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FRACTAL (HUMP) SIGNALS
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The middle two columns of the worksheet (Figure 10-1) pro­ vide the boundaries within which we will trade, and our trad­ing tools are contained in the "Hump Signals" and "Thumb Signals" columns. Our job here is simple; we are working now with only the current trading time frame. We again read from right to left (current to past bars), and we note the last fractal buy and sell signal that still contains appropriate leverage. See Chapter 8 for a full description of fractals and leverage.

THUMB SIGNALS

The next step is to note any thumb signals (see Chapter 8) and include them appropriately on the buy or sell line.

At this point, we have condensed all the necessary direct market information and have converted it into easy-to-read trading signals. To integrate this material with our current positions, we list our ongoing trades in the "Current Trades" column.

When all this information is at hand, it is time to make an executive decision. We consider our current equity and the number of positions already in the market. Are we in a Prof itu- nity Planned Trading sequence? Where are we and what are the potentials in the Elliott wave, on both the current time frame and one significantly higher time frame?

We list our proposed trades in the "Proposed" column. To continue trading, we need only update this one sheet of paper (Figure 10-1), which is truly our "trading partner."

We make all entries in pencil. As the market progresses through the current trading time frame, we erase the space and enter the changed information. I have found, over the years, that this tactile intervention gives me a very good handle on the market's immediate personality. In Figure 10-6, the process is condensed into an outline so that you can follow the procedural steps without rereading all the explanations.

I. Air Bag Protection

A. The number-one cause of accidents

•  Who gets hurt

•  Protecting yourself with the air bag

•  The air bag in trading

a. The two-bar reversal on a significantly higher time frame

4. Not an initiating signal, but gives protection from drunken,
staggering market movements

II. Rhythms of the Market

A. Tide/wave ripple (TWR)

1. Looking at the market as a "natural" phenomenon
a. 5/13/34 Moving averages

i. If 5 is above 13 and 34, you should be long

ii. If 5 is below 13 and 34, you should be short

iii. If 5 is between 13 and 34, you should be out

(a) Indicator will be up, down, or zero

2. Using an MACD for accurately counting Elliott waves and
determining the current market momentum

a. The three things the 5/34/5 Profitunity MACD can tell
you about the Elliott wave

i. Peak of wave 3

(a) Special cases of waves 3 and 5 inside of wave 3 ii. End of a trend iii. When the "minimum" requirements for wave 4 have

been met

b. The same MACD can detect market momentum

i. Take fractal signals only when this momentum indicator is in the direction of the fractal signal (a) Indicator will be either up or down

III. Locating Fractal Signals

A. Minimum of five bars

B. Must have current leverage

IV. Locating Thumb Signals

A. Minimum of three bars with higher highs and higher lows, or
lower lows and lower highs

B. At least two of the three bars must have increasing volume

C. Inside and/or parallel bars do not count

D. Two of the three bars musts have increasing volume, or there
must be two greens, two squats, or a squat and a green.

V. Making an Executive Decision

A. Considerations

•  Moving up one and/or two significant time frames to
pinpoint current price action in the higher degree Elliott
wave

•  Going to a significantly lower time frame to pinpoint good
trade location

B. Execute

•  Fractal

•  Thumb signal

•  Squat

C. Flow =F - ocus

L - et go O - bserve W-in!

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