As the community has embraced Harmonic Trading, the online discussion and interpretations have expanded the total engagement to the point where my initial work is now a separate entity from me. In my opinion, I encourage interpretations and advancements that seek to improve the overall understanding of what I have put forth over the past two decades. I can only stress that the primary pattern measurements that are founded in the essence of what is harmonic remain as the standard for future application.
Otherwise, traders will find themselves attempting to identify random movements as repeatable behavior that simply is not a true phenomenon. Realistically Harmonic Many traders often search for one tool or method that can tell them when to buy and sell. It seems that these individuals are overwhelmed by the market in general and are looking for a lottery ticket more than a logical approach to understanding price action.
Like anyone who has spent countless hours in front of the screen looking at endless of charts, it becomes apparent that certain market conditions possess clearer signals than others. I think one of the biggest misnomers of the market is that to be successful one must understand everything that is occurring all at the same time.
Certainly, the news outlets attempt to tie all of the various market moves together to package one big story. Real traders understand that not all markets can be traded all of the time. In fact, successful traders are typically spending as much of their time preparing for the trade than actual trading itself. If you're not spending as much time preparing for trade than trading, you're probably going to make mistakes.
This type of discipline can be difficult for most as they are unable to be patient and wait for opportunities to develop. A degree of selectivity is mandatory to focus on only those opportunities that present overwhelming conditions for a successful trade.
All of these considerations are critical throughout the trading process and assessments must be made to minimize risk and maximize profit. Most important, I believe that a realistic perspective of what is possible is an essential trait to stay grounded and navigate a Harmonic Trading Volume 3: Reaction vs. Reversal 5 professional course in your trading endeavors.
In my opinion, most people who are dedicated to measuring the market do realize that it takes more than one strategy or simple tool to develop the skills necessary to succeed. Remarkably, there are broad elements within the industry that still operate on this type of unrealistic hype.
I do believe that the larger public is becoming more aware of these unsavory elements, especially as more traders are dedicated to learning the proven strategies to succeed in the financial markets. I have spoken about this general disdain for the bad actors in the industry in each of my books. I have been forced to address a variety of issues, especially due to the unusual degree of disregard for fiduciary responsibility up and down Wall Street.
Ultimately, I want the work to speak for itself and always remain the focus of what is important. Although sometimes these distractions must be dealt with, the fiduciary responsibility that I maintain to consistently put forth the best work that I can create is a driving principle of Harmonic Trading.
The History of Harmonic Trading In my own life, I have experienced a variety of positive and negative relationships that have had a profound impact on my personal trading journey as well as my perspective of the industry that I love. I feel that I have created a special foundation where individuals can actually learn predictive strategies that help them understand future probable price direction. However, it is important to share the personal journey that has shaped me to advance my work with harmonic patterns and expand the knowledge base of Technical Analysis in general.
It is an interesting story and I believe it is an essential element to finally explain how the strategies were developed, where I initially released my work and provide the proper citation of those who came before me - the predecessors to what is now known as Harmonic Trading. It is important for me personally to recognize these predecessors from the inception of my initial discoveries to clearly delineate the Harmonic Trading advancements that have been put forth over the past two decades. So, let's start at the beginning.
The history of Harmonic Trading has its roots in my initial market endeavors nearly 30 years ago. It started with me at a time where I was transitioning from primarily fundamental analysis to Technical Analysis.
My observations about financial fluctuations in fundamental values of companies led me to focus on price action. In doing so, I was able to begin my formal study of all books related to Technical Analysis of price action. I started with the older books from the s and s since I felt that these were they forefathers of modern Technical Analysis. I also read numerous pop culture market books during this time. Probably the most infamous of these was Peter Lynch's One up on Wall Street This was one of the first books that clearly defined the ability to look at the market from an individual perspective and begin to look for relationships that were outside of fundamental numbers.
However, his book ignited an excitement where I started to pay close attention to what was happening in Harmonic Trading Volume 3: Reaction vs. Reversal 6 the economy and the financial markets. I became an avid reader of any recommended financial book.
I found myself increasingly wanting to know more about the indicators and other technical measures that were frequently discussed by traders more so than brokers' recommendations. I always felt that the traders were more in tune with what was happening in the markets than stockbrokers or financial advisors tied to a recommended buy list.
Regardless, I understood early on that the answers were not going to be handed to me and there was much to consider when it came to the world of trading. This became ever apparent for me during a college summer internship on the floor of the Philadelphia Stock Exchange.
