The Practical Fractal: The Holy Grail to Trading by Bill Williams PhD of Profitunity Trading Group

0:03 All right.

0:05 Thank you.

0:08 We're We're here today to talk about trading and some ways

0:11 to increase our efficiency at trading and make more money at trading.

0:15 One of the things I'd like to pose with you

0:16 first is a real problem that we have in trading.

0:19 And if we can solve this problem, then we're a long way along the way

0:23 to understanding the market better and to trading better.

0:26 One of the The first part of this problem is that you as a group

0:31 as a group of traders are in the top 10% intelligence-wise of the entire nation.

0:38 We're in the top category as a group.

0:40 That doesn't mean that every one of us is in there,

0:42 but as a group we're in the top 10 percentile.

0:45 Most of the people who come to trading commodities have already been successful,

0:49 and that's a second characteristic of it.

0:51 And that's number two is that we've had previous success.

0:55 And then the third thing that we have Yes, okay.

1:00 Yeah, we'll we'll lower those so you can see them better.

1:02 The third thing that we have,

1:03 unless you have found a broker that I haven't found yet

1:06 who will open up a an account on a credit card,

1:09 you have to have accumulated some kind of amount of money.

1:12 So, there are three things then.

1:14 You're in the top 10%, you have success previous success, and you have money.

1:18 And guess what that ends up at?

1:20 That ends up as over 90% failure.

1:24 In fact, the average trader coming into the market is

1:27 blown out in a little bit more than 3 months.

1:31 If we can understand this, then we can go a long way in understanding

1:35 how to make money in the markets and how to trade the markets.

1:38 Einstein, Albert Einstein,

1:40 toward the end of his life was asked a question by fellow scientists.

1:44 And the question that he was asked is what

1:46 is the most important question we could possibly ask?

1:50 And I They thought that Einstein was going to ask

1:52 ask say that something about the unified field theory,

1:55 which was what he was working on at that particular time.

1:57 But his answer is intriguing.

1:59 It was Without any hesitation, he said the most important question you can

2:03 ever ask is is the universe a friendly place?

2:07 And today the question I hope we can ask after

2:10 this is over is is the market a friendly place?

2:12 Let me give you a challenge right now.

2:14 You have your pencils and paper there.

2:16 What I'd like for you to do is to take a second or two

2:18 and write down on that piece of paper

2:21 what what animal personifies the market to you?

2:25 Assume that I have just landed from Mars.

2:27 I don't know anything about the market,

2:28 but I want to become a commodities trader and I come to you and I say,

2:31 "Well, what is it like?" You know, I know animals.

2:33 I've been out on the farm.

2:34 What animal does the market personify to you?

2:37 Okay?

2:38 Somebody give me an answer.

2:39 A 500-lb gorilla.

2:40 A 500-lb gorilla, okay.

2:43 A wolf.

2:44 An eagle.

2:44 An eagle, okay.

2:46 Godzilla.

2:46 A Godzilla.

2:48 What else?

2:48 A female.

2:49 A female.

2:50 Woah.

2:50 I won't get into that one.

2:52 Okay, what else?

2:53 Anybody have a different one?

2:54 A cow.

2:55 A cow.

2:57 A Tasmanian devil.

2:59 What's What's characteristic about all of this?

3:01 Unpredictable, unpredictable, unfriendly.

3:04 Exactly.

3:04 It's unfriendly.

3:05 It's threatening.

3:06 And we come to the market and this is a threatening

3:08 thing and we're supposed to relax and make money and trade well.

3:12 And And one of the problems that we have is that in trading the market,

3:17 we oftentimes come in with a lot of fear.

3:19 And because we have that fear, our mind doesn't quite work the way it should

3:23 and we don't trade the market the way it should.

3:25 Today we're going to look at a very different map,

3:28 a very different way of looking at the market.

3:31 And the first thing we need to understand is exactly what is the market.

3:35 It's not a Tasmanian devil.

3:37 It's not Godzilla.

3:38 It's not a female.

3:39 It's It's really not all these things.

3:41 The market is very simple.

3:43 And I'd like to share with you a very simplistic kind

3:46 of a comic book example of what the market really is.

3:49 Most of you remember The Flintstones.

3:51 Remember we had two leading characters in there.

3:53 We had Fred and the other guy's name was Barney.

3:57 And Fred was sort of an outgoing guy, a dinosaur hunter, and a real he-man.

4:01 And Barney was more the the academic,

4:03 laid-back research guy who likes to live in his backyard.

4:06 And Barney liked to carve uh dinosaur clubs.

4:10 And And Fred like to go out likes to go out and hunt dinosaurs.

4:13 So, one day Fred goes out, he really hits the jackpot.

4:15 He brings home two dinosaurs and he's dressed those dinosaurs

4:19 and he's got all these dinosaur whoppers in his freezer.

4:21 And he notices that his club is is kind of wearing out.

4:24 It's not too good.

4:25 And he looks over at his neighbor's yard,

4:27 Barney, and Barney's got this brand new club.

4:30 So, Fred gets an idea.

4:32 And he goes over to the fence and he says, "Barney, I'll tell you what I'll do.

4:34 I'll give you two big platters of dinosaur whoppers if you'll

4:38 give me that club." And Fred thinks about it and he thinks,

4:41 "Well, if I get those two platters of dinosaur whoppers,

4:45 I won't have to go hunting for a couple of 3 weeks.

4:47 I'll feed my family everything.

4:48 Okay, Fred, you've got a deal." Now, they have created a commodities market.

4:53 And there's no commodities market in the entire

4:56 world that's really more complicated than that.

4:59 They have a lot more computers,

5:00 a lot more screens than than Fred and Barney had, but that's a commodity market.

5:05 A commodity market, very simply,

5:07 is a a process or a place that's designed specifically to find

5:13 that point where there's an equal disagreement

5:15 of value and an agreement on price.

5:18 For example, the last car that you bought,

5:21 you gave somebody either your money or your credit to get

5:24 the car because that car was more important to you than that money.

5:29 Now, to the other side of that deal,

5:30 your money was more important to the person you bought the car

5:33 from and you made a deal and you created a commodity market.

5:37 And again, repeating that, a commodity market is nothing more

5:40 Any market is nothing more than a place where you have

5:43 an your your job is to find that place where

5:46 there's an equal disagreement on value and an agreement on price.

5:50 Now, that being true,

5:52 let's let's examine that and see if we can take it a little bit further.

5:55 If that is true, we can greatly simplify our approach to the market.

6:00 Making money, and you've heard this before,

6:01 making money in the markets is really very simple.

6:04 Not necessarily easy, but simple.

6:07 And commodity markets are very simple.

6:09 Now, as a commodity market, and they they're very efficient.

6:12 I mean, they find this place,

6:14 whether it's outcry or computer matching or whatever,

6:17 before you know it, before I know it,

6:18 before the guys and gals on the floor know it.

6:21 It happens automagically.

6:23 It It will be right at that point all the time.

6:26 If that's true then, we can throw out a lot of things.

6:30 First thing we can throw out is the concept of bullish

6:32 and bearish consensus cuz basically there is no such thing.

6:35 The way that works is simply this.

6:37 I will go out and I will survey some people.

6:39 I'll survey these four people over here.

6:41 What's your opinion on gold?

6:42 You like it?

6:43 You like it?

6:43 You like it?

6:44 You don't like it.

6:45 Then I write up a a text and it says that there is a 75% bullishness in gold.

6:51 Now, all that means is I haven't surveyed all the bears.

6:55 Cuz there can't be 75% There can't be 50.1% bullishness in the gold.

7:01 If there were, it would have already gone up in price.

7:03 So, if we can throw out bullish and bearish consensus,

7:06 we can throw out some other things.

7:08 We can throw out the entire concept of oversold, overbought.

7:12 Cuz it's really not there.

7:14 The markets are designed specifically so

7:17 that there cannot be oversold, overbought.

7:19 We had a person come to a tutorial who said, "Billy, you're absolutely crazy.

7:23 There is such a thing." And I said, "How do you know?" And he says,

7:25 "Cuz they have an oscillator for it." And how can

7:28 they have an oscillator for it if it's not really there?

7:30 And so we had to spend a little bit more time with him to explain it.

7:33 But that's really true.

7:34 There is no such thing as oversold, overbought.

7:37 The markets are designed specifically to make sure that that doesn't happen.

7:42 So, we can simplify that way.

7:44 We can also simplify a lot of money management that you read.

7:48 And one of the things that that's very common,

7:50 particularly with with new traders,

7:51 is that they will tell you as soon as you call the broker,

7:55 the same telephone call, don't hang up the phone.

7:58 When you put in the order, you put in what else?

8:01 A stop.

8:01 right.

8:02 And they'll say, "Well, if you're trading the bonds, put your stop in $500 away.

8:07 Don't ever take more than a $500 risk

8:09 in this in the in the bonds." And if you do,

8:13 that's okay, but you need to understand

8:15 that you have nothing to do with the market.

8:17 You're not trading the market, you're trading your wallet.

8:19 And one of the one of the most inappropriate questions in our opinion that you

8:23 can ask at the end of the day in trading is did we make money today?

8:27 That's totally irrelevant from our point of view.

8:30 The only question that that is legal at the end

8:33 of a trading day is was I in tune with the market?

8:36 If you're using a $500 stop, you're not in tune with the market because you're

8:40 trading your bank account and you're trading your wallet.

8:42 And one of the problems that really gets us and and we're

8:45 going to get into how to use this very shortly,

8:47 but before we do, we need to look at the maps that we use for trading.

8:51 And And one of the problems in technical analysis,

8:54 and let me state quite frankly my opinion,

8:56 and this is my opinion, technical analysis does not work.

9:00 I don't know how in the world anybody can espouse technical

9:03 analysis when 90% of all the technical analysts lose money consistently.

9:08 Now, if you were a plastic surgeon and 90%

9:11 of your patients were uglier than when you started on them,

9:14 you're not going to be in business very long.

9:16 Technical analysis is not bad, it just doesn't work.

