Diamond, Trading as a Business

Dick Diamond has been trading fulltime since 1965. By my calculation that’s fifty years, although the subtitle of Trading as a Business (Wiley, 2015) is The Methods and Rules I’ve Used to Beat the Markets for 40 Years. Ah yes, at the beginning of his trading career Diamond didn’t beat the market. In fact, in late 1968, when he had positions in fifteen low-priced, go-go AMEX stocks, he went on a vacation and let the positions ride. Two weeks later he had lost 70% of his trading capital. It was a pivotal moment: either throw in the towel or change course.

Diamond slowly morphed into a short-term technical trader, comfortable with both long and short trades. He incorporated options into his trading arsenal. After the CME introduced E-mini futures in 1997, they became his preferred day-trading vehicle.

In this book Diamond shares the MetaStock templates he uses to make his trades. Traders who don’t have the MetaStock platform can most likely replicate three of his four templates—the moving average template, the moving ribbons template, and the RMO template. But they won’t have access to the Bressert indicator, which is based on cycle analysis and shows trend direction.

Diamond is always on the lookout for the 80/20 trade, the high-probability setup. Throughout the trading day he reads the market with his indicators, asking (1) whether the indicators are flat, trending, or somewhere in between, (2) whether the moving averages are separating or converging, (3) whether any divergences between price and momentum are developing, (4) whether the indicators are confirming each other or are in conflict, and (5) what the next most likely 80/20 trading opportunity is. (p. 118)

Trading as a Business is a thin book, devoted primarily to describing and illustrating the four templates. But it’s a decent starting place for the would-be technical trader.