As a CRT operator, I was in the options pits manually adjusting the quote prices displayed at the market maker's terminal as he barked them out. I spent the first few weeks trying to keep up with the regular employees whom had been there for a while. I was intrigued by the overall operation, the excitement and the basic understanding that people were making large sums of money working at a dynamic place of employment.
For me, it was clear that those who understood probable future price direction were able to successfully navigate the chaos that was the trading floor of this time. Albeit a physically small exchange, the floor in Philadelphia was as busy as any frenetic day in New York. I learned a lot during this time and a few individuals took the time to teach me some complex option strategies even though I barely knew what a put or a call was. It was all special and certainly different from any other corporate environment that I had previously experienced.
I came away from that internship with a passion to further explore what this industry was all about. I rededicated myself to studying books on charting and Technical Analysis. The more I investigated the measurement of the market using technical tools, the more I realized that this was the true means to know when to buy and sell for profit.
In those early days, I was considering fundamental information but quickly into this discovery, I also learned that most of it that attempts to describe what is unfolding in the market actually has little value when it comes to determining price. Therefore, I finally made the jump in the early s to full Technical Analysis as my exclusive means of determining trade opportunities in the market.
Although this was the right move, there were a few years of study required of all methodologies before I could fully grasp which technical tools worked the best. In this research, I spent tens of thousands of dollars on books and seminars to discover who had the real deal and who was able to clearly define opportunities in the market.
I was fortunate to encounter a retired former floor trader as I was finishing my college degree who mentored me on many old-school methods of Technical Analysis. I have mentioned him before but I would like to recognize him again. Although he never wrote a book and he was an extremely private person in nature, Bill Sourbey was my primary mentor in Technical Analysis.
He was a former floor trader in the Minneapolis grains pit in the late s. He shared many stories of the old days - and this was back when they were still writing quote changes on a chalkboard! Regardless, he showed me unique charting methods. And, he would create by elaborate charts by hand.
He Harmonic Trading Volume 3: Reaction vs. Reversal 7 stressed the importance of trendlines, channels and various price action phenomenon that he painstakingly measured. His discipline and focus on measuring every data point of individual price action showed me that charts were merely a collection of information that told a story. He believed that specific points and price levels served as critical to finding limits of possibility.
These all helped to shape my predictive abilities and understand that price action moves within definable constraints that can be measured must be measured! In fact, I did not truly understand the nature of what he taught me until I had a few years of experience studying his charts. I met him at the University of Arizona where he was a volunteer. Bill and I formed a friendship and we shared an interest of Technical Analysis. Bill was an oldschool market guy he kept meticulous notes, developed his own indicators and was able to predict market moves with phenomenal accuracy.
His methods were quite simple trendlines, price action analysis and clear break out and breakdown triggers. The other side of Bill was that he developed indicators such as Viscosity. This is a very interesting concept that tries to measure the thickness or thinness of support or resistance within the market. Bill has since passed in my life and he never imparted to me the entire formula of how to determine this. I do have numerous charts and I have been analyzing for years trying to figure out exactly what he was talking about.
He was somewhat vague in his descriptions of his analysis but he was an influencing factor and encouraged me to continue my technical studies which I did in earnest. My first introduction to various pattern formations was simple wedge and triangle formulations that denoted breakouts or breakdowns in trends.
Trend analysis proved quite accurate and quite effective as a starting point for my studies, as well. The simple fact that I could analyze a price action by drawing a basic trendline along the general direction was a breakthrough unto itself for me as simple as it may seem.
It opened up the perspective that actually monitoring price action is the most effective means of gauging what potentially could occur. From this, I then began to focus on the phenomenon that markets frequently trade within ranges and cycles. In my discussions with my friend Bill Sourbey, he constantly reminded me of the importance of certain trendline violations as important structural signals. In fact, he frequently cited Richard Wyckoffs books from the early s and another author named Ted Warren's relatively unknown book How to Make Money in the Stock Market, which provided indepth resources that explain why the market is always in a process of moving through stages.
Armed with all of this information, I began to really focus in on the things that I knew were consistently yielding the proper information and correct predictive value for my trades. I made a lot of mistakes in those early years and lost quite a bit of money probably more money than I even had to lose but I knew that this was all in the endeavor to eventually make breakthroughs to become a consistently profitable trader.
