Over the ensuing years, the popular and practical definitions of wealthy adjusted for inflation, but the IRS code did not. And even though Congress has approved inflation-adjusted patches for many years, the current exemptions stand at just $58,000 for married couples filing jointly and $40,250 for single filers. The 2007 patch increased the levels effective to $66,250 for married couples and $44,350 for singles, and allows nonrefundable personal credits to be used to offset income when calculating AMT.

Now, instead of a tax net for the wealthy, the AMT has become the “stealth tax,” torpedoing upper-middle class taxpayers who don’t see it coming until they hit line 44 of their 1040. According to the Urban-Brookings Tax Policy Center, just 20,000 taxpayers fell under the AMT in 1970. By 2006, that had risen to 4 million. The

The problem with the AMT lies not in its tax rate – 28% compared to the 35% top bracket of the regular tax system – but in the deductions it doesnt allow. You can still take mortgage interest and charitable donations, but the AMT excludes state and local income taxes and property taxes, unreimbursed business expenses, child tax credits, tax preparation fees, legal fees and home-equity loan interest.

Utilizing incentive stock options might be the biggest, most unexpected whammy. Under the AMT, the difference between the exercise price and the market price counts as income. Before you exercise incentive stock options, consult a financial professional. The amount of options you exercise and the timing can significantly impact the amount of taxes you’ll owe on the gain.

Private activity bonds, municipal bonds for public projects like airports and stadiums, lose their tax-free status in AMT land. The offering circular for these bonds usually carries a disclaimer saying they might be subject to the AMT. Consult your financial professional before investing in or selling private activity bonds.

The typical tax strategy of delaying income and maximizing deductions may push you into the AMT zone. A financial or tax professional can assist you with balance ordinary income against deductions, including state taxes and when you pay them, to at least reduce if not eliminate the AMT hit. Such planning should look beyond the present tax year to ensure that minimizing AMT exposure in the current year doesn’t maximize it the next.

Although the income patches Congress has made to the AMT levels have kept many taxpayers out of the AMT’s clutches, a permanent repeal seems unlikely. The Treasury has estimated the resultant loss to the tax coffers would be $500 billion over 10 years. For now, the best strategy will be constant vigilance and competent tax and financial counsel to ensure the AMT doesn’t take the wind out of your financial sails.

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Everyone has their own twist to these patterns. I notice one reviewer had mentioned that he profited on the exact opposite strategy that the book had described. Selling new lows and buying new highs. Personally I think this is more dangerous than the strategy in the book(Buying new lows and Selling new highs). That is what swing trading is about. I do the same exact strategy as they mention in the book, and make money from it frequently. But I am also aware of the fact, that new lows/highs are set for strong fundamental reasons, so instead of using regular stops, I use Stop and Reversal(SAR)type orders. These order give me the best of both worlds. If my estimate is correct, I get an early fill as the market decelerates in one direction and accelerates in the opposite. If the trend continues, my SAR order gets me out, and fills me in the direction of the momentum. Price, Momentum, Time and Volatiliy and how you react to them, is the key to swing trading.

It’s not set in stone that these patterns work everytime, but as the title mentions, it’s the probabilities of the markets reaction when these patterns form. Like any other method in trading, nothing works everytime, but as years go by, you find out what works best for your trading style and what doesn’t. This book didn’t teach me anything that I already have found out through experience, but for traders interested in swing trading, it’s a fantastic starter book and worth the investment if purchased. It excerises the mind’s of traders on how to anticipate the market, thereby always thinking one step ahead of it. And when your anticipation is wrong, get out!

One other important factor. Rashke was a former successful floor trader and Connors was a hedge fund manager. These people know how to trade professionally. They know how other floor traders trade on the floor, and how institutional giants such as ADM,Refco and Rosenthal Collins play their cards and make money. In other words, their livelyhood depended on their attention to detail in the area of trading. They aren’t like most us that trade, that have a job to fall back on. This is their job and main source of income! My point is, don’t just learn their techniques,setups and strategies, but more importantly, learn their mindset, and what they do when the market moves in favor or against them. Determine how they react to such conditions and take notes! Through time and experience, you’ll soon notice that you will be able to react with percision and timing as these professionals do, without doubt but with full confidence!

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