9:19 And here's the reason it doesn't work.

9:21 What happens is you have these smart people coming in, the top 10% IQ,

9:25 and they come into the market.

9:26 They've been successful in most most everything they've ever done.

9:29 They try to trade or they start trading and they lose money.

9:33 Then what would do we do?

9:34 Well, we we pull out the charts and we say,

9:36 "Well, yesterday or last week or last month or last year,

9:40 if I'd done this and this and this, I

9:42 would have made a lot of money." So, they said,

9:43 "Okay, if I would continue to do this, maybe I'll

9:46 make a lot of money." They go to the past

9:48 and they make a template of the past and then

9:50 they try to fit that template onto the future.

9:53 Unfortunately, it doesn't work.

9:55 As a matter of fact, the better it worked in the past,

9:57 the more for sure it's not going to work in the future.

10:00 The underlying assumption is not accurate.

10:03 It's a false underlying assumption.

10:04 And that underlying assumption is that the future will be like the past.

10:09 And if there's any one thing I have learned in 36 years of trading

10:13 is that the past the future is not going to be like the past.

10:15 The S&P is not what it was a year ago.

10:18 And my conclusion is not going to be next year what it is this year.

10:21 The currencies last year were crazy, wild, and wonderful to us.

10:25 The currencies are good to us this year,

10:26 but not they're they're not crazy, wild, and wonderful to us this year.

10:30 So, the the underlying assumption behind technical analysis,

10:33 again in our opinion, is false.

10:35 We're using the wrong map.

10:37 It's exactly the same thing and and right now as we're talking there's a very

10:40 very good football game college football game

10:43 going on between number two and number four.

10:46 So, we will cut this short so we can go to the football game later.

10:49 But, it's like playing a football game where you outline every play

10:53 you're going to make during the whole game before the game starts.

10:57 Now, how successful do you think a football team would be that way?

11:00 Wouldn't be successful at all.

11:01 No, you'd be kicking at the wrong time, throwing at the wrong time.

11:04 But, that's what technical analysis does.

11:06 It takes this template from the past and tries to impose it on the future.

11:10 And it doesn't work.

11:11 It lucks out every now and then, but it doesn't work.

11:14 So, what we're doing as a group of traders,

11:17 the 90% of us that lose, is that we're using the wrong map.

11:21 And let me explain what I mean by that.

11:23 Uh about 20 22 years ago a university in Texas did a research study.

11:31 Now, this is a little bit weird research study.

11:32 They spent $3 million on this and they asked two questions.

11:36 If all of the animals in the world

11:38 had the same intelligence that human beings have,

11:40 but they had the same physiology.

11:42 So, a grasshopper is still a grasshopper here, but it has the brains of a human.

11:46 And a cow is still a cow, but it has the brains of a human.

11:49 And all of the animals at once went out to look for water.

11:52 Search for water.

11:54 What would be the first animals to find it and what would be the last animals?

11:58 Now, all of these real smart professors and researchers

12:02 could not decide on what animal would be the first.

12:04 But, do you have any idea of what they all agreed unanimously,

12:07 without one exception, what animal would be the last to find water?

12:12 Anybody?

12:14 Fish.

12:15 Fish would be the last to find water because fish don't know anything else.

12:19 I mean, you're sitting here and I'm up here

12:21 and what we think normally is there's nothing between us, right?

12:24 But, there's a whole ocean of stuff that's going on between us.

12:27 And just as a fish don't they can't see the water or don't notice the water,

12:31 we don't notice what's going on.

12:33 And this is because of the classical scientific heritage we have.

12:37 Uh what's going to kill you and I, what we're going to die of if we don't

12:40 get in an accident or have some uh tragic disease,

12:43 we're going to die of gravity.

12:45 Gravity's going to kill us in the end.

12:48 And we don't ever talk about gravity, do we?

12:51 But, we talk about the weather all the time.

12:53 Now, what if we what if we were out of gravity

12:56 for say two or three minutes every every 24 hours?

12:59 We wouldn't talk about the weather.

13:01 We'd talk about gravity.

13:02 Where'd you go last night?

13:02 Well, I went to Mars and then came back to Venus and you know, went around here.

13:05 But, we don't talk about gravity because it doesn't change.

13:09 We talk about the weather because it changes.

13:11 We talk about the market because it's changing.

13:14 The market is exciting because it changes.

13:16 Um We live in a logic ocean.

13:22 And what we think about determines how we trade.

13:26 And one of the assumptions that we operate under when we trade,

13:30 and one of the assumptions that I think is true,

13:32 is that you don't trade the market, I don't trade the market,

13:35 the institutions don't trade the market, none of us trade the market.

13:38 We all trade our personal belief systems.

13:42 And chaos, when we talk about chaos,

13:44 we'll understand how this affects our trading.

13:47 Now, our current logic system came down from an old

13:50 guy about 2,500 years ago by the name of Aristotle.

13:54 And Aristotle seduced the whole world by saying, "If you don't know something,

13:59 the best thing you can do is to go

14:00 to somebody who knows more than you and ask them." Now,

14:03 that sounds very logical, doesn't it?

14:05 I mean, our whole all of our our society is built on that.

14:08 Medicine is built on that with its double-blind studies.

14:11 Law is built on that with its precedents and and what cases we we had before.

14:16 And schools are certainly built on that.

14:18 Right, you go to school to let somebody

14:21 tell you you're either right or wrong, right?

14:23 And and you want to get more right,

14:24 so you you change everything to please the teacher.

14:28 If you're a freshman in college,

14:29 you're probably very ignorant and when the history professor

14:31 tells you to go home and read 10 pages,

14:33 like an idiot, you go home and read 10 pages.

14:35 Then you become a sophomore and somebody

14:37 clues you in, you don't study the books, you study the professors.

14:41 You give the professors what they want and that's how you get by.

14:44 And what you do is you lose your own thinking and you lose your own creativity.

14:47 Well, Aristotle came down through the ages with this and and his picture

14:51 of the world was a very smooth-running world.

14:54 And anything that didn't fit in this picture

14:56 was either a measurement error or it was random.

14:59 There was another guy who lived at the same time as Aristotle

15:03 and I don't know how many of you've ever heard of his name,

15:05 but his name was Heraclitus.

15:07 Heraclitus had a very different view.

15:09 The most famous saying of Heraclitus probably is

15:12 that you can't step in the same river twice.

15:15 And Heraclitus had a student by the name of Cletus who went further than that.

15:20 Heraclitus says when you step in the river and pull your foot out

15:23 and you go right back in, not only has your the river changed,

15:27 but your foot has changed also.

15:28 Cletus, his student, went further than that.

15:31 Cletus says you can't step in the same river once.

15:34 That in the process of stepping in it, it changes.

15:37 So, on the one side we have this smooth-running Euclidean Newtonian

15:41 world and on the other side we have this Heraclitian world.

15:45 Everything goes very smoothly through Galileo,

15:47 Descartes, all of these people, Newton,

15:51 and and comes down to about 1911 and some little short

15:55 guy comes out of the woodwork and upsets a whole apple cart.

15:59 And his name was Einstein.

16:00 And he came in and he introduced a concept called relativity.

16:05 Uh the special theory and the general theory.

16:07 Up to that time science classical science

16:10 said there are four things we're working with.

16:12 We're working with mass, energy, space, and time.

16:15 And Einstein said space and time are really the same thing, guys.

16:19 There's no difference.

16:20 And any self-respecting physicist in the last

16:23 uh 90 years doesn't mention the word

16:25 time without a hyphen in space or space with a hyphen in time.

16:29 And he said that energy and mass are really interchangeable.

16:33 So, he he took all of this stuff that we'd counted

16:36 on for all these centuries neons and took them away from us.

16:39 The only thing he really left us with as a constant was the speed of light.

16:44 And then comes along quantum mechanics.

16:46 And quantum mechanics says, "Hey, that's no limitation.

16:49 There there dozens and dozens of things that travel faster than

16:52 speed of light." And now we're we're sort of left with nothing.

16:55 And John Bell comes in in 1964 with what's known now as the Bell theorem,

17:01 which state says that there is no locality of causes.

17:07 That there isn't a cause and effect,

17:09 a stimulus response that we all learned in school.

17:12 That everything is connected to everything else, that you and I are connected.

17:15 Right now, you and I have been

17:16 intimate with each other already because you've breathed

17:19 out part of your body and breathed in part of mine and we don't notice it,

17:23 but we've been very very intimate with each

17:24 other already since we've been in this room.

17:27 And John Bell says that we are all connected together.

17:31 Then after that, a guy who just passed away a couple years ago, David Bohm.

17:36 Um in my opinion, 100 years from now people are going

17:39 to look back and they're going to say the most famous person,

17:41 world-changing person in the entire 20th century was

17:45 a scientist by the name of David Bohm.

17:47 David Bohm was an American.

17:48 He was a graduate student of Einstein's at Princeton.

17:51 He was Einstein's favorite student of all and got somehow

17:55 messed up in the McCarthy hearings in the '50s and said,

17:57 "I will not live in a country that acts like this." Moved to London,

18:01 became a physics professor at the University of London.

18:03 And he went further than Bell.

18:06 He what David Bohm said is that everything not only is connected,

18:12 but everything is the same thing.

18:16 And that has some far-reaching aspects.

18:19 It means that you and I and the market are the same thing.

18:22 That the market is not one of these big

18:24 economic fundamental mechanical or technical kind of operations.

18:27 The market is really a composite of all these millions of human traders

18:31 like you and I who are making these crazy chaotic decisions in our life.

18:35 Now, let's talk about chaos for example for for a moment

18:38 because chaos is going to affect your life much

18:41 much more in the next 20 years than either relativity

18:44 or atomic vision or any of these other scientific advances.

18:48 If you knew everything there was to know about chaos,

18:52 and if your job was to throw as many people off

18:55 base as you possibly could by naming it something it isn't,

18:59 you would call it what?

19:01 Chaos.

19:02 We we have a we have a um a talent for misnaming things.

