Pristine.

com Presents

Core Trading for a Living

With

Dan Gibby
West Coast Manager

Copyright 2001, Pristine Capital Holdings, Inc.

 Disclaimer
It should not be assumed that the methods, techniques, or indicators presented in this book will be profitable or that they
will not result in losses. Past results are not necessarily indicative of future results. Examples in this book are for
educational purposes only. This is not a solicitation of any order to buy or sell.

“HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS.

UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL
TRADING. ALSO, SINCE THE TRADES IN THIS BOOK HAVE NOT ACTUALLY BEEN EXECUTED, THE
RESULTS WE STATE MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF
CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN
GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF
HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO
ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.”

The authors and publisher assume no responsibilities for actions taken by readers. The authors and publisher are not
providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that any
suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. All
readers and seminar attendees assume all risk, including but not limited to the risk of trading losses. Options
involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of
Characteristics and Risks of Standardized Options (www.cboe.com).

Day Trading can result in large losses and may not be an activity suitable for everyone.

Copyright © 1994-2001 by Pristine Capital Holdings, Inc. All rights reserved. Printed in the United States of America.
Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or
distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of
the publisher.
 Table of Contents

Introduction The Key Events

The Major Time Shift 3 to 5 Bar Set-ups
The Major Analytical Shift Tail Set-ups
Fundamental vs. Technical
COG™ Set-ups
Foundation The Strategies
Four Styles of Trading
Mighty MA Play
Core Trading Defined
Core Trading vs. Investing Pristine Buy/Sell Zone™
Macro Core vs. Micro Core CBS™ & CSS™ Plays
The Never-ending Battle Putting It All Together
Tools of the Core Trade
 Introduction

Introduction
 The Major Time Shift

Fact # 1 Fact # 2
20 years ago, the Today, the
typical investor typical investor
looked to hold a looks to hold a
stock position for stock position for
4 ½ years, on 4 ½ months.
average.
 Pristine Theories

Theory # 1 Theory # 2
We believe, the Long-term
investor’s average Investing,
holding period for commonly referred
any stock will drop to as the “buy-and-
to 4 ½ weeks…. hold” approach, is
becoming less
inside of 2 years!! effective by year!
 The Dynamics of Change

What has led to this dramatic change?

I) 25 Year Decline in Commission Rates

II) Worldwide Collapse in Interest Rates

III) Phenomenal Technological Advancements

IV) New Order Handling Rules

V) The Advent of the Internet

VI) A More Sophisticated Public

 Fundamental vs. Technical

Fact # 1 Fact # 2
20 years ago, “Today, the
fundamental ‘purely’
analysis was fundamental
considered the analyst is
only proper way virtually extinct.”
– Mark Douglas, author of
to make market The Disciplined Trader and Trading In
decisions The Zone
 The Dynamics of the Analytical Shift

What has led to this dramatic shift?

I) Money!

II) Markets are not mathematically logical and/or rational

III) The hopes and fears of people move stocks

IV) Under extreme stress and glee, people react the same way.

V) Charts are the foot prints of these actions and reactions

VI) In other words: Charts Don’t Lie!

 The Building Blocks

Foundation
 Four Styles of Trading

Types of Trading
Four Styles of Trading: Core; Swing; Guerilla; Micro

Which fall into….

Two Broad Trading Categories: Wealth; Income

 Two Broad Trading Categories

Wealth Trading Styles Income Trading Styles

Core Trading Guerilla Trading™

- Weekly Charts - 60 Min & 30 Min

- Weeks to Months - Hours to Days

Swing Trading Micro Trading

- Daily Charts - 5 Min & 15-Min

- Days to Weeks - Minutes to Hours

 The Pristine Philosophy

Pristine Tip:

The Pristine Trading Philosophy calls for a

trader to have 1) a Wealth Building trade and
2) an Income Producing trade on….

At All Times!
 Core Trading Defined

What is Core Trading?

1) A style of market play that typically covers a holding period of
several weeks to several months.
months
2) There are two forms of Core Trading: Macro; Micro
3) This style of trading has become the new form of investing.
investing
4) The Core Trader uses weekly charts to make entries and exits.

5) Core Trading is best used on key stocks and indices.

indices
6) Core Trading is the key to capturing substantially bigger gains
than the swing and/or day trader is accustomed to.
7) Core Trading is style of trading that can be practiced by ALL!!
ALL
 Who are we up against?

