setups (often used by trend followers). . Here the market is identified as being in a clear trend (the first part of the setup), then it reverses [and retraces a minor portion of the primary trend for a limited time], and then [it reverses again and] the [primary] trend continues.”One of the most common, and most significant patterns in every timeframe; . an excellent category for the beginning trader to start from and build upon.Repetition of this “trend-reverse-trend” pattern (or “zig-zag-zig” pattern) for two or three cycles can create an ascending or descending channel (See Section 3.1 above, and Section 10.2 below)Consider the following “modes of progress / regress”:Mode A — Even in overall favorable circumstances, progress or overall forward motion in any “walk of life” or project is not generally continuous. . Rather, it is often two or three steps forward and one step backwards, followed by another two or three steps forward, and one step backwards, followed by… etc.Mode B — Likewise, even in overall unfavorable circumstances, regress or overall backward motion in any “walk of life” or project is not generally continuous. . Rather, it may be two or three steps backward and one step forward, followed by another two or three steps backward, and one step forward, followed by… etc.In both Mode A and Mode B above, there are continuing steps in the overall direction of motion, but every so often they are interrupted by a step in opposite direction from the overall direction of motion.An analogy can be made between “everyday life” as in Mode A and Mode B above, and the behavior of stock prices on stock charts.In technical analysis terms, those less-dominant back-trends, that occur in the opposite direction to the overall trend, are termed retracements.Examples: . An especially significant bullish example is the daily chart of SPY rallying from the pandemic V-bottom from March 23 to April 9.For more bullish examples, see the daily charts of JD, TEL, and TWTR from late March-June of 2020; . also AYX and HOG from April-July 2020 [examples of ascending channels]; . also PKI from May-July 2020 .For bearish examples, see CVS, GLW and HLF and their daily charts from Jan through March of 2020.One of the most repeated aphorisms on Wall Street is:“The trend is your friend.”While it may not always be true, it can be hazardous to your account balance to trade against the trend.9.3.1 — Retracement setups: . Bullish or BearishRetracement setups are associated with trends in highs and lows.a) . In a Bullish Retracement Setup, an uptrend leads to a local high, followed by a local low, followed by a continuing uptrend — that continues upward beyond the preceding high.If bullish market conditions continue, the chart may very well develop a “second up-cycle”, in which the chart generates a second high that is higher than the first high, and a second low, that is higher than the first low.Drawing an upper trendline through the two highs, and a lower trendline through the two lows, produces what could become an ongoing ascending channel, if the two trendlines are more-or-less parallel.b) . Conversely, in a Bearish Retracement Setup, a downtrend leads to a local low, followed by a local high, followed by a continuing downtrend — that continues downward beneath the preceding low.If bearish market conditions continue, there is likely to be a “second down-cycle”, in which the chart generates a second low that is lower than the first low, and a second high, that is lower than the first high.Drawing a lower trendline through the two lows, and an upper trendline through the two highs, produces what could be an ongoing descending channel, if the two trendlines are more-or-less parallel.9.3.2 — Retracement Setups: . 50% Retracement SetupsSuppose a stock is in a primary bullish trend, and produces a higher low, and then rallies to a higher high, and then reverses into a retracement pattern.When the price has retraced 50% of the range from the previous low to the last high, the price may find support at that 50% level, and then rally to follow the primary bullish trend.Here is a detailed presentation of what may be called a “50% Retracement Setup”:50% Retracement Swing Trading Strategy - Trading Setups Review9.3.3 — A setup similar to a retracement setupImmediately below is modification of the Tharp quote of Section 9.3 above — note carefully the changes:“Here the market is identified as being in a clear trend (the first part of the setup).Then the slope of the trend decreases strongly and/or flattens for several periods — but with no well-defined reversal, and no significant degree of actual retracement.Then there is either a re-emergence of the uptrend, or an upside breakout, and the [primary] trend continues.”The above setup could be given the name “Similar To A Retracement” setup, or STAR setup. . [ Another setup used by trend followers. ]Study the closely-related patterns known as bull flags and bear flags — these flags echo what I have just described here in Section 9.3.39.4 — Tharp: . Seven additional types of setupsI encourage you to read Super Trader for Tharp’s remaining seven types of setups, and for all the other valuable information in the book. Note carefully that Tharp’s title heading for page 146 is “Setups are not as important as you think” — and recall my one-sentence summary of successful trading:“Profitable trading is 40% cutting losses efficiently, 30% being patient with winners, 20% developing AND maintaining effective trading setups, and 10% everything else — all in accordance with a detailed, sound, written trading plan.”—————————————————————————————10 — Trending versus Mean reversionYou can choose between:Adapting and/or configuring widely-known strategies and setups to your own style of trading, orCreating your own strategies and setupsIn either case, there are some key, over-arching concepts that will help you integrate everything that you are learning, and help lead you toward effective strategies and setups.A prime example would be the complementary concepts of “trending” and “mean reversion”.An idealized way of describing the ups and downs of changing prices is:. . . first prices respond to significant news — or simply to one or more waves of buyer optimism or pessimism — by moving rapidly and/or steadily away from their recent “mean level” — either bullishly (upwards) as buyer demand overwhelms supply, or bearishly (downwards) as supply exceeds falling demand].. . . but after a sufficient amount of time, and/or the arrival of contrasting news, market participants increasingly “change their mind” and the price reverses and moves in the opposite direction, back toward the “mean level”In a bullish-to-bearish shift, those who were buyers now sell to capture profits from long positions, or open short positions.In a bearish-to-bullish