Steidlmayer on Markets: Trading with Market Profile / Edition 2 available in Hardcover
Steidlmayer on Markets: Trading with Market Profile / Edition 2
- ISBN-10:
- 0471215562
- ISBN-13:
- 9780471215561
- Pub. Date:
- 12/06/2002
- Publisher:
- Wiley
Steidlmayer on Markets: Trading with Market Profile / Edition 2
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Overview
Product Details
| ISBN-13: | 9780471215561 |
|---|---|
| Publisher: | Wiley |
| Publication date: | 12/06/2002 |
| Series: | Wiley Trading , #132 |
| Edition description: | REV |
| Pages: | 240 |
| Product dimensions: | 6.34(w) x 9.57(h) x 0.89(d) |
About the Author
STEVEN B. HAWKINS has been involved in the markets throughout his professional career. He has acted as an institutional broker and analyst to some of the largest investment banks and trading houses in the world. His trading experience entails proprietary trading in stocks and commodities. Over the past ten years, Mr. Hawkins has instructed traders in the United States, Europe, Australia, Canada, Singapore, and Hong Kong. He has also collaborated on the writing of trading books and has written articles for industry trade publications. Hawkins graduated from the University of Illinois with a degree in economics.
Read an Excerpt
Steidlmayer on Markets
Trading with Market Profile
By Peter Steidlmayer Steven B. Hawkins
John Wiley & Sons
Copyright © 2003
Peter Steidlmayer, Steven B. Hawkins
All right reserved.
ISBN: 0-471-21556-2
Chapter One
EARLY LESSONS
The most important element in becoming a successful trader is
having a sound background consisting of a strong base of knowledge
acquired from being active in the markets through time.
Building this background is in some ways the easiest and in
other ways the most difficult thing for a trader to accomplish.
Trading experiences, observations of all kinds, a focus on what is
most important, and a clear understanding of business principles
are all necessary ingredients in a strong trading background.
Awareness and patience are also required to further develop
one's background. Without a sound background, one's trading
cannot be consistently successful. With it, one can develop clear,
correct ways of thinking and confidence in one's trading judgment.
In today's fast-moving world, some traders try to bypass
the crucial first step of developing a sound background, and then
rationalize the lack of background for the rest of their careers.
But the opportunity to develop the needed background is always
there. I would like to share thebackground that underlies
my own understanding of the markets. The experiences that
went into building it are varied and required a lot of time and
hard work. If you can learn the principles that these experiences
illustrate, you will find that the same principles figure in your
own experiences as a trader. I think you will also learn some
things about today's markets.
Trust and Freedom
In my formative years, from 1944 until I completed high school
in 1956, I gained both education and knowledge. Education provides
a foundation and method for learning, but knowledge
comes through experience. Thus, a lot of knowledge develops on
a subconscious level. I was not aware of this subconscious learning
process when I was growing up, but in later years I found that
I had a large storehouse of knowledge to draw on to gain a good
understanding of any subject. I had stored in my subconscious a
database of real knowledge that came from varied experiences.
I grew up on a ranch in California and much of my early
learning came from being exposed to the family business. Skill
was greatly respected in my family, but more important than
skill was integrity. People who were disloyal, dishonest, or untrustworthy
were not needed regardless of how skilled they
might be. If my family was doing business with someone who
turned out to be untrustworthy, we stopped doing business with
him or her no matter how rewarding the deal might appear to be
on an immediate basis. We used this principle to avoid major
losses in the future, and I stick by this principle to this day.
In my family, no one was condemned for making mistakes.
We understood that all knowledge came from making mistakes.
This idea became dominant as I ventured out into the world and
got bumped occasionally. "That was a good experience," my parents
would say. "Learn from it and go forward."
My parents did not criticize or analyze the mistakes we boys
made. We did that on our own. The burden of facing up to our mistakes
and learning from each experience was on our shoulders.
Patience was always stressed because it reflected and developed
our inner self-confidence. We were not expected to show quick
results; it was understood that "slow and steady wins the race."
My parents encouraged me to take my time to find a profession
that I enjoyed rather than one they would like me to pursue.
The object was to do things and to find out what I could and
could not do-then I would be able to make choices for the future.
Later I learned about the American Indian practice of
putting a young man of 11 or 12 years old out alone on a mountaintop
or in the desert to spend several days searching for the
meaning of his life. The revelation might come through a sign or
perhaps through a dream. Either might reveal the young man's
destined path. I was raised in the same spirit, and it has become
an important part of my background as a trader.
Home was a base from which we could venture and a sanctuary
to which we could always return. My parents assured us that
we would always be welcome to stay with them no matter how
bad things were. But we were responsible to ourselves, to those
surrounding us, and to the community. If we ever violated that
trust, we might lose our sanctuary. Success was viewed as temporary.
