Download Trading Chaos 2nd Ed.pdf - Trading Software PDF

TitleTrading Chaos 2nd Ed.pdf - Trading Software
TagsTrading Books Chaos
File Size5.8 MB
Total Pages261
Document Text Contents
Page 1


Maximize Profits

with Proven Technical






John Wiley & Sons, Inc.

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trading software col

Page 2
mailto:[email protected]?subject=Subscribe
mailto:[email protected]
mailto:[email protected]
mailto:[email protected]

Page 130

The Mighty Alligator 97

The Alligator is:

• An integrated approach to monitoring the market’s momentum
• A simple indicator to trade only with the current trend
• A protection device to not lose money during a nontrending market
• An advanced indicator to signal the end of a current trend.

Here is our problem: We do not want to spend our time and resources en-
tering and exiting a market that is going nowhere. If the market is going
nowhere, then opportunity is no-where. We want to change that statement
to opportunity is “now-here.” Our technique for moving that hyphen over
one letter is the Alligator.


Basically, the Alligator is a combination of Balance Lines using Fractal
geometry and nonlinear dynamics. (See Figure 8.1; because this book does
not include color, you may want to visit to our Web site to see how it looks

FIGURE 8.1 The Alligator.

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Page 131

in color.) The Blue Line that we call the Alligator’s jaw on Figure 8.1 is the
Balance Line for whatever time frame is on the chart. The (blue) Balance
Line is where the market would be if there were no new incoming informa-
tion (chaos). The distance between this line and the current price is an in-
dication of how the traders interpret this new incoming information.

The Red Line is the Balance Line for one significant time frame lower.
Significant in this case is approximately one-fifth of the time frame on the
chart. So, roughly, if the time frame on the current chart is a daily and
refers to the Blue Line, the Red Line would approximate an hourly chart.
Remember that these lines are simulations that were discovered and cre-
ated by a mainframe computer with a confidence level of more than 99.5
percent. This confidence level means that you may miss not more than 1
out of 200 trades that would be created by a mainframe using nonlinear
feedback calculus.

The Green Line is the balance line for still another significant time
frame lower. Again, it would be approximately one-fifth of the time frame
of the Red Line. So if the chart we are examining is a daily, the Red Line
would approximate the hourly chart and the Green Line would approxi-
mate a 5 to 10 minute chart.

Putting this another way, as seen on Figure 8.1, the Blue Line is where
the market would be on the daily chart, the Red Line is where the market
would be on an approximately a one hour chart, and the Green Line is
where the market would be on an approximately 5- to 10-minute chart. Re-
member these time values are approximate and not connected to clock
time. All lines are drawn using current price sequences. You do not need
three different time charts.

New incoming information would first affect the Green Line, followed
by the Red Line and finally by the Blue Line. To personify the Alligator a bit
more, we refer to these lines as follows: The Blue Line represents the Alli-
gator’s jaw, the Red Line represents the Alligator’s teeth, and the Green
Line represents the Alligator’s lips. As you become more familiar with this
notation, the Alligator seems to take on a life of its own. The Alligator then
becomes an excellent guide as to when to get into a market and when to
wait for it to get hungry, which happens when it starts to open its mouth.
Remember, the purposes of the Alligator are to

• Provide an integrated approach to monitoring the market’s momentum
on three different time frames in one chart.

• Provide a simple indicator to know when a trend starts and stops.
• Create a protection device so as to not lose money during a bracketed,

range-bound market.
• Provide an advanced indicator to signal the end of a trend.


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Page 260

origin of, 10
Oversold/overbought condition, 6

Paraconscious, 67–68
worldview, 69–70

Paradigm, 13–15
Path of least resistance, 28
Path of Least Resistance (Fritz), 28, 31
Penfield, Wilder, 38
Physics, 8
Powers of the Mind (Smith), 13
Preparation for trading, 37–49
Pribram, Carl, 39
Price, 4
Prigogine, Ilya, 18
Proficient trader, 92–93
Profitable trading, 95

new incoming information, 95–96
trader’s biggest problem, 96–97

Profitunity, 4
strategy for entering or exiting

market, 147–149
Profitunity Trading Group (PTG), ix
Psychological structure, 60–63

Relaxation, 74–75
Resistance, 75–76
Resonance, 83–84
Reverse pyramiding, 155–156
Richardson, Lewis F., 20
Right hemisphere, 67–68
Risk takers, 52
Roosevelt, Franklin, 33
Ruykeyser, Louis, 54

Sacred-Cow Terminators, 5–7
Schulz, Johannes H., 188
Science, 8
Second Wise Man, 125–133
Selling or going short, 149–154
Shadow traders, 159–162
Sinatra, Frank, 92
Smale, 20
Smith, Adam, 13, 14
Stillness, 81–82
Stockings, Jerry, 52

elements of, 30
kinds of

Type One, 31–32
Type Two, 32–34

underlying, 28–29
and trading behaviors, 29

Successful trading, 44–48
Super-natural trade/vesting, xxii, 59–85

application to trading framework,

belief systems and market results,

brain function and trading, 65–68
cause and effect in market, 71–72
defined, 59
mind mistake, 82–83
focusing on thinking, 78–81
monitoring the mind, 72–74
resonance, 83–84
stillness, 81–82
techniques for trading, 74–78

Teresa, Mother, 71
Third Wise Man, 135–144
Thought-counting meditation, 78–79
Traders, xx–xxii

real-life examples, 55
Trader’s date, 166–167
TradeStation 2000i, 211–218
Trade/vesting, xviii, xix–xxiii

checklist, 171–175
Trade/vestors, 87–94

five-step progression
level one: novice, 88–90
level two: advanced beginner,

level three: competent trader,

level four: proficient trader, 92–93
level five: expert trader, 93–94

Trading consciousness, 51–58
crew members (investors), 52–54
examples of traders, 55–58
landlubbers (savers), 52, 53–55
leaders (traders), 52–55

Index 227

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change, 133
trading with, 7

Twain, Mark, 7

Understanding markets, 7

Value, xv, xvi, 65

Wealth, xv
Western trader’s worldview, 69
Wise Man

First, 109–123
Second, 125–133
Third, 135–144


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