To do so, I needed a framework of strategies so I could understand market action in any environment on any timeframe. Reversal 8 During this time, I started to encounter other traders in my area, especially as the internet provided a direct means of reaching other traders unlike ever before. In , I was living in Tucson, Arizona and I encountered a group of traders that met once a month. Although initially intended as a local group support group for Tradestation users, the discussion soon focused mostly on trading strategies relevant to the unfolding bull market mania of this era.
Founded by Alan Kuenhold who was a broker with UBS Advisors, the initial group of people met at the Williams Center regularly to talk about the markets. It was a great discussion group and it is also the first place where I publicly began to divulge many of the strategies that became Harmonic Trading.
After a few months, we officially named ourselves The Gartley Group. The pattern alignments, the trade management strategies such as the I am grateful to Alan and that group for giving me the format to present these ideas. Now, I must admit this was during a time where the market was moving straight up so anything that you bought had a good chance of actually working out. Almost every significant retracement pattern led to a significant reversal. This made harmonic patterns look great.
And, when I was able to differentiate which patterns were the most significant and where to execute the trades, the level of precision increased as did the number of people attending the Gartley group. After about two years, the Gartley Group tripled in size as we started meeting nearly every week.
On average, we would see nearly 30 or 40 people show up. It was kind of funny because I would walk in there, they would hand me the laser pointer and then I would go through any charts that people wanted to look at based on the way that I was differentiating patterns. The whole experience became extremely emotional as other individuals in the group began to talk about certain penny stocks and talk about the future of technology. However, the mania had gripped the masses in soon several people in the group were investing in speculative penny Tech stocks.
Shying away from such penny Tech stocks, I was more accustomed to following the leaders of the market and the more heavily traded issues. For me, I felt that this mania was problematic and the fact that the group went from a constructive discussion of technical methods to focusing on penny Tech stocks. Well, nothing goes straight up! Wrecking day was near and I stayed clear. Despite the post-crash squabbles, the entire experience was the perfect case study in Dot Com mania!
FrMJ8 zz0. Volatility Baids 20,2. TTI A 0. All Rights Reserved After some time, it was still recommended as a buy. And people bought! There were approximately 50 people there that night. I was late arriving and there were so many that I couldn't even get into the room. I watched Harmonic Trading Volume 3: Reaction vs.
Reversal 10 from outside the door. At that point, I knew that the Gartley Group was over. I also knew that this eDigital stock would not end well. People were asking me if I had bought the stock and I said that I didn't touch those types of positions. It was only a matter of time before the whole stock would collapse and that's exactly what happened.
I won't even go into the other details of the post-crash arguments and squabbles that ensued, including potential legal action from one person to the next but the clear lesson to be learned from a mania like that taught me how to read the public and understand when certain market periods are exhausted. Reversal 11 EDIG 3. After the stock rallied vigorously through this price, I distinctly remember hearing comments such as the fact that harmonic measurements don't work in situations like this.
Nothing have could have been further from the truth because the 3. Even in the early days, I understood that an extreme ratio measurement in a stock such as this would result in only one conclusion. I felt bad. But, I had nothing to do with it and I knew that things had to change. So, the remaining core Gartley Group actually decided to disband and begin to meet "secretly.
I was even working on new harmonic structures such as the pattern and the Shark Harmonic Trading Volume 3: Reaction vs. Reversal 12 pattern. I also was beginning to investigate which indicators served as the greatest confirmation techniques for the patterns. I go out of my way to cite those real technical forefathers who have laid the foundation for what modern Technical Analysis is today. Most of my inspiration for these ideas has been derived from the "old-school" books. Based from this technical foundation, I have created the system of trade identification execution and management strategies that effectively defines the Harmonic Trading process.
These strategies create a framework so that traders understand what to do in every instance of every trade. From this perspective, an entire skill set has been established based on harmonic measures. Although these are some of the most accurate means of measuring, the business of trading is not easy. If you do the work and you want to understand which strategies are vital, a professional skill set that identifies harmonic opportunities facilitates the ability to execute with an optimal efficiency.
This comprehension takes time. Furthermore, I urge everyone to do their own research, look at the materials and assess what I have done as a unique system in way to look at the market, especially now that it is now widely embraced. After I released The Harmonic Trader people began to take notice. I was having great success, and I was sharing my information and charts with many people freely. Maybe this was a naive step of mine, but I believed in sharing the information with people that I knew and others whom requested it.
I felt that we were on the same boat as traders trying to succeed in a challenging market environment. Everyone was trying to figure out how to trade the market, especially during a time where the Internet stocks were going through a historic bull market.
