c03 JWBT016-Busby September 30, 2008 14:23 Printer: TBD
Opening the Vault with Key Numbers 47college students have learned. I draw a “T” on a piece of paper. On one
side of the letter I list all of the reasons for going long at a particular time.
On the other side I list all of the reasons for going short. Key numbers are
central to my strategy. If the key numbers near the current trading price
evidence a move up, the bulls get a check on their side of the “T.” When
major resistance is broken, the bulls get another check on their side. Or, if
the bears are strong enough to hold back the bulls and prevent them from
moving above resistance, they earn a check in the bearish column. Using a
checklist makes it possible to keep emotions out of trading and focus on
the numbers.
The reverse is true for the bears: if support numbers hold, the bulls
get the check. The strength of the bears is in question because the bulls
succeeded in drawing the line in the sand and defending that price point
against attack.
For many years I tracked key numbers manually. Following prices
with pencil and paper can be done, but it is time consuming and errors
can be made. In this age of Internet communications, there is no need to
do it the old-fashioned way. Several years ago, I began working with a
software specialist to develop a program that organizes data and tracks
key numbers for my students and me. By doing so, the software iden-
tifies entry and exit points for stocks, futures, and stock options. I call
this particular software my StockBoxTM. The program cuts many hours
off of my preparation and planning time. Figure 3.6 shows the power of
technology and how computer programs can analyze and organize masses
of data.
StockBoxTMrecords the weekly and monthly high of the particular
product being traded. It also notes the average true range (ATR) and the
daily open, high, low, and five-day high and low. After noting those key
numbers, it identifies a buy and sell zone.
If you want to trade to win, learn about key numbers and use them
effectively in your trading. They will serve as guides through the market’s
maze and help you stay on the right side of the action.Review
Effective trading requires good analysis of market conditions. One needs
to know whether to be long, short, or out of positions. I use time as one
part of my analysis, and I use key numbers as another. Without the use of
key numbers, I could not possibly answer correctly the long, short, or out
question. My trading would be nothing more than aiming at a number on a
dartboard.