Who is
Buyer Seller
Smarter?

The Stock Market is a battle between

two players, the buyer and the seller
15
 Candlesticks

Close & High High Open & High

High High

Close Open

Open &
Close
Open Close

Low Open & Low Low Close & Low Low

Candlesticks make it easy to visually see which group, buyers

or sellers, is controlling the market. They also make it easy to
see which group is about to lose or regain control. In the
market, you want to trade with “Goliath.” 16
17
 Stock Cycles Exist on All Time Fra mes (CNXT Monthly)

Monthly (Left) CNXT - CONEXANT SYSTEMS

1998 2000 2001

140

Topping Tails
120 Stage 3 Pristine
traders in
bushes
100
Stage 4 ready to
Pristine traders
80
Stage 2 pounce on
buy on Major breakout
Stage 1 break60 to after NRBs
Major Stage 2 and COG
40
Stage 1
20

100000000 500000

0 Volume
J A J O J A J O J A J Up-ticking
 Stage 2 Uptrend-GREED
STAGE
• Higher highs & higher
lows
• Moving averages & Stage 2
trend up
• Buy the dip
(Minor Stage 2)
 TRENDS

Upward Trend

Consistently higher highs and higher lows (Major Stage 2)

Look to buy shallow pullbacks (Minor Stage 2)

Broken by lower high and a lower low

(Transition from Stage 2 to 3 to 4)
 Stage 4 Downtrend-FEAR
STAGE
– Lower highs &
lower lows
– Moving averages &
trend down
Break
– Sell/short the rallies
from
(Minor Stage 4)
Stage 3
to 4
 TRENDS

Downward Trend

Consistently lower highs and lower lows (Major Stage 4)

Look to short on the failed rallies (Minor Stage 4)

Broken by higher low and a higher high

Transition from Stage 4 to 1 to 2)
23
 Sideways Trend-UNDECIDED
STAGE
• Relatively equal highs
& equal lows Stages 1 and 3
• Moving averages &
trend flat
• Buy dips and sell
rallies
• Stages 1 and 3
represent uncertainty”
 Pristine Buy Setup (PBS) and Pristine Sell Setup (PSS)

Pristine Buy Setup (PBS) Pristine Sell Setup (PSS)

1. Major and minor stage 2 1. Major and minor stage 4
2. 3 or more consecutive lower highs 2. 3 or more consecutive higher lows
3. 3 or more consecutive lower lows 3. 3 or more consecutive higher highs
4. 3 or more red bars 4. 3 or more green bars
5. NRB, COG, Tail, Volume 5. NRB, COG, Tail, Volume
6. Buy 5 – 10 cents above COG high 6. Sell 5 – 10 cents below COG low
7. Stop 5 – 10 cents below COG low 7. Stop 5 – 10 cents above COG high
8. Follow Pristine sell rules 8. Follow Pristine Sell Rules
 Pristine Combo Strategies

•Changing of the Guard (COG)

•Narrow Range Bar (NRB)
•Tails
•Gaps
•Support and Resistance (major and minor)
•Climactic Volume
•Mighty Moving Averages (MAs)
•Pristine Buy and Sell Zones (PBZ and PSZ)
•Time of year, month, week, and day
 Core Trading vs. Investing

Core Trader Sells!

Core Trader Sells!

Core Trader Shorts!

d20ma
d40ma
Investor Buys!
r20ma Shorts!
r40ma
The Investor is a loser!
Core Trader Buys!

Chart Courtesy of MasterTrader.com

 Macro vs. Micro Core Trading
Macro Core Trader Sells!
Key Point: The Macro Core
Trader looks to ride the
entire (macro) move, while
ignoring the temporary
r20ma
weekly set backs.
r40ma
Macro Core Trader Buys!
Charts Courtesy of MasterTrader.com
Micro Core Trader Sells!
Key Point: The Micro Core
Trader only looks to ride
one color, primarily. This is
the “no pain” approach.
r20ma
Micro Core Trader Sells!
r40ma
Micro Core Trader Buys!
 Core Trading Chart (QQQ)
S
CSS 3-5 Candlestick Bars

20ma
40ma
BT S
B 20ss
3-5
3-5 S
B
Pristine Charting Power!!
CBS
Color Coded Volume B
Volume Climax

Chart Courtesy of MasterTrader.com

 Core Trading Tools

Tools of the Core Trade

Charting Tools: Weekly charts displayed in
Japanese Candlestick form.

