Each time I have written a book. this eing my third, I always remember one of my first teachers in the art of speculation. Dave Nelson was an old time trader when I first met him in 1971 and he remained one of my closest friends and confidants until his death. He once told me that the market will always tell you where it is going to go and usually how fast it will make the trip.
The analogy he used was this, “If you have two brand new Porsche convertibles and one is filled with the highest quality racing fuel and the other with low grade diesel, which one will you bet on to go the fastest?” Markets are no different! They are composed of people with fears. greed and many other emotions mixed into a clever disguise.
After continually looking at thousands of charts over a 30 year period. I have isolated what I believe are the three best indicators that any technician can use as an aid in his successful trading. Before I reveal what these three signals are, I want you to know that I personally feel this is one of the most important things you can learn. It took me over a year of researching chart patterns to isolate what these signals mean. They usually occur simultaneously, sometimes only by themselves, but they are there none the less. They exist because speculators, investors and professional money managers cannot hide their operations for any length of time.
If they want to buy huge quantities of Gold and there is not much Gold around, prices will rise. The same thing goes regarding selling. If prices are going higher there are more buyers than sellers or less of the product to sell. The opposite is true if prices go down. More sellers, less buyers (or more supply). That’s really all you need to remember!
Markets are seldom wrong ! There is one fact that is always present in the markets: If prices go up there are more buyers; if prices go down there are more sellers! Here are a few technical indicators that suggest a market may be changing character:
A. Gaps: A big price gap on a chart is indicative of a change in sentiment and deserves your attention. Use the Shapiro Iteration (wait one time bar) before acting.
B. Wide Range: When price ranges become abnormally wide then price objectives are more likely to be exceeded (1.618). You should know the average daily range of the commodity you are trading.
C. Tail Close: Markets that close at the extreme top or bottom are indicating strength or weakness. Look for several days of tail closes in the same direction.
”Take care of your losses and the profits will take care of the1nselves. ”
– Amos Hostetter, Commodity Corporation (circa 1967)
Price and Time Geometric Trading Plan:
- 1. Try to use 1st Choice signal (Gartley 222).
- 2. Use astro·harmonic timing or Fibonacci count.
- 3. Place stop beyond last swing (high or low).
Trade Analysis Sheet D = (B + C) – A:
Trade Planning Sheet:
Stop protection should be no more than three percent of total trading equity.