Against the backdrop of a frenzied market environment, my goal was to share the information and make it available so that people could understand the power of harmonic patterns and realize the importance of being as precise as possible.
From this, I was motivated to explore the subject, refine the strategies and develop the most accurate tools available. I was confident from the start I was using the right measures to analyze price action. Although it is easy to get caught up in the mystique, I was more focused on relating the theory of these natural cycles with harmonic ratio proportions to define turning points in the financial markets.
It was my goal to take that knowledge to new areas of experimentation and capitalize on the natural advantages of harmonic measures. I wanted to refine it as far as I could to differentiate patterns structures, interpret price action at those completion points and make larger assessments of the trend. In , I received an offer from Financial Times Press who was able to promote the material globally. Furthermore, the validity of this strategy was reinforced as more traders became aware of harmonic patterns, their popularity has grown.
On a final note, I want to stress that for me it is always about the work. I always felt that if the work was excellent people would respond people. Traders have responded! For that Harmonic Traders, I thank you. This is become something far greater than I could ever imagine. Reversal 13 this planet that I want to share this knowledge. I want to leave behind a legacy where people can not only trade the markets effectively but actually realize the amazing natural wonders and natural cycles that are occurring in the universe and in the world, every day.
For me, integrity and character is everything. My goal in this material is to preserve the value of the Harmonic Trading approach to show people the correct way to measure the markets not just the well-chosen examples. This has been something that I have seen quite a bit in recent years. People are teaching harmonic patterns based straight out of my book but they're doing it incorrectly and in most cases, are unable to do it in real time.
My goal is to bridge this faulty promotion and clarify the ambiguity in the execution and trade management process that optimize trading decisions. By now, most people know the definitions of the ratio alignments in the patterns. But as I've always said, the harmonic patterns are a starting point. They require a precision and a dedication above and beyond what most offer. Yes, I have products to sell. I have a software program, webinars, etc.
But, I have made it my fundamental goal to provide the bulk of this information that presents the foundation of Harmonic Trading approach for free. Why would I do this? I have met so many people from around the world who want to learn about the markets but they don't even have the money to be able to buy my book. This is disheartening. So, I offer numerous resources online for free. Having lived abroad for a few years, I understand the struggle that most people face when they must live on a limited amount of money.
However, with the advent of the Internet Age, we have an opportunity to reach people in a way like we've never done before. I believe this is the true accomplishment of Harmonic Trading - an open dissemination of the information to educate people about the market to empower individuals whom are willing to do the work, and ultimately improve their lives. I have talked to people from Africa, Iran, China, Saudi Arabia and many other countries that otherwise might have been previously out of reach.
These interactions have been inspiring to say the least. In fact, many of these people volunteered to translate my first book The Harmonic Trader into their native language. Without this type of response, I would never be able to have the first book translated into five languages. I am grateful for these experiences and I feel confident that the work is reaching traders in a positive manner. Most have related to me that they are able to avoid the pitfalls of the learning curve that can often be quite expensive, as well as the confidence a defined measurement framework instills.
There is a profound comprehension in the understanding of the phenomenon of these natural laws and the associated ratios to define clear structural relationships. Reversal 14 Introduction A Reintroduction to Harmonic Trading My main goal in this book is to set the whole record straight to reinforce the established structural measures while emphasizing the need to precisely confirm harmonic pattern opportunities with "environmental technical indicators" that optimize all situations.
I have been reluctant to write another book, as I knew that it would take quite a bit of time to put together a comprehensive advancement of the existing material. Although I have been aware of many of these techniques for years, I have not shared these with too many people. Initially, I needed a great deal of time to test each strategy and completely refine the rules to effectively complement the basic Harmonic Trading approach.
The advancements presented in this material represent a new stage in the evolution of the Harmonic Trading methodology. The material in this book picks up right where Harmonic Trading Volume 2 left off, and defines unprecedented situations that are as distinct as harmonic patterns themselves to improve the effectiveness of the entire approach.
Although many of these strategies can be learned as individual concepts, I reference much of the material from Volume 1 and Volume 2. Simple pattern rules, trade execution strategies and other guidelines serve as the essential model for the trading process. This book represents an advancement of that process, especially in the area of trade execution and trade management.
Although the first few books detailed effective strategies to comprise the identification aspect of the Harmonic Trading approach, this material coalesces a variety of individual techniques to assess a more comprehensive perspective of critical measures. My evolution of measuring the market has led me to realize that my primary source of material information for trading decisions must be derived from the price movements themselves rather than any outside influences.
