"Prices ccrrected to day W, and tho following day I would have beeri short as prices took out the low of day W. By tfie close of the day I would have moved my stop to breakeven with S78 of profit showing, Tfiis was now open position number .

"Day X would have seen me move rny protective stop lo proieci 22 ticks of profit, or $133 The following day I would been stopped out, netting $107 on the trade. My cash position would have been plus 590,

"Prices corrected to day Y. I would have shorted a breakout of the low of day Y, and been slopped out the following day witfi a loss of 585. My cash position would have been up 55.

"At the time I day Z, I was protecting 50% of 108 ticks made from the breakout of day Q down to the close of day X. I would have been stopped out of trade number three with a profit of $324 less $25. or a net profit of $299. My cash position would have been plus .

"At the close of day Z, a blow off day, 1 would have moved my stop to just one tick above the high. I would have been stopped out tfiere the following day on my remaining two contracts. 1 would have made 105 and 106 ticks respectively on each of those positions. The total dollars would have been $1 2G6, less $50 costs, for a not of SI216. Add to that my previous wiimings of 5304, and I would have had $1520 dollars to spend,

"So, whats the point of all this? I want you to see wftat trading is really like, f want you to see why you must keep your losses small,

"Look at how many times I liad to attempt this market and take small ossRs before I was abc to really score.

"Thats what trading is all about. Keep in mind that the losses were all cnlcufated losses. There were plenty of them, but they were all within the parameters of trading plan. Would such a method work in todays markets? You bet! Thie series of trades 1 just showed you could have been made starting with a chart of July 1991 Bean Oil, and going hack to July of 1990. The first trades shown were the short positions on day R which was October 4, 1 0.

"Did I actuaNy make these trades? Mo! Why? Because I was irading elsewhere at llie time. But the truth is the truth. Ive shown you how I earned to trade. I traded that way exclusively for three years. I supported myself and my family with my trading. I learned to be patient and to wait for trending mFrknts.

"Tho method I was using forced me to wait, I was never allowed to trade what I vjss thinking, I had to trade only what I sow. The truth I had to trade with was always on the chart in front of me. There was no otfier truth. I had no oscillator, and no moving averages. Just a trend line, and a straigfit edge with vjhich to draw it.

When I looked back at the chart, I saw I had missed a connecting joint. Since 1 hi:id already used all the letters of the alphabet, day M connects ED day m.

4s this Ifio rmly way to have traded Bean Oif? Irn sure it isnt, but trading this wjy forced roe to learn many valuable lessons.

"I learned that the trerid was my friend as long as I floored it. As long as prices were below the trend line, 1 traded only to tfte short side. If prices were above a trend line, I took only long positions.

"I learned I had to take a lot of srnati fiits. I Icarnnrl lo fear them. I learned to cherish the profits I had, and to protect them. I learned to be unwilling to give them all back,

"The losses had to come when I had little or no profit iri a trade. The osses had to be kept minuscule in si?c. My first account was $5.000, not my own money. I had to borrow it, and 1 had to protect it. I had to put up my home as collateral. I dared not lose that money.

"My arrangement with my lenders {rriy uncles) was sirtctly business. It had to be, and now t appreciate the reason why. If I had been given that money, I would have sooo lost it. It would not have been the same if it were money I could just Ihrov away.

"I had to manage that money. I had to pinch every penny. I had to run my trading as a business. Thjs was no game. This was real- The roof over my head was at stake,

"I was forced to learn to enter a market more than once, to make numerous attempts. To do this, I hfid to conserve capital. If I were to lake a big loss tho first time irh 1 would in no way have the courage or the capital to try again.

"Can you see that? If you allow yourself to take s beating on a trade, it not only greatly dirtiinishcs your capital, but it deprives you of the will to coniinue trying.

"Although we can be somewitat sure of the trend {its true while it Eastsh we can never be sure of the timing. No one knows exactly when a market will break and run, or when it will continue lo run. Consequently, you have to be prepared to make several attempts.

"Its the sort of thing where you stick your toe in the water to see if its too hot. If you get burned, you are quick to pull that toe out of the water. So you wait. When you see that its time to try again, you shck that toe back into the water. Perhaps this time you t:an go swimming. If not.. Uy again. But you dont just jump in and get scalded with third degree burns all over your body.

"If you sit there and take a hig loss, you wilf have been badly burned. Youll be like a vhipped dog. Youll have to slink avay to a corner and tick your wounds. Youll no longer have the courage of your convictions. Do you know what you will do then? Youll probably go out and buy anotfier system.