reversal, those who were sellers now buy to capture profits from short positions, or open long positons.Thus, most trading strategies and setups are, in essence, expecting or predicting the price to either . . .. . . continue moving in the same direction — and these strategies (or setups) are referred to as trend-following strategies (or setups), or. . . reverse and move in the opposite direction — and these strategies (or setups) are referred to as mean reversion strategies (or setups)10.1 — Tr vs MR: . Visible in every channel patternAn ideal channel pattern consists of all the following, happening in sequence.An up-trend. . The uptrend begins near the bottom of the channel, and heads upwards. . The up-trend is followed by . . .A reversal (from up to down). . The reversal happens when the uptrend meets overhead resistance at the ceiling, or top of the channel. . The reversal causes the price to start heading back down toward the middle of the channel, or mean. . The reversal initiates the process of mean reversion. . The reversal is followed by . . .A down-trend. . The first half of the down-trend is mean reverting, meaning the price is approaching the middle of the channel, or mean. But the second half of the down-trend carries the price below and away from the mean. . The down-trend is followed by . . .Another reversal (from down to up). . This reversal happens when the down-trend meets underlying support at the floor, or bottom of the channel. . The reversal is followed by . . .A new up-trend. . And now you can see how a channel can be formed by a continuing combination of trending (up & down & up & down & etc) and mean reversion (reversal + reversal + reversal + etc).The centerline, or axis, of the channel then represents the mean. . [ Recall and review the example of the 2017–2019 TSM weekly chart, as previously mentioned in Section 3.1 and Section 8.3]10.2 — Tr vs MR: . Learn to see channelsWhether or not the chart you are viewing is currently displaying an obvious, clear, well-defined channel pattern, I recommend that you “squint” and "stretch" your imagination just a bit, to see one there, if at all possible, even a weak / slender / poorly-developed / distorted one, and even if it is a stretch to believe that one is there.Remember that channels can be ascending, or descending — gently sloping or steeply sloping — as well as horizontal, and that this greatly extends the use of channels as a basis for strategies and setups. . Even if the upper boundary is irregular or vaguely defined, if there is a clear lower boundary or basal trendline — there is a fair to good chance that it can be traded through the lens of “channel pattern”.Examples of an ascending channel: . the daily chart of ETSY from June-August 2020; the daily chart of WDC from early 2019 to March 9 2020.When you looking a channel pattern: . Always be aware if the price is currently . . .falling through the bottom of the channel, ornear the bottom of the channel . . . ornear the middle of the channel . . . ornear the top of the channel . . . orbreaking above the top of the channelBecause, to the extent that channel dynamic is still in effect, the direction the price is headed may be statistically related to it’s level in the context of the channel, and whether or not trending or mean reversion lies just ahead.A strategy could be developed around any of the following “channel expectations”:going long when the SP (share price) begins showing signs of gaining strength or gaining momentum as it lifts off the bottom of a channel (or forms an upside-breakout off the bottom), orgoing long when the SP is clearly gaining momentum and up-trending toward the center of a channel, orgoing short when the SP is showing signs of weakness or losing momentum as it approaches the top of a channel (or forms a downside-breakout away from the top of the channel)going short when the SP is clearly losing momentum and down-trending toward the center of its channel11 — Buy strength? . . . Or buy weakness?Q. Should a trader or investor “buy strength and sell weakness" or "buy weakness and sell strength"?A one-size-fits-all generalization such as "buy strength and sell weakness" or "buy weakness and sell strength", by itself, is simply too short and too incomplete to be meaningful or useful.a — First, you must choose a timeframe — because the answer to your question can be different for different timeframes.As an example, let’s choose the daily timeframe (as opposed to say, the 10-minute timeframe, or the monthly timeframe).b — Second, you must understand that, once you have chosen a timeframe, the share price dynamic in that timeframe is, broadly speaking, either relatively trending, relatively range-bound (or in a channel), or “in between”. . I recommend that you next read the following link:How do you determine trends in a stock?A very simple way to gauge whether or not a stock is trending or range-bound is to subtract a shorter-period moving average from a longer period moving average. . [ See the link immediately above for more on trend analysis. ]For example, subtract the 100-day moving average from the 20-day moving average:Diff_% = ( Price_20ma - Price_100ma ) / Price_100maCalculate the value of Diff for about 10 or 20 different stocks, compare the values, compare the appearance of the charts, and you will see a pattern.The stocks that have been steadily rising, or up-trending, over the past 100 days will have a relatively large positive value of Diff.The stocks that have been steadily rising, or down-trending, over the past 100 days will have a relatively large negative value of Diff.The stocks that have been going sideways (either straight sideways, or with some large up and down swings), or which are range-bound, will have relatively small values of Diff.[ To get a broader, more complete picture, use the same approach with several different pairs of moving averages, such as 10 / 50, or 10 / 100, or 20 / 50, or 20 / 200, or 50 / 200. . Then look at the geometry of all the moving average lines running across the chart:The more that several widely-different moving averages spread out from one another on the chart — in a smooth and consistent fan, and/or as many sub-parallel to parallel bands over time, the more trending the share price pattern is.The more that several widely-different moving averages are remaining close to one another and braiding back and forth through each other over time, the more range-bound and/or sideways the share price pattern is. ]Now, past performance is no guarantee of future performance — breaking news can change the trajectory of the share price at any point in time — but past performance should certainly be included in your decision making process.c — If the stock has been trading in a range-or-channel, and it’s near the top of it’s