EURUDOLlJ\K WEEKLY CHART

ReslBcaiice at 97.01

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97.50 97.00 96.50 96.00 95.50 95.00 94.50 94.00 93. 0 93.00 92.50

[ ! Oct 11992 ftpr \J»1 OcF" 1993 Meekly

Illustration 10-1

1.92 X .38 = .72 1.92 x .50 = .9& 1.92 X .61 =1.17 1.92 X.73 =1.40

Subsequently, these retracement percentages are subtracted from resistance at 97.01 to calculate the possible support price.

97.01 .72 = 96.29 is the 38% retracement price.

97.01 - .96 = 96.05 is the 50% retracement price.

97.01 - 1.17 = 95.84 is the 61 % retracement price.

97.01 - 1.40 = 95.61 is the 73% retracement price.

Basically, the idea is that the market will come to one of these 1 ibonacci support prices and then rally. The obvious difficulty is in figuring out which one of the Fibonacci ratios will end up as the key support price from which the market will rally.

You will find Symmetry Wave to be most useful in figuring out the most likely Fibonacci support price that the market will comedown to. To find the most I ikely Fibonacci support price, we go back in time and find a previous retracement wave on the weekly Eurodollar chart (see illustration 10-1) that the current retracement wave might match in magnitude. Looking at the magnitude of the retracement wave IV that occurred March 1992, you can proceed to calculate its magnitude. The range belween trend wave 111 and the retracement wave IV is about .98; therefore, you can subtract .98 from $97.01 (wave V) and come up with a possible Symmetry price of $96.03. This corresponds closely with the 50% retracement as calculated above. Therefore, the most likely Fibonacci support price will be $96.05. The market came down to $95.90 and then rallied.

Similar calculations can be made for a market that is in a drjwntrend. To illustrate the calculations for a downtrend market, the share prices of Digital Fquipment will be used (see illustration 10-2). After this market made a top on November 26 at $64.50, retracement wave VI, it went down to $48.50, trend wave VI!. The difference between the retracement wave VI and trend wave VII becomes the range from which Fibonacci support prices will be calculated.

Wave VI - Wave VII = 16.00

16.00 X ,38= 6.08 16.00 X.50= 8.00 16.00 X.61 = 9.76 16.00 X.73 =11.66

The above ratios are added to the low of wave VII, which is at $48.50 to come up with potential resistance points.

48.50 + 6,08 = 54.58 is the 38% retracement. 48.50 + fi.OO = 56.50 is the 50% retracement. 48.50 + 9.76 = 58.2,6 is. the 61% retracement.. 48.50 + 1.66 = 60.16 is the 73% retracement.

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Again, those who use libonacci ratiosto trade are faced with the di lemma of choosing which f ibonacci ratio is correct lor entering the niarkel. Symmetry Wave can bo used lo choose the proper Fibonacci ratio for calculating the most likely resistance point. The previous big retracement in illustration 10 2 was from the October 4,1991 low of $53.00 (trend wave V), up to the October 31,1991 high of S64-50 (retracement wave VI). The difference between wave V and waveVI is the Symmetry Wave rangeof $11.50 that will be used to calculate the most likely next resistance price from trend wave VII. calculate the most likely resistance point using Symmetry Wave, add $11.50 to the December 20, 1991 low of $48.50 (wave VII), to arrive at the next most likely resistance price, that of $60.00. The closest Fibonacci ratio to the Symmetry Wave resistance price is the 73% retracement price of $60.16. This price of $60.16 is the most likely Fibonacci resistance price. The market rallied op to $61.04 and subsequently felt again. To see a clearer perspective of the Symmetry Wave count, refer to the weekly chart of Digital Equipment (illustration 10-3).

The Fibonacci ratios are similar to the ratios that W. D. Gann used. Ganns ratios were made up by dividing an entire range into one-eighths. Thus, if we divide TOO by 1/8 we get 12.5%, and its multiples are:

Cann ratios: 12.5%, 25%, 37.5%, 50%, 62.5%, 75%, and 87.5%.

FR ratios;

14.4%, 26%, 38%, 50%, 61.8%, 73.8%, and 85.6%.

Besides using Fibonacci and Gann ratios with Symmetry Wave, other tools such as Gann lines, Andrews pitch fork lines, and trend lines can be used with Symmetry Wave.

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CHAPTER ELEVEN

PSYCHOLOGY OF TRADING AND

GENERAL OBSERVATIONS

In this final chapter Ill take a closer, somewhat analytical, look at some of the minds basic behavior in relation to trading. Then Ill share some general observations about the markets.

PSYCHOLOGY

The essence of the market is obscured by hundreds of misleading price patterns and mental assumptions. In Chapter One we looked at how a person 1 1 5 three-month, six-month and longer price data in many different ways. In Chapter 1 wo it was mentioned how, when price patterns are strung together, complex patterns are created. One of the most famous is the Elliott Wave Theory, a complex web of patterns with numerous variations which have proven not to be a great help in trading. Finally, it was shown how Symmetry Wave peels away the excess and reveals the essence of the market. That essence is the fact that markets organize themselves in symmetrical waves. To succeed you must match the same size retracement waves.

The market may get to your predicted symmetry price very rapidly or very slowly. Fact is, though, it does not matter how a market gets to the symmetry price. AI! assumptions and expectations need to be given up. In previous chapters, we mostly concentrated on the outer worid; however, lets take a look at the "inner world" that controls how we think, speak and act in the outer world. Several years ago I created a system which I named TAAS. The system had not had a losing year since 1980. Yet, whenever I had a signal generated by TAAS, I would find reasons not to take the trade. Then, when there were no trading signals, I would find an excuse to get into the market. Invariably, TAAS trades would make money and my random trading consistently tost money. I read about different psychotogical theories as to why I might be doing this (fear of sticces5, fear of failure,, seifsab.qtage, etc.). Whatever the actual reason, there, was. no doubt my inner self was controlling events.

The mind is changeable. It is an instrument, and like all instruments, it can be altered. However, habits form mental grooves which the mind loves to run in, making it disinclined to change. Ego is made up of every single thought, belief, assumption and imagination. Since ego and rnind are oui- self-identity, therein lies the difficulty of change. An individuals beliefs and assumptions are his base; it is his securiiy. Seeing the fallacy in ones beliefs or assumptions, and