"I dont know wfiere I read this, but it says it all, "Wh.en a woman has a bad day, she goes out and buys a \e.vJ hat. When trader has a bad day.

he goes out and buys a new system, that, let rne know.

f you know who first said or wrote

"When I do a mailing for my books, do you know who sends Jor them? Thats right, the person who just took a big hit in the market.

"If ] mail the same list again, Ill get the same number oi sales. Why? Because next time Ill yet others who have lost.

"The winners almost always throw my letter in the trash, Who wants to read a book about trading when he is winning? How many of you are willing to shell out $2500 lo $3000 for a new system when you are ahead in your trading?"

True Correction fyletfiod

A method I often use is one I cafi Ifie "True Correction" method. Its similar to the segment method but it differs in that a tine connecting two segments cannot be drawn until a true correction fias takeii place.

Ill show the difference between the two methods side by sidc-

SrVl

The difference is that under the True Correction method I cannot count a segment until there has been a takeout of the low. A segment cannot be counted until a new low is made.

No difference here because the correction has taken out the intervening lows.

But look at the difference in the count wfien tfiere are progressively higher lows. Obviously tfe True Correction method is more conservative.

Ranked in order From most conservative to most liberal they are;

True Trend method Successive Mew Extremes Sagging Tops and Rising Bottoms True Correction method Segment method

Its best lo pick out one that fits your temperament and style of trading and stick with it. When you become proficient in using one, begin to master another. Eventuatly you will become exiremefy good at detecting a trend just as it is being born. Dont become entirely mechanical in using these methods. Mix and blend them with good judgment. Always look at thr? t)ig picture. Get >erspeciive. Move to a greater time frame. Step back and view the entire chart. Squeeze the price bars closer together and take a broader outlook on the entire situation.

SurtTmary

Here Is a verbal recap of the various inetfiods for identifying tfie very !)eginmngs ot a trend:

True Trend Method (TTM): Dovnward

The True Tiend Metliod does not require counting or sfiifling. It only rerjuires tfie ability to draw a trend line in an already trending market. Tfie method involves connticting highs to highs in a downtronding market, and lov/s to lows in an up trending market. Wfien analysing downward, you connect tfie fughest fiiyfi ol tho last up leg to ifie ctJrrent correction high, After that you repeat the process by connecting the current correction high to the next correction fiigh.

Wheri applying downward, you are allowed to connect correction bar tops only to correction bar tops. The meitiod needs only a sjngle higher high (correction bar) in a downtrend in order to create a connection. Ttiai is to say you need only ONE connection {one correcting bar) to draw a trenrj line. Once you have an established trend line you try to sell a breakout of the low of each day in whicfi the market moves towards the trend line. Tfie sell point is 1 tick below the low of the previous day, which once trading begins, rrjpresenrs a breakout of yesterdays low. You stay in the trade as fong as prices move away from the trend line by making a lower fiigh, and/or a close lower than tfie open. You add to your position as price moves away from the trend line by selling trade-through breakouts of the \ovj of eacfi correction bar. You also are to place a resting sell stop below every Ross f-foak, The Tnrc Trend method is not considered a counting netfiod. You areni counting anything; youre simply conriecting cnrreciion extremes to correction ej<iremes.

True T\enii Mivifiod ITTM}: Upward

The True Trend Metfiod does not require counting or shifting. It rcqurres only tiie abiEity to draw a trend line in an already trending rnarket. The rnelfiud involves conriecting lows to lows in an up trending market, and highs to highs in a down trending market. When analyzing upward, you connect the lowest low of tfie last down leg to the current correction low. After that you repeat the process by connecting the current correction low tu Ifie next correction ow. When applying upvard , you are allowed to connect correction bar tiottoms only 10 correction bar bottoms, Tfie method needs only a single ower low (correction bar) in an uptrend in order to create a connection, That is to say you ! only ONE connectron [one correcting bar) to draw a trend inc. Once you have an established trend line you try to buy a breakout of tfie fiigh of each day in wfiich the market moves towards the trend line.

Tfu? buy point is 1 tick above the high of the previous day, which once trading jegins. represents a breakout of yesterdays high. You stay in the trade as oriy as prices move away from the trend line by making a fiiglicr low, and/or a close higher than die open. You add to your position as price mioves away from ilie trend line by buying trade-thrnugh breakouts of thr: high rjf each cnrrction bar. You also Ofc to place a resting buy stop above every Ross Ilook. The True Trend method is not considered a counting methorj. You arent counting anything; youre sirnjily connecting correction extremes to correction extreriles.

