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significant. Also, when there is an area of three or more numbers, it is important to examine where the closest convergence of numbers occurs within that potential reversal zone.

It is important to note that these methods are not an exact science - its more like an art. Although these methods do require precise calculations, a "feel for the numbers" is essential to gauge accurately the price action, to determine valid reversals and to optimize trade executions.

These skills require consistent dedication to research past harmonic examples and to analyze current set-ups. The initial "training" period will be mentally challenging. However, once you have gained experience with these techniques, it will become much easier to identify harmonic opportunities and successfully execute trades.

I have a friend who recently earned his pilots license. Although he was able to grab the controls and fly the plane on his first lesson (with the instructor present), it took him almost a year of consistent flying before he was able to really develop a feel for the airplane. On one flight, he allowed me to take the controls. He instructed me to maintain the altimeter at a specific level. I took command ofthe controls and started to fly the plane.

As I was flying the plane, I wanted to look out the cockpit and admire the scenery around me. However, every time I looked out the window, the planes altitude dropped. I would look back at the altimeter and ascend to adjust our altitude back to the required height. After flying the plane and maintaining the altitude by focusing directly on the instrument gauges for a few minutes, my curiosity would get the better of me. Sure enough, I would begin to sightsee. As soon as I did, the planes altitude would drop. When my friend took over the controls after my attempt to fly the plane, he was able to maintain the altitude precisely without looking at the altimeter at all. He told me that it took him an initial period of training before he was able to maintain the planes altitude without looking at the altimeter. It required many hours of flying to develop his feel for the plane.

In the same manner, these methods for identifying harmonic set-ups require training and practical experience. Although you might be able to calculate Fibonacci numbers and identify pattems that define potential reversals, these methods require that special touch of intuition, earned through dedicated and consistent work, before these techniques can truly be mastered.



Gauging Price Action

Price Bars

Since a stocks trading action is exhibited through individual price bars, it is important to have a basic understanding ofthese formations. There are four basic elements of a price bar: open, close, high, and low. Although this may seem very simplistic, it is important to review the nature of price bars because a stocks price action within the potential reversal zone will determine the validity of the harmonic set-up.



Bullish Price Bar

The open and the close define a bullish price bar. Simply, if the close is above the open, the price bar is considered bullish. The degree of bullishness can vary based upon the distance between the open and the close.

High

Open

Close

Bullish Frice Bar

This simple illustration is very crucial because it defines the result of trading within a specific time frame. Since a bullish price bar represents a stock that closes above the open, it is possible to draw certain conclusions regarding the price action. In essence, a bullish price bar manifests the result of more buyers than sellers during that particular time period. When this price bar appears in a bullish potential reversal zone, it signifies that the trend is potentially changing.



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