Although most traders will consider a variety of sources of information to formulate a strategic approach to define opportunities, ultimately every participant is trying to profit from price movements. Therefore, the business of trading is inherently a game of skill and strategy that must predict future price direction and profit from the buying and selling of these defined opportunities. Thus, financial reports and news stories become less relevant over time Harmonic Trading Volume 3: Reaction vs.
Reversal 15 as signals for trading opportunities. After reaching this point, traders begin to base decisions upon the readings of the market. Harmonic patterns provide a strategic approach to measure these opportunities and they can define those exact price levels where to pinpoint the parameters of the trade.
Other technical measures can help us monitor secondary readings, where the total market bias is reflected in something other than price. All of these techniques are designed to gauge some sense of order within the chaos and randomness of price movements. I believe patterns provide that order, especially since all parameters are defined in advance and measured based upon the market's historic price action.
In addition, analysis of Relative Strength readings is one example that helps to monitor the environment in which patterns complete. We will look at this integration in detail later in this material. We will examine price behavior with measured technical environments and show those conditions that possess the optimal characteristics for positive confirmation.
The Harmonic Learning Curve Personally, I still feel there is room to improve optimization but this actually made one of the easier tasks within our process once the coordination of variables has been established. Despite my attempts to simplify all of this, I know that I am overloading everyone with a great deal of information. Please take your time to review my notes and look at the resources provided for a greater understanding. For anyone that is new to this perspective, I like to use the phrase "live with it for a little while" where you walk through the analytical steps to create a greater awareness of these relationships.
The common experience for most is a "light bulb" that goes on and the relationships become almost obvious. Therefore, I recommend a full comprehension-n of identification strategies first to reach a level of basic awareness that is required to integrate more complex measures. I will thoroughly explain details and finer relationships that will answer most questions that typically arise in the discovery phase of these strategies.
The common experience for most Harmonic Traders is a clearer comprehension of all relationships after mastering the identification of exact scenarios. Consistency in the Application of Identification One of the important broader principles always to be mindful of is the fact that Harmonic Trading is a defined and quantifiable technical model to define opportunities in the financial markets.
This means that the prescribed measurements merely serve as a minimum framework upon which the actual expression of real trading must be compared. I emphasize this point in an attempt to reduce unrealistic expectations of patterns as signals on their own and implore traders to intelligently assess other market conditions that clearly contribute to the overall understanding of the harmonic opportunity. Furthermore, the true advantage of these identification strategies is founded upon the consistency in the definition of what is a potential opportunity.
Reversal 16 Specifically, each pattern has its own set ratios. Regardless of the timeframe or the price of the structure, each situation is defined by the relative harmonic measurements that validate random price movements as specific opportunities.
It is important to note that these ratio alignments identify opportunities differently than other structural approaches to the market such as Elliott Wave, which is continually counting three and five segmented price structures. Unfortunately, practitioners seem to be reworking wave counts all the time. This is a profound difference than the identification of harmonic patterns. Valid harmonic opportunities must possess the prescribed structure and ratio alignments to validate structure.
Regardless of size or price range, the proportional aspects of the structures are uniformly measured and analyzed. In doing so, we can assess multitude of markets that possess such ratio proportions and compare them uniformly across all time periods. Furthermore, these rules create distinct classifications that are precisely quantified.
Harmonic Trading strategies can be applied to all markets on any timeframe uniformly. That is, all techniques possess the same interpretive qualities and must be applied in the same manner in every market and on every timeframe. From stocks to futures to currencies, Harmonic Trading principles possess the same implications in all markets. Although some argue that certain markets may behave differently than others, our primary concern with analyzing price action is to discover consistent relationships that can be derived without differentiation.
This is critical because the strategies are hence standardized, and define market opportunities in the same manner. Furthermore, the same relationships that occur on a daily or weekly chart can be found on intraday or even tick price movements. Some structural market approaches have a tendency to adjust their analysis and fit derived results to conform to the overall picture. This type of interpretive analytical approach is dangerous when it comes to assessing price action because such variation of measurements leads to inconsistent results.
Harmonic Trading employs proportional measurements that can be deciphered regardless of the price range. This is one of the true advantages that separates Harmonic Trading from all other methodologies. Finally, such universal application possesses enormous strengths in deciphering market movements that can frequently diverge from the norm. When this happens, traders tend to adjust their analytical findings and begin to create a biased assessment of what is happening. Essentially, when a trader is confused they start guessing and nothing is more expensive than trying to guess which way the market will go.
