The Art

and Science
of Trading
Course Workbook

Adam Grimes

Hunter Hudson Press, New York, New York

MMXVII
The Art & Science of Trading: Course Workbook 
Copyright ©2017 by Adam Grimes. All rights reserved.

Published by Hunter Hudson Press, New York, NY.

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ISBN-13:

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10 9 8 7 6 5 4 3 2 1

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 Contents

Module 4 Homework

This module begins our work looking at concrete trading patterns with the pullback trade. We then turn our at-
tention to some quantitative perspectives on markets and trading, with a deep look at one way to test Fibonacci ratios.
Though the conclusions of our work there was that we are unable to find any quantitative support for Fibonacci ratios,
the important concept is the thought process: ask questions, think about how to test those questions, and then see
what the market data says.
Asking these questions correctly and understanding the answers we get from testing are not simple tasks. We
looked at some of the potential issues in that unit, but we will extend this work significantly.
This module concluded with some thoughts on record keeping, journaling, and manual backtesting... and this is
where your work begins.

Contents
Section 1: Record Keeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2: Pullback backtest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3: Charting by hand. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4: Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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The Art & Science of Trading: Course Workbook Module 4 Homework

Section 1: Record Keeping

Your work for this module might appear to be less than for previous modules—certainly, the page count is lower.
But that is an illusion! In this module, the emphasis and focus shifts to you doing the work, and this begins with record
keeping.

Journal
This is the perfect time—today, right now, immediately—to start keeping a journal.
Though you can consider the issues of format and exactly what you want to put into the journal later, this practice
will be most effective if it is a routine done consistently. Essentially, you want to make journaling a habit—a very good,
constructive habit that will ultimately play a big part in your success.
For the beginning trader, it’s sometimes confusing to know what to put your in journal. If you aren’t sure what to
write, write that. Write about your feelings about journaling, your feelings about building habits. Write about things
in your life and world you want to change. Write about your experiences trading. Write about your future trading, and
what you think of the work you’re doing in this course. Write about kittens. It doesn’t matter! Just write a little bit,
each day, and let this work evolve as you go along.

P&L Sheet
You also do need a P&L sheet that allows you to record at least the following datapoints for each trade:
• Date In
• Price In
• Price Out
• Initial Stop

You will use this in your research project this week.

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 Section 2: Pullback backtest

Section 2: Pullback backtest

First of all, it needs to be said that this will not be a proper, rigorous statistical backtest. Rather, it is a process
designed to do a few things:
• Train your eye to see the pullback pattern in the market
• Get some idea what edge might (or might not) be in the specific way you see the pattern
• Point you toward some improvements in your perception
• And to get you used to doing some work on historical data

Before you can really do this work, you need access to historical charts and some record keeping system; pencil
and paper will work, but electronic formats are much better. You then need to define the pullback pattern. This can be
difficult, because there is admittedly (and deliberately) some element of discretion. Do not be discouraged. The way
in which you see these patterns will evolve and change, but it is the exposure to market data that will let you evolve.
This is truly a case where the only way you learn is by doing.
So, define the pullback pattern. What, specifically, will get you interested in looking for a pullback? How will you
define a strong enough or sharp enough move to tell you that a pullback might set up? How will you monitor the
shape of the pullback as it develops? Where will you actually get into trades? Where will you place that initial stop?
Take some time to answer those questions, and come up with a rule sheet for pullbacks. (Write it down.) Then, go
through some market data bar by bar, recording key stats for each “trade”, and see how it works and how it feels; your
subjective sense or feeling is valuable. At the first stages, this exercise is as much about you as it is about the market.
Like anything else, this process becomes easier the more you do it. To have a valid test, you need a significant num-
ber of trades, but just get started with the exercise this week.

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The Art & Science of Trading: Course Workbook Module 4 Homework

Section 3: Charting by hand

This is still a valuable exercise, and this will be the last module that carries an explicit reminder to do hand chart-
ing. In the first module, we discussed the several ways you can do this exercise. The details are not important; it is far
more important that you do it.
This should also not be a tremendous time suck—this is not a unique form of torture I have devised. A few min-
utes every day (but every day!) directed to drawing your charts, or a few minutes each hour if you are an intraday
trader, will reward you with deep understanding of price action.
You may wish to leave this exercise, but come back to it whenenever you feel out of touch with the market, or
when you’ve been away from trading for a period of time. There is something about the practice of writing down prices
and/or charting by hand that has deep power to connect us to the flow of the market.

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 Section 4: Readings

Section 4: Readings

From the Art and Science of Technical Analysis:

Pp 19-21
65-76
83-84
154-169
189-212
291-313
409-424

This the heaviest reading from the book in the course, but this is to be expected as we transition from purely theo-
retical, high-level perspectives on markets to looking at applied trading patterns. The readings this week will give you
deeper perspective on the patterns and issues involved.

You may also find the following blog posts interesting and useful:

On journaling
https://adamhgrimes.com/what-do-you-believe/
https://adamhgrimes.com/your-best-trading-book-is-your-own-trading-book-four-steps-to-making-it-real/

Market research and trading edge 

https://adamhgrimes.com/quant-101/
https://adamhgrimes.com/how-do-you-know-if-you-have-a-trading-edge/
https://adamhgrimes.com/how-do-you-know-when-youre-wrong/

Fibonacci ratios
https://adamhgrimes.com/whats-wrong-fibonacci/
https://adamhgrimes.com/fibonacci-fibs/
https://adamhgrimes.com/fibonacci-thinking-deeper/
https://adamhgrimes.com/testing-fibonaccis-12/
https://adamhgrimes.com/fibonacci-conclusions-22/

The pullback pattern

https://adamhgrimes.com/pullback-trade-works/
https://adamhgrimes.com/choosing-best-pullbacks/
https://adamhgrimes.com/thinking-ahead/
https://adamhgrimes.com/trading-a-long-complicated-pullback-in-the-dollar/
https://adamhgrimes.com/trade-pullbacks/
https://adamhgrimes.com/trade-complex-consolidations/
https://adamhgrimes.com/one-step-ahead/

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