We were encouraged not to get too excited when things
went well or too depressed when things did not, but to remain
emotionally balanced. Time was the most important measurement
of all. A person or an idea had to stand the test of time. New
ideas and dreams were not disregarded, even if they did not work
out. They were considered opportunities for learning and growth.
The Importance of Fixing the Gate
When I worked for my father, I learned not to run away from a
problem and to finish what I started. Our philosophy was to do
the job once and do it right. My father never understood why
people would fail to recognize a problem or, if they did, why they
would not deal with it unless forced to. We had many wooden
gates on our ranch, and from time to time they would need repair.
When our ranch hands went through a broken gate, they
would open and close it without stopping to fix it. By contrast,
my father would fix the gate then and there. That was his way.
Years later, when the markets changed in 1969, the trading
method I had developed no longer worked-it was "broken." Although
I was trading in the markets every day, I did not want to
face the reality of the broken gate. Once I realized that I was running
away from the problem, just as the ranch hands had ignored
the broken gate, I motivated myself to stop and correct the problem.
I also learned from my father the importance of the last 10
percent of any job. He always said that this was the most important
part of any task-the part that required the greatest discipline.
This final effort separates success from failure; it separates
the person who always has 10 projects 90 percent done from the
person who successfully finishes each task. It separates the
many climbers who reach the 25,000-foot level on Everest from
the few who reach the summit.
The same philosophy applies to trading. The willingness to
follow through on a task marks the difference between those
who are almost successful and those who achieve their goals. In
my family, we also learned to recognize the abilities of others.
Some people have more talent than you, others less. Do not compete
outside yourself; try to be the best you can within your own
abilities. But learn from observing yourself and the many types
of people around you.
The Secrets of Order and Control
In August 1946, when I was 7 years old, my father and I were
moving a tractor from our valley ranch to our ranch in Nevada.
As we reached the foothills around 4 P.M., about 4 hours from our
destination, we got a flat tire and stopped at a tire shop in
Orville, California. In those days, truck tires were complicated
to take apart and put back together, so at about 4:50 they were
still working on it. My father was anxious to get on with the trip.
The mechanic wanted to quit work at 5:00, so both men wanted
to get the job done. I watched them take the tire apart trying to
put it together again and again, emotionally beating at the tire
with a hammer and swearing at it. Finally, I piped up, "Why
don't you put the tire back together the opposite way you took it
apart?" I can still see the mechanic's face as he turned his head
toward me-his face covered with dirt and sweat-and said,
"Well, how is that, sonny?" I proceeded to tell him how, and 5
minutes later we were on our way.
I learned that by watching you could perceive a sense of order.
Emotions and impatience do not produce results-observation
and understanding do. I have found the same to be true in
trading. When working the land, there was pride in the different
chores we were given. A job had to be done according to standards
that were acceptable to our parents and to the ranch. More
importantly, it had to meet our own standards first, before we
even showed anyone the completed job. In my family, your job
was you-a reflection of your standards. The full-time ranch
workers did a good job with the income-producing crops, but not
as well with the fill-in jobs, which kept them occupied during
slack times. One of these jobs was irrigating the back pasture.
You could not get water across the back pasture because it had
never been leveled. If you were irrigating a bean or corn crop,
which was planted on level ground, you were expected to make
sure water got over every inch. But everybody slacked off on the
fill-in jobs because no one ever checked them. But when I was
asked to irrigate the back pasture, I designed a system of dams to
get water all over the field, which had never before been fully irrigated.
No one ever knew, but that did not matter because I got
personal satisfaction out of doing it. I realized that if I stayed
within the accepted standards for the job, I would not learn anything.
By stretching myself beyond the standards, forcing myself
to do more, I learned a lot.
Another experience taught me to have confidence in my abilities
and to take control of a situation. I was riding with our dogs
on the back edge of a trailer that my dad was pulling behind the
pickup truck. We were moving down a rugged road at about 25
miles an hour. Suddenly, the trailer hit a bumpy stretch of the
road, and I realized that I could not hang on because there was no
place to grip on the back of the trailer. I pictured myself falling off
the truck onto the rocky road. I could see that if I fell, I would
probably break my arms and possibly die. I panicked. I started to
scream, and the dogs began to bark, but my dad could not hear
over the noise of the pickup and the rattle of the bounding trailer.