Nine times out of ten that guess will be wrong. Therefore, any market approach must have the ability to be uniformly applied and assess price action from an unwavering basis. There should never be any divergence or adjustment for the abnormal case, as these conclusions are flawed and often wrong.
This has been one of the guiding principles throughout my research. I am always looking for the market relationships that consistently and clearly present readings that can reliably defined probable future price action. Many of the market methodologies that I have studied make room for slight variation of the application of their principles. However, I found that these circumstances led to incorrect assumptions and created Harmonic Trading Volume 3: Reaction vs. Reversal 17 more confusion within the trading process.
As I mentioned previously, Elliott Wave is a prime example where traders will conform their structural counts to best fit the current market environment. In fact, the "Elliott recount" that readjusts structural calculations in the event that the market does not adhere to the ideal situation creates inherently flawed structural signals. Founders of M and W Structural Analysis There are many people whom have discussed price patterns in the market.
However, few assigned ratios to the structures. Robert Prechter and A. Frost advanced wave analysis and were among the first to discuss But, as most people know, Elliott wave counts are quite subjective. For me, I never understood Elliott Wave sufficiently to use it as an accurate and consistent predictive system to trade the markets. Yes, it's a great structural model but it is very difficult to predict accurate waves and trade off that information.
Regardless, the real focus of the history of Harmonic Trading must credit those predecessors that laid the foundation for simple structural analysis. It is incredible to think that years ago people first started writing about the stock market and various strategies to profit from market movements. These were more anecdotal stories but many of the basic technical methods such as Dow Theory were the first to describe market movements and ratio measures.
Later technicians focused more on simple percentage moves and also try to identify simple trendline formations. Some of the more prominent methods such as Relative Strength, Stochastics, harmonic patterns, Elliott Wave, ratio analysis and other measured techniques have advanced strategies that quantify market movements.
Despite this history, I feel there is plenty of room for advancement and for an evolution of Technical Analysis to focus on the realization that market movements possess all of the answers traders need to facilitate trading decisions. It is within this principle that I believe Harmonic Trading derives its greatest strength. Harmonic Trading encompasses parts of many theories and expands upon a variety of basic technical measurement strategies.
I have studied most of the prominent technicians of the past hundred years and I have learned a great deal from their initial insights. I believe that it is imperative to recognize these individuals for their contribution. They Harmonic Trading Volume 3: Reaction vs. Reversal 18 have created a basic science around the recognition of market movements, and these works have created the body of knowledge that is Technical Analysis today.
Harmonic patterns are an advancement of a vague identification strategy that labeled structures as five-point XABCD formations. Although the initial tenets of fivewave price structures was first prescribed by R. Elliott, the notion that a complex price formation contains relevant predictive value of future price action has been refined by many other technicians since then.
Other practitioners of Technical Analysis have added to this foundation and expanded the envelope of understanding over the past hundred years. Historic Technicians s Once I was committed to the study of Technical Analysis, I researched the oldest materials I could find. Historic market insights that were presented decades ago have relevance to modern-day markets. In fact, many of the forefathers of Technical Analysis were keen to emphasize the importance of price analysis over advisor opinion.
Illegal speculation and manipulation were rampant years ago and a motivating factor for these pioneers to uncover the truth from price analysis. The following technicians must be sought out and researched. Most are known for a seminal book or method that distinguished their work from many others. In fact, most people do not know that there are dozens of technical pioneers whom have presented amazing work but they never realized much recognition.
I mention a few of these individuals throughout this material and recommend them as well. Gann Richard Wyckoff H. Reversal 19 There are numerous individuals whom have put forth a dearth of resources but most have simply regurgitated the works of the past masters. It is important though that I recognized two individuals whom have immensely inspired my work with Harmonic Trading. Robert Miner's Dynamic Trading is an Elliott Wave masterpiece that introduces new applications of the standard rules, including unique time and price projections.
I have had the pleasure of meeting Mr. Miner one time at a presentation he generously gave to the Gartley Group. Bryce Gilmore's Geometry of Markets is another must-have technical book that correlated ratios with wave analysis in an unprecedented manner.
Gilmore's application of Gann-style ratios and trendlines were applied to his thorough explanation of the XABCD framework. In fact, he presented some interesting combinations of the structures but did so to identify multiple types of complex five-wave Zig-Zag formations. I am immensely grateful for his contributions and I recognize his work as a direct forerunner to Harmonic Trading. The strategies borrow from two general categories of technical analysis.
