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1 Part III: Pattems Chapter 12: Pattems ......................................................113 Chapter 13: AB=CD........................................................115 Chapter 14: Gartley 222...................................................157 Chapter 15: Butterfly ....................................................189 Chapter 16: Three Drives..................................................217 Part IV: beaming the System: Putting it All Together Chapter 17: Potential Reversal Zone Confirmation....................247 Chapter 18: Scanning for Stocks..........................................257 Chapter 19: Tools for Trading............................................261 Chapter 20: Developing the Trading Plan...............................265 Chapter 21: Gaugmg the Profit Potential................................269 Chapter 22: Sticking to the Plan..........................................277 Conclusion...................................................................283 Appendix.....................................................................285 Bibliography.................................................................303
Parti Harmonic Trading
Harmonic Trading Harmonic trading is a metliodology that utilizes the recognition of specific price pattems and Fibonacci numbers to determine highly probable reversal points in stocks. This methodology assumes that trading pattems or cycles, like many pattems and cycles in life, repeat themselves. The key is to identify these pattems, and to enter or to exit a position based upon a high degree of probability that the same historic price action will occur. Although these pattems are not 100% accurate, these situations have been historically proven. If these set-ups are identified correctly, you can discover significant opportunities with a very limited risk. One of the earliest references to harmonic trading was made by J.M. Hurst in his cycles course from the early 1970s. His Principle of Harmonicity states: "The periods of neighboring waves in price action tend to be related by a small whole number." (Hurst, J.M., J.M. Hurst Cvcles Course, Greenville, S.C.: Traders Press, 1973.) The important concept to grasp is that price waves or distinct price moves are related to each other. Futhermore, Fibonacci numbers and price pattems manifest these relationships, and provide a means to determine where the tuming points will occur. When these tuming points are identified correctly, trades are executed at a price level where the cycle is changing. Essentially, this type oftrading is respecting the natural ebb and flow of buying and selling. In doing so, these trades are executed "in harmony" with the market. For example, when a stock is bought at this tuming point, the majority of the selling that has 
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