19:06 You and I think we're right now that we're talking

19:09 with our conscious mind or we're communicating with our conscious mind, right?

19:12 The left hemisphere up here.

19:13 But, that's the only part of your brain that ever goes to sleep.

19:17 It's the only part of your brain that is really unconscious from time to time.

19:21 And yet we call it the conscious mind.

19:23 If you really understood what chaos is, chaos is not randomness.

19:26 Chaos is a much higher form of order.

19:29 And what I'd like to suggest that you you remember

19:32 from this presentation is that the next time you hear the word chaos,

19:36 uh as in the science of chaos, chaos is a bad name.

19:41 The real in the real message or the real

19:44 meaning of this science is how you handle new information.

19:48 So, chaos is new information.

19:50 And we call it chaos, but new information is a much more descriptive term.

19:55 Then we we come to the part of how do we handle new information?

19:58 Because up here on the chart,

20:00 what you see is new information every time you look at a chart.

20:04 The first thing you have to do or what first thing we

20:07 normally do when new information comes in, we try to organize it.

20:11 We try to put it into old categories.

20:14 So we say, well, what is it like?

20:16 It reminds me of this or is it like this?

20:19 What we're doing is we're massaging this new

20:21 pristine information and putting it into old categories.

20:24 And we'll we'll swirl it around and bend it

20:26 around and make it plastic so it'll fit in there.

20:29 Um I had in my younger days,

20:31 I had an experience a bad experience with a lady who happened to have red hair.

20:36 And and I judged from that experience that that any

20:38 any female with red hair is absolutely no good.

20:42 So today when I see a red-headed lady,

20:44 unless I catch myself, I've already made a judgment.

20:46 I don't even know who she is.

20:47 I've never met her.

20:48 But this is because I have I've massaged this new

20:51 information into this old category that stay away from red-headed women.

20:55 Now we all do this.

20:56 We all try to organize any kind of incoming information.

21:00 Once we have anything organized,

21:02 it doesn't matter whether it's a note you're taking or the IRS or whatever,

21:06 there is a strong tendency the first priority of any organization is to survive.

21:13 Now we're in election year and not so much now as we get closer to the election,

21:17 but last year there was a lot of talk about doing away with the IRS,

21:20 getting a flat tax, a consumption tax or whatever.

21:23 Can you imagine what would happen with a hundreds

21:26 of thousands of employees at the IRS,

21:28 the hundreds of thousands of CPAs and tax lawyers

21:31 if we really try to do away with the IRS?

21:33 They're going to try to keep that thing going.

21:35 You once a bureaucracy in government is established, it keeps going.

21:40 In the market, once a bracket goes, it tends to keep going.

21:43 Once a trend goes, it tends to go further than you thought it would.

21:46 Remember back in the mid-80s when when some of these um

21:50 wild-eyed skeptics and specters were were saying that gee,

21:54 you know, the Dow's going to go up above 3,000.

21:56 It's going to go to 3,700.

21:59 And everybody was pooh-poohing that and what happens?

22:01 It's almost twice that now and still on its way up.

22:04 Anything that is organized tends to survive or that's its primary function.

22:11 We were having a discussion not long ago about the economy of the world

22:14 and we were talking about what are the biggest movers of money in the world.

22:19 And we came up with four.

22:20 The four biggest money movers in the world and nothing else

22:24 in the world can come close to any one of these four.

22:27 And those four are war, medicine, religion, and insurance.

22:31 Think about that for a moment.

22:33 War, medicine, insurance, and religion.

22:36 And they all have one thing in common.

22:39 And that's death.

22:41 And and all of us want don't want to look that in the eye.

22:44 We want to survive.

22:45 There's there's an old country song whose verse goes,

22:48 "Everybody wants to go to heaven, but nobody wants to die." Which points

22:53 out some of our paradoxical kind of thinking.

22:55 But think about it.

22:56 You have war to kill people and break things, right?

22:58 And if you if you get don't kill somebody and you wound them,

23:01 you you put them together with medicine so

23:03 you can send them back and shoot them again.

23:05 And and those who get shot and killed,

23:07 you've got insurance to send some money home

23:08 to sort of ease their pain a little bit.

23:11 And then you have religion to take care of the ones who were shot.

23:14 But all four of these biggest money movers in the world have to do with death.

23:18 And it has to do with organization.

23:20 Now let's look at some of our personal organizations.

23:22 Here you are in a profession of trading commodities.

23:25 Your job as a speculator is to take risk that other people don't want to take.

23:31 And if you do a good job,

23:32 they'll pay you outlandishly for taking those risk off their back.

23:36 But what did you learn?

23:37 What was the first thing you learned?

23:39 As a kid, not to take risk, right?

23:42 Don't touch the hot stove.

23:43 Don't go across the street.

23:44 You learned before you had any intelligence

23:46 to make a decision to be risk averse.

23:49 Let's say that you're a 2-ft high person here.

23:51 And and you're adventurous.

23:52 You're out there trying to learn what the world's about

23:54 and you're you're entering the terrible twos as they call it.

23:57 And your mama says, "Don't touch the hot stove." Well,

23:59 you don't like that, so you bite her on the leg.

24:01 And then she whips you a little bit and and you get this idea,

24:04 this organization comes in, this new information organizes itself that I'd be

24:08 a better lot better off if I wouldn't bite her on the leg.

24:11 And then you you take this into adulthood

24:14 and when somebody says something to you, you don't bite them on the leg anymore.

24:17 Well, we we do the same thing in trading.

24:19 We don't trade the market, we trade our own personal belief system.

24:24 Any questions at that point?

24:26 One of the things that that we we talk about in in in chaos,

24:31 one of the things that chaos theory tells us,

24:34 there are three principles in in chaos theory that that are important.

24:37 And you can see these principles at work in the market

24:40 every day and on every 1-minute and 5-minute chart.

24:43 First principle is that everything in the universe,

24:47 everything, takes the path of least resistance.

24:51 Now you are here because whatever was going on in your life,

24:55 this is the path of least resistance.

24:57 You're sitting where you're sitting right now because that was

25:00 the path of least resistance for you at this moment.

25:04 What you will trade tomorrow or Monday will be the path of least resistance.

25:08 And the market will take the path of least resistance.

25:11 That's the first principle.

25:12 The second principle is that this path of least resistance

25:16 is determined by the always underlying and the usually unseen structure.

25:23 For example, let's say you have a river running down down a hill.

25:26 That if the riverbed is shallow and narrow, you're going to have rapids.

25:31 If the riverbed is deep and wide, you're going to have a calm pond.

25:34 It's not a decision of the river.

25:37 It's a decision that's met that's dictated by the riverbed.

25:41 Let's take another example.

25:43 Let's say that you had to go to the bathroom right now.

25:47 Well, the bathroom is straight over there.

25:50 But you wouldn't go that way, would you?

25:52 What you would do is you'd get out of your seat

25:53 and you'd go down the aisle and you'd go back through

25:55 the door and then you turn left and go down the hall

25:57 three doors and then you turn left and go through that door.

25:59 Why did you take all that circuitous route when the bathroom's over there?

26:04 Because you have learned you've learned long ago that you're better

26:07 off if you don't try to walk through walls unless you're Superman.

26:10 But when you were doing that behavior, when you were going to the bathroom,

26:14 you were probably unaware that your behavior was controlled

26:18 by the architect who drew up this building and by the building

26:21 contractor who put the doors in the hall out

26:23 there rather than straight to the bathroom from your seat.

26:26 The same thing happens when we're trading.

26:28 We're affected by things we're not even conscious of.

26:31 The third So the first principle is

26:33 everything follows the path of least resistance.

26:35 The second principle is that path is determined

26:38 by the always underlying and the usually unseen structure.

26:41 And the third principle is that that unseen structure,

26:46 that unseen underlying structure can be discovered and it can be changed.

26:52 So the underlying structure of our belief systems that we

26:55 trade can be discovered and it can be changed.

26:59 Just like the kid who doesn't bite mothers anymore,

27:02 that structure can be changed.

27:03 Let's look, for example,

27:05 at a couple of things about the market and the underlying structure.

27:08 What happens and who moves the market?

27:11 The first thing that moves the market is

27:14 out there in the whole complex of trader land,

27:17 there are changes in attitude about the market.

27:21 I think it's going up and I'm not sure it's going up.

27:24 I think it's going down.

27:26 And that kind of change for And remember

27:28 that that for every every change in the market

27:31 that it always happens where there is

27:33 an equal disagreement on value and agreement on price.

27:36 And that first thing that happens is somewhere out there in trader land,

27:42 a group of people who may not be together but scattered all over the world,

27:45 looks at the market and looks at the chart and says, "Hey,

27:48 this is not quite working out the way that we

27:51 thought it was." So that's the first thing that changed.

27:54 The second thing that changed is that produces a change in volume.

27:59 Either people getting into the market, going long or short,

28:01 or people getting out of the market,

28:02 reversing their position, just getting out or going flat or whatever.

28:06 And that changes in the market uh volume and a possible change

28:09 in the bias of the momentum and the direction of the momentum.

28:14 Following that, that produces a change in the speed

28:17 of the current momentum and it may again change the direction.

28:21 For example, the last thing in the market to change is price.

28:27 And a lot of traders and a lot of analysts say,

28:30 well, changes in price make changes in attitude.

28:33 Uh from our standpoint, price doesn't do anything.

28:37 Price is the effect.

28:40 The last thing to change is price.

28:42 What changes before price is momentum.

28:44 What changes before momentum is volume.

28:46 And what changes before volume is all of these crazy

28:48 decisions that we're making out there in bond land.

28:51 Then the next thing that changes is the speed of the current momentum.

28:55 It will either accelerate or decelerate.

28:59 It's like a bowling ball, something heavy.

29:01 And you take that ball and you roll it down the street.

29:04 And as the ball is rolling down the street,

29:06 it continues because it has momentum.

29:08 If if it meets a hill up here,

29:11 it'll slow down on that hill and finally it'll come back and go the other way.

