Q. How much time will I need to spend?

A. Minimal. Half an hour per week day and about two hours on the week-end. As my
readers already know, my idea of fun is sailing and spending time with family and friends,
not sweating over multiple computer screens all day.

With my method you identify likely stocks with your weekend searches (done by your
software), then track those stocks on the open and close of the market each week day,
buying or selling depending on price action and the charts.

Q. What if I can’t look at the market on the open and close?

A. Not a problem. Many of my students place their trades in the lunch hour, or when the
market is closing just before 4pm. If you are not able to trade in these times, there are
simple ways of placing trades out of hours.

Q. What is the difference between Technical Analysis and Fundamentals?

A. Technical Analysis uses charting of stocks to determine if the price is likely to rise or
fall, either in the short, or long term. Charts also indicate price targets, and prices that
indicate resistance or support. The charts are based on the sell prices of the stocks, together
with other information eg, the volume of the stock traded in a particular unit of time, for
instance, in one day.

Technical Analysis, or charting, means an investor is watching what the market is actually
doing – following the money, as it were. This can be contrasted to what the market says it is
doing, or Fundamental Analysis.

Fundamental Analysis is a consideration of a company’s performance - what it and the
market says it is doing. A chartist prefers the literal nature of analysing what is actually
being bought and sold, rather than the minutae of company reports and announcements,
business projections and the general “static” of the market place. A chartist is also of the
view the market has already priced in the reality of a company’s performance well before
the average investor is even aware of it.

Q. Is Charting something New?

A. No. General charting has been used since at least the early 1900’s. “Candle” charting was
developed by the Japanese in the 1600’s. Candle charting was adopted relatively recently
by Westerners. Candles are preferred by many serious traders as they provide an easily
grasped picture of what the market or stock is doing. It is immediately apparent if what is
charted is going up, or down – what its highs and lows were for the period charted

Q. What do I need to get started?

A. To invest using Technical Analysis you will need:

• a basic computer,

• charting software,

• data updates (to provide the daily price moves of the market for your charting

• Access to the internet,

• An online trading account, or a full service broker.

Q. Do I need to be computer literate?

A. Only basic skills are required. I have successfully taught many investors who had never
used a computer before. The cheapest basic computer is adequate for your needs.

Q. What software do I need?

A. Before computerisation, charts were drawn by hand. Traders drew and updated their
own charts, or employed skilled clerks or charting services to assist them. Today we have
software for that.

What software then?

Any charting software that will allow you to display price and volume in candle format and
allow you to search the data base for potential trades is all you need.

Two of the most popular software packages available are “Insight Trader“ and “Metastock”.
I personally use Insight Trader, and have done so for 20 years, because of its speed and
great search capability.

Q. How do I get Data?

A. You will need to obtain the daily price action for the stocks in the market you want to
trade. This is known as a data feed.

There are several vendors who provide this service. Once your software is set up the vendor
will guide you through the process of how to download the data and have your software
automatically distribute it so all your charts will be updated.

Data vendors include “Vestdata”, “Paritech” and “Almax”.

It is also possible to download data from some online Brokers such as “Comsec”. To go this
way you may need to be a little more computer savvy.

Q. What kind of internet access do I need?

A. Basic. With my method, you only need to look at the market at the opening and after
the close.

Q. Do I need a broker?

A. Yes. These days most traders use an online broker, as contrasted to a full service broker.
A full service broker is the kind you see in the movies. They actively advise their clients on
what stocks to invest in and charge accordingly.

The advantage of an internet broker is you just need to log onto their website and enter
the trade, for a minimal fee. You of course need an account with them and the shares
registered with them.

If you have shares you have owned for some time, you will need to contact the broker
(preferably ) by phone and have them transferred to their register which is known as
the “CHESS” system. It’s easy to do.

Q. How do I open an online Account?

A. To open an online account you will need to either download the application form or
contact them by phone and have them either email or send the application to you.

The application form will consist of many sections but you only need fill in some of these,
depending whether you are trading as an Individual, Company, Partnership or through your
Self managed Super Fund.

I find it is easier to ring and the broker and have them advise exactly which pages you need
to fill in.

Q. Can I use these methods to trade other markets than stocks?

A. The charting techniques you will learn from our DVD and workshops, will work in any
freely traded market and in any time frame.

I have used these techniques to trade a four minute chart on Futures markets, daily
and weekly charts on Stock and Futures markets. They are work on foreign markets -
both commodity and Indexes. Price movements are driven by both fundamental and
psychological elements (fear, hope and greed). The latter is as important, if not more so
than the fundamentals, in determining price movement.

