In an , the price makes a new high, pulls back, and rallies to retest that high, failing to exceed it (creating a lower high). Step 3: The Breakout
: Aim for steady, repeatable gains rather than volatile, high-risk home runs.
The 2B rule is a specialized pattern designed to exploit false breakouts and catch rapid turning points.
Sperandeo argues that 80% of trends reverse using this pattern:
In the sprawling library of financial literature, few books command the quiet authority of Trader Vic: Methods of a Wall Street Master by Victor Sperandeo. Published in 1991, this book has outlasted market fads, trading gurus, and algorithmic revolutions. Yet, for the modern trader, a curious search query has emerged: In an , the price makes a new
Risk no more than 1% to 2% of total trading capital on any single trade.
Example: Instead of risking 1% on each of three correlated tech stocks, risk 0.5% each to keep portfolio beta neutral.
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Sperandeo's technical approach, rooted in Dow Theory, emphasizes identifying the trend and knowing when it's most likely to change. To do so, he provided a set of powerful, actionable tools. Sperandeo argues that 80% of trends reverse using
: This is the most critical rule—protecting what you have before trying to make more.
Only when a trader has established a cushion of consistent profits should they seek exceptional gains. This is achieved by increasing position sizes exclusively during major, well-defined market trends. Market Analysis and Trend Determination
Sell short immediately. Place your stop-loss just above the newly created, failed peak. Risk Management and Market Philosophy
The original book contains dense appendices on Dow Theory, moving average calculations, and risk-reward ratios. The PDF version (especially properly formatted scans or modern re-releases) allows hyperlinked navigation. Clicking a footnote takes you directly to the cited chart. Clicking a glossary term defines it without losing your page. Example: Instead of risking 1% on each of
Download the legal version today. Read it once. Read it again in six months. By then, you won’t ask if the PDF is better. You’ll know it is—because your equity curve will be, too.
The book is divided into several sections, covering various aspects of trading and investing. Some of the key concepts and strategies discussed in the book include:
Most amateur traders enter the market asking, "How much money can I make?" Victor Sperandeo turned this question on its head. His primary rule is absolute capital preservation.