29:15 In market terminology, that's called a change in trend.

29:18 But actually from a physics standpoint, when it starts to slow down,

29:22 it's really accelerating in the opposite direction, isn't it?

29:26 And the market will tell you that.

29:27 So when we look at the charts in a moment,

29:29 the three things we look at and the only

29:31 three things we look at are are the price,

29:34 where the balance line is, the acceleration, and the momentum.

29:37 And these we trade the market on these five dimensions.

29:40 The next thing that produces is a change in the direction of the momentum

29:44 and the final thing that it produces is a change in price.

29:48 And uh we change we trade this on a five-dimensional basis

29:52 and we're going to show you exactly some of these dimensions.

29:55 We won't be able to show you in this time span all five of them,

29:57 but we'll show you some of them.

29:59 Before we do that, I want to share with you

30:00 a couple of things that from people who are trading this way,

30:04 we have now trained almost 600 people in our private tutorial who are

30:09 now professional private and mostly most

30:12 very most of them are successful speculators.

30:15 These are two people who came to our seminar about four years ago,

30:20 Charles Parker and Steve Winland in Houston,

30:23 Texas and this is a note that we got to him from him.

30:26 Bill, I wanted to thank you for your guidance this weekend

30:28 as it was very rewarding enclosed is an article from Futures Magazine.

30:32 I'm sure you've heard of that magazine this month.

30:34 Just to show you how a couple of your students are doing.

30:37 This was in December and the the headlines were the the funds remain in a slump

30:42 and these two guys went out and and established

30:45 an offshore fund called San Juan Investments.

30:48 And Futures Magazine charts every month a number

30:52 a little over 200 funds and this was number one.

30:56 This was in October.

30:57 Then in the following this was in December.

31:00 I'm sorry.

31:01 The following October of the next year it's

31:04 interesting that they're still number one and number five.

31:07 Two of the top five were trading exactly what we're

31:10 talking about and then 1994 noticed down here the top

31:15 performers for 1994 from Futures Magazine and you could believe

31:19 anything you read in Futures Magazine was was San Juan Investments.

31:24 The thing that that takes chaos from chaos to cosmos which

31:31 is unorganized or seemingly unorganized to organized is a thing called fractals.

31:37 Now fractals are nothing new and don't be frightened by the word.

31:41 When Columbus invaded America the mathematicians back

31:45 in those days were talking about fractals.

31:48 And in the 1400s in the 15th century

31:51 they were talking about these are the theoretical mathematicians.

31:54 They were saying, well, a dot has no dimensions.

31:57 They were talking about dimensions and they said a line has one dimension,

32:01 a a um plane has two dimensions, a solid has three dimensions.

32:08 And then they asked themselves the question,

32:11 suppose you had a very curvy line and if

32:13 you have a curvy line it's still one dimension.

32:16 And you had this line and it was so curvy that you had a plane,

32:21 a rectangle here and this line goes through here and it's

32:24 extremely curvy and it goes back and forth and back

32:27 and forth and back and forth and then comes out

32:29 the other side and it shades one half of that plane.

32:33 What is the dimension of that line?

32:36 Well, for 500 years they pondered that.

32:38 And then a very brilliant scientist by the name of Benoit

32:41 Mandelbrot came up with the idea that this is a fractional dimension.

32:46 If it covers half of this plane, its dimension is 1.5.

32:52 Now what that's saying is that in in a chart form an irregular

32:56 scattered pattern will have a higher

32:58 dimensionality than than one that's very smooth.

33:02 A straight line through this would have one dimension.

33:05 If it were a plane it would have two.

33:07 Mandelbrot went further and he analyzed the fractal

33:10 dimension of the Mississippi River and here we go

33:13 down the Mississippi River and he found

33:15 that the Mississippi River had a fractal dimension of 1.2610.

33:20 Which meant that it was curvy enough or staticy enough or back

33:25 and forth enough that it covered one quarter of that plane.

33:28 Then the IBM management and he is

33:30 a professor emeritus of of advanced mathematics

33:33 at Yale and then also still working for IBM in Yorktown Heights, New York.

33:38 They came to him and said, well, um you know,

33:40 it's nice that you're analyzing this, but it'd

33:43 be more helpful for us since we're supposedly

33:45 a for-profit corporation if you would analyze something

33:48 that we might make a little money out of later.

33:50 And he took a four-pronged approach.

33:52 He said, okay, we'll look at economics,

33:54 we'll look at physiology which is medicine,

33:56 we'll look at sociology and we'll look at psychology.

33:59 And from that and by the way directly because of that we have two things.

34:04 We have heart artificial hearts that work and we have the World Wide Web.

34:08 The World Wide Web would not work without chaos

34:11 and I'll show you why in just a moment.

34:13 But what Mandelbrot did is he said, okay, we'll go and we'll study economics.

34:17 And in Yorktown Heights the largest database

34:20 they had were corn and cotton prices.

34:23 So he analyzed corn and cotton prices and guess what he found.

34:28 To three decimal places they had the same

34:31 fractal number exactly as the Mississippi River.

34:35 And then they later analyzed the Ohio River and then

34:37 they analyzed the Tennessee River because it was dammed

34:40 up and interfered with by man and all of them

34:42 had to three decimal places the exact same fractal number.

34:46 The day that I read that I did not sleep a wink

34:49 all night that night because it was like the curtains were opening.

34:52 What it said was the markets are a natural function.

34:56 They're not a man-made function.

34:58 They're natural function.

34:59 So if you really want to see how the markets work,

35:02 take a picture of water out here and pour

35:04 it on the ground and watch the strange attractor

35:06 gravity come in and pull it around the rocks

35:08 and around the high places and the low places.

35:10 So this was the Mississippi River and this was the corn chart.

35:15 Same exact thing.

35:16 If that be true, then then the science of chaos

35:21 offers us a great deal in analyzing the markets

35:25 and understanding the markets and it may be a key

35:27 to why technical analysis doesn't work any better than it does.

35:31 It may be a better map in which to analyze the market and we

35:34 think it is and we think that we can very easily prove that.

35:37 So let's talk about a fractal.

35:39 A fractal is a change in behavior.

35:44 So when the market goes up and then comes down, that's a fractal.

35:47 A trend change.

35:49 A fractal one fractal that's very easy to locate is a fractal

35:53 of when you will get out of the market and you will always

35:56 get out of the market at that exact point where losing one

36:00 more dollar is more painful than saying I shouldn't be in this trade.

36:04 And when you get to that point you'll get out and that's a fractal.

36:07 A fractal was when you decided to come into this room

36:09 rather than you go into one of the rooms down the hall.

36:11 A fractal will be when you decide whether you're going

36:14 to use this material in your own trading or not.

36:16 When you decide Monday or Tuesday to buy a bond or sell a bond,

36:20 when you to make that decision to call the broker, that's a fractal.

36:23 How do we look at a fractal in the market?

36:26 On page in your notes on page nine there are some key fractal formations.

36:32 And a fractal when we were first looking

36:35 at this, we we call this a five-fingered boogie.

36:39 And we called it that for lack of imagination of anything better to call it.

36:43 When I was in college I worked most

36:45 of my way through college playing in a Dixieland

36:47 band and we had a number that featured

36:50 the piano which was called the five-fingered boogie.

36:52 So it's like your five fingers.

36:55 The definition of a fractal is that there must be on an up fractal there must be

36:59 a bar that is higher than the two

37:01 preceding bars and higher than the two following bars.

37:05 Now the two preceding bars and following bars don't have to be like a tent.

37:09 They don't have to be this way.

37:12 They can be anything.

37:13 They just can't be as as higher.

37:15 So here on this first illustration we have a pristine fractal.

37:20 On the second one notice that we have

37:22 two that are same height on the middle finger.

37:24 That's okay.

37:25 That is still a fractal up.

37:27 Over here we have three.

37:28 It's still a fractal up.

37:29 It's a fractal.

37:30 It's a fractal.

37:31 Down here we have the exact same thing

37:33 a fractal a fractal a fractal and a fractal.

37:36 It takes only five a minimum of five bars.

37:39 It can be more than five bars,

37:40 but you have to have one bar that's higher or for sale one bar that's lower.

37:45 And and let's look at an example of this and let's look at an example

37:49 in in a real chart and by the way these are these are actual trading examples.

37:57 These are not hypothetical.

37:58 Let's look at at trading the Japanese Yen

38:03 on a daily basis starting in January of of last

38:06 year and this is trading on a daily

38:09 basis and trading one contract for every signal.

38:13 And we'll follow this through January, February,

38:16 March and until April the 19th which is where we got out of this trade.

38:20 This is January and that's yeah.

38:24 And notice that the first fractal up is is demonstrated

38:27 or is is noted by this this uh carrot here.

38:30 And notice that it has a high,

38:32 it has two previous lower highs followed by two lower highs.

38:38 So our stop our buy stop is one tick above that fractal.

38:42 So we bought that fractal at one and we're filled on it at 102.31.

38:48 Any questions about that?

38:51 We have the five-fingered boogie or the fractal

38:53 and the market goes beyond that, it's a breakout.

38:55 It's obviously a breakout trade.

38:57 Yes, a question.

38:58 I I assume you're building on the fifth.

39:01 We we the question was which bar we bought it on.

39:05 We buy it on the first the first price that exceeds the top of that fractal.

39:09 We take one tick above that and when it hits that we're gone.

39:13 Now since that since you're buying a breakout,

39:16 you obviously have the world's worst trade location, don't you?

39:19 You also have the maximum potential loss.

39:22 So you need to be satisfied a little bit.

39:24 Now remember that we're looking at the market from five different dimensions.

39:28 For example, let me give you an example.

39:30 Let's say that we have an aquarium here and we have an a fish in that aquarium

39:34 and you have a television camera here

39:36 and you have a television camera from over here.

39:38 You're going to see two different fishes, aren't you?

39:41 And if we look at the if we look

39:42 at the chart just from the from the price standpoint,

39:47 we're only going to have one dimension of that.