range-or-channel, and you expect the stock to continue being range-bound or channel-bound . . .Then if you own it, it is time to consider selling it. . If you don’t own it, it’s time to consider shorting it [just make sure there’s no good news coming in].d — If the stock has been trading in a range-or-channel, and it’s near the bottom of it’s range or channel, and you expect the stock to continue being range-bound or channel-bound . . .Then if you own it, consider holding it. . If you don’t own it, consider buying it.e — If the stock is just now breaking out of it’s range-or-channel to the upside, and/or trending upwards after a recent breakout . . .Then if you own it, consider holding it. . If you don’t own it, consider buying it.f — If the stock is just now breaking out of it’s range-or-channel to the downside, and/or trending downwards after a recent breakout . . .Then if you own it, consider selling it. . If you don’t own it, consider shorting it.g — If the stock is up-trending and/or setting new highs, try to determine whether it has lots of strength left in it, or if it’s close to exhaustion. . News, media coverage, and sentiment are important factors.h — If the stock is down-trending and/or setting new lows, try to determine whether it’s close to bottoming out, or has a lot further to fall. . News, media coverage, and sentiment are important factors.————————————————-All of the above is within the domain of technical analysis, and important to a technical trader.A traditional buy and hold investor does fundamental analysis to determine a fair value for the stock, compare that fair value to the current share price, and then on that basis, decide whether to buy, hold, or sell.A hybrid buy and hold investor does both fundamental and technical analysis, and combines the two, to determine whether to buy, hold, or sell.__________________________________________________________________________12 * * * Learn and understand FIRST * * * Strategize SECOND * * *Where do specific strategies come from?You can, of course, do a google search, and get lots of search results, and start combing through what you find. . You are likely to encounter much advertising for paid trading courses, advisory services, alert services, subscriptions, newsletters, etc.Before spending a lot of time “shopping, digging, or toiling for a strategy”, I strongly recommend that you FIRST just work on thoroughly understanding what stocks are and what fundamental and technical factors influence stocks, stock prices, and the stock market overall.As you begin to understand the subject, strategies will begin to occur to you spontaneously, naturally, and automatically. . For resources related to trading strategies, see also Appendix A-2 near the end of this answer.12.1 — A General View of Strategies and SetupsMost strategies and setups aim to do one of the following:Enter a trade “before the action”, anticipating and expecting a significant move to occur soon, and hope to capture all of the moveCatch a move just as it is beginning and emerging, and hope to capture most of the move. . Certain price and/or volume changes may be regarded as confirming (as in confirmation) that the share price will continue to move in the expected direction.Ride an obvious, well-established trend, and hope it will continue even further, and for as long as possible.12.2 — A Note About VolumeWhen conceiving, shaping, or modifying a strategy, you may want to keep in mind the following notes about volume in relation to price:“Price changes accompanied by higher volume indicate strong action by institutions and that tends to have sustained and enduring power in the the direction of the move. There are two main ways I watch volume.“If the day was up and the volume was higher than the session prior then that is accumulation. And was the volume heavier than the 50dma of volume? That also indicates a strong move that is likely to be sustained.“I also look at the weekly volume the same way? Was it higher than the prior week and was it higher than its 10wma line?“Moves on lighter volume don’t really tell us much. Those light volume days are easily overcome so they don’t have any great trend value.” — Mike Scott, Quora__________________________________________________________________________13 — RRM = Risk and Reward Management"We can't direct the wind, but we can adjust the sails" -- Thomas S. MonsonRisk magnitude = the dollar amount of your loss if the trade goes against you, and continues to go against you, all the way to your pre-determined limit of tolerance, at which point you mechanically close your position to prevent any further loss.Reward magnitude = the dollar amount of your profit if the trade goes in your favor, and continues to go in your favor, all the way to your pre-determined target, at which point you mechanically close your position to lock in your profit.The introduction of the following simple definitions leads to an important formula — the key formula is shown further below in bold font just below all of the following definitions.NT = total number of trades—————————————NG = number of winning (or gaining, or profitable) tradesPG = percentage of winning trades = NG / NT * 100SG = Sum of gains from NG winning trades = NG * AGAG = average gain per trade, for winning trades = SG / NG—————————————-NL = number of losing (or unprofitable) tradesPL = percentage of losing trades = NL / NT * 100SL = Sum of losses from NL losing trades = NL * ALAL = average loss per trade, for losing trades = SL / NL—————————————-V = Net (gain or loss), from all trades = SG - ALVA = average net per trade, from all trades = V / NT—————————————-NT * VA = SG - ALNT * VA = NG * AG - NL * AL* * * * * * which brings us to the formula of interest * * * * * *VA = ( NG / NT ) * AG - ( NL / NT ) * AL* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *Stated in words, this formula means…The average net per trade (over all trades) is equal to:The percentage of winning trades times the average gain per winning trade— minus —The percentage of losing trades times the average loss per losing tradeIf you have executed 10 trades using exactly the same trading system, and the VA value is significantly positive, it may or may not be positive over the next 10 trades.However, if you have executed 100 trades using exactly the same trading system, and the VA value is significantly positive, the odds that it will be positive in the next 10 trades are better.And, if you have executed 1000 trades using exactly the same trading system, and have a VA value that is significantly positive, the odds that it will be positive in the next 10 trades are better still.Having a positive value of VA, derived from a long trading history, is referred to as having a positive expectancy.13.1 — RRM: . Alternative ways to be profitable over timeYou cannot control whether the stocks you trade go up or down. . But once a trade turns into either a winning position, or a losing position — and that is only a matter of time — you can control, when you close that position.You may find that how you close your positions, and your overall level of profitability after many trades, are linked to the following trade-off arrangement:“Win More Often” (WMO) — Limit your loss on losing trades to 5%, and also take profits on winning trades at 5% [ or 10% in both cases, or 20% in both cases ] — and then hope or expect to win more than 50% of your trades.With the WMO approach, the emphasis is on your percentage of winning trades exceeding your percentage of losing trades.