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Although it is more time consuming, I suggest that you calculate the numbers manually - without computer software - at first. When you initially utilize this methodology, it is important to develop "a feel for the numbers." Although these techniques reveal potential reversal areas, a stocks price action does not always "bounce" offthe precise retracement calculation. Also, a potential reversal zone usually includes several numbers within a specific price zone. So, it is important to "gauge" the market action to determine the best price point for the trade execution.

Calculating the numbers manually promotes a greater understanding ofthe various calculations converging in a specific area. It has been my experience that the manual calculations have helped me develop a better "feel" around the potential zones and execute these opportunities more successfully.

I would like to add one final note about doing the work by hand. I have noticed that the best market technicians, at some point in their career, have relied on manual computations as a foundation for a greater comprehension of price action. Before the advent of computer charting programs, the old-time technicians created charts with a pencil and a big eraser to study price action. It really wasnt that long ago that these "dinosaurs" had to scrutinize a quote machine, to plot the various price points and to study the hand-written stock chart. But, I believe that such detailed work helped these technicians truly understand the market action by studying and contemplating each price bar - point-by-point. In addition, these old-timers often created their own indicators - testing various calculations to discover new market signals.

An "old-time commodity trader," or should I say an extremely experienced trader-friend of mine, used to work on the Minneapolis exchange in the 1950s. At that time, commodity prices were maintained on a quote machine. As the price within the pit fluctuated, the traders signaled the changes to the person responsible for reporting the commodity prices. Each change was recorded on a paper print machine. At the end of the day, my friend would examine the days action by studying the tape - trade-by-trade. He has told me that it was through such scrutiny that he developed his feel for market action.

To this day, some forty years later, he still plots various averages by hand. He relies on longer-term data, weekly and monthly, to gauge market action. He has developed and continues to perfect his own market indicators. His indicators have proven very accurate and quite fascinating. Although I will not explain them in this work (maybe another time, if he



allows), he has developed various gauges, such as a viscosity indicator and a variable moving average that accurately assess the state of the stock market.

I mention these indicators to illustrate that such dedicated number crunching yields an enhanced understanding of price action. I have observed these indicators for many years to substantiate their validity. Also, following these charts with him, I have gained a much greater insight to the nature ofprice action. Therefore, I encourage you to crunch the numbers by hand, using a spreadsheet, a pencil and an eraser, until a greater "feel" is attained.



Developing the Trading Plan

Trading Rules

Consistently profitable trading requires specific rules to define opportunities and to guide optimal executions. Trading rules prevent irrational behavior, such as an "impulse" trade. Impulse trading is really just guessing - thats it! I confess to my share of impulse trading. However, effective trading rules, as defined by the harmonic techniques, have provided me with a system that has proven itself over time.

Although these methods do not yield a reversal every time, I believe that an excellent set-up - three or more numbers in the potential reversal zone - will yield a profitable reversal seven out of ten times. This is a subjective assessment, however I actually consider it a conservative estimate. After studying the overwhelming number of charts in this book, it should be clearly evident that these methods are incredibly effective in defining opportunities.



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