39:50 One of the characteristics of the market is simply this.

39:54 That most of the time, about 70% of the time,

39:57 the market's going to do nothing and only about

39:59 15 to 30% of the time will the market trend.

40:03 And and this trending is where we make most of our money.

40:06 And you've heard, I'm sure, from a lot of traders,

40:09 they'll say, "Well, making money in the market is easy.

40:12 The hard part's keeping it." And what they're saying

40:14 is that anybody can make money in that trend,

40:16 but when the market's not going anyplace,

40:18 that's when the floor brokers and the the locals

40:20 on the floor will take your money away from you.

40:24 And what the fractal guarantees is that you will

40:27 not be left out of any of these trends.

40:30 Uh my grandfather used to tell me that even a blind

40:33 chicken will find an ear of corn every now and then.

40:36 And we call these blind chicken trades.

40:38 I mean, there's there's absolutely nothing skillful in making

40:42 money in a in a trend like that.

40:44 You just got to be dumb enough not to get out.

40:47 And and it's very easy.

40:48 This is the easiest trade to make.

40:50 It's not the most profitable because on the five dimensions,

40:53 this is the fourth dimension to get in.

40:55 So, in this fractal and in this illustration that we're using here,

40:59 we would have been in before that fractal,

41:01 but right now let's talk only about the fractal.

41:03 So, that was our first entry.

41:05 Now, we had a fractal up here on um at 103.81

41:11 up at that, and that was on January the 16th.

41:14 And then on January the 23rd, we had a a fractal down form,

41:18 and notice that it was never hit in January.

41:20 And then toward the end of the month, we had another fractal.

41:23 So, we ended up the month on a daily basis, and we had 20 bars.

41:27 We had three fractals up and one fractal down.

41:31 Only one of them was hit.

41:33 So, we're ending up the month and the ending up the month of January,

41:36 at the end of the month, we were long from January the 12th fill at 102.

41:40 That was our fill, 102.31.

41:42 The yen was at 109 101.90 at the end of the month.

41:46 We're carrying into February a 41-point or a $513 open equity loss.

41:53 So, we've traded the yen on one contract basis for the entire month of January.

41:57 We're behind $513.

42:00 Not too good, yet.

42:01 Then we go into February, and February, uh we had another down fractal.

42:07 We had an up fractal, a down fractal, and another up fractal.

42:10 So, in February, we had four fractals, two downs and two ups.

42:14 Neither one of the downs were hit.

42:15 And this is on your on your um notes on page 12.

42:20 The center of the fractal buy forms with a high of 102.

42:23 And then on February the 13th,

42:25 we were filled on the opening on our fractal buy from February the 8th.

42:30 And then on February the 16th,

42:33 we were filled on our January 16th and February January 30th fractal buy

42:38 and had slippage on both parts because we had a we had a gap opening.

42:41 We're only trading the Chicago markets.

42:43 We're not trading the overnight markets.

42:45 So, we had this gap up.

42:46 We were filled on both of those fractals.

42:49 So, at the end of February,

42:51 where we were standing is that the yen closed out the month at 104.57.

42:56 We're long four positions, 102.31, 104.11, 104.11.

43:00 That was on the there where we got filled on two with slippage, and 102.76.

43:05 We also have a buy stop order for another position at 104.91,

43:09 and we're carrying into March an open equity profit of 539 points or $6,738.

43:16 Much better than the end of January.

43:18 $500 open equity loss,

43:20 now we have a little better than a $6,700 open equity profit.

43:24 And we are now in three contracts.

43:27 Um four contracts, I'm sorry.

43:29 Then we come into March, and March was extremely good to us.

43:32 We only had two fractals in March.

43:35 Now, can anyone tell me why this point right here is not a fractal?

43:41 Why is that not a fractal down?

43:43 Yes.

43:47 Right.

43:49 It it needs a higher low here in front of it.

43:52 It only has one.

43:53 Remember, it has to have two on both sides.

43:55 So, that is not a fractal down.

43:56 The same thing is true with that one.

43:58 That's not a fractal down.

43:59 And this is not a fractal up here because it doesn't have what?

44:02 So, it takes a minimum of five bars.

44:04 At the end of this month, though,

44:06 um we had a buy order from March the 23rd was filled at 114.81.

44:12 The market closed out the month at 116.97,

44:16 giving us the following open equity profits on five long positions.

44:19 Now, you're in five positions on a one contract basis.

44:23 We trade a multiple contract basis,

44:25 but we're looking at this only on a one contract basis.

44:27 And at the end of the month,

44:28 we had 5,675 points or a little better than $70,000.

44:34 And that's for three months.

44:35 And and that's that's a little bit better than working for a living.

44:39 Then on on April, we came in.

44:43 Listen, I used to I I have not always been a winning trader.

44:46 Let me be real honest with you.

44:47 And back in the and back in about '80 and '82, I almost bit the dust.

44:51 And I was literally having nightmares.

44:53 And my nightmares where I was having to go out and apply for a real job.

44:57 And that is a nightmare.

44:58 Um At the end, we we actually bailed out of this trade on April the 19th,

45:03 a day after this, and we actually had a little bit more

45:06 profit than this, but we made this up on April the 18th,

45:09 and we had six positions long.

45:11 And our six positions had a total of 9,000 points or $121,000.

45:16 That's three and a half months.

45:19 There are traders who don't make that much in a year.

45:22 And this is obviously a good example.

45:23 And I'm going to show you some good examples,

45:25 and I'm going to show you some bad examples.

45:28 This works on every commodity, and it works on every time frame.

45:32 What caused you to get out of that different time?

45:35 Because we had a sell.

45:36 It was a it was a reversal.

45:38 Yeah.

45:38 We we don't One of the things And by the way,

45:40 let let me let me dispose of another kind

45:44 of thing that you'll hear over and over again.

45:46 What you'll hear over and over and over again is that there is no holy grail.

45:51 And and let me stand here and testify

45:53 to you that there absolutely is a holy grail.

45:56 And I can give you that holy in five simple words.

45:59 And if you remember these words, and if you abide by these words,

46:02 you will not be a losing trader.

46:04 Those The holy grail is simply to want what the market wants.

46:09 It's as simple as that.

46:11 Want what the market wants.

46:14 All of all of your disappointments and all

46:16 of your frustrations come from one place.

46:19 You you predicted the market.

46:20 You had expectations, and it didn't fulfill your expectations, right?

46:24 You bought the bonds.

46:24 You thought they were going up.

46:25 You fantasized they were going up.

46:27 You bought them.

46:27 You bought them from a guy who had

46:28 just as strong a fantasy they were going down,

46:31 and they didn't go up, and your expectations weren't met,

46:34 and you say, "Goodness gracious, you know, the market's really tough,

46:37 and nobody can win at this game." But what if you had no expectations?

46:42 What if there were no expectations at all?

46:45 Now, when when I was trading years and years ago,

46:48 I used to keep I I still do keep very very accurate financial records.

46:52 I always have.

46:53 Uh this is the only thing, I guess, in my whole life I've done consistently.

46:56 I still have 3x5 cards, real tattered cards,

47:00 when I was 11 years old and had a paper route,

47:02 and on a good month, my net worth would go up 25 cents.

47:06 And on a real spanking good month,

47:07 like Christmas, when they'd give the paperboy gifts,

47:10 sometimes my Well, some years, my net worth would go up 75 cents in one month.

47:14 So, when I was trading,

47:15 I decided that I would keep an account of how well I was trading.

47:19 So, I would take all of the contracts I traded, take my profits and loss,

47:22 and divide the profit or loss by the contracts,

47:25 and I would get an average profit or loss per contract.

47:28 So, if this month I averaged $75 profit a contract,

47:31 last month I averaged $50 a contract, I would say, "Well,

47:34 I was trading better this month than last month."

47:37 And then I saw the the fallacy and actually

47:39 the stupidity of that, and I decided that since

47:42 I this is my way of making a living,

47:44 and has been for a long, long time, that I should run this like a business.

47:48 I should have a cash flow, a profit and loss,

47:50 and and the whole nine yards accounting-wise.

47:52 And did.

47:53 And that wasn't what I was wanting.

47:54 That wasn't what I was looking for at all.

47:56 And today, and for the last 10 or 12 years,

47:59 I have evaluated my trading on two counts.

48:02 Um one being more important than the other.

48:05 The the lesser important, but vitally important, don't let me lead you astray.

48:10 This is vitally important, but but it's not the most important thing.

48:14 Is how long does it take me to dial the broker after I see an indicator?

48:18 So, when I see this fractal going up,

48:20 if I dial if I'm speed dialing the broker as soon as it's formed,

48:24 I know I'm trading well.

48:25 But if I'm saying, "Yeah, but it might be an Elliott wave fourth wave,

48:27 and you know, 85% of all my whiplashes happen in fourth wave,

48:30 and think I'll let one more hour go by before

48:32 I get in." That's a kiss of death for me.

48:36 My trading will not withstand that.

48:38 But the real thing the the real thing that I evaluate

48:41 my trading on every second that I'm in the market is this.

48:46 I look at the chart.

48:47 I know my positions, and I ask my question I ask myself the question,

48:51 "Do I give a hoot which way it goes?" Do I care which way the market goes?

48:55 And if I can honestly sit there and say,

48:57 "I don't care which way the market goes." I know I'm trading well.

49:01 But if I'm sitting there and I'm long the bonds,

49:03 I'm saying, "Come on, bonds, get up,

49:04 you know." Then I then I know I'm in a I'm in a lot of trouble.

49:08 Because I I am no longer proactive in the market.

49:12 I'm reactive in the market.

49:14 So, if I walk back there and I slap you real hard on the face, I've got you.

49:18 Because you're going to react.

49:20 And you're going to react automatically.

49:22 And most traders react.

49:23 You know, the it goes down one more tick,

49:25 and I'm getting out of here, you know, the it it's it it doesn't work.

49:29 It it works for us.

49:30 It's been at least seven years since I have been aggravated at the market.