“Win by a Larger Margin” (WLM) — Limit your loss on losing trades to 5%, but take profits on winning trades at 10% [ or 10% and 20% respectively, or 15% and 30% respectively ] — and you do not necessarily need to win more than 50% of your trades.With the WLM approach, the emphasis is on finding — and patiently riding out — trades with significant “reach”, or “ability to trend through a relatively large price range”, and thereby achieve relatively large percentage gains (compared to your percentage losses).You can experiment, of course, and you can backtest. . Backtesting can be quite valuable in helping you decide how to manage your closures.13.1.1 — RRM: . Examples of WMO versus WLMSuppose you have closed 120 trades, and each trade invested $1,000 of capitalIf you won 80, and lost 40, and your average gain per trade is 10%, and your average loss per trade is 10% — you have a net profit of 40 X $100 = $4,000, and your trading results are resembling the WMO (Win_More_Often) pattern described in Section 13.1 above.OTOH, if you won 40, and lost 80, but your average gain per trade is 30%, and your average loss per trade is 10% — you have a net profit of $4,000, and your trading results are resembling the WLM (Win_by_a_Larger_Margin) pattern described in Section 13.1 above.13.2 — RRM: . When to close a losing position?Small profits — ok, i’ll get better at this over timeSmall loss — ok, i’ll get better at this over timeBig profits — ok, actually much better than just “ok”Big loss — Not ok, it will take too long to catch upThe only sure way of avoiding a big loss is to accept the gift of a small loss while it is available.Consider closing a losing position the moment your losses exceed a preset small percentage, for example 5% …this is adjustable, and might be as little as 1% or as large as 25%.Some traders use actual stops, and some use mental stops.Are you the type of person who can easily and promptly let go of a losing position — or do you have an uncontrollable “urge to be right” in which you get stuck [or “married”] to a security, hoping desperately for a turnaround while the losses diminish or destroy your success as a trader?* * * * * * * * * * * * * * * * *13.2.1 — Cutting your losses: . A horse-riding metaphorCutting your losses at a predetermined level is one of the most important, if not the most important principle of profitable trading.Failure to cut small losses before they become large losses is a far, far worse problem than having a strategy which is no better than a coin flip.Most beginners worry if their strategy is good enough, when their emotional courage to accept and take every small loss lies at the very heart of becoming a successful trader.* * * * * * * * * * * * * * * * *So with the above in mind I offer the following “horse-riding metaphor”, which concludes with two key questions that every trader will face more or less continuously through their career.a — Imagine that you are out on the plains where wild horses are moving about in large herds.b — Each horse is moving either east or west.c — Some are walking slowly, some are walking briskly, some are trotting slowly, some are trotting quickly, some are galloping, and some are racing at top speed.d — A few of the horses maintain the same speed and direction for long periods, but most are changing speed and changing direction in a highly unpredictable fashion.e — Now imagine that you are a horse rider and traveler who is capable of riding any of these wild horses, for as long as you choose, and also that you are capable of changing horses anytime you want.f — Imagine that your objective is to travel due west as quickly as possible.g — You cannot control the speed or direction of any horses, but you are free to look around you, and observe what all the other horses are doing, and you are free to change horses anytime you want.Now ask yourself these two very important questions:1 — If you find yourself on a horse that suddenly decides to turn around and travel east instead of west, how long are you going to remain on that horse, just hoping that it will turn around and travel west again? . When there are several horses all around you that are traveling in the westward direction that you want to go?2 — If you find yourself on a horse that, either gradually or suddenly, starts to move a lot more slowly, how long are you going to remain on that horse, just hoping that it will pick up speed? . When there are several horses around you that are going faster than you?* * * * * * * * * * * * * * * * *13.3 — RRM: . When to close a winning position?Consider closing a winning position sometime after your gains exceed a present larger percentage [relative to the loss-limit percentage of Section 13.2 above], for example 10%. . Perhaps 1.5 to 3 times larger — you can experiment as you attempt to improve your track record.Exactly when to close a winning position is an artform, but many successful traders recommend that you do this mechanically, according to mechanical rules that are strictly adhered to.For trading to be worth your time, you must track your total profits and total losses, and of course, your total gains must exceed your total lossesYou will have to experiment to see if this is possible, and the extent to which it is possible. . Some recommend a long period of paper trading [without real money], but others recommend starting with small but real money, because “skin in the game” will accelerate your progress.Many successful traders have a lot of small losses that are more than covered by a lesser number of large gains.