Technical Tools: Color coded volume; 20 & 40

period ‘simple’ moving averages.
Weekly Chart with Volume

Wide Bars

Japanese Candlesticks

Small Bars

Color coded Volume

 Core Trading Tools

The Only Tools You Need!

1) Weekly Chart

2) Colored Volume Japanese Candlesticks

3) 20sma

4) 40sma B
B
B

B r20ma
B r40ma
Color coded Volume
 Japanese Candlesticks

BUYERS SELLERS
CONTROL CONTROL

HIGH TAIL
CLOSE OPEN

BAR

OPEN CLOSE
TAIL
LOW

Each bar tells us who won the battle within that bar
COLOR: Buyers vs. Sellers - Controlling The Market (Goliath)
LENGTH: Indicates Weakness Or Strength
REVERSAL: Type of bar after extended run
 Candlesticks

Close & High High Open & High

High High

Close Open

Open &
Close
Open Close

Low Open & Low Low Close & Low Low

Candlesticks make it easy to visually see which group, buyers

or sellers, is controlling the market. They also make it easy to
see which group is about to lose or regain control. In the
market, you want to trade with “Goliath.” 34
 An Important Statistical Fact

Pristine Tip:
Bulls and Bears cannot consistently win more
than 5 battles in a row. Each side typically
surrenders to the other after 3 to 5 battles won.
However…

If the Bulls or Bears win significantly more than

5 battles in a row, a catastrophic loss will be the
price paid for such an abnormal winning streak.
 Relative Strength

• A Stock that remains strong or level when the Index

or sector falls, shows RELATIVE STRENGTH and
should move higher when the market moves higher
• A Stock that cannot rally with its sector shows
RELATIVE WEAKNESS and is likely to fall on the
next market sell off
• When futures gap down, stocks that cannot
fill their gaps while the futures rise show
RELATIVE WEAKNESS
• When futures gap down, stocks that fill their gap
while the futures fall show RELATIVE STRENGTH
 3 Key Pristine Events

The Key Events

 3 to 5 Bar Rallies

Pictures of Greed
Think “Sell”
Think “Sell”

Think “Sell”

3 Bars Up 4 Bars
PristineUp
Capital Holdings, Inc.5 Bars Up
 3 to 5 Bar Rallies

Pictures of Pain

Think “Buy” Think “Buy” Think “Buy”

3 Bars Down 4 Bars Down
Pristine Capital Holdings, Inc. 5 Bars Down
 Count Your Way to Profits

4 Green Bars 3 Green Bars

3 Green Bars

3 Red Bars
3 Red Bars 5 Red Bars
5 Red Bars

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Count Your Way to Profits

5 Green Bars

4 Red Bars
3 Red Bars
3 Red Bars

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Bull & Bear Tails

Bottoming & Topping Tails

Topping Tail (TT)

Bottoming Tail (BT)

Pristine Capital Holdings, Inc.
 Topping Tail Play I

Topping Tail Topping Tail

1) 6 Up Bars in a row
2) Topping Tail (TT)
6-Up 6-Up

$160 Catastrophe!
The Party is Over!

r20ma r20ma
r40ma r40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Bottoming Tail I

1) 6 Down Bars in a row

2) Bottoming Tail 110% Party!

6-Down
It’s Party Time! 6-Down

Bottoming Tail
Bottoming Tail
r20ma
r40ma r20ma
r40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Bull & Bear COG

Changing of the Guard (COG)

Bear COG

Bull COG
Pristine Capital Holdings, Inc.
 Bear Changing of the Guard™

Topping Tail Topping Tail

Bear COG™ Bear COG™

1) 5 Up Bars in a row
5-Up 5-Up
2) Bear COG™
3) Topping Tail (TT)
$120 Catastrophe
The Party is Over!

r40ma r40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
Changing of the Guard™ Plays

4 Up Bars Bear COG™ 5 Down Bars

3 Up Bars 3 Up Bars

5 Down Bars

4 Up
3 Down Bars Tails Bars
Bull COG™
Bull COG™ Bull COG™

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Pristine Core Trading Strategies

The Strategies
 Mighty 20ma Plays

The Powerful 20ma Play

r20ma Play
d20ma

r20ma d20ma Play

Pristine Capital Holdings, Inc.