49:34 Now, I I won constantly in seven years.

49:36 Don't get me wrong.

49:38 But it's been 7 years at least since I've been angry at the market because

49:41 I will not if I'm in the market and I'm I'm rooting for a trade,

49:45 I know from past experience the best thing for me to do is get out.

49:48 Question.

49:49 Why do you set up five not four?

49:52 Okay.

49:53 The question is a good question.

49:55 Why do you set up five not four or three?

49:58 Because five five dimensions of the market

50:01 are all we've been able to distinguish between.

50:03 Now, pri- you have What we try to do is trade the mass energy space and time.

50:09 So, we trade the space and the space are the fractal trades.

50:12 The- these are the spatial trades.

50:14 But we also trade the acceleration, we trade the momentum,

50:17 we change trade the change in momentum,

50:19 and and we trade what's known as the balance line,

50:21 which are what the strange attractors do.

50:24 So, these and and what we're talking about now is one of the dimensions,

50:27 which is the fractal trade.

50:30 And if you uh if you'd like more information

50:33 on this, just just call our office and and we will

50:35 send you a computer disc free and a 1-hour video

50:39 tape free that that goes into more detail in explaining it.

50:52 I'm sorry.

50:52 Ask Ask that question again, please.

50:54 You said that the market is like a water.

50:57 Yes.

50:58 Yes.

50:58 Yes.

50:59 It water's is like a river.

51:00 Yeah, the number of the dimensions of 1.76.

51:05 Yes.

51:06 Yes.

51:06 How you found that your approach is uh you know, related to that magic number?

51:13 Okay, the question is if the Mississippi River and the markets in general,

51:17 the fractal number is 1.26,

51:19 which is a number which is a a measure of irregularity.

51:23 And and that And that's very important.

51:25 Let Let me make a side point here.

51:26 For example, um nothing in the world seems to work regular.

51:30 If you had very regular brain wave patterns,

51:33 you would be in an epileptic seizure.

51:35 You'd be going You'd be having a conniption fit here.

51:37 If If you If your heart has a very very regular heartbeat,

51:41 you're going to die of congestive heart failure in the left ventricle.

51:44 So, your heart what does you good when you're running

51:47 or jogging for example is not that you're building a strong heart,

51:50 but it's it's rotor-rootering the the the stuff in the left ventricle.

51:54 So, the the fractal number is a measure of irregularity.

51:59 So, we use that number, but we the number does not give us a buy and sell.

52:03 So, what we're doing basically on the fractal,

52:06 what the fractal is is when it comes up here and changes

52:10 direction and then changes direction and goes further than it did,

52:14 it's it's it needs to do that.

52:16 That's one of the the curvatures that make up the 1.2610.

52:22 And and I think this will be a little bit clearer in just a moment.

52:25 Okay?

52:25 Let's Let's go from here then and let's go

52:27 to uh spreads because this works in in options,

52:31 it works in spreads, it works in commodities,

52:33 and it works very very well in stocks also.

52:36 On a spread for example, you don't have the open high low close.

52:40 Uh you don't have volume.

52:41 So, when you're spread,

52:42 you're you're talking about one one price minus the other price.

52:46 So, all you have is a line and all you have is two signals.

52:51 And this is your fractal up signal.

52:53 So, if it goes beyond that fractal there, you would buy.

52:56 And this is your down signal.

52:58 If you go lower than that fractal, you sell.

53:01 And and it's as simple as that.

53:02 It cannot get any simpler than that.

53:05 And let me give you a couple of examples and and these are also

53:08 in your notes and this is page um This is another page on your notes,

53:13 but I'm not sure which page.

53:14 This is the the Swiss franc yen spread.

53:18 Now, we regularly trade three spreads all the time.

53:21 Uh we're in them almost every day.

53:23 Swiss franc D-mark, Swiss franc yen, and D-mark yen.

53:26 Again, last year was an absolutely great year for us

53:30 in the Swiss franc and the D-mark and the yen.

53:33 And and here you see uh 10 months of the Swiss franc yen spread.

53:38 And all of these numbers are numbers of of of um contracts.

53:44 Not numbers of contract, these are entries.

53:46 And this is again, we trade multiple contracts,

53:48 but the example I'm going to use is a single contract basis.

53:51 All we're doing is doing what the market tells us to do.

53:55 We're not predicting, we're not analyzing in in the normal sense of the being.

53:59 It It's The market is is to us and I think this is the more I think about it,

54:04 the more I think it's true.

54:05 Trading is like a religion.

54:08 And in a religion, what you do is you make a leap of faith,

54:11 you make an assumption that whatever God says is true, right?

54:15 I mean, you don't say, "Well, God, I that doesn't make sense to me." You know,

54:18 because God says it, that makes it true.

54:20 Well, when the market says it, that's true.

54:23 And anytime you say, "Well, market,

54:24 that doesn't make sense to me." So, somewhere along the line,

54:27 you have to have enough experience or good experience

54:30 or enough faith to have faith in the market.

54:33 The market is not a gorilla.

54:35 It's not Godzilla.

54:35 It's not a Tasmanian devil.

54:37 It's none of those things.

54:38 The market is nothing except a projection of your mind in a real sense.

54:42 So, once you get the faith there,

54:44 then whatever the God says is okay and you don't question it.

54:47 So, when the market says buy, you buy.

54:48 When the market says sell, you sell.

54:50 So, anytime these happens, we we don't discuss it.

54:54 It's there.

54:55 All we All we do We become an obedient servant and when it says buy,

54:59 we call a broker and we buy.

55:00 So, during Sep- from March the 1st of last year until January the 1st,

55:07 which is 10 months, these were our actual trading uh in the Swiss franc yen.

55:13 And on the next page, there is a No, those those each Those are fractals.

55:20 Each one of those number Good question.

55:22 The question is what are the numbers?

55:23 The numbers are are the fractals.

55:25 So, this was our fourth entry.

55:27 That was our fifth entry.

55:28 It It's not the number of contracts.

55:30 We were trading multiple contracts,

55:32 but but this is And this is based on a one contract basis.

55:35 And the reason it's based on a one contract

55:37 basis is because in looking at a way of trading,

55:41 I want to eliminate basically some of the asset allocation.

55:45 Uh we do asset allocation,

55:46 but the only way I think you can analyze an approach to trading better

55:51 by looking at it on a one contract basis than you can a lot of contracts.

55:55 Another question.

55:56 So, those are both buy and sell signals, though.

55:58 Yes, those are both buy and sell signals.

56:01 And we on the up ones,

56:03 you can see we're buying and the reason that was such a good

56:05 good move is because we moved from way down here to way up there.

56:09 And uh the results of that move are on the next two pages and I'll just

56:14 show you here the last page and this is 10 months on a one contract basis.

56:19 Now, a a the margin for a currency spread

56:22 normally is 75% of what uh one contract would be.

56:27 So, if both of them were $2,000, the spread margin would be 1,500.

56:31 So, you can do four Basically, you can do four spreads for three open orders.

56:35 And um and we have other ways of where we we implement this also,

56:39 but on the uh D-mark yen in the same period had a very similar chart,

56:44 but not quite as much, but it made over $200,000.

56:47 So, if you had last year, and this is you know,

56:49 this is what they normally call um well well, the the initials are BS.

56:54 Um it does it doesn't do any good to look at the past,

56:57 but these are actual trading examples.

56:59 You could have started both of these trades with a very small account,

57:02 less than $10,000, which is totally ridiculous.

57:05 I mean, we're talking hypothetical now,

57:07 but $10,000 would have handled the entire year of trading both of those spreads.

57:12 And uh the problem is you don't know when these are going to happen.

57:16 So, you have to be in the market.

57:17 Let me give you a an example.

57:19 Um we do private tutorials and um couple of a while back,

57:24 we had a a young lady from Little Rock, Arkansas who came and she Yes.

57:30 Yes.

57:31 Yes.

57:31 Yes.

57:32 And and uh I don't know if she knew Hillary or not.

57:34 You know, but but seriously, uh it wasn't Hillary.

57:38 Uh this this girl became a general contractor and she was a short girl,

57:43 4-ft nothing kind of thing.

57:45 And if you're if you're a female who is short trying to do building business,

57:49 general contractor in the good old boy network of Little Rock,

57:52 Arkansas, you the odds are against you.

57:54 I mean, the odds are very much against.

57:56 She She was a success.

57:57 She built residences.

57:59 She built some commercial buildings.

58:00 She even built a couple of strip shopping centers.

58:02 She was a general contractor for 10 years, very successful,

58:06 got bored with it and said, "I want to do something more exciting.

58:08 I want to trade commodities." And she started trading commodities.

58:11 Her husband said, "You made all that money,

58:13 you can throw it away any way you want to, but you're

58:15 not getting any of the family money to trade." So,

58:18 she came to a tutorial and on the last day of the tutorial, she said,

58:21 "Bill, I I I have a problem." And I said, "What's that?" And she said, "Well,

58:25 I don't have much money in my account and um if I lose this money,

58:30 I I got to go back to building and I

58:31 don't want to do that." And I said, "Well, Janet,

58:33 how much money do you have in your account?" And she said,

58:37 "A little over $4,600." So, I said,

58:41 "Okay, let me tell you what your problem is going

58:43 to be." Because she's really a vivacious go go-getter girl.

58:47 And I said, "Your problem is going to be patience."

58:50 And you've got to trade so cuz you can't lose this money.

58:53 And you need a lot more money than

58:54 that to really have a good chance of being successful,

58:56 but you've only got about $4,600.

58:59 And she says, "Well,

59:00 I'm I know you're going to tell me to trade euro dollars, right?" And I said,

59:03 "No, not euro dollars, euro dollar spreads." Intra-month spreads in the euro

59:08 dollars because they don't move that much anyway.

59:10 And so, when she came to the to the um uh tutorial,

59:14 this is where the market was.

59:15 Now, down here at the bottom, and this is not in your notes,

59:18 but maybe you can see this here.

59:20 But down at the bottom, we had every reason to believe that that was the bottom.