———————————“Nature abhors a straight line — and a profitable position usually goes through multiple ‘waves’ on the chart, rather than a simple straight line.”Beginners may be prone to fall into the two-jawed trap of…“I’d better lock in this small profit before it disappears” and“I don’t want to sell this stop-triggering loss yet because I just know it will turn around and break even”These two inclinations can quickly lead to net lossesIf you have found an excellent to superior strategy, and your setups have an exceptionally high average_win_rate (say 60%), then perhaps you can be profitable with a close-out percentage for winners that is comparable to your close-out percentage for losers. . But the key word here may be “exceptionally”.13.4 — RRM: . Choices for beginning or novice traders[ the finished version of Section 13.4 is not yet available; coming eventually ]1% & 1,2,3% — versus — 10% & 10,20,30 % ]14 — Position management: . Position sizing and scaling14.1 — RRM: . Maximum position sizeMore important than all of the above is NEVER going “all in” — never risking more than about 1% [this is adjustable depending on your experience, talents, success] of the funds in your trading account on any single trade.Limiting your position size to 1% (or less) is especially important for beginning and novice traders.Can you resist the temptation to attempt to “get rich quick” by piling all your chips on one color?If this is a problem for you, or even a potential problem, I recommend that you seek counseling or therapy to explore why you may have a self-destructive urge, and how you can let go of that urge.14.2 — Scaling into (or out of) a full positionYou can “buy all at once”, or you can buy “a chunk at a time”. . Also known as: . building, layering, stepping, or progressive establishment of a full position.Consider scaling into, or scaling out of, any position. . Meaning, you can start with a 1/3 size or 1/2 size position and build it into a full position. . Once a full position has reached your profit target, you can close out 1/3 of it, or 1/2 of it, and leave the rest if you think the trade will continue further in your favor.. . You can experiment to see if this helps to increase your profitability.15 — System Trading versus Discretionary TradingSections 4–14 above outline a systematic approach to trading, where the stock selection, strategy, and setups are well-defined, rule-based structures. . System Trading means every decision to open or close a position has been guided by a rule, and the rules are strictly adhered to.Some traders choose not to be bound by a strict set of rules, but would rather look at all available information, and mentally integrate or synthesize that information in a qualitative way, and then choose to either open a position or not, “at their discretion” or according to their instinct, intuition, or past experience. . Discretionary Trading may require more talent, skill, experience, and other capacities to be profitable over the long term.I recommend that novices start out with System Trading, and then very gradually, if at all, move toward experimenting with Discretionary Trading.15.1 — System Trading: . Eight steps leading up to a trade1. Screening, or Stock Selection — Screening is the process of using a stock screener or scanner to find stocks whose attributes match those specified by your strategy and set-up criteria. . Once you have a well-formulated strategy, you will be able to use search criteria to find stocks most closely aligned to your strategy.2. Backtesting — With backtesting, you observe how your strategy would have performed had you been using it over a past interval of time. . Stocks that pass your screening process or selection process can be backtested using your strategy and set-up criteria.3. Ranking — If you are working with more than one stock, all stocks that pass your backtesting process can be quantitatively ranked from “most likely to rise (or fall) in price” to “less likely to rise (or fall) in price”.4. Weighting — Suppose that you have selected the top 5 stocks of your screening and backtesting results to trade. . You can weight them all equally, or weight your higher-ranked stocks more that your lower ranked stocks.5. Position sizing — including how you will scale, if scaling [See Section 14 above]6. Establishing the Stop Loss — Not all traders use stop losses, but it if you are a novice trader, think about this very carefully7. Establishing the Entry Point8. Establishing the Exit Point — [Initial Estimate] — If important news is reported after your entry, you may wish to adjust your initial estimate higher or lower15.2 — Two different approaches to stock selectionWhen deciding what stocks you may wish to trade, I suggest that you compare the advantages and disadvantages of the following two very different approaches:The first approach is to create a watchlist of perhaps 20 to 50 stocks [adjustable to your personal preference], and apply technical analysis to each, updating your analysis on a daily, weekly, monthly, etc basisThe advantage of this approach is that you get to know the stocks on your watchlist very well over time.The second approach is to obtain or create a stock scanning application [such as Finviz, Trade Ideas, or ThinkorSwim], and regularly scan 500 to 1000 stocks [adjustable to your personal preference]. . Once you have chosen a strategy, each scan can be designed to find a specific setup.The advantage of this approach is that you will find more setups that if you just look at the stocks on your watchlist.16 — Beginners: . Trade *with* the broader marketIf you are just starting to trade stocks, only go long specific stocks when the overall market is rising; only go short specific stocks when the overall market is falling.As a beginner, or novice, or even an intermediate-level trader, open long positions when the market as a whole is bullish, and avoid taking long positions when the overall market is bearish or flat.Conversely, as a beginner, open short positions when the market as a whole is bearish, and avoid entering short trades when the overall market is bullish or flat.“A rising tide lifts all boats. . A falling tide does the opposite.”“Knowing when to be patient and stand aside is a mark of a profitable trader.”“On a day when the overall market is up 3%, anyone with a long idea can be a trading genius.”16.1 — Trade *with* the associated sector . . . & w/ assoc. industryIdeally, a beginner should be trading with not only the broader market, but with the associated sector and with the associated industy as well. . Always be aware of how the associated sector and industry are performing as you consider opening a trade with a specifc stock.17 — Statistics, updrafts, and drawdownsYou need to get comfortable with a large component of randomness in price dynamics and trading outcomes.Even if you are profitable on average over months or years, you will likely experience considerable drawdowns in between updrafts — periods during which losses exceed profits. . How comfortable are you with that?Assuming that you are capable of executing the logistics and mechanics well — are you the type of person who can easily [or sufficiently] adjust to the annoyance or pain of many losses, with the patience to wait for the larger gains?18 — “Herd logic” versus “Contrarian logic” in tradingTo a considerable