 20 MA Play I

1) Rising 20 MA (r20ma) +
2) Rising 40 MA (r40ma) +

3) r20ma > r40ma =

Stock Will Rally Off r20ma

r20ma
r40ma
3 D/Bars
3 D/Bars

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 20 MA Play II

1) Rising 20 MA (r20ma) +

2) Rising 40 MA (r40ma) +

3) r20ma > r40ma =

Stock Will Rally Off r20ma

r20ma
r40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 20 MA Play III

1) Declining 20 MA (d20ma) +

d20ma 2) Declining 40 MA (d40ma) +

d40ma 3) d20ma < d40ma =

Stock Will Decline Off d20ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 20 MA Play IV

d20ma
d40ma

1) Declining 20 MA (d20ma) +
2) Declining 40 MA (d40ma) +

3) d20ma < d40ma =

Stock Will Decline Off d20ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Pristine Buy & Sell Zones™

Pristine Buy & Sell Zones

Sell Zone

Pristine Buy Zone™ Play

(PBZ) d40ma

d20ma

r20ma

Pristine Sell Zone™ Play

r40ma
(PSZ)
Buy Zone
Pristine Capital Holdings, Inc.
Pristine Buy Zone™ Play I

r40ma
r20ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
Pristine Buy Zone™ Play II

r20ma

r40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
Pristine Sell Zone™ Play I

d20ma
d40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
Pristine Sell Zone™ Play II

d20ma
d40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Climactic Buy & Sell Set-up

Climactic Buy & Sell Set-ups

Climactic Sell

Sna
rs

p Ba
40ma
Ba
Up

ck to

Wide Distance
Wide Distance
ore

a
20m

40 m
3o
rM

rM
3o

k to
ore

Bac
Do
20ma
wn

Sna p
Ba
rs
Climactic Buy
Pristine Capital Holdings, Inc.
 Climactic Sell Set-up I

1) 6 Up Bars in a row 2TT

2TT
2) 2 Topping Tails (TT)

3) Wide Distance from 20ma 6-Up 6-Up

The Party is Over!

$75 Catastrophe
r20ma

r40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Climactic Sell Set-up II

1) 6 Up Bars in a row 3TT 3TT

2) 3 Topping Tails (TT)

3) Wide Distance from 20ma 6-Up 6-Up

4) Climactic Volume
$85 Catastrophe
The Party is Over!
r20ma r20ma
r40ma r40ma

Climactic Volume

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Climactic Sell Set-up III

1) 5 Up Bars in a row Tail/COG Tail/COG

2) Topping Tail (TT) 5-Up 5-Up

3) Bearish COG
$70 Catastrophe
4) Wide Distance from 20ma
The Party is Over!
r20ma
r20ma
r40ma r40ma

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Climactic Buy Set-up I

d20ma
d20ma
It’s Party Time!

125% Party!
1) 9 Down Bars in a row 9-Down 9-Down
2) Climactic Volume
3) Far from 20ma
Climactic Volume Climactic Volume

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Climactic Buy Set-up II

1) 6 Down Bars in a row

2) Bullish COG d20ma
3) Far from 20ma
d20ma

6-Down 6-Down
A 100% Party
COG
COG
It’s Party Time!

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Climactic Buy Set-up III

1) 4 Down Bars in a row

2) Climactic Volume
3) Bullish COG
4) Far from 20ma

d20ma

4-Down $12 Party

4-Down
It’s Party Time! COG
COG

Climactic Volume Climactic Volume

Pristine Capital Holdings, Inc.

Chart Courtesy of MasterTrader.com
 Core Trading Summary

Core Trading Combinations

3 to 5 Bar Buy/Sell Set-ups
Can happen with:
Powerful Core
1) Topping/Bottoming Tails Trading
Combinations
or
2) Bull/Bear COG Set-ups
These Combinations can happen:
1) At or Near the 20ma
or
2) In the Buy/Sell Zones Location
or
3) Far from the 20ma
 Tools & Tactics – A Must Read

A Japanese proverb says, “If you

wish to know the road, inquire of
those who have traveled it.” The
authors of Tools and Tactics for
the Master Trader clearly know
the road. Their unique insights,
trading tactics and powerful tools,
so enjoyably presented, make
this a book that belongs on every
trader’s shelf.

Steve Nison, CMT - Author of

Japanese Candlestick Charting
Techniques
www.pristine.com
 Pristine’s Core Trading Manual

Pristine’s Core Trading Manual is

available for download @
www.pristine.com/core.htm

For more info call e-mail

staff@pristine.com