59:23 We had what we call our five magic bullets.

59:25 And what that means is that all five

59:27 dimensions had turned around and gone the other way.

59:30 So, we had our five magic bullets.

59:31 When they turn around it will kill a trend.

59:33 Um I've never seen it fail not even once and we thought this was the bottom.

59:38 This was in November and then we had a move up

59:41 and we had what looked like a three wave move back down.

59:44 When she came to the to the tutorial which was the first weekend in December

59:49 we thought that the this was a September

59:52 December Eurodollar spread of the next year.

59:55 This was in the first weekend in December and we said

59:58 that it looks like that the bottom is in to us

1:00:00 Janet and what we're going to do is we're going

1:00:02 to buy a year some Eurodollar spreads at minus 68.

1:00:06 All we have we only have to take three three ticks risk $75

1:00:11 and by the way the the margin on a Eurodollar spread is only $250 so

1:00:15 you can you can you're not taking a big risk and so our immediate

1:00:19 question was G okay that's good let's trade some how many can I trade?

1:00:23 And we thought about it while and we said well let's

1:00:26 try three because if we if we miss out you you're getting

1:00:29 in at 68 your stop is at 71 you're risking $75

1:00:33 three contracts three spreads that's

1:00:35 that you're risking $225 plus three commissions.

1:00:38 And and that would be somewhere around $300 and you've got $4600 in your account

1:00:43 that would bring it down but well it's worth a chance we think.

1:00:47 So she left she bought the three spreads at six minus

1:00:50 68 and she left and as she was leaving as soon

1:00:53 as she walked out the door that our staff were talking

1:00:55 we said well let me tell you what's going to happen.

1:00:59 Janet is going to get on that plane back to Little

1:01:01 Rock and she's going to realize that she's only margining $750 out

1:01:07 of her account that she's got enough money she could margin 16

1:01:11 other spreads because I got still $4000 and that's 16 other spreads.

1:01:15 Well she she didn't go 16 spread but she did indeed

1:01:18 think about that on the way back and she increased her spreads.

1:01:21 Now we got this this fax from her uh month later than that and hopefully you can

1:01:27 read it says Bill sold all of my Eurodollar

1:01:29 spreads except five this morning at minus 27.

1:01:33 Now she went in at minus 68 and minus 27 total profit

1:01:36 after commissions was $16,250 and this is what she started with up here.

1:01:42 She started she left the tutorial with $4621 and and took it

1:01:47 up to 20,800 and and that was on plain old Eurodollar spreads.

1:01:53 Any questions on on that?

1:01:56 Okay yes question.

1:02:01 She she was at the tutorial the first weekend in January

1:02:05 and the the fax does not have a date on it.

1:02:09 Um it was probably about three months.

1:02:13 It may maybe somewhere between three and four

1:02:15 months because it was it was about the end of March as I remember it that we got

1:02:18 that and and since then she's express very very good.

1:02:22 She has not gone back into the building business.

1:02:24 She didn't go out and get a real job.

1:02:26 Another question.

1:02:41 Okay the question is we we said we do lose some from time to time

1:02:45 and and and if if I said we didn't lose you should walk out right now.

1:02:48 If anybody says they don't lose from time to time you should walk out.

1:02:52 Um this does lose and and I quite

1:02:56 frankly am not very interested in wins over losses.

1:03:00 I'm interested in the bottom line.

1:03:02 About nine or 10 years ago I had a very good winning percentage.

1:03:07 My winning percentage was something around 68 69%.

1:03:12 Um I was not make with the same amount of equity I was

1:03:15 probably making less than 10% what I am now with the same equity

1:03:19 and I'm I don't know what my winning percentage is but I would

1:03:22 guess and this is a guess but I'm pretty sure it's less than 50%.

1:03:25 I I don't win 50% of the time but if you get out of your losses

1:03:29 quickly you're going to your win loss ratio is going to be relatively small.

1:03:34 I know that in the commodity traders consumers report one one year

1:03:38 one of the newsletter writers in there about May of that year saw

1:03:43 very clearly that he was not going to be a winner in anything

1:03:46 so he decided very consciously I'm going to go for wins over losses.

1:03:50 So what he did for the rest of the year

1:03:51 as soon as he got a profit he locked it in.

1:03:53 As soon as he had a loss he'd let that mother go

1:03:55 and go and go and hoping it would come back and be a winner.

1:03:58 So at the end of the year uh CTCR he won the best win over loss ratio.

1:04:04 He had 67% wins but it was a losing year.

1:04:08 Now guess what the advertisements were the next year which were

1:04:11 very truthful rank number one by CTCR in wins over losses.

1:04:15 Well now to a naive person that I that's where I

1:04:19 want to go but but the bottom line is is what's significant.

1:04:22 What causes the losses are simply that we're

1:04:24 not perfect and and incoming new information.

1:04:28 The biggest key that we can talk about is let

1:04:30 this incoming information organize itself and react to the market.

1:04:34 Some of you may remember the the black comedian Flip Wilson

1:04:39 who used to talk about the church of what's happening now.

1:04:42 Well what we want to do is trade the market of what's happening now.

1:04:45 So we don't consider what we're doing technical.

1:04:47 Now our our indicators are absolutely totally 100% unambivalent.

1:04:53 I mean if we took the 500 people that have gone through the tutorial

1:04:56 and showed them the chart they would pick out the exact same indicators.

1:05:00 How you use those indicators is something else because you may trade a five

1:05:04 minute I may trade a 30 minute or I may not trade that or whatever.

1:05:07 So it's it's very important I think the most important thing we

1:05:12 could say today is that the key to trading is to give up.

1:05:17 It it's not to outsmart the market not to outsmart

1:05:19 other traders but simply to give up what your expectations are.

1:05:23 It it's it's almost a a Zen Buddhist kind of thing.

1:05:27 Um it it's not that you're trying to control

1:05:29 the market or outsmart it or outpower it or anything else.

1:05:32 It's like the market is a dog and I want I want to be the tail

1:05:35 on the dog and I would just want to follow the dog everywhere it goes.

1:05:38 Now my friend Tom DeMark says he wants to be the nose of a dog and nose

1:05:42 is what often times gets in trouble and I

1:05:44 would rather be the tail than the nose.

1:05:46 Question.

1:05:47 So basically you're saying is this a mechanical trading system or a black box?

1:05:51 No this this the question is is this a mechanical or black box trading system?

1:05:55 Absolutely not.

1:05:56 The indicators are automatic.

1:05:59 There there's no interpretation of the indicators.

1:06:02 There is some interpretation of how how much you want

1:06:06 to go how much asset allocation how many you want

1:06:08 to go how many contracts and how much you want

1:06:10 to load up but the the indicators themselves are absolutely unambivalent.

1:06:15 It is not mechanical.

1:06:17 Uh it it for example one of the things we know is that 85% of all

1:06:21 of our whiplashes talking about losses 85%

1:06:24 of all of our whiplashes happen in wave four.

1:06:27 And we know exactly when wave four is going to happen.

1:06:30 When when the momentum tops out at wave three that first

1:06:33 bar after that which which predicts the market which predicts the price

1:06:37 change and the accelerate see the the acceleration changes before the price

1:06:42 change before momentum changes and the momentum

1:06:44 changes before the price changes.

1:06:45 So if you got this market which is a bowling ball going down the street as soon

1:06:49 as it starts slowing up we start putting in orders to go with the other way.

1:06:53 Then when it turns around we jump on the board.

1:06:55 So the way you do that is is

1:06:57 a personal thing that sort of fits with your personality.

1:07:01 For example the the most successful trader that has ever

1:07:05 come to our tutorial has been trading for 14 years.

1:07:08 His last and we swap P&S statements every month.

1:07:11 His last losing trade I'm sorry the last losing month was February of 88.

1:07:21 And that was what eight eight almost eight and a half years ago.

1:07:25 Uh that was his last losing month.

1:07:26 That month he lost $405.

1:07:28 Since then he has not had a losing month.

1:07:30 His worst month since then.

1:07:32 Now here's a guy who 14 years ago started out with $25,000.

1:07:37 His worst month since then was a net profit of $775,000

1:07:42 and he's paid $60,000 that month in commission and 775 was his net.

1:07:49 And and he has not added anything.

1:07:51 He's he started trading he started trading in 1982.

1:07:54 The first thing he did he came to the very first workshop

1:07:57 that I ever did and we became friends and we visit every year.

1:08:01 And he's and and now this is pinnacle.

1:08:03 This is not average.

1:08:04 Don't let me again lead you astray.

1:08:06 This this and he makes more money than I do.

1:08:09 Um but if you if you call him up Monday or if you go to his office Monday

1:08:13 he's probably got a telephone on each ear

1:08:16 and a telephone down here and I don't trade that way.

1:08:18 I like to trade very peacefully.

1:08:20 I I like to trade with classical music.

1:08:22 I don't like telephones ringing and I have a Doberman dog and a Siamese cat

1:08:27 in the trading room with me and and I'm very it's very very calm there.

1:08:31 And that's that's my style.

1:08:32 So how you trade is not mechanical.

1:08:35 You trade one of the things that we try to do in our tutorial is find

1:08:38 what time what time you're you're most comfortable

1:08:41 with where you're intraday daily trade and what kind

1:08:44 of trading you are most comfortable with because

1:08:46 if you're uncomfortable with your trading then it becomes

1:08:48 a fearful thing and if you're running a fear

1:08:50 program you're going to do exactly the wrong thing.

1:08:53 You're going to be consistent.

1:08:54 A fearful trader is the most consistent trader in the whole world.

1:08:57 The only problem is we buy the tops and sell the bottoms consistently.

1:09:00 Yes question.

1:09:01 Uh Bill on your fractal breakout adding a position where would your stop be at?

1:09:06 Uh good question.

1:09:08 And that's on on the outline that's in there.

1:09:11 Your question the the stop is two fractals back in the opposite direction.