extent, the more traders and algo’s use and apply very similar forms of technical analysis to help make trading decisions, the more the price/volume charts will display characteristics reflecting those principles and methods of technical analysis.In the sciences, this phenomenon is known as positive feedback. . In everyday language, some call this phenomenon self-fulfilling prophecy.But positive feedback and self-fulfilling prophecy also have limits, and there will be times when traders [including traders/investors acting on fundamental data and/or technical data, and/or “gut instinct”] and algo’s make trading decisions that may be inconsistent with conventional, traditional, “at face value” technical analysis.Over certain time intervals it can be advantageous for an individual trader [and/or his(her) algo] to “follow the herd”.Over other time intervals it can be advantageous for an individual trader [and/or his(her) algo] to “be contrarian”.The better a trader understands the strategy and setup-design of the majority of other traders and their algo’s, the better equipped the trader is to be profitable. . [ Think of those old “road runner” cartoons. ]Good luck navigating this challenging landscape! . If it were clear, easy, straightforward, and non-competitive, every trade would be always be profitable — which leads into Section 19 below.19 — Intraday trading as a competitive, zero-sum gameDay trading (as opposed to Buy-and-Hold) is similar to professional sports: . It is a zero-sum game: . For every dollar that someone wins, someone else has lost at least a dollar (or a minus-sum game, counting other expenses).Think of it this way: . Suppose every aspiring day trader had to first complete a rigorous, 1-year trading course taught by the world’s greatest day trader. . The teacher should honestly stand before his class and say:“A - The annual financial outcomes for all the day traders in the world are as follows: . some will break even — some will lose money — and some will make money. . How great will the disparity be, between those who make money, those who break even, and those who lose money?”“B - The more evenly matched all day traders are in training, skill, capabilities, resources, and opportunities, the more likely everybody will just about break even.”“C - On the other hand, the more unevenly matched all day traders are in training, skill, capabilities, resources, and opportunities, the greater the disparity will be in profits and losses. . It is now much more likely that a small number will make big money, a small number will lose big money, and the rest will be spread out in between.”So, if you begin day trading, just remember that you will be competing against truly talented, skilled, experienced veterans who have been doing it for years, some using computers analyzing millions of past configurations and future possibilities every second. . You had better be very well-prepared — mentally, psychologically, logistically — before venturing into this arena.What are your chances of a hit, facing Nolan Ryan in his prime?What are your chances of striking out Ted Williams?What are your chances of a single, if you hit a slow grounder to Ozzie Smith?20 — How will you think about “the market”?Even though day traders are competing for each others’ dollars, I think you will find it helpful to see “the market” — which is merely an average of all of the actions of all the other participants in the game — as an impersonal entity that you wish to align yourself with, not as an entity that is out to “beat you” or “defeat you”. . Think of “the market” as your source of volatility, the whole reason you are in the trading game to begin with.If you are are trend trader, who looks for the long steady rides], think of the game as finding and maintaining alignment with the market’s tendency to trend.If you are are a momentum trader, who tries to capture the breakouts and explosive moves, think of the game as finding and maintaining alignment with the market’s tendency to jump.If you are a contrarian trader, think of it as being attuned to the market’s tendency to correct excesses.One of the most unproductive attitudes is to “revenge trade” after being overly pyschologically invested in a losing trade.One way to think about the market is like a sailor on a sailing ship on the ocean, reading the winds, the currents, and the stars to reach your destination — slipping off course occasionally but overall making progress to your intended destination.21 — “Just watch charts” — and ideas will come to you* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *There is no substitute for spending a lot time watching charts “build out” on multiple timeframes, one candle, or a few candles at a time — while you notice how your chosen technical indications and technical indicators are responding.* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *As you watch charts and become thoroughly familiar with “the building blocks” outlined above, if you are passionate about trading, you cannot help but begin to recognize key patterns.Consider trading quarterly charts for a few years . . .. . . then trading monthly charts for several months. . . then weekly charts for several months. . . then daily charts for several months. . . finally working your way down to hourly charts and 10-minute charts.Or vice versa. . Or all in parallel, but only IF you have the time and the versatile, adaptable, agile mental capacity for doing many charts in parallel — that may pose a formidable and daunting mental challenge.What you learn from following and watching charts as they form, cannot readily be duplicated by simply studying past charts. . Studying “static” charts from the past, is just not the same as watching charts in real time. . I get so many ideas just from looking at fresh charts, and I think that you will too.22 — In ConclusionYou do need a working strategy — but there are lots of strategies available that are good enough to get started with.What should be of greater emphasis is your risk management and position sizing."The beginning is the most important part of the work." — PlatoIn the general scheme of things, risk management and position sizing is far more important — especially in the beginning when you are forming habits that will become the backbone of your trading program — than strategies and setups.