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LEVEL TWO: THE ADVANCED BEGINNER
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At this level, we expand our horizons timewise to include more bars than we examined at Level One. We are now moving from novice to advanced beginner.

Advanced Beginner Level

Objective: To make money consistently on a one-contract basis

Tools: Elliott wave and fractals

The advanced beginner in music has learned the basic notes and chords, has started to put together music that is pleasing to both the player and listeners, and is enjoying the newly acquired skills. Let's look at some of the differences be­ tween Level One and Level Two.

Where Level One in math is arithmetic and numbers, Level Two is space (geometry). In music at Level One we are con­ cerned with tones; at Level Two, we become concerned with tunes. In computers, Level Two is the analog computer. In his­ tory, it is the Renaissance. It is looking at the shadows as well as the leaves. It is moving from one dimension to a higher dimen­ sion. Information is available that is not obvious at level one. In the market, some examples of Level Two maps are the fractal and the Elliott wave. The time frame has now changed from comparing two adjacent bars to a more panoramic view of 140 bars or more.

At this point, all traders reach a crucial impasse. Is the mo­ tivation for trading strong enough to overcome the temporary frustrations of the market's learning experiences? Just as grav­ ity provides frustrations that help you learn about balance on a bicycle, so will market losses let you learn more about yourself and the balance points of the markets.

Fractals and the Elliott wave are tools that reveal the under­ lying structure of the market. The Elliott wave provides a direc­ tory to the up-and-down moves of the market. The Profitunity approach to analyzing the Elliott wave takes out 90 percent of the ambiguity and gives alternative strategies for dealing with the other 10 percent.

I view trading much like the beginning of a new manufac­ turing endeavor. The first thing you want is to produce a qual­ ity product. If you increase production before you have a quality product, you will face returns from dissatisfied cus­ tomers. The time to increase production is only after you have a quality product. In the markets, a quality product is being able to make profits consistently on a one-contract basis. If you are not doing this, you either don't have a quality ap­ proach to trading or you are not implementing the technique properly.

The advanced beginner has become a quality producer of profits. The next move is to the competent level, where you begin trading on a multiple-contract basis, and the skills learned at Levels One and Two become automatic. A trader's focus at this point is on maximization of the return on invest­ ment (ROI) as opposed to profit per contract. Professionally, at this level, a trader is in the top 3 percent of the profession. We are now talking real money!

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