Bill Williams Trading Chaos Applying Expert Techniques To Maximize Your Profits
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We pointed out earlier that germination energy always follows entry into a new experience. Once they discover that more is involved than they had first envisioned, most new traders become discouraged and never achieve what is there just for the taking. At Level Two, you approach this most critical juncture. Will you become discouraged and decide that no one really makes money trading the markets? Or will you hang in and gain all the benefits of being in the top 1 to 2 percent? At this point in our journey from Level One (novice) to Level Five (expert), we get acquainted with some powerful trading tools. Once these specific tools are mastered, your trading confidence will grow. We will be looking specifically at the underlying structure of the market, which we first discussed in Chapter 4.

At Level One, the novice level, our purpose is to stay in the market and not lose money while gaining experience. At Level Two, the advanced beginner level, we should be taking money from the market on a consistent basis. Level One is concerned with only two bars (on any time frame). We analyze the current bar by looking at the open, high, low, and close. At Level Two, we expand our horizon. While analyzing the Elliott wave, we must have a minimum of 100 bars and a maximum of 140 bars. When using the Profitunity Planned Trading approach, we can have virtually any number of bars.

First, we will take apart the Elliott wave. Then we will journey to the far reaches of market analysis and look at the underlying structure of the Elliott wave. This underlying structure comes from the new science of chaos and, specifically, from the fractal of the Elliott wave. After looking at the Elliott wave, we will simplify the trading of it in real time. You have probably heard the saying that if you take two Elliotticians and put them in a room with one chart, they will come out with nine different counts. Not so when you trade with the Prof itunity approach.

Almost any issue of a commodity trading magazine will have either a letter or an article about how the Elliott wave is simply too subjective to be of any trading value. Trash that thought! I challenge any trader to come into my trading room and trade with us for just one day. That trader will leavea believer! I have worked with several hundred traders privately, teaching them our approaches to using this tool. As far as I know, I don't have a single disbeliever.

The basic problem is that few traders understand and know how to test where we are in the current count. Any Elliottician can give you a good wave count after the fact. Traders need a current wave count that is dependable and accurate. That exact tool can be found in Level Two. Following a simple theoretical explanation, we will work through some actual trading examples. In Level Three, we will combine our other proprietary indicators with our fractal analysis to yield the most surefire, least-risk trading possible.

One of the few things that all traders agree on is that proper timing is a necessity for profitable trading. In over 35 years of active trading, I have yet to see any approach that has consistently beaten our technique's awesome accuracy in tim­ing the market's turns. Combining the perspective given by an accurate Elliott wave count with an understanding of what is actually happening in the market (the Profitunity windows) and with our own fractal analysis, a trader can be "on top" of the market minute by minute (or day by day, if that is the preferred time frame).

It is the best of both worlds when you work the market from both sides—profit buildup and risk reduction. The Profitunity approach to wave analysis provides a quantitative and qualita­tive measurement of the risk involved in any specific trade. Knowing where you are in the Elliott wave real time (not after the fact) gives you the knowledge to cut through rumors, opinions, announcements, and myths to get at the basics of how the market is unfolding. Some traders, even with this knowledge, lack training in the emotional-logical balance required for successful trading. To most traders, emotional management is the most difficult barrier to profitable trading. This barrier will be specifically addressed in Chapters 10 and 11, when we examine the proficient and expert levels of trading.

Our purpose in this chapter is to build a framework that shows why the market does what it does. Learning to ride the market waves is similar to surfing. The bigger the wave you ride, the more chance youTl have a "wipeout." An occasional water dunk is the price you pay to master this sport. All surfers know that the more often they go out to sea to meet the "monsters," the more they will learn how to read the behavior of each wave. The more you understand how to use and how to dissipate the energy contained in each trading "monster," the more confidence you'll have in any unexpected situation.


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