—————————————————————————————-Appendix A-1. . Eight Types of Test Area Setups1 — ACTOR Setup: . Uptrending / Continuation / Anticipated EntryThe share price is trending upwards into a test area of past overhead resistance. . A test of that overhead resistance is about to commence.The trader expects, anticipates that the price will soon successfully breach the resistance and the uptrend will continue — either gradually, or as an upside breakout.ACTOR Setup = Anticipated_Continuation_Through_Overhead_Resistance SetupThe trader who is using this setup would be opening (or adding to) a long position.2 — CCTOR Setup: . Uptrending / Continuation / Confirmed EntrySimilar to Case 1a above, but with a later entry associated with the trader waiting for the price to “confirm the outcome”Say the share price has just exceeded a critical threshold identified by the trader, that defines the ceiling, i.e., it has (by this measure) “passed the test” posed by the “test area”, i.e., it has successfully breached the resistance.The trader expects that the uptrend will continue — either gradually, or with an upside breakout.CCTOR Setup = Confirmed_Continuation_Through_Overhead_Resistance SetupThe trader who is using this setup would be opening (or adding to) a long position.3 — ARAOR Setup: . Uptrending / Reversal / Anticipated EntryThe share price is trending upwards into a test area of past overhead resistance. . A test of that overhead resistance is about to commence.The trader expects, anticipates that the price will fail to breach the resistance, and the recent uptrend will be reversed — either gradually, or as an downside breakout.ARAOR Setup = Anticipated_Reversal_Against_Overhead_Resistance SetupThe trader who is using this setup would be opening (or adding to) a short position.4 — CRAOR Setup: . Uptrending / Reversal / Confirmed EntrySimilar to Case 2a above, but with a later entry associated with the trader waiting for the price to “signal the outcome”Say the share price has just dropped substantially, and/or dropped below a critical threshold identified by the trader, that defines the ceiling, i.e., it has (by this measure) “failed to breach the overhead resistance” posed by the “test area”.CRAOR Setup = Confirmed_Reversal_Against_Overhead_Resistance SetupThe trader who is using this setup would be opening (or adding to) a short position.5 — ACTUS Setup: . Downtrending / Continuation / Anticipated EntryThe share price is trending downwards into a test area of past underlying support. . A test of that underlying support is about to commence.The trader expects that the support will fail, and the downtrend will continue — either gradually, or as a downside breakout.ACTUS Setup = Anticipated_Continuation_Through_Underlying_Support SetupThe trader who is using this setup would be opening (or adding to) a short position.6 — CCTUS Setup: . Downtrending / Continuation / Confirmed EntrySimilar to Case 3a above, but with a later entry associated with the trader waiting for the price to “signal the outcome”Say the share price has just dropped substantially, and/or dropped below a critical threshold identified by the trader, that defines the ceiling, i.e., it has (by this measure) “failed to find the underlying support” in the “test area”.CCTUS Setup = Confirmed_Continuation_Through_Underlying_Support SetupThe trader who is using this setup would be opening (or adding to) a short position.7 — ARFUS Setup: . Downtrending / Reversal / Anticipated Entryhe share price is trending downwards into a test area of past underlying support. . A test of that underlying support is about to commence.The trader expects that the support will hold, and the downtrend will be reversed — either gradually, or as an upside breakout.ARFUS Setup = Anticipated_Reversal_From_Underlying_Support SetupThe trader who is using this setup would be opening (or adding to) a long position.8 — CRFUS Setup: . Downtrending / Reversal / Confirmed EntrySimilar to Case 4a above, but with a later entry associated with the trader waiting for the price to “signal the outcome”Say the share price has just acquired critical upward momentum, in a way that suggests that the underlying support is going to be sustained.CRFUS Setup = Confirmed_Reversal_From_Underlying_Support SetupThe trader who is using this setup would be opening (or adding to) a long position.Appendix A-2. . List of stock-trading related web linksWilliam J. O’Neil’s 10 Trading Principles:Free Stock Charts, Stock Quotes and Trade IdeasAbout Van Tharp - Van Tharp InstituteThe Wyckoff Method: A TutorialFoundational-Swing-Trading-ConceptsSwing-Setups-and-Entry-TechniquesTrading Setups Review - Trading Strategies, Guides, and Articles for Active Technical TradersTrade-and-Risk-ManagementHOME - In The Money StocksTechnical analysis of stocks with candlesticksStock Market Insights | Seeking Alphahttps://marketchameleon.com/Stock Market MapFINVIZ.com - Stock ScreenerTrade Ideas: Artificial Intelligence | Automatic Execution | Backtesting | Trader EducationMarketInOut.com - Technical Stock ScreenerPublic ChartListsInvestor's Business Daily | Stock News & Stock Market Analysis - IBDShort Interest Stock Short Selling Data, Shorts, Stocks: Short SqueezeWhat are the best books about stock trading?Top 5 Books for a Budding Professional Trader4 Favorite Day Trading Setups: Examples and How to Use Them - StocksToTrade.comWorking patterns for day trading on the US stock marketIntraday trading |How to filter stocks for day trading - Stockstellar50% Retracement Swing Trading Strategy - Trading Setups ReviewThe 7 deadly sins of TradingGianni Di Poce On Chart Patterns You Should KnowAppendix A-3. . List of some informative Quora Q&A’s. . IMHO, there is at least one very good answer to each of the following questions.What are the most important concepts that transformed your trading after you understood them?I am currently trying to understand the concept of the stock market. Where do I begin?How can I learn in detail about the different sectors of the stock market?How long would it take a gifted individual to learn how to trade stock efficiently?Why is it unrealistic to make 1% a day in the stock market?Dan Underhill's answer to How much of your 25,000 dollar portfolio would a day trader leverage? . . . [ good answer by Dan Underhill, and I recommend reading any and all answers by DH ]What are some ideas for good stock trading? I have been doing stocks on fidelity for about 3 months and have only managed about 30$ Profit in total after putting 700$ in. Should I focus on penny stocks, mid stocks, expensive stocks, or combination?Is the stock market trading more about a technical/analytical game or more a kind of a psychological game? Why?How do you determine trends in a stock?What is the RSI tool / RSI indicator?Are MACD and RSI trend or momentum indicators?Mike Scott's answer to: . How do you interpret the volume of a stock at a given time with respect to the average volume of the same stock? How is it related with the stock price trend?How do you make informed decisions when day trading?Amit Goswami's answer to How do you read candlesticks in trading?What can I do to help improve my live trading execution? I always seem to screw up my own trading progress. . . . [ good answer by Jay Fairchild, and