You can only expect a system based on probabilities to develop the expected degree of success if it is followed with utter consistency!

In fact, it requires remarkably little deviation from coieistency to radically affect the odds.

Lets try another example.

Youve set yourself mentally and financially to try the new method. (Maybe the XYZ transaction didnt turn out so well: merger news situations are sometimes tricky.) You steel yourself and say: "From now on I will be influenced only by my own analysis of the situation!"

Suddenly, ABC stock trades one day in such a manner that it is apparent a new two-week low has been established. But your extension lines on the non-real time envelope tell you that this low should have been two points lower, if the past downtrend was still mtact. You compute and plot in the new low, use your channel envelope measure, and sketch in the reversal-complete with the next expected intra-channel high and low values. The downtrend is broken? The analysis is confirmed by ail other aspects of your graphical constructs. The stock has snaled a 30% move over the next week and a halfl

You call your broker to place an order to buy. But the market has been going up for the last two weeks. The DJ Industrials have risen 25 points in the last six days. Your broker, anxious to avert a costly mistake on your part, says, "The market is weakening. Its time it took a breather-after all its been up 25 points in the last week. The tick has just started to deteriorate. I would strongly advise that you delay all purchases until the market reacts a little."

You think: "Thats true. Is the method really that accurate? I cant be absolutely sure I just saw a cyclic low. Maybe that cycle was stretched a little. Maybe a short-term fundamental factor popped the stock up a bit. I sure dont want to sit in it at a loss for the next two weeks." Aloud you say "Maybe youre right. Forget the order: Ill wait a while."

However, your broker (and perhaps you) did not realize that ABC has been going down during the last six days the market has been up. You are aware of the close time synchronization between cyclic activities of individual issues and the overall market, and are also aware that for short periods of time the shorter duration periodicities can get out of step. Nevertheless, you worry a little about the latter. As a matter of fact, the last significant up-move in ABC started two weeks before the average turned, and ABC soared 20% under cover of a down market! In short, the cyclic components of ABC are just slitly out of time synchronization with the market as a whole at this particular time. Youve heard the Wall Street expression: "This is a market of stocks, nor a stock market." You know this is true by virtue of three facts:

1. Price changes between stocks vary because of fundamental differences.

2. Price changes between stocks vary because of magnitutte-duration fluctuation differences.

3. Price changes between stocks vary because of small differences in cyclic time synchronization.

You have just seen an example of the latter, doubted your own analysis, and missed your 30% move in ABC! You were defeated by the psychological impact of respected outside influences!

The outside influence doesnt have to be your broker. It can be an earnings statement you see in the newspaper. It can be an article on the company in Barrons. It can be anything whatever that creates doubt in your mind, and prevents you from acting when the stock price behavior tells you what it is going to do next! All of this is not saying that you are always going to be right while the next fellow is always wrong-but if you are going to trade on fundamental information and tips, you must do so consistently. If you are going to trade on cyclic analysis, you must do this consistently also. Mix your methods, and the best features of each will not dominate your results!

Now that this powerful agent of difficulty has been identified, the question is

what can you do to train yourself out of trouble?

It will help a great deal if you will keep just one fact very firmly in mind:

When you tested the methods on paper, they worked-and you didnt have any

outside influences deflecting purpose then. In fact, you did not even need the

date nor the name of the stock in order to derive the needed conclusions from your

analysis.

You will find also that there is no substitute for analytical practice. You simply cannot apply the methods in this book too often on paper. You must do this, checking out every statement made, over and over again. Keep meticulous track of what the results would have been had you been invested. Lean over backward not to cheat. In this manner you can buUd sufficient confidence in the efficacy of the methods and in yourself to assure a stiff spine when the barrier is approached.

It wiU help to consciously prepare your mind to give these methods the good old "college try." You must inform your friends that you are trying something new and you do not want to hear any news about investments. Then, you must pre-make your decision as to what way you will react, and what you will do if outside influences sneak in anyway, as they will. You will probably still not be able to refrain from succumbing at fust If you do so, follow the transaction both ways-and keep a record of the results! After you have a series of these results on record, go back and see how all would have worked out i/you had been able to master outside influences!

OVERCOMING GREED

It may sound trite to you, but you must be able to overcome greed. You now have available a logical and complete basis on which to trade in the market. After training yourself to overcome outside influences, the next most important psychological barrier you vrill meet is simple avarice.

Lets say you have followed all the steps in this book in detail. You have selected issues, pulled data, plotted, and analyzed. Rit off the bat you notice several situations which seem to fit all criteria-almost. Not all factors are aligned in your favor, but most of them are. For example, everything is right except for some confusion on the status of the 13-week cycle. But everything else says buy. Besides, to

locate better candidates would require another several days of work, and your opportunity may be past by then in the issue before you.

Dont Trade on the Issue Where Confusion is Present!

Remember this: you can work diligently without trading at all for three and a half weeks, discarding prospect after prospect before you find a stuation that leaves no doubt in your mind. It is perfectiy possible to trade on that one issue and capture a 10% gain in half a week. Recall the compounding example of Chapter One. Starting with $10,000, making just one 10% trade per month, your capital compoimds to over S1,000,000 in something like four years! On the other hand, trade on all the "almosts" that come along and youre sure to strike some losers. Each time you lose you will diminish self-confidence.

The same thinking applies to sales. Ride your profits only as long as there is no doubt as to what the techniques are telling you to do. If doubt occurs-take your profit, and be content. You dont need much per trade for the principle of profit compounding to make you rich!

This barrier is particularly hard to contend with when you see situation after situation where "almosts" go right ahead and do what you expected them to. The temptation gets very great to jump on the next one, in spite of the fact that the daily effort required to identify the ideal situation is far less strenuous and exacting than your work-a-day job. The trait at fault is simply greerf-and greed can defeat you just as effectively in the market as if you attempt to *rade without system!

BEAT THE "PERSIMMON EFFECT"

As you practice graphical analysis you will note a common situation over and over again: The ideal time to buy a stock is exactly when it looks the least interesting. Similarly: The ideal time to sell a stock short is when it looks as though it will never stop going up!

You will put a stock into your stable and patiently track it for a buy signal. The price continues to drop and the amount of daily or weekly variation dries up along with volume. Your cyclic analysis teUs you to expect this, but it certainly looks as though all investor interest has completely vanished.

At such a time it is very difficult indeed to convince yourself that you should actually take action when that buy signal comes along.

Anyone who has experienced the varied taste treat of the persimmon can form the appropriate analogy. Even knowing the situarion with regard to this fruit, it is still difficult to force yourself to select the nearly rotten looking ones which are sweet and tasty. But the penalty for biting into the smooth, firm, and deshrable looking fruit is severe!

Quite often when the cyclic situation is ripe a full days trading all at one price and on vanishing volume will signal in advance a buy signal the very next day!

You will have to consciously recognize and train yourself to avoid the persimmon

effect!