Fortunately, I figured out a way to avoid disaster. By lifting
my body off the truck with my arms and tilting my weight back
toward my head, I was able to absorb the bounce in my arms and
keep my balance. I rode that way for about three-quarters of a
mile, until we got to the shop. I never told my father about this
experience, although I had been really scared by it. I learned not
to accept disaster. In this episode I fought off disaster with my
brains and my muscles and I gained confidence in my own abilities
as a result.
Looking Beyond the Self
One Saturday when I was about 11, I wanted to hunt ducks. It
was a rainy day with a strong south wind, and there were ducks
and geese all over the ranch. My brothers and I had to move
about 1,500 sheep from one ranch to another before I could go
hunting. My father warned me not to cut across the fields with
the sheep. But as we proceeded, I grew more and more anxious to
go hunting because we were passing right by the ducks and
geese. Finally, I told my brothers that we should take the sheep
across the field to get to the other ranch faster. As we approached
the middle of the field, about 150 sheep got stuck in the mud. If
you can image 150 sheep up to their bellies in mud-each weighing
more than I did-you know what we were dealing with.
Normally the ranch hands got off at noon on Saturdays, but
not that week. Everyone worked until 3 P.M. pulling sheep out of
the mud-I was too small to move them myself. No one complained,
but I realized that my selfish interest had given a lot of
people a lot of extra work. From that experience I learned not to
put myself first.
To me, success in trading also requires unselfishness. When
you are in the pit, you have an obligation to other traders and
brokers in the pit to contribute to the well-being of the market-place,
not just to seek your own profit. The marketplace comes
before you or any other individual trader.
Glimpses of Markets at Work
Observing the ranch hands trading in used guns and cars and my
father trading in land, equipment, and crops taught me to take
advantage of situations rather than letting them take advantage
of me. At harvest time, my father was not speculating for big
gains. He wanted a fair price for his crop to make a normal profit
for his work and his capital investment. If the price at harvest
time was fair, he sold. If he felt the price was not fair, he held and
stored the grain.
When buying, my father wanted a fair price as well. I remember
going with my father shopping to buy all the groceries
for the camp. He knew the price of everything, and he always
bought sale items. If the price was too high he would not buy; he
would substitute or go without. He had a list of what he thought
each item should cost, and he would check off the list when he
got to the counter to make sure they did not make any mistakes
in adding up the bill.
When my father had the option of buying some used farm
equipment, he behaved just as the ranch workers did when
they were buying a used car. If the car was undervalued, they
would buy it; if it was overvalued, they would not. At the cattle
sales, my father would say, "You can make a lot of money
just being a sharp buyer. But if you overpay, there's no way to
get it back." I learned that if you pay more than fair value for
something, time is against you; but if you underpay, time is on
your side. This became the underpinning of my approach to
trading commodities.
My father had one rule in buying property: 6 months or a year
after you buy the property, your neighbor should be willing to
pay what you paid for it. That was his measurement of value. He
was an optimistic man, but one imprinted by the experience of
the Depression. Although he went out of his way to avoid debt,
he could see that in the postwar world values were changing,
making it necessary to use debt judiciously. He knew that the focus
of the ranch should not be on daily operations, but on land
acquisitions. So he would never borrow to finance daily operations,
but he would use credit to buy land.
In buying property, my father had different time frames, different
needs, and different motives, depending on the situation.
He once planned to buy a ranch with his brothers at an auction.
It was a sealed-bid auction, at which everybody had the right to
raise the bid 10 percent. On our way to the auction, he told me
that the other people there would have more money than he did
and that he would have to scare them out of the auction if he
hoped to get the land. To do so, he bid a lot higher than what people
thought the land was worth so there would not be any after-auction
rebids.
When his bid was announced, a hush fell over the crowd.
Many of the farmers in the area told my father that they would
sell him their land at that price. No one else tried to raise the bid,
and my father accomplished his goal. A good broker or trader
does the same thing.
Continues...
Excerpted from Steidlmayer on Markets
by Peter Steidlmayer Steven B. Hawkins
Copyright © 2003 by Peter Steidlmayer, Steven B. Hawkins.
Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
I: THE STEIDLMAYER METHOD.Chapter 1. Early Lessons.
Chapter 2. College Years.
Chapter 3. Chicago.
Chapter 4. Changing Markets.
Chapter 5. The Information Revolution.
II: THE HAWKINS INTERPRETATION.
Chapter 6. Understanding Market Profile.
Chapter 7. Liquidity Data Bank: On Floor Information, and Volume @ Time.
Chapter 8. The Steidlmayer Theory of Markets.
Chapter 9. The Steidlmayer Distribution.
Chapter 10. The You.
Chapter 11. Anatomy of a Trade.
Chapter 12. Profile of the Successful Trader.
Chapter 13. Trading, Technology, and the Future.
Endnotes.
Index.