The Insider Edge

Bestselling trading author Guy Cohen introduces the OVI indicator to stock trading

More fortunes are made from trading stocks than any other financial instrument, and these windfalls are available to anyone who has access to the right information.

Presenting the methods used by the best traders in the market, The Insider Edge: How to Follow the Insiders for Windfall Profits uses options transaction data to reveal what "informed traders" are doing, and how anyone can take advantage of these techniques.

Whether the markets are choppy or trending, it always pays to wait for a clear opportunity. Any good trader knows that they need an Edge to excel, and this book demonstrates how the combination of specific chart patterns, author Guy Cohen's proprietary OVI indicator, and a robust trading plan, when combined, will deliver success.

In The Insider Edge, Guy Cohen reveals:

• How you can profit from options without having to trade or even understand them!
• Why the smart money often gravitates to the options markets.
• How options transactions can often reveal the direction of the stock price.
• How you can trade using information typically reserved for the pros.
• A trading plan the delivers maximum safety and windfall profits.
• How to use his proprietary OVI indicator online for free, so you can start to follow the insiders.

The author emphasises that The Insider Edge is for anyone who wants to trade stocks. No options knowledge is required to benefit from this book. His method involves observing what the smart options traders are doing, and then following them. This is what gives you The Insider Edge.

Preface vii

Acknowledgments xiii

Introduction 1

March 8, 2008 3

March 2008 5

March 2009 6

April 26, 2010 7

March 2011 8

Summer 2011 9

September 7, 2011 10

“Informed Trading” and the OVI 11

The Insider’s Rationale 12

Trading Breakouts 13

Chapter 1 The Most Popular Chart Patterns: Why Chart Patterns Are So Important 15

Price Bars 16

Support and Resistance 20

Trends 30

Flag Patterns and Consolidations 33

Head and Shoulders 43

Indicators 48

Learning Points 51

Chapter 2 The OVI: Guide to the Insiders: Introduction to the OVI 53

What Is the OVI? 59

When to Use the OVI and When Not to Use It 64

The OVI with Stocks 78

Learning Points 105

Chapter 3 Flags and Channel Breakouts in Detail: Focusing on the Patterns That Work Best with the OVI 109

Bull Flags 110

Bear Flags 118

Flags with a Strong OVI Signal 127

Channel Breakouts 128

Setting the First Profit Target 134

Learning Points 146

Chapter 4 The Trading Plan: The Complete Trading Plan 151

Order Types 153

The Trading Plan 155

Learning Points 214

Chapter 5 Putting It All Together 217

Summary of the OVI Trading Method 219

A Few More Examples 221

Action Steps 226

Summary of Tools for You to Use 239

Take the Next Step Now! 240

About the Author 241

Index 243

An innovator in financial trading, Guy Cohen is the creator and originator of the unique OVI Indicator, FlagTrader, and OptionEasy, among other trading tools. Guy is also an established bestselling author, commentator, and entertaining speaker on trading and the financial markets.

Guy specializes in trading stocks and options, with his hallmark user-friendly approach and liberal use of illustrations. His published work is complemented by pioneering breakthroughs in the areas of trading and technical indicators, especially the OVI. With Guy's market-tested innovations, you will find proven techniques to succeed, complemented by industry-leading customer service.

Guy earned an MBA in finance from Cass Business School, City University London.

The most profitable traders succeed because they can see what others cannot. Now, with The Insider Edge in your hand, you have everything you need to follow in their footsteps and put yourself on the path to trading for windfall profits.

Time and time again, author and trading guru Guy Cohen has successfully anticipated market events—including the fall of Bear Stearns—which most commentators failed to see coming.

In The Insider Edge, Guy shares his proven secrets so that you, too, can read the markets like a pro and make better trading decisions. Many of the savviest, best informed traders gravitate towards the options market, and this book reveals a revolutionary new trading indicator, the OVI (Options Volatility Indicator), that uses options transaction data to follow what these experts are trading so that you can spot—and capitalize on—new trends as they emerge.

Introducing the OVI for the first time, explaining why it works, and what it can do for you, this book shows you how to combine the OVI with the right chart pattern to build a robust trading plan. Offering a helpful overview of the most popular chart patterns and identifying those that work best with the OVI, The Insider Edge is designed to help you make money when breakout opportunities emerge, while minimizing risk at all times.

Groundbreaking and innovative, this is a book about making smart decisions, uniquely informed by what the pros are doing. Providing readers of all levels of trading experience with access to invaluable additional resources online, including the top twelve OVI charts, this is the only book you need to gain the ultimate insider edge.