Successive Mew Extremes Method (SMEM); DownwEird

The Successive Mew Extremes Method requires cokJnling but does not require shiftjag. The mediod needs 3 consecutive bars of Lower Lows when considering a downtrend; you must see 3 bars of Lower Lows in a row. You need focus on only one side of the bar; lows when youre counting downward, and highs when youre counting upward. The method does not require that you wait for a correction bar. You simply sell one lick t)elow the ow of the bar representing the 3 segment.

The Successive New Extremes Method is considered a counting method. I: requires a three count before entry. There is no shifting of the coum involved with i:his method. You seEl a breakout of a tow of the bar ihat makes a third successive lower tow.

Successive Mew Extremes Method (SNEM}: Llpward

The Successive Mew Extremes Method requfres counting but does not require shifting. The method needs 3 consecutive bars of Higher Highs when considering an uptrend; you must see 3 bars of Higher Highs in a row. You need focus on only one side of the bar; highs when youre counting upward, and tows when youre counting downward. The method does not require that you wail for a correction bar. You simply buy one tick above the high of the bar representing the Ii2 segment.

The Successive Mew Extremes Method is considered a counting method. It requires a three count before entry. There is no shifting of the count involved with this method. You buy a breakout of a high of the bar that makes a third successive tiigher high.

Sagging Tops and Rising Bottoms Method (STM & RBM)

Sagging Tops (STM): Dov/nward:

The Sagging Tops Method requires counting but does not require shifting.

Sagging Tops require 3 consecutive bars of Lower Highs. Three consecutive bars means exactly that, three consecutive bars; no intervening bars are allowed. You need focus on only one side of the bar; Lower Highs when youre counting downward and Higher Lows when youre counting upward. With Sagging Tops, it is not necessary for new lows to occur: you need only for Lower Highs to occur. Each lower high counts one. Three successive lower highs yield an entry signal at the point where the low of the bar that made the third lower high is taken out. With Sagging Tops, look for three successive lower highs Sell a breakout of the low oi the bar thai marie the third successive lower high.

The Sagging Tops Method is considered a counting metfiod. It requires a three count before entry. There is no shifting of the count involve.

Sagging Tops an Rising Bottoms Method tSTM & RBM} Rising Bottoms (RBM); Upward

The Rising Bottoms Method requires counting but does not require shifting.

Rising Bottoms require 3 consecutive bars of hiigher Lows. Three consecutive bars means exactly that, three consecuttve bars; no intervening bars are allowed.

You need focus on only one side of Ihc bar; Higher Lows v/hen youre counting upward and Lower Highs wheri counting downward. With Rising Bottoms, il is not necessary for new highs to occur; you need only for Higher Lovjs to occur. Each higher low counts one. Three successive higher lows yield an entry signal at the point where the high of the bar that made the third higher Eow is taken out. Wilh Rising Boitorms, look for three successive lower highs. Buy a breakout of the high of the bar that made the third successive higher low.

The Rising Bottonis Method is considered a counting method. It requires a three count before entry. There is no siiifling of the count involved.

True Correction Method (TCM}: Downvard

The True Correction Metiiod requires botti counting and stiifting. When analyzing downward, the True Correction Mettiod must fiave a Lower High AMD a Lower Low on the same bar before beginning the coutH. Thkis beginning from the last high in price, any bar having both a Lower High AMD a Lower Low, on the same bar, becomes the bar representing segment number one.

After the first segment has been labeled this method is similar in every respect to the Segment Counting Method; meaning you need only Lower Highs for segments 2 and 3. If the bar representirig segment 3 isnt taken out by the very next bar, you shift the count 1 segment to the rigfn and begin the count again.

The True Correction Method is a counting method. It requires a three couni before entry, fn a downtrend you try to sell 1 tick below the low of the bar representing the 3 segment.

It is important to note that there may be several intervening bars between the segments.

To repeat, tfte True Correction Method does require botfi counting and shifting

True Correction Method (TCM): Upvard

The True Correction Method requires both counting and shifting. When analyzing upward, the True Correction Method must have a Higher Low AMD a Higher High ori the same bar before beginning the count. Thus beginning from the fast low in price, any bar having both Higher Low AND a Higher High, on tho same bar, becomes the bar representing segment > one.