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Way of the Trade: Tactical Applications of Underground Trading Methods for Traders and Investors, + Online Video Course

ISBN: 978-1-118-59068-3
368 pages
August 2013
Way of the Trade: Tactical Applications of Underground Trading Methods for Traders and Investors, + Online Video Course (1118590686) cover image

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Praise for Way of the Trade + Online Video Course

"Jea Yu's Way of the Trade offers serious traders a comprehensive and compelling approach to short-term trading. Jea writes in a reader-friendly style, connecting market realities with sound trading techniques and risk management strategies. If you are dedicated to succeeding in the trading world, Way of the Trade belongs on your bookshelf."
—Toni Turner, President, TrendStar Trading Group, Inc.; author of A Beginner's Guide to Day Trading Online and Invest to Win: Earn and Keep Profits in Bull and Bear Markets with the GainsMaster Approach

"In his new book, Way of the Trade, Jea Yu does a great job explaining market truths and delivering the tools helpful for profitable trading. There is so much valuable information in this book, but the section on 'The 5 Laws of the Marketplace' alone is worth the price of this book. A must-read for the serious trader!"
—Bennett A. McDowell, President, TradersCoach.com, and author of The ART® of Trading, A Trader's Money Management System, and Survival Guide for Traders

"Jea Yu's powerful new book offers a wide range of tools, strategies, and insights to help traders at all experience levels. Combining his unique market methodology with high-powered tape reading techniques, Yu's well-written narrative presents serious-minded readers with a detailed road map to short-term profits."
—Alan Farley, Editor/Publisher, Hard Right Edge "Jea is like the Kevin Smith of trading. His knowledge and historical perspective are rivaled only by his passion for the business. From X-Men comics to Bloomberg stock pickers, Jea takes you on a journey through the culture and mind of a Wall Street trader."
—Jeremy Frommer, CEO, Jerrick Ventures; former CEO of Carlin Financial Group; former Head of Global Prime Services, Royal Bank of Canada

"Jea Yu's latest masterpiece, Way of the Trade, illuminates a path of trading success appropriate for new hopeful traders and veterans alike. Way of the Trade encapsulates the strategic wisdom of Sun Tzu with the modern street smarts of a market master. Skillful use of trading examples, along with lessons of individuals who beat seemingly impregnable odds, make Way of the Trade incredibly difficult to put down and impossible not to learn from."
—Robert Weinstein, TheStreet.com contributor, founder of Paid2Trade.com, and full-time trader

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Table of Contents

Preface xiii

Acknowledgments xxi

Chapter 1

The Mutation 1

The Phantom Menace 2

Typical HFT Sheep Skinning Cycle in 2009 to 2012 8

Enter the Thunder and Tumbleweeds Market Trading Landscape 18

Defining Market Landscapes, Climates, and Terrains 20

The Five Laws of the Marketplace 26

The Profit By-Product 29

The Model of Excellence: Shokunin 30

The Excellent State of Excellence 34

Earnings Seasons: The Super Bowl of Momentum 35

Global Influences: Europe, China, and the World 38

Chapter 2


The Hybrid Market Predator 43

The Hybrid Market Predator 43

Relevant Traits of the Three Skillsets 44

Kurt Warner: Adversity Conditioning Model 45

Pockets, Pockets, Pockets 48

Properly Aligning Your Personal Perspective 49

Manifesting By-Product into a Product 51

The Eight-Step Process to Turn Idea into Profit

Chapter 3

The Morning Ritual 57


Hunting for Prey: Headliners and Corganic 58

The Gapper/Dumper Three?]Reaction Sequence 59

Ritual Religion 61

Wasted Effort 61

The Real Work, Don’t Skimp! 61

Law of Reciprocity Revisited 62

Fast and Simply Thorough (FAST) Chart Analysis 63

Step?]by?]Step Ritual Routine by Time 65

Evaluate the Climate 73

Chapter 4


The UndergroundTrader Trading System: The Katana 75


Recommended Online Direct Access Broker: Cobratrading.com 76

Configuring the Rifle Charts 77

The Role of the Bumpers: Moving Average Breakouts,

Breakdowns, and Trends 79

The Four Parts of Trends:

Consolidation → Break → Peak → Exhaustion 85

The Role of the Bumpers: Bollinger Bands 87

The Slope Effect 88

The Weekly and Monthly Moving Averages and Bollinger Bands 91

The Role of the Stochastics 91

Spotting and Trading Fades 93

The Two Most Important Price Patterns: Pups and Mini Pups 96

Stinky 2.50 and Five?]Level de Facto Price Bumpers 109

The (Only) Three Candlesticks I Use 111

Massive Volume Spikes 116

Mischievous Mistick Manipulation 119

The Essence of Stops 129

Less Is More Applies More Than Ever 132

Early and Mid?]Stage Perfect Storms 142

Three Levels of Stop Mindset 144

What to Do after a Disaster 145

The Three Steps for Proper Re?]Setting 146

Purposely Add More Stocks to Watch List and Minders 149

Step?]by?]Step Healing and Recovery 150

The Unconditional Three STOP Rule 151

DSS: Defensive Sprawl Scaling 152

Chapter 5

The Perfect Storm Pattern Trade 157


What Is a Perfect Storm? 157

Perfect Storm Profile 161

Spotting Perfect Storm Opportunities with the Anchor Time Frame 165

How to Trade the Three Types of Perfect Storms 175

How to Play Trending Perfect Storms 177

Trading the Sympathy/Laggard Perfect Storm 180

The Tightening 181

Tightening Reversals 186

How to Play Tightening Perfect Storms 186

The Consolidation Break 189

How to Play Consolidation Break Perfect Storms 191

Repeating Nature of Perfect Storms 194

Double?]Hedged Sword Sequence Trade 197

How to Execute DHSS Trades 201

Chapter 6


Optimized Four-Level Research Process 205


Level 1 Research Process: Spot Technical Analysis and

Headline Search 207

Level 2 Research Process: Digging Deeper into Fundamentals 211

Level 3 Research Process: Mining Perspectives 214

Level 4 Research Process: The Juicer, Full Immersion 216

The Afterglow Effect 221

Chapter 7

How to Prey for Playable Stocks to Trade 223


Stocks Are Battlegrounds and Participants Prey 224

Playability: Internal and External Factors 225

The Two Types of Playable Stocks: Headliners and Corganic 229

Where to Find Playable Stocks: Sources for Ideas 236

Chapter 8


Stalking Prey 243


Aging: Waiting for the Pattern to Form 244

Stalking: Setting an Alerts Minder on Your Trading Platform 244

Chapter 9

The Encounter from Start to Finish 247


Anxiety: Bad versus Good 247

React, Don’t Panic 248

Distinguishing Trade Entry Stages: Early, Impact, Late 249

The Complete Trade Sequence 256

Pretrade Process: Information Gathering and Analysis 256

Trade Execution Process: Entering the Position 258

Trade Management Process: Monitoring and Exiting the Position 258

Identifying Maladies in Your Trading 262

Post?]Trade Sequence Analysis 273

Reconstruct the Trade and Conditions Accurately 273

Summary 274

Chapter 10

Portfolio Trading: The Skillset of the Evolved Hybrid Market Predator 277

Market?]Calibrated Portfolio Creation and Management 278

General Capital Allocation 278

Activity Allocation = General Capital Allocation 280

Risk Averse Nature of Intraday Trading 280

Her Majesty, Queen Leverage 281

Application of Well?]Managed Allocation Management 282

truTV: “Not Reality. Actuality” 282

Constructing the Portfolio 282

General Macro Market Analysis and Allocation Assessment 283

Qualifying the Three Types of Trade Considerations 284

Intraday Trade Profiles 285

Position Trade Profiles 290

Active Portfolio Management 298

Options Strategies 299

Delta Neutral Hedging 300

Covered Calls: Creating Your Own Dividend 301

Bullish Call Debit Spreads 301

Bearish Call Debit Spreads 302

Portfolio Trading Schedule of Activity 302

Harnessing Your Hybrid Evolution 303

Chapter 11

Conclusion: Cultivating Your Personal Evolution 305

Acknowledging the Spirit 305

Elements That Affect One’s Spirit 306

Broken Spirits’ Blowout 309

Nourish Your Spirit 310

Continuing Your Progress 311

Appendix A

My Trading Tools and Anatomy of Pattern Trades 313
Suri Duddella

About the Video 333

About the Author 335

Index 337

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Author Information

JEA YU is a cofounder of UndergroundTrader.com, an interactive training site for traders, fund managers, and investors, which was voted Best of the Web by Forbes magazine for four consecutive years. A popular public speaker, Yu has been quoted in USA Today, the Wall Street Journal, and the Financial Times and is also a contributing writer for TradingMarkets.com and Benzinga.com.

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Related Websites / Extra

http://news.wiley.com/TraderResources Wiley Trading Resources Available
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Press Release

August 07, 2013
Way of the Trade: Tactical Applications of Underground Trading Methods for Traders and Investors

With the emergence of high-speed trading algorithms and zombie markets, it's increasingly difficult for traders to extract any sense—or dollars, for that matter—from the chaos of the markets. In his new book, Way of the Trade: Tactical Applications of Underground Trading Methods for Traders and Investors, Jea Yu presents an optimized and market-tested hybrid approach to winning in today's algorithm-dominated marketplace for intraday, swing, and portfolio traders.

A cofounder of the popular trading site UndergroundTrader.com, Yu arms traders with the skills they need to generate consistent profits in any market landscape. The book, along with its access to Yu’s 90-minute streaming video course, addresses market realities in all its facets, not just concepts, through a first-hand point of view perspective complete with illustrations, analysis, lessons, case studies, insights and stories.   

“The delivery is multi-layered and lateral to purposely challenge the ‘conventional’ (and losing) mindset to stimulate, entertain and ultimately enlighten the reader in the ways of the trade. Simplicity is an end goal that appeals to the masses,” says Yu. “In the markets, the outcome of any trade will be green of red, profit or loss, simplicity in only two possible outcomes, but that’s linear hindsight mentality.”

Yu explains how The Way of the Trade is not a traditional buy-and-hold method, but a market-calibrated portfolio management system combining precision execution, technical analysis, and the risk aversion and timing of a day trader merged with the teardown scrutiny and analytics of an activist investor. Yu shares this hybrid system, as well as the skills you need to operate it.

Yu adds, “The algorithms certainly have the upper hand—you can't compete with their speed or firepower. But like a guerrilla army, individual traders can still win against a more powerful foe by better understanding the market landscape. Way of the Trade advises how to use this market landscape to your advantage, going to ground when necessary and waiting for the perfect moment to strike.”

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