I recommend reading any and all answers by JF ]What is the basic point to trade by support and resistance?How do I start with stock trading?Can I become a full-time trader with $50000?Is it possible to have a 90% win rate trading the stock market like some people claim?How do I differentiate between a fake breakout and a real breakout in a 5-minute time frame for intraday trading?How can I learn in detail about the different sectors of the stock market?Imtiaz Mohammad's answer to As an experienced trader, what is the best stock market advice you can offer for beginners? . . . [ general answer, that also includes a specific strategy / setup ]Appendix A-4. . Links That Discuss Strategies and SetupsPratik Jain's answer to How many types of trading strategies in the stock market are used daily by traders around the world? Which ones?Be VERY wary of spending hundreds or thousands on high-priced trainings or trading courses. . That said, the following links from Warrior Trading are useful and easy-to-read, easy-to-grasp presentations of day trading strategies:Momentum: Day Trading Strategies for BeginnersGap and Go: Day Trading Strategy For BeginnersReversal: Day Trading Strategies for BeginnersBull Flag Chart Pattern & Trading StrategiesMean Reversion TradingWhat does "buy strength and sell weakness" mean in intraday trading? . Shouldn’t it be "buy weakness and sell strength"? . . . [one of the most important links of all here]What are the top / best technical indicators for stock trading? . . . [includes strategies using moving average crossovers (2 EMA’s or 3 EMA’s), plus MACD, Bollinger Bands, Heikin Ashi, and Vortex]Russell D. Daily's answer to What are some of the most successful day trading strategies?ISurya Kamal's answer to What are the best stock daily trading strategies? . . . [ how to use three moving averages together — could be modified to four or more? ]https://www.insidershort.acom/post/intraday-trading-strategy-vwap-and-emaThe Perfect Moving Averages for Day TradingWhat % of swing traders can: (a) View 20 to 50 stock charts [weekly charts], (b) Pick out one chart and predict the price direction [up or down] for the following week, and (c) Average 3 out of 5 hits (or better) over many years?Can the integrated use of support, resistance, trendlines, moving averages, candlesticks, multi-timeframes, breakouts, & chart patterns give the trader a "trading edge" as much as 60/40 versus the random 50/50?Ragnar Lodbrok's answer to What are the day-trading strategies/patterns with a high win probability? . . . [ good answer by Ragnar Lodbrok, and I recommend reading any and all answers by RL ]What's the best stock swing trading strategy?How do I shortlist stocks for positional trading (swing trading)?Swing Trading Strategies overview (SwingTradeSystems.com)What are the best stock daily trading strategies?What are some of the most successful day trading strategies?What are some good intraday trading strategies?What is the idea behind buying a stock that breaks above the 52-week high? Is it still a valid trading strategy?What are some strategies based on EOD (end-of-day) trading?How do I differentiate between a fake breakout and a real breakout in a 5-minute time frame for intraday tradingImtiaz Mohammad's answer to How do I recover all the money lost in stock market? Lost my entire savings of 30 lacs trading bank nifty options. Can someone please help? . . . [about trading options]23 Trading Quotes That Made Me A Better TraderAppendix A-5. . Checklist for engaging in intraday or swing tradingAn intraday trader should be continuously aware of, monitoring, and weighing all of the following:what is the most important general news relevant to trading todaywhat is the most important specific news relevant to this stockhow are the overall market, the sector, and the industry doing at this hourwhat is the “core or primary timeframe” for the trade that I am currently considering or monitoringwhat are the supplementary timeframes for the trade that I am currently considering or monitoringwhere the key support levels arewhere the key resistance levels arewhat is the strength and direction of the current trendwhat indicators am I using, and what are they telling mewhere is my desired entry point, or actual entry pointwhat is my maximum and/or actual bid / ask spread (%) for entrywhere is my initial target, where are any additional targetswhat is my risk : reward ratiowhere is my stopwhat percent of my trading funds are being usedAnd be frequently comparing them to his/her written trading plan for the day.Appendix A-6. . List of important topics for further studyImportant topics that are either not covered — or not sufficiently covered and deserving of much deeper coverage — in this broad outline of technical trading:Trading from alerts — alerts can be generated by many/most trading platforms and some specialized softwareBacktesting your strategy and setups, including risk and reward parametersYour trading journal: . an essential learning, improving, and reference toolShort selling, short interest, short squeezeTechnical indicators: . when and how to use themVolatility, types of volatility, VIX / VXX / volatility indices, trading volatility assetsSector / Industry / Sub-industry breakdownsAlgo’s and algorithmic tradingCorrelation: . Correlated versus non-correlated assets; correlation of an asset to an indexMarket structure and operation: . Bid/Ask Spread, Halts in trading, How to use Level 2 trade data, etc.Order types, including Market Order, Limit Order, etc., their pro’s and con’s, and how and when to useStops, using (or not using) stops, determining stopsExtended Hours Sessions — Pre-market Session, vs Regular Session, vs Afterhours SessionMargin, margin accounts, margin callsStock optionsTrading platforms, pros and cons of various choicesTrading software, stock screeners, stock scannersBrokerage companies, accounts, feesStock trading services, newsletters, websites [free and/or paid subscriptions]Appendix A-7. . Buy-and-hold Investing — Fundamental AnalysisFor those more interested in buy-and-hold investing, and Fundamental Analysis, I recommend the following link:Healthy Wealthy & Wise — Long Term Investing in Best of Breed Stocks — https://www.quora.com/profile/Jim-Beekhuizen/posts—————————————“Profitable trading is 40% cutting losses efficiently, 30% being patient with winners, 20% developing AND maintaining effective trading setups, and 10% everything else — all in accordance with a detailed, sound, written trading plan.”“Give me six hours to chop down a tree and I will spend the first four sharpening the ax.” — Abraham Lincoln“Practice, practice, practice, ’til it all seems sooooooooo familiar and natural, and then you’ll know you are getting somewhere.” — WLHappy Learning! . Happy Investing! . Happy Trading! . Good Luck! . 🍀