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9781118498958 • Hardcover • US$29.95 208pages • January 2013

Trading systems shouldn’t be as complex as the markets themselves. But finding a simple trading system capable of filtering out all the noise and extracting gold from the ore of raw market data can take years of frustrating and expensive trial and error. Unless, that is, you have a wise and patient mentor like Peter Pham. The Big Trade combines Pham’s account of his personal journey on the road to trading success—and the powerful lessons he learned along

the way—with valuable insights into the strategies of some of the most successful traders of all time. He describes how, through years of testing, analysis, and practice, he arrived at the principles and practices that form the basis of his trading system—a system with which he has achieved nothing less than astonishing success.

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Extracted from The Big Trade: Simple Strategies for Maximum Market Returns published in 2013 by John Wiley & Sons Singapore Pte. Ltd., 1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628.

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Preface

O ver four centuries ago, the invention of both the telescope and microscope brought new focus to a data measurement revolution. The ability to bring far

away objects closer and make tiny objects bigger opened the world and sky up to new levels of observation. The science of optics fed our curiosity and ignited our imaginations.

Today our world is awash in data; we are swimming in it. We call this the Information Age but we could just as easily call it the Data Age . The art of statistics and the use of Big Data are leading to revolutions in fi elds as diverse as the physical sciences, sports, and economics. It doesn ’t matter if you ’re the general manager of a hockey club or a process engineer working for a solar cell manufacturer, data is your work ’s lifeblood, and with-out accurate and precise data we would not have been able to make the kinds of strides we have. This use of data is spear-heading a decision-making revolution that is changing the very foundations of our society.

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xiv p r e f a c e

Similar to how the use of optic lenses four centuries ago paved the way for the Age of Enlightenment, we are living through a leap forward in the types and quality of observations we can make about our world. No longer are we intuiting our decisions based on a mix of anecdotal evidence and supposi-tion. We can make an observation, test its validity, and make decisions based on it. Data is at the heart of how we conduct business and how prices paid form markets for our goods.

Over the past decade I ’ve had the pleasure to stumble upon this big and small data phenomenon in my pursuit of under-standing capital markets. What I have discovered is that data-driven discovery is fundamentally changing the way our lives work, and those who master its manipulation will have an inherent competitive advantage over their peers. This is espe-cially true in the capital markets, where quantitative analysis mixed with the brute force of vast amounts of capital create a very hostile environment for the individual investor. It is my hope that this book will help level that playing fi eld a little bit for you.

As I said, we live in a world steeped in data. Information comes screaming at us in waves and it is easy to be over-whelmed by it, become lost in it. Big Data can and often does overwhelm the smallest actor. But it doesn ’t have to.

The bigger they are, the harder they fall. One person with an idea and the will to implement it in this age of unprece-dented access to high-quality information can disrupt things, and use it to their advantage. Previously, information itself was the barrier to entry into the markets. Today, the biggest worry for most established players is not innovating by producing new information but keeping information under their control and away from you. Think of the music industry or Apple ’s patent litigation against Samsung and you have an idea of where we ’re headed.

Take heart, because inside of each of us is our Big Idea . I believe that. Everyone has at least one, biding its time and waiting for

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you to believe in it. With time, attention, and the proper use of Big Data, we all have the means to see our Big Idea become real. It ’s simple, really, when you stop to think about it. It is a little thing in a big world, but it is the secret to fi nding and making The Big Trade .

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Contents

Acknowledgments xiPreface xiii

Chapter 1 Breaking with Tradition 1 Then I Got High 1 Training Sequence 5 Technical Diffi culties 8 Reading Is Fundamental 17 Inductively Coupled Failure 19 The Big Trade 22 We’re Getting the Band Back Together 23 Summary 26

Chapter 2 The Conditions of Change 27 Livin’ on the Edge 27 Closing Time 31 The Outsiders 36

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cONTeNTS

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viii c o n t e n t s

Living Day to Day 38 Sold to the Highest Bidder 42 Breaking It Down 49 Finites Move in Infi nite Markets 55 Summary 61

Chapter 3 Wax On, Wax Off 63 What Goes Around Comes Around 63 It’s Always Noon Somewhere 71 Opening Range Jitters 77 Objects in Motion 84 Summary 89

Chapter 4 As the Market Turns . . . 91 Subconscious Implications 91 Elephant Walk 95 Breakouts versus Reversals 98 Losing Your Inhibitions 100 Reversal of Fortune 103 Traders Do It with Frequency 111 Rules of Engagement 112 Turn Around and Make Money 116 Heading for the Exits 119 Becoming a Reactionary 125 Summary 126

Chapter 5 The Range Is Your Friend 129 Sideways 129 Waves of Sentimentality 132 Where Are They Now? 135 The Edge of Value 137 The Great One 141 Summary 143

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CONTENTS

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Contents ix

Chapter 6 Closing Arguments 145 Crossing the Great Stream 145 Pressing the Issues 150 The Point of the Journey Is Not to Arrive 153 Summary 156

Appendix A Terms and Defi nitions 159

Appendix B Trading Examples 163

Appendix C Spreadsheet Examples 181

Appendix D Supporting Data for Nvidia Example in Chapter 4 183

About the Author 187Index 189

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CONTENTS

the AuthorPETER PHAM is recognized worldwide as an expert consultant in global equities with more than twelve years of experience in all aspects of capital markets. He has held senior positions at several respected brokerage and investment firms, and worked with some of the world’s largest international funds.

Pham’s site, AlphaVN.com,is an independent research and consulting firm focused on Southeast Asia, where he publishes his views on the capitalmarkets and trading daily.

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