Q. How much money do I need?

A. I believe the amount of money needed to trade, using a well planned risk management

strategy, is around $10,000.

This is based on making around $2,000 investments per trade. With most online brokers,
the brokerage on this size trade will be between $20 and $30 – brokerage is usually a set
amount for trades of less than $10,000 which amounts to 1 – 1.5%.

If the size of the trade is reduced to $1,000, the brokerage stays the same dollar amount, so
this means the cost of the brokerage considered as a percentage, almost doubles.

$10,000 also means several small losses can be made without wiping out your capital.

Q. What can I do to reduce the chance of losing all my money?

A. As a trader, risk management is the critical element in preventing a big percentage loss
of capital. This is an essential part of my teaching, both in the DVD and Workshops.

My approach to risk management is simply understood and applied. It is based around what
the individual trader can stomach losing, rather than say, a percentage of capital, as is often
suggested. An individual must feel comfortable and in control of their risk – trading should
be fun, not fraught with stress.

Once a possible maximum loss is chosen, this can be used to determine how many shares
can be purchased for that particular trade. This is just as important to the individual trade
as it is to the entire portfolio. Stop Losses are also integral to the construction of a risk
management strategy.

Q. Is the DVD tax deductable?

A. I’m not a tax expert, but my best advice is if you are trading, then educational expenses
relating to your trading are tax deductable. However this may vary, depending on various
things like whether the cost was incurred by the trading entity and your current tax status.
If you have any doubts about the tax deductability of these or any expenses, it is always
wise to contact your accountant for verification.

Q. Can I trade in my Super Account?

A. Again, I’m not a tax expert, but you can certainly buy and sell shares in your Self
Managed Super Fund. However you cannot run a “business” in your Super fund. You will
need to consult with your Financial Adviser and or Accountant to sort out how to structure
your share holdings within your Super fund.

Trading Terms

Q. What is Technical Analysis?

A. Technical Analysis uses price action alone to determine the likely direction the share
price or Index will move. Fundamental Analysis on the other hand uses economic
forecasting and likely company results, along with all sorts of other data, to determine likely
price movement.

The belief of Technical Analysts is that between them, all the market participants know all
the likely elements that will affect a share price. This along with their fears, hopes and
greed will determine the price. They then put their money where their mouth is and the
result is a price action we can analyse.

Q. What is Risk Management?

A. Risk Management is a process where the Trader manages the money invested in such a
way that the inevitable losses suffered from time to time when trading the market are kept
within acceptable limits.

Q. What is a Stoploss?

A. A Stop Loss is the price selected by the Trader at which, if the stock falls to that price, it
will be sold. This is one method of limiting losses.

Q. What is a Trend?

A. There are three basic trends. Up, down and sideways. An uptrend is simply a series
of higher highs, a downtrend a series of lower lows and a sideways trend is when the price
moves within a narrow price range for a period of time. Depending on the time frame the
trader is working with, trends can be seen weekly, daily, hourly and right down to a few
minutes, in a very liquid market.

Q. What is a Pivot Point?

A. Different authors and different software use different definitions of a pivot point. The
definition I use applies to all time frames, for example weekly, daily and down to a few

My definition for a pivot point to the upside is - the closing price for the last price bar
(candle) for the time period being studied, is higher than the high price of the price bar
(candle), which made the lowest price for the move down.

For a pivot point to the downside to form, the closing price of the most recent price bar
(candle), must be lower than the price bar that made the highest price of the move up.

In both cases the candle which completes the pivot point can be one, two, or many, candles

after the respective high or low occurred.

Q. What is meant by Shorting?

A. A stock is shorted when a trader thinks its price will fall. The trader sells the stock at a
high price, with the intention of buying it at a lower price (so they can honour the sale) and
hence makes a profit by the price falling.

Over the past few years various financial instruments have been constructed to make
profiting from a falling market a simpler process. However there are greater risks involved
in shorting than in conventional stock buying, as they all involve leverage.

Q. What is Leverage?

A. When the term leverage is applied to trading the markets, it means the trader has used
borrowed money to enter the transaction.

Many new to trading do not fully comprehend the consequences of leverage in some of the
newer financial instruments and the extent of losses, if they enter a trade which moves in
the opposite direction to that which they expected.

My advice to any new trader is to gain experience over at least a full market cycle (bear and
bull), trading straight stocks, before using any form of leverage. This gives you a better
understanding of risk management and your emotional acceptance of losses.

Q. Can I use Charting to Short the market?

A. Yes, as all charting is doing is telling you the likely direction the market is going to move.
There are various price patterns which occur in a market whether it is moving up or down.