1:09:16 So if we had let's say that we had a fractal up

1:09:20 here and a fractal up here and a fractal up here all

1:09:22 of these are fractals then you would go long at this point

1:09:25 you would go long at this point And when you were long there,

1:09:28 your stop would be two fractals back in the opposite direction.

1:09:31 And it's very important that it be in the opposite direction.

1:09:35 Yeah.

1:09:36 Other questions?

1:09:39 Okay.

1:09:41 Um The the five dimensions that we trade

1:09:46 and and we're really only covering one here.

1:09:49 Uh I would like to um see if I can get this to working.

1:09:56 Ah ha ha.

1:09:58 Believe we have it.

1:09:58 Yes, okay.

1:10:00 Um This this is the um This is the S&P daily through yesterday.

1:10:07 And what I would like for you to to see

1:10:09 in this is um that there there is a fractal right there.

1:10:15 Does everybody see that?

1:10:17 But that is not a fractal down here, I don't think.

1:10:19 That bottom of that bar right there is 540.

1:10:22 Uh the bottom of that bar is five Yes, that is No, that is not a fractal.

1:10:27 We need one more up.

1:10:28 So, tomorrow on a daily basis Now, this is a daily chart.

1:10:31 So, tomorrow or Monday, we would have a buy at 694.25.

1:10:37 The high of that is 694.

1:10:39 The question about the the stop then, the stop would This is one fractal back.

1:10:44 This is the second fractal back here.

1:10:47 If there is a discrepancy,

1:10:48 if the second fractal back is closer to your price than the first fractal,

1:10:52 you would go to the furthest fractal.

1:10:54 So, to answer your question really technically and precisely,

1:10:57 your stop is the furthest back of the last two fractals.

1:11:00 Usually, it will be two fractals back.

1:11:02 And and what you're what you're seeing here in the gray bars and the black bars

1:11:07 and the red bars are are part of our dimensions

1:11:10 which we analyze the momentum that the market has.

1:11:14 And it's very very simple.

1:11:16 Um It it's in the book and and everything we've talked about is in the book.

1:11:20 The These we call squats, greens, fades, and fakes.

1:11:22 This tells you exactly what the market's

1:11:24 the reaction of the market to the volume.

1:11:27 Uh the volume can cause very different things.

1:11:29 Um And announcements can cause very different things.

1:11:32 We don't trade One of the things that we quit doing

1:11:34 about uh 8 years ago and and our trading immediately improved.

1:11:39 We don't read any current news at all.

1:11:42 We don't watch FNN.

1:11:44 In fact, I'm I'm sure you know what CNBC FNN stands for, don't you?

1:11:49 Can never be correct financial neurotic network.

1:11:52 Um And remember, those guys don't get paid for telling the truth.

1:11:55 They get paid for words.

1:11:56 They get paid by the word.

1:11:57 Same thing is true on your computer.

1:11:59 So, we don't watch FNN.

1:12:00 We don't read the Wall Street Journal.

1:12:01 I haven't read a current Wall Street Journal in the past uh 9 or 10 years.

1:12:06 The most of the ones I read,

1:12:08 I find on seats in an airplane that are day old and I'll read those.

1:12:11 I like reading it.

1:12:12 But I will not read anything that has current information.

1:12:16 And uh I don't subscribe to any newsletters.

1:12:19 Uh I The only thing I look at ever uh is is a chart just like this.

1:12:23 What this tells me is the fractal.

1:12:25 This line here is a balance line.

1:12:28 The balance line is simply a 13-bar smooth

1:12:31 average that's offset eight bars in the future.

1:12:33 The balance line is where the price would

1:12:36 be if there were no new incoming information.

1:12:39 So, here there was some new incoming

1:12:41 information that's putting the the price up.

1:12:43 This is the momentum chart.

1:12:45 The momentum chart is a 534 oscillator.

1:12:48 And all that is is a 34-bar moving

1:12:51 average that is subtracted from a 5-bar moving average.

1:12:54 And this is what we count the Elliott wave on.

1:12:56 And this thing is is as close to infallible as any indicator I've ever seen.

1:13:01 In the last uh three or four years, we've looked literally at our staff has

1:13:05 looked at literally tens of thousands of charts.

1:13:07 We found two errors.

1:13:09 One was in a 10-minute sugar chart.

1:13:11 One was in a 15-minute cocoa chart.

1:13:13 Both errors were less than 5/100 of a point in the wrong direction.

1:13:18 The bottom chart here, this is the acceleration.

1:13:21 This is like reading tomorrow's Wall Street Journal.

1:13:24 On any trend move and and I mean that seriously,

1:13:27 any trend move can be detected here but on the accelerator before it's detected

1:13:32 on the momentum and will be detected

1:13:34 on the momentum before it's reflected in the price chart.

1:13:36 So, we call this tomorrow's Wall Street Journal.

1:13:39 Any other questions?

1:13:42 Yes.

1:13:44 Yes.

1:13:44 Uh the question is does it work on equities?

1:13:46 We are in the process of completing a book applying this to equities right now.

1:13:51 And that should be out uh very shortly.

1:13:54 But yes, it does work on equities.

1:13:56 As matter of fact, it really um on high-cap equities, on high high-volume stock,

1:14:02 it really tends to work more precisely than it does in commodities.

1:14:06 And we do a lot of things in equities uh with this material like covered

1:14:10 call writing and uh uh rolling over and and a lot of things like that.

1:14:15 Other questions?

1:14:15 Yes.

1:14:16 If your momentum is a 534 MACD, how do you calculate the acceleration?

1:14:20 Okay, the question is the momentum is a 534 MACD.

1:14:24 It really isn't.

1:14:25 Uh when when Gerry Appel invented the MACD, the the default that was first um

1:14:32 programmed into computers was an exponential moving average.

1:14:35 The exponential moving average does not work as well as a simple average.

1:14:39 So, this is really an oscillator.

1:14:41 So, it's a it's a it's a simple average, a 534 oscillator.

1:14:45 The accelerator would make it an MACD.

1:14:48 The bottom accelerator is simply a 5-bar moving average of that difference.

1:14:53 So, if you combine the two, it would be an MACD.

1:14:56 But if you use an MACD, you you need to go in and and program it

1:14:59 to be a simple average rather than an exponential average.

1:15:02 And that does make a difference.

1:15:03 It makes a difference in your profits.

1:15:05 Does that answer your question?

1:15:06 What's the 5-bar moving average of the momentum?

1:15:09 No, it's a 5-bar moving average of of the Yes,

1:15:14 it it of the difference between the five and the 34, exactly.

1:15:18 So, it is a 5-bar Well, all we've done is we've If you put this here on a line,

1:15:22 it would look exactly like an MACD, exactly.

1:15:25 So, we've we've taken the line of the MACD,

1:15:27 made it into histogram because it's just easier to see on the chart.

1:15:30 But this is all we look at.

1:15:32 Uh we we um we do not um uh get out of the market because of announcements.

1:15:40 Uh we in the last 7 years,

1:15:42 we have had one occasion where we had a limit move against us.

1:15:45 That was 2 years ago last October.

1:15:47 We were short all the grains and they came out with a um

1:15:51 a food announcement or a crop report and it went went against us.

1:15:55 Every other limit move in the last 7 years has been in our favor.

1:15:58 This will anticipate what the bonds and stuff are going to do.

1:16:01 One more question.

1:16:02 Can you explain how you use the MACD the momentum to do your wave count?

1:16:07 Uh yes, I can, but I can't because we only have 2 minutes left.

1:16:11 Yes.

1:16:11 But but it it it talks about it in the book if you'd like that.

1:16:15 Or if you call our office or or do our email or or web page,

1:16:18 we'd be happy to send you a lot of material.

1:16:21 Question?

1:16:22 Yes.

1:16:22 Do you know all your five dimensions from those three charts?

1:16:25 Yes.

1:16:26 Yes, we do.

1:16:26 Yes, we do.

1:16:27 The the fractal is one dimension.

1:16:29 The we we have a uh a initiating fractal, a breakout, and a responsive fractal.

1:16:35 The balance line between the two uh strange attractors are here.

1:16:38 The momentum's here and the accelerators there.

1:16:40 So, that's our five dimensions.

1:16:42 Yeah.

1:16:42 One more question and then we need to Could

1:16:44 you could you tell us about your tutorial?

1:16:47 The question is could could I tell you about the tutorial?

1:16:49 Basically, very quickly is that we uh we send out a home study package

1:16:54 which is a 3-month package which has a contains the book, a 300-page manual,

1:16:59 a chaos workbook which tells you everything to do every day for the 90 days,

1:17:04 um 12 video tapes which tells you exactly

1:17:07 what charts to look at, eight audio tapes,

1:17:09 three uh three computer disks, and then you come to a tutorial.

1:17:13 Uh we have a staff of six that conducts a tutorial where we work with you.

1:17:17 We we ask you to come prepared to bring your to trade your own account

1:17:22 on a one contract basis and then we support

1:17:25 you both before the tutorial and after the tutorial.

1:17:28 Once you join the come to the tutorial, you're a member of the family.

1:17:30 Again, if you want more information about that, call

1:17:33 us or there's some at the back of the room.

1:17:35 Okay.

1:17:36 Uh the time is just about up.

1:17:37 Let me summarize very quickly.

1:17:38 The most important point I I would like for you to take

1:17:41 away from here is the difference between how you handle new information.

1:17:46 For example, in in psychology tells us that anytime you're overwhelmed or bored,

1:17:51 it's always because you're trying to fit new information into old categories.

1:17:54 That's what we've all been taught in school, at home, everyplace else.

1:17:58 Using the science of chaos,

1:18:00 we are allowed to let that new information organize itself.

1:18:04 Then we don't get in our own way.

1:18:05 The other thing that I'd like to leave you with is when you're trading,

1:18:09 make sure that you trade in such a way

1:18:11 that you really don't care which way the market goes.

1:18:13 If you do that, you're going to be a winning trader in one

1:18:16 of the top three to five percent of all the traders in the world.

1:18:19 Thank you very much for being here.

1:18:21 I appreciate you listening.