Harmonic Trading employs ratios with structural analysis in a unique manner but resembles many of the primary strategies from the past masters. Wave Theory-Market Structure R. A few decades later, the writings of R. Elliott were some of the most comprehensive structural analysis ever presented of his time. His classifications of three and five wave price phenomena were the first prescribed structural analysis that identified the importance of multiple segments.
Although the initial work with these structures lacked precise ratio measures, the general wave count rules provided an effective framework to assess the state of the larger trend. In the same manner, Harmonic Trading distinguishes structural opportunities in the markets. The proprietary concepts of harmonic patterns advanced the primary body of knowledge as it relates to structural analysis of price segments in the same simple differentiation principle as the following: Harmonic Trading Volume 3: Reaction vs.
Reversal 20 Does this Does this look like this look like this I have outlined this concept in prior books but this key recognition of structural differences is the essence of harmonic pattern analysis. When validated by specific ratio alignments, these structures quantify all relevant parameters in the determination of the trade. Gann William Delbert W. Gann presented numerous measures that have become a primary foundation within Technical Analysis.
Tools such as Gann angles, Square of 9, Hexagon, and Circle of became his primary market forecasting methods. Although I agree with many of his Geometric principles, Harmonic Trading has nothing to do with his other areas of study, most notably Astrology. Although cyclical in nature, Astrology has little relevance to exact prices structures, regardless of what its proponents might argue!
In my opinion, the Gann mystique is overblown while I feel his basic technical measures do not receive the credit due. Gann can be considered as the forefather of ratio differentiation, as he effectively refined concepts from Ancient Mathematics into trend analysis. In this regard, harmonic patterns and their measurements respect the natural phenomenon of cyclical movements of growth and decline in the same manner as Gann's principles.
When related to the market, Harmonic Trading also considers trendline analysis similarly, as well. Therefore, immense respect is due to Mr. Gartley Most popular of all harmonic patterns, the origins of the Gartley have been mired in a haze of misinformation and misrepresentation. I have discussed this previously in a variety of materials, including an article entitled "The Great Gartley Controversy. This masterpiece was ahead of its time and it is one of the most detailed technical resources I've ever read.
The problem that I had with the initial interpretations of the Gartley pattern was the lack of precision to define exactly what Harmonic Trading Volume 3: Reaction vs. Reversal 21 constitutes valid trading opportunity. This was not Mr. Gartley's fault, especially since he mentioned little in regards to patterns and did not integrate ratios with their measurements, despite contrary opinion.
The Gartley pattern that many improperly attribute to his book does not resemble anything to what the industry standard is today. Since I have been unable to obtain permission to feature a copy of the entire page from his material, I have presented the following illustration that resembles his initial structural presentation from his book, Profits in the Stock Market I encourage all serious students of the market to invest the money and buy this rather expensive resource.
The painstaking detail and explanation provide accurate technical insights that are still relevant to this day. Lambert-Gann Publishing, p. This illustration represents what he presented in his book. No harmonic ratios.
This was the extent of his identification of patterns structures. I have studied this book intensely and learned much from his work. However, the core focus of his material has been more on cycles and general wave structures. This is immensely important as a clarification of the source of harmonic patterns. Although others have presented various interpretations, the personal breakthrough in my first book, The Harmonic Trading Volume 3: Reaction vs. Reversal 22 Harmonic Trader integrated the M and W-type structures on an unprecedented level.
Whether I fully understood the uniqueness of this integration or not, the complex rules that defined harmonic opportunities advanced the general XABCD knowledge to convert this structural analysis into predictive trading capabilities. The number of classifications that Mr. Merrill presented seems to have the intention of structural differentiation. It seemed to me he was trying to identify those wedge and consolidation formations that resemble the rules of Elliott Wave.
In fact, on page 11 of the book, Mr. Although others have presented this illustration around the same time, I have yet to find a more precise presentation that preceded this work. Regardless, his work has been an important bridge between the writings of R. Reversal 23 Welles Wilder I believe it is important to clarify the focus of the meaning of "technical environmental measures" as more than just indicator analysis.
I have long cited Welles Wilder for his ground breaking work with the Relative Strength formula. He is a pioneer in the field of indicators and developed some of the most popular tools used today. His work has been an immense inspiration to me and it was a driving force behind the creation of the Harmonic Strength Index. The Relative Strength concepts were revolutionary when he released it nearly 50 years ago.
He is to always be lauded for these remarkable contributions. Although it may have been difficult to foresee the magnitude back at this time, he did freely share a wealth of knowledge that has been a game changing perspective on the markets. You could call him a disruptor long before disrupters existed.
Furthermore, I personally learned from his work that an integrative perspective will always find new relationships and clarify analysis moving forward. It is essential to learn upon mistakes and proactively optimize these measures, especially with the technology capable today. From a technical side - that is, the pure analysis of price action - I was disappointed in the vagueness of many well-popularized methods of the day.
Over the past 30 years as a student of the market, I adapted concepts and combined new ideas to create a greater standardization of price structure. As they say, "Necessity is the mother of invention. Initially, the categorization of price structures as harmonic patterns created specific guidelines for the identification of a trade opportunity. Beyond this, my analysis evolved as I was able to further define unique states of price action, especially relative to measured price environments.
This has defined a larger analytical science of structural wave behavior of price action in the financial markets that possesses unique technical conditions as measured by harmonic ratio formulae. These pattern rules and larger technical measures have become collectively known as the study of Harmonics in the financial markets.
Reversal 24 Theory of Market Mechanisms My journey into Technical Analysis was the result of following daily stock prices. This was long before the internet and for most beginners if you wanted to create chart analysis you had to track the prices by hand and plot the results manually. As charting technology was introduced in the late 80s and early 90s, the ability to quantify market movements expanded rapidly. Well-known concepts such as Elliott Wave, wedge patterns and standard indicators could finally be automated.
I know that sounds like talking about ancient history but in relation to what is happening today, yes those were antiquated markets. Now, the awareness has shifted. Traders are more statistically driven to look at those strategies that can be mathematically proven. Anything that can have a definable edge is of value. Gone are the days of gossiping stock tips. Technology has removed many blatant inefficiencies and the next generation of online trading will eventually replace the need for a physical exchange.
Maybe someday the New York Stock Exchange will be a museum? The pace of technology is helping to facilitate this revolution and the focus of market analysis has shifted to unlock those characteristics that define consistent situations that have predictive value. There is some standardization required in markets analyzed - mostly is important to stick with the markets with the highest liquidity. However, the price action in most major markets expresses unique technical conditions that define predictive opportunities.
Market mechanisms such as pattern structures, RSI BAMM combinations and other distinct confirmation strategies provide the analytical tools to interpret price history for an accurate assessment of future prices. Harmonic patterns are one example of a multi-segmented structure that possesses unique expectations unto the pattern. Other singular measurements provide technical insights especially when combined with distinct indicator strategies.
All of these definable phenomena are micro price action mechanisms that facilitate the functional buying and selling that makes the market go. The collection of various technical events manifested by the population of price data provides the relevant signals to define the possibilities of future trend direction. Remember, it is not essential to have every possible harmonic phenomenon to validate an opportunity but the recognition of the primary elements regardless of type will always confirm a trade opportunity.
The Natural Harmonic Reaction Principle The Natural Harmonic Reaction is the mechanical response of trading behavior at prescribed measurements of ratios that are related to the Fibonacci sequence, and the structural assessments that possess basic wave properties in the same manner as manifested throughout nature. I believe this to be the common characteristic all Harmonic Traders initially realize but it is a concept that needed to be labeled to better understand this phenomenon.
Simply stated, correctly measured harmonic patterns provide important inflection points - whether temporary or permanent in their strength Harmonic Trading Volume 3: Reaction vs. Google Scholar. Hicks, Value and Capital 2nd ed. Keynes, A Treatise on Money Vol. II New York, Download references. You can also search for this author in PubMed Google Scholar. Rockwell, C. In: The Economics of Futures Trading. Palgrave Macmillan, London. Publisher Name : Palgrave Macmillan, London.
Print ISBN : Online ISBN : Anyone you share the following link with will be able to read this content:. Sorry, a shareable link is not currently available for this article. Provided by the Springer Nature SharedIt content-sharing initiative. Skip to main content. Search SpringerLink Search. Abstract Two theories are advanced to explain the returns of speculators in commodity futures markets.
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Welcome to ForexStrategyExpert!Let's make money!Our target is to provide free and useful FOREX trading knowledge to everyone, for a better wealthy society. The Economics of Futures Trading. The quantitative arguments of this study use only the values of the variables and their first moments. Specifically, we leverage a strategy based on genetic algorithm (GA) to search the optimal Trading Strategy